1. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 1 Frequency Project BMW – Georgia Tech April 13 th 2006

2. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 2 Outline 1.Project background 2.Problem description and objective 3.Approach 4.Results 5.Recommendation for BMW 6.Future work CoverEuropean Part Supplies Outline

3. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 3 European Parts Supplies 40% of parts needed by (Plant 10) Spartanburg are sourced in Europe and shipped across the Atlantic via: –regular ocean shipments –Airfreight expediting in case of stock-out at Spartanburg plant OutlineGeographics European Part Supplies

4. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 4 ~1-2 days The Geographics Spartanburg Wackersdorf / Steyr European Part SuppliesCurrent Case Geographics ~10 days ~1-2 days

5. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 5 Current Case Frequency: –Three times per week Arrival Days: –Thursday –Friday –Saturday US Entry Port: -Charleston European Departure Ports: - Bremerhaven GeographicsProject Description Current Case Sailing Time: -10 days -12 days -11 days

6. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 6 Project description Previous study suggests increasing the shipment frequency would decrease inventory costs Objective for this Project: Suggest an optimal shipping schedule which reduces costs related to European parts shipments - Using real data and constraints - Considering safety stock - Considering Split - Transportation Costs Current CaseVariable Elements Project Description

7. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 7 Major variable elements –Changing the European (American) ports affects land lead times –Frequency of shipments affects needs for inventory at plant –Parts proportions (Split) to be shipped in each scheduled shipment may reduce stock-out? –Shipping lines have different rates per container, shipping lead times and reliability Project DescriptionApproach Used Variable Elements

8. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 8 Approach used 1.Collection of sailings data 2.Creation of a tool to search among the large number of Sailings 3.Selection of multiple optimal ports and lines combination for various frequencies (based on ocean and land lead time) 4.Simulation to find costs incurred with the different scenarios 5.Processing Simulation Outputs in Excel Variable ElementsData Collection Approach Used

9. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 9 Collection of Sailings Ports were selected based on: Ranking in terms of TEU of European ports Ports preferred by BMW Duration of Sailings offered Geography Data obtained from www.joc.com 1 (current Tender) and material “Trans Atlantic Workshop” provided by BMW (new Tender)www.joc.com 1 sometimes data not accurate Approach UsedConstraints on Sailings Data Collection

10. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 10 Constraints on Sailings Cutoff for sailing time: 18 days Entry Ports considered : –Savannah, Norfolk, Charleston, New York, Montreal, Newark, Baltimore, Philadelphia, Miami, Houston, Halifax European Ports considered: –Hamburg, Antwerp, Bremenhaven, Le Havre, Rotterdam, Copenhagen, Fos, Genao, Gioia Tauro, La Spezia, Le Verdon, Livorno, Montoir, Valencia, Algeciras, Barcelona Ports preferred by BMW Data CollectionGeneral Assumptions Constraints on Sailings

11. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 11 General Assumptions If it arrives in port on Saturday or Sunday it cannot be shipped until Monday (high extra charge if pulling out of port on weekends) We are not considering multiple arrivals at Spartanburg on the same day High and Low runners can not be mixed on a container Capital Charge: 12 % Non-Capital Holding Charge applied in Spartanburg: –5% (High Runners) –10% (Low Runners) Constraints on SailingsPort Selection Tool General Assumptions

12. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 12 Port Selection Tool (Excel Model) Assignment Model to minimize lead times under each scenario. Each scenario is a combination of: –Various ports in Europe –Various ports in the US –Various shipping lines used –Different weekdays of arrival General AssumptionsAssignment Model Port Selection Tool

13. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 13 Port Selection Tool (Assignment Model in Excel) Port Selection ToolSimulation Input Assignment Model

14. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 14 Simulation Input Parameters used –Holding/carrying cost: –Values of Engines –Detailed Expediting costs Major points included in the simulation –Demand uncertainty (difference between forecast and actual usage) –Ocean lead time variability –Lead time variability between US-port and Spartanburg Assignment ModelSimulation in Arena (1) Simulation Input Simulated were 5 different engines, three high and two low runners Other parts like transmissions to be simulated at a later time

15. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 15 Simulation in Arena (1) Ship Arrival Assign Departure Port and Departure Date Travel to Exit Port Exit Port Travel to North America via Ship European Transit North America Transit Entry Port Travel to Spartanburg Simulation InputSimulation in Arena (2) Simulation in Arena (1)

16. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 16 Simulation in Arena (2) North America Total Costs Spartanburg Determine Shipment Size Update Pipeline Inventory Level Update Pipeline Costs Plant Demand Define Daily Demand Update on-hand inventory level Update on-hand inventory costs Are inventory levels positive? Update Expedited Costs Update on-hand inventory level and costs Calculate Total Inventory + Expediting Costs Simulation in Arena (1)Simulation in Arena (3) Simulation in Arena (2)

17. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 17 Simulation in Arena (3) Simulation in Arena (2)Output Processing Simulation in Arena (3)

18. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 18 A Simulation with 500 runs 1000 days each was performed for each engine for each scenario The average values for key variables were obtained by aggregating data in Excel Transportation costs were calculated in Excel using the simulation output Costs were summed to total figure Processing of Outputs Simulation in Arena (3)Graphs Output Processing

19. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 19 Output Processing Graphs Split *Note: Total cost does not include the transportation cost

20. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 20 Split Split policies were simulated for: One high and one low runner engine For a frequency of three GraphSplit Graphs Split

21. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 21 SplitSplit Graphs(2) Split Graphs(1) Split Graphs Optimizing the split implies important savings in the Total Cost

22. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 22 Split Graphs(1)Split Graphs(3) Split Graphs(2) Split Graphs Models were run using OptQuest Analyzer for Arena. We defined variables (split variables) to identify the amount of engines (on a day basis) for each shipment route. The variables implemented in the simulation then were evaluated minimizing total cost under changes in the split variables. 500 replications of 1000 day runs were done for 100 scenarios to find the behavior of near optimal solutions. Convergence can be seen from the results. Best policy is inclined toward sending more through the fastest vessel, but trying to keep a homogeneous distribution among routes.

23. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 23 Split Graphs(2)Recommendations Split Graphs(3) Split Graphs Vessel 2 refers to the fastest vessel in each case. Different cases for two engines, related by equal and unequal interarrival times. Split validates that the most should be allocated to the fastest vessel and the split is also trying to be more equally divided among shipments. First case has variable delay upon arrival at Charleston for the second vessel, volume movement is not enough to make this vessel significantly more prone to more shipping.

24. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 24 Recommendations Split Graphs(3)Transportation Recommendations Use frequency of shipments of four times a week. Move towards evenly spaced shipments. Move towards more shipping routes Unrestricted case, approximately 7% savings per engine based on Inventory cost+pipeline cost+expedited cost. Transportation Costs

25. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 25 Total Cost incl. Transportation Recommendations Transportation Future Work *Note: Case 1 identifies the current case

26. April 13th 2006, BMW Frequency Project ISyE 6203, Prof. J. Vande Vate N. Garg, A. Hentati, M. DiPace, Y. A. Chen, C. Valderrama & K. Wittek 26 Future Work Improve model to consider only integer number of container loads Come up with a policy concerning mix of parts on a container Simulate other plant 10 parts Improve modeling of safety stock More sensitivity analysis Risk reduction by having multiple arrivals on one day Transportation Future Work