wal-mart logistics network lt john harrop and lt aaron baker
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Wal-Mart Logistics Network LT John Harrop and LT Aaron Baker. Background (US 2010). 3708 Retail Units 117 Distribution Centers 1.8 million employees. Background (US 2010). Annual Sales $258.3 Billion Annual Operating expenses $15 Billion Annual Transportation Costs $3 Billion. - PowerPoint PPT PresentationTRANSCRIPT
Wal-Mart Logistics NetworkLT John Harrop and LT Aaron Baker
• Background (US 2010)
• 3708 Retail Units • 117 Distribution Centers • 1.8 million employees
• Background (US 2010)
• Annual Sales $258.3 Billion• Annual Operating expenses $15 Billion• Annual Transportation Costs $3 Billion
• Background
• Wal-Mart Imports $25-$30 Billion of Chinese goods annually
• More than many countries– Russia– Australia– Canada
• Background• 8010 Driver Associates• 7150 Tractors• 46,650 Trailers
• Background• 1 Billion Miles/Year• 1.8 Million Store Deliveries;• 1.3 Million Deliveries from Suppliers
• Model Assumptions• $3 per mile Transportation Cost (includes cost
of time at 65 mph)• $83.68 per hour • $50,000 in goods, value per container• $1500, cost to ship 1 container of goods from
China to California.• Demand across network is 1317 cntrs./day
• Model Assumptions (cont.)• 3 Chinese suppliers– Each with supply of 350 containers/day– Shipping cost of $1500/container
• Model Assumptions (cont.)• 3 U.S. Suppliers– Each with Supply of 200 containers/day– Shipping cost of $860/container– $2000 import penalty added– Total cost $2860/container
• Model Assumptions (cont.)• Vancouver added as a back up port for Mira
Loma.– Can receive imports from China if needed– Transportation cost according to actual mileage
ChineseSuppliers
Port Mira Loma
Import DC
U.S. Suppliers
Sams DC6493
Vancouver
• Nodes/ArcsChinese
Suppliers Port start
RDC start
RDC End
Port End
Imp DC ST
Imp DC End
Wmt St Wmt End
Attack Arcs
Supply (-)
Demand (+)
Demand (+)U.S.
suppliers
Wmt St
Wmt St
Wmt End
Wmt End
Supply (-)
• Measure of Effectiveness
• Solve a Min Cost Flow model using estimated costs to find the most cost effective way to meet all demands from DCs and individual stores on a given day.
• Vulnerabilities• Wal-Mart Imports $25
to $30 billion annually from china
• Protesters might try to disrupt flow from Chinese Suppliers to shift business to U.S. merchants
• Results: First Run, Protest Causes 3 Hour Delay
• No Interdictions:– Total transportation cost to meet demand is $3.6
million– 1050 containers from Chinese suppliers
(Entire Supply)– 267 from U.S. suppliers
• Results: First Run, Protest Causes 3 Hour Delay
• 1 Protest: – Routes unchanged– Protest location:• Port Mira Loma
– Transportation cost increases by $263,592
ChineseSuppliers
Port Mira Loma
Import DC
U.S. Suppliers
Sams DC6493
• Results: First Run, Protest Causes 3 Hour Delay
• 2 Protests:• Routes unch.– Protest locations:• Port Mira Loma• CA Imports DC
– Transportation cost increases by $527,184
ChineseSuppliers
Port Mira Loma
Import DC
U.S. Suppliers
Sams DC6493
• Results: First Run, Protest Causes 3 Hour Delay
• 3 Protests:– Routes unch.– Protest locations:
• Port Mira Loma• CA Imports DC• RDC 7033
– Transportation cost increases by $723,497
ChineseSuppliers
Port Mira Loma
Import DC
U.S. Suppliers
Sams DC6493
• Results: First Run, Protest Causes 3 Hour Delay
• 4 Protests:– Routes unch.– Protest locations:
• Port Mira Loma• CA Imports DC• RDC 7033• South Sams DC
– Transportation cost increases by $790,776
ChineseSuppliers
Port Mira Loma
Import DC
U.S. Suppliers
Sams DC6493
• Results: First Run, Protest Causes 3 Hour Delay• 5 Protests:– Routes unch.– Protest locations:
• Port Mira Loma• CA Imports DC• RDC 7033• South Sams DC• RDC 6493
– Transportation cost increases by $815,854
ChineseSuppliers
Port Mira Loma
Import DC
U.S. Suppliers
Sams DC6493
• Results: First Run, Protest Causes 3 Hour Delay• 6 Protests:– 45% increase in Supply
from U.S.– Protest locations:
• Port Mira Loma• CA Imports DC• RDC 7033• South Sams DC• RDC 7047
– Transportation cost increases by $847,133
ChineseSuppliers
Port Mira Loma
Import DC
U.S. Suppliers
Sams DC6493
Operator Resilience curve
Number of Protests
0 2 4 6 8 10 120
200,000
400,000
600,000
800,000
1,000,000
1,200,000
cost
Operator Resilience curve
• Operator Resilience curve• Steady cost increases from 1 – 6 protests– Increase in cost of $200K for each protest– First two attacks were on the busiest nodes
• Port Mira Loma & Imports DC
• Costs gradually drop off as number of attacks increases because only lower value attacks are left and supply begins to shift more to U.S. suppliers.
• Results: Second Run, Protest Causes 24 Hour Delay
• No Interdictions:– Same as first Run– Total transportation cost to meet demand is $3.6
million– 1050 containers from Chinese suppliers
(Entire Supply)– 267 from U.S. suppliers
• Results: Second Run, Protest Causes 24 Hour Delay
• 1 Protest: – Protest location:
• Port Mira Loma– Now use China to
Vancouver Route– Only 717 containers from
China.– Transportation cost
increases by $1.97 million/day
ChineseSuppliers
Port Mira Loma
Import DC
U.S. Suppliers
Sams DC6493
Vancouver
• Results: Second Run, Protest Causes 24 Hour Delay
• 2 Protest: – Protest location:
• Port Mira Loma• Vancouver
– Imports from China Stopped completely.
– 16% of demand cannot be met
– Transportation cost increases by $2.1 million/day
ChineseSuppliers
Port Mira Loma
Import DC
U.S. Suppliers
Sams DC6493
Vancouver
Operator Resilience curve
Number of Protests
0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.51.9
1.95
2
2.05
2.1
2.15
Cost
$ Mil
Operator Resilience curve
• Operator Resilience curve• After 1 protest, supply from China is reduced
from 1050 containers/day to 717.• After 2 protests, supply from China is cutoff
completely• Additional cost to use U.S. suppliers instead of
Chinese suppliers for same goods is $2 million/day
Operator Resilience curve
• Alternate Model 1• Created 3 suppliers in US and 3 suppliers in
China with slightly different prices.• Reduced competitive disadvantage of US
suppliers from $2000 to an average of $1500• Changed cost of 24 hour delay from nC to just
the cost of the delayed resources (assumed longer term supply chain)
Operator Resilience curve
Number of Protests
$ Mil
1 2 3 4 5 6 7 8 9 10 110.0
100,000.0
200,000.0
300,000.0
400,000.0
500,000.0
600,000.0
700,000.0
800,000.0
900,000.0
0
100
200
300
400
500
600
700
800
900
ussupcost
Tons
Operator Resilience curve• Operator Resilience curve
• Steady cost increases from 1 – 6 protests– Increase in cost of $250K for each protest– First two attacks were on the busiest nodes
• Port Mira Loma & Imports DC
• US suppliers see immediate increase in demand, but run out of supply after 3 attacks. If US suppliers were available, it would reduce Walmart costs and provide more US sales.
• Jumps in cost reflect cost increases to Chinese supply, and are mitigated when US supply is available.
Operator Resilience curve
Number of Protests
$ Mil
0.5 1 1.5 2 2.5 3 3.5 4 4.50.0
500,000.0
1,000,000.0
1,500,000.0
2,000,000.0
2,500,000.0
3,000,000.0
3,500,000.0
Cost
Operator Resilience curve
• Operator Resilience curve• After 1 protest, supply from China is reduced
from 1050 containers/day to 717. US suppliers reach max capacity immediately
• After 2 protests, supply from China is diverted to Vancouver port.
• 3rd attack is on Vancouver, which forces supply back to Port Mira Loma, at greatly increased cost
Operator Resilience curve• 2nd Alternate Model
• Added Portland port, restored average competitive disadvantage of US suppliers to $2000, increased range of supplier costs.
• With a 3 hour delay, only one US supplier overcame competitive disadvantage (max US supply was 400/600), and Portland was never used.
• With a 24 hour delay, US supply was maxed at first blockage of Port Mira Loma, and Portland was used at that point, but was second port blockaded. Then a second blockage at Mira Loma, and then Vancouver, at which point delay costs were almost $3 million
Operator Resilience curve• Conclusion & Recommendations
• Port Mira Loma, Vancouver, and CA Imports DC are the most likely places to cause a major disruption.
• Goods go from Port Mira Loma to Imports DC• Coordinate with local law enforcement to ensure a protest at
the Port can be contained quickly.• Use another DC as a back up to receive import goods if the
Import DC is blocked.• Location of alternate port is less important than reliability of
network, recruiting additional US suppliers would be key to keeping costs low during a disruption.
Operator Resilience curve
• Future work• Expand the network to encompass the entire
U.S.• Assess actual cost difference between US and
Chinese suppliers, and available supplier capacity.
• Develop a metric to account for the “cost” of protesting to the protesters to estimate the amount of time a disruption would last.
References
• References• http://www.epi.org/publication/ib235/• Wal-Mart 2010 notice to shareholders.• http://www.etrucker.com/2009/01/05/new-
data-on-trucking-costs-available/
References
Questions?????????