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MILLIKEN – Domestic Network Lagrange, GA April, 20th 2006 Tibor Banach, Aixa Cintron, Benedikt Finkenauer, Thilo Frankenhauser, Meeti Saraswat, Narendhra Seshadri 21.07.2015 1 Agenda Current Business Model Demand Distribution Proposed Solution Summary 21.07.2015 2 Current Network Milliken ships various products such as broadloom, tiles, rugs, mats and chemicals out of their facility in Lagrange, GA Products are shipped via LTL carriers to various locations all over the United States Depending on the size of the shipment, the destination and the service required, Milliken uses a variety of shippers 21.07.2015 Current Situation Demand Distribution Solution 3 Current Network LTL LTL Lagrange, GA 21.07.2015 Current Situation Demand Distribution Solution 4 Problem Outline Current shipments are mostly LTL and parcel Can shipments to the same geo be consolidated via FTL? - Is consolidation economically feasible? - Where should the consolidation hubs be located? - How is service affected by consolidation? 21.07.2015 Current Situation Demand Distribution Solution 5 Issues to Consider Can shipments to the same geo be consolidated via FTL? Is consolidation economically feasible? Where should the consolidation hubs be located? LTL TL TL TL 21.07.2015 Current Situation Demand Distribution Solution 6 Agenda Current Business Model Demand Distribution Proposed Solution Summary 21.07.2015 7 Data Extraction Chemicals and “Miscellaneous” items removed from the demand data Shipments with 0 freight costs removed Demand available in the form of units and yards. Conversion of data to fraction of a 53 ft. trailer: Item Units/Truckload Broadloom 6000 yds Mats 800 units Rugs 700 units Tiles 4800 yds Demand aggregated by 3-digit ZIP code Demand averaged by number of days shipped to obtain a daily fraction of TL 21.07.2015 Current Situation Demand Distribution Solution 8 Demand Aggregation by 3 Digit ZIP 21.07.2015 Current Situation Demand Distribution Solution 9 Agenda Current Business Model Demand Distribution Proposed Solution Summary 21.07.2015 10 Data Preparation for the Model Distances Calculated from Lagrange to all 3-digit ZIP codes of demand points Calculated to and from all 3-digit ZIP codes of demand points Freight Costs TL Costs calculated from existing TL shipments in customer data. LTL Costs calculated for shipments of different sizes and for different distances traveled. For example: Shipment Size(TL) Cost Equation 0.001 - 0.002 6.77 + TL* 6819.82 + Dist * 0.0074 <0.001 5.15 + TL* 15290 + Dist * 0.002 21.07.2015 Current Situation Demand Distribution Solution 11 Restrictions Discard extremely small orders Discard orders that fill over 0.6 of a truck Restrict assignment of demand points to hubs within a 500 mile radius on the west and a 300 mile radius on the east This created two sub-models – one for NE and one for West NE WEST 21.07.2015 Current Situation Demand Distribution Solution 12 Model Decision Variables xij = 21.07.2015 1 0 if customer j is assigned to hub i otherwise 1 yi = 0 if hub i is opened 1 wj = 0 if customer j is served directly from Lagrange otherwise otherwise Current Situation Demand Distribution Solution 13 Model Parameters LTLcij = Less-than-truck load cost for shipping from hub i to customer j TLci = Truck load cost for the shipment that goes from Lagrange to hub i LTLcj = Less-than-truck load cost for shipping from Lagrange to customer j Demandj = Demand of customer j 21.07.2015 Current Situation Demand Distribution Solution 14 Model z Min i Subject to: j xij LTL cos t ij yi * TL cos t i 500 * yi w j * LTL cos tLagrange j j i i x ij w j 1 i xij yi x ij j i, j * demand j 0.7 * yi i j xij = binary 21.07.2015 Current Situation yi = binary wj = binary Demand Distribution Solution 15 Results - North East The model recommends the opening of two hubs in the North East region located at ZIP codes 023 and 231 023 Assigned to 023 (Boston area) Assigned to 231 (Richmond area) 231 Assigned to 302 (Lagrange) 302 - Lagrange 21.07.2015 Current Situation Demand Distribution Solution 16 Results - North East Projected cost savings from consolidation: Daily Minimum Savings TL @ 0.9 TL Annual Savings @ 0.9 TL & 250 Days Ideal TL Current Demand 023 (Boston) 0.9 0.6 0.78 $201.31 $50,326 231 (Richmond) 0.9 0.73 0.76 $187.73 $46,932 Hub 21.07.2015 Current Situation Demand Distribution Solution 17 Results - West The model recommends the opening of two hubs in the western region located at ZIP codes 752 and 850 850 752 Assigned to 752 (Dallas area) Assigned to 850 (Phoenix area) 21.07.2015 Current Situation Demand Distribution Solution 18 Results - West Projected cost savings from consolidation: Daily Minimum Savings TL @ 0.9 TL Annual Savings @ 0.9 TL & 250 Days Hub Ideal TL Current Demand 752 (Dallas) 0.9 0.35 0.71 $111.41 $27,853 850 (Phoenix) 0.9 0.77 0.62 $638.30 $159,576 21.07.2015 Current Situation Demand Distribution Solution 19 Agenda Current Business Model Demand Distribution Proposed Solution Summary 21.07.2015 20 Summary There is opportunity to consolidate shipments for projected annual savings of $284,687 ($187,429 from the Western region and $97,258 from the North-Eastern region) Orders that can be shipped as parcels or can fill a truck by themselves should not be consolidated with other shipments On any given day, savings can be achieved by consolidating to a hub if the minimum requirement for that hub is met. Eg. 0.71 of a TL for 752 (Dallas) Next Steps: Evaluate vehicle routing options among multiple hubs 21.07.2015 21 Questions? 21.07.2015 22