Ford Motor Company’sFord Motor Company’sFinished Vehicle Distribution SystemFinished Vehicle Distribution System

April 2001April 2001

Ellen EwingProject DirectorUPS Logistics

Dr. John Vande VateExec. Director EMILISyE Georgia Tech

OutlineOutline

Introduction

1999 Environment

Solution Approach

Network Design

Car Tracker

Implement New Strategy

Results to Date

Summary

Objectives/MotivationObjectives/Motivation

Novel application of cross-docking: Rail-to-Rail

Cross-docking for Speed

Role of modeling

Role of information

Network Management

Competitive NecessityCompetitive Necessity

The new BMW Sales and Production System

Financial Incentives: Capital Utilization

– In 1996

– Ford produced 3.9 million vehicles in the US– Avg. transit time 15+ days– Avg. vehicle revenue $18,000– Value of pipeline inventory: > $2.8 Billion– One day reduced transit time:

» $190 Million reduction in pipeline inv.» 1400 fewer railcars

The Need for SpeedThe Need for Speed

The Need for SpeedThe Need for Speed

Demand for land• 22 Plants• 54 Destination Ramps• ~1,200 Load lanes• ~8,400 vehicles waiting at plants• $166 Million in inventory

The Need for SpeedThe Need for Speed

Other Incentives Damage

Flexibility

Origin RampDeparture

Dealer

Arrival at Dealer

InterchangePoint

This diagram represents most of themovements of Ford vehicles.

Copyright 2000. UPS Logistics Inc., All Rights ReservedLast Updated: 8/30/00

FORDTRANSPORTATION

NETWORK OVERVIEW

Destination Ramp Arrival

VehicleForecast

ProductionBegins

VehicleReleased

Origin RampDeparture

Dealer

Arrival at Dealer

InterchangePoint

This diagram represents most of themovements of Ford vehicles.

Copyright 2000. UPS Logistics Inc., All Rights ReservedLast Updated: 8/30/00

FORDTRANSPORTATION

NETWORK OVERVIEW

Destination Ramp Arrival

VehicleForecast

ProductionBegins

VehicleReleased

The PriceThe Price

• Inventory at the cross dock• Added distance traveled• Handling at the cross dock• Capital costs of the cross dock

1999 Vehicle Network Delivery Conditions1999 Vehicle Network Delivery Conditions

Record production levels

Demand shift from cars to trucks

Overburdened rail infrastructure

Deteriorating rail service

Shortage of transport capacity

Mixing centers

15+ day transit time

High inventory cost

Dissatisfied customers

High 1999 Level StatisticsHigh 1999 Level Statistics

Assembly plants 22

Mixing centers 5

Destination rail ramps 54

Dealer locations 6,000

Production volume 4.4 Mil./Year

Freight expense $1.5 Bil.

Dec. ‘99 avg. transit time 16.8 Days

Pipeline Inventory $4.1 Bil.

NEVADA

OREGON IDAHO

CALIFORNIA

WASHINGTON

VT. N.H.

R.I.

MASS.

MAINE

MONTANA

WYOMING

UTAH

ARIZONA

NEW MEXICO

COLORADO

NEBRASKA

MINNESOTA

IOWA

KANSAS

TEXAS

OKLAHOMA

MISSOURI

ARKANSAS

TENNESSEE

KENTUCKY

ILLINOIS

WISCONSIN

MICHIGAN

INDIANA

OHIO

GEORGIA

VIRGINIA

FLORIDA

NEW YORK

MD. DEL.

N.J.

HAWAII

W.VA.

MISS.

N. DAKOTA

S. DAKOTA

PENN.

LA.

ALA. S. CAROLINA

N. CAROLINA

CT.

U N I T E D S T A T E S

C A N A D A

M E X I C OGULF OF MEXICO

OCEANATLANTIC

OCEANPACIFIC

Mixing Center Origin Plant Groupings Destination Ramp Planned Ramp Closure

Edison

Norfolk

Atlanta

Kentucky

Ohio

St Louis

CanadaSt Paul

Michigan

Chicago

Kansas City

15% of all vehicles go Haulaway Direct to Dealer within 200-300 Miles of the Assembly Plant

85% of all Vehicles go via Rail to a Hub (Mixing Center or Destination Ramp)

Ford Distribution NetworkFord Distribution Network

Old Delivery DesignOld Delivery Design

Push Network

Vendor sub systems optimized for individual segments

Little to no visibility

Mixing Centers not used effectively

Ford GoalsFord Goals

Speed 1999: Average 15 days transit time

Goal: Maximum of 8 days transit time

Precision 1998/1999: 37% on time within 1 week

Goal: 95% on time within 1 day

Visibility 100 % Internet vehicle tracking from plant release to dealer

delivery

Guide the flow of vehicles

Respond to variations

Inform customers

Why UPS Logistics Group Chosen?Why UPS Logistics Group Chosen?

Global logistics expertise

State-of-the-art technology

Rail experience

Brand identity

Financial stability

Bench strength

Solution ProcessSolution Process

Assemble team of experienced operations and network planning personnel from Ford and UPS

Evaluate current system - process mapping

Develop a new “no constraint” vision for the industry

Design a new network

Create a new organization

Implement the new network

Tools Used for ModelingTools Used for Modeling

Supply Chain Strategist from i2 Technologies

Cost Modeling Cost impact measured for each sort - route

combination

Sourcing Determined optimum sourcing route from ramp to

dealer

Plant

Mixing Center

Origin Ramp

Dest. Ramp

MC Ramp

Ford LocationsFord Locations

Sourcing Solution ProcessSourcing Solution Process

Input dealer demand volumes by product family and plant location

Create candidate lanes between dealers and closest ramps

Run models to determine optimum ramp to dealer sourcing

Dealers sourced by multiple

ramps

Old Ramp AllocationSouthern USOld Ramp AllocationSouthern US

Dealers sourced by single ramps

New Ramp AllocationSouthern USNew Ramp AllocationSouthern US

New Allocation of Dealers to RampMainland USNew Allocation of Dealers to RampMainland US

Cost Modeling Solution ProcessCost Modeling Solution Process

Assign each plant to a mixing center

Determine rail shipment sizes for all rail lanes

Determine shipments that move direct from plant to dealer

Obtain carrier rates and perform regression

analysis of historical shipments

Reduced plant

destinations

New Rail LanesNew Rail Lanes

NEVADA

OREGON IDAHO

CALIFORNIA

WASHINGTON

VT. N.H.

R.I.

MASS.

MAINE

MONTANA

WYOMING

UTAH

ARIZONA

NEW MEXICO

COLORADO

NEBRASKA

MINNESOTA

IOWA

KANSAS

TEXAS

OKLAHOMA

MISSOURI

ARKANSAS

TENNESSEE

KENTUCKY

ILLINOIS

WISCONSIN

MICHIGAN

INDIANA

OHIO

GEORGIA

VIRGINIA

FLORIDA

NEW YORK

MD. DEL.

N.J.

HAWAII

W.VA.

MISS.

N. DAKOTA

S. DAKOTA

PENN.

LA.

ALA. S. CAROLINA

N. CAROLINA

CT.

U N I T E D S T A T E S

C A N A D A

M E X I C OGULF OF MEXICO

OCEANATLANTIC

OCEANPACIFIC

Mixing Centers Destination Ramps

Union Pacific CSXT FEC

BNSF Canadian Pacific Car Haul to Ramp

Norfolk Southern Canadian National

Edison

Norfolk

Atlanta

Kentucky

Ohio

St Louis

Canada

St Paul

Michigan

Chicago

Kansas City

Final Outbound Rail Network with CarriersFinal Outbound Rail Network with Carriers

CharacteristicsCharacteristics

Shipment tracking - plant to dealer

Shipment events - customizable based on route specifications

Exception event tracking - alerts & alarms

Financial event tracking

Similar to UPS Package Tracking System

Value AddValue Add

Management of supply chain down to individual VINs

Alerts & alarms - “pipeline bottlenecks”

Management of inventory levels

Enhanced communications

Improved accountability of rail provider, mixing center, and convoy carrier resources

Better reporting mechanism

New OrganizationNew Organization

Announced new strategic alliance on February 2, 2000Launched on March 1Manage finished vehicle delivery network

Network design and planning

Carrier selection and rate negotiation

Carrier performance management

Daily network operations

Freight bill payment and claims processing

Staffed by Ford and UPS Autogistics personnel

Offices in Atlanta and Detroit

Operations personnel in key field locations

ResultsResults Cut vehicle transit time by 26% or 4 days

Initiative is 6 months ahead of time

$1 billion savings in vehicle inventory

$125 million savings in inventory carrying costs

Avoid bottlenecks

Reduce assets in supply chain

Less damage

Improved inventory turns at dealer

By end of Q1 2001 network will be fully operational in US, Canada and Mexico

Benefits Benefits

Ford

Dealers

Rail Carriers Auto Haulers

Benefits - FordBenefits - Ford

On-time delivery

Supply chain visibility

Competitive edge

Single network manager

Improved accountability

Cost control

Benefits - DealersBenefits - Dealers

Reduced inventories Increased customer satisfaction

Benefits - Rail CarriersBenefits - Rail Carriers

Improved equipment utilization (reduced capital expenditures) Visibility and planning capabilities Synergies with existing UPS traffic Increased cooperation

Benefits - Auto HaulersBenefits - Auto Haulers

Expanded dealer delivery hours Visibility and planning capability Improved asset utilization Increased cooperation

Status ReportStatus Report

Before

Sub Optimization

Little Visibility

Mixing Center Concept

Rail Car Shortage

15 Day Network

Now

Car Tracker for Operations

Increased Bypass Loads

Clean Ramps & Mixing Centers

24 Hour monitoring

12 Day Network

Future

Transit Merge

Add Customers

Daily Dedicated Rail Networks

Too Many Railcars

Less than 8 Day Network

The Whole PictureThe Whole Picture

Mixing Centers

Network design and planning

Carrier selection and rate negotiation

Tracking

Daily network operations

Carrier performance management