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Milliken Lagrange ISYE 6203 PROJECT

“Evaluation of Consolidation Strategy for LTL Shipments”

Chunhao GAO

Halil Ozan GOZBASI

Hashai PAPNEJA

Jin SHI

Lin WAN

Jie ZHU

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Company Overview

Textile Manufacturing Industry Produces finished fabrics for rugs and

carpets Synthetic fabrics used in such goods as

apparel, automobiles, tennis balls, and specialty textiles

Milliken operates more than 60 plants worldwide

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Project Topic

Evaluation of consolidation option for Less-Than-Truckload (LTL) shipments

Plant in Lagrange,GA Customers, almost every state in USA

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Less-Than-Truckloadvs. FTL Consolidation

Small shipments Send Directly from Plant

to Customers

LTL

LTL

LTL

LTL

FTL

Customer 1

Customer 2

Plant

DC

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Solution Approach

Data Analysis Cost Structure

Parcel, LTL, FTL Aggregating Customers

3-Zip Customers (30332, 30345, 30358)-> 303) Reduce Number of Customers

Focus on customers which constitute 90% of the transportation cost

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Data Analysis- Cost Structure

Cost Structure

15%

72%

13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Parcel FTL LTL

Shipment Type

Cost

Parcel

FTL

LTL

Consolidation Strategy to decrease LTL costs

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Data Analysis - Aggregation

Number of 3-Zip Customers: 792

90% Tail : 325

Size reduced by ~60%

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Mapping the Demand by Total Freight

demand distribution by Total_Freight13.7% to 1 (75)7.1% to 13.7% (64)5.0% to 7.1% (60)3.3% to 5.0% (70)0% to 3.3% (74)

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Mapping the Demand by Total Trucks

demand distribution by Total_#Trucks3.3 to 19.2 (79)1.7 to 3.3 (68)1 to 1.7 (56)0.6 to 1 (58)0.1 to 0.6 (82)

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Candidate DC Selection

demand distribution by Total_Freight13.7% to 1 (75)7.1% to 13.7% (64)5.0% to 7.1% (60)3.3% to 5.0% (70)0% to 3.3% (74)

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Model Building

Parameters DCs candidate ofindex :i

customers zipdigit -3 ofindex :j rate FTL :f ($/mile)

i DC plant to from Distance :id (mile)

jcustomer toi DC from rate LTL :ijl ($)

DC selected aon load minimum :c (truck-load) truckafor factor load :lf

jcustomer toshipments ofamount :jt (truck-load)

daysshipment ofnumber :DAYS frequency shipment on rate service :r

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Model Building

Decision Variables

otherwise 0

selected is DCith theif 1iY

otherwise 0

i DC toassigned is jcustomer if 1ijX

i DC plant to from needed Trucks ofNumber iZ

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Objective & Constraints

i j

ijiji

ii lXdfZMinimize

Subject to DC a toassigned iscustomer Each 1 jX

iij

i DC toassigned iscustomer any if 1 bemust Y , ijiYX iij

selected is i DC if i DCby served be illcustomer w 1least At iXYj

iji

loadenough hasit ifonly chosen be tois DCA iYctX ij

jij

Number of trucks needed for shipments consolidated at DC ii ij jj

lf Z X t i

frequencyshipment by i DCat needed trucksofNumber iYrDAYSZ ii

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Parameter Estimation

CZARLITE LTL Pricing Software Prices from each candidate DC to every 3-digit

customer region which are closer than 700 miles.

For numerical comparability

We have real LTL from Plant to CustomersDiscount_Rate= Real_LTL_Cost / CZARLITE LTL Cost

Update all prices by

LTL(model) Cost= CZARLITE LTL Cost* Discount_Rate

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Results

Consolidation vs Current Strategy

-9.07%

9.21%

7.74%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

1 2 3 4 5

Frequency (Shipments / Week)

Cost

Red

uct

ion

Benefits from Consolidation Strategy is Related to Frequency

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Frequency & Consolidation

Low frequency increases consolidation of loads into each truckLess number of trucks are used in consolidation

0

0.2

0.4

0.6

0.8

1

1.2

Frequency 2 Frequency 3 Frequency 5

Frequency-Costs

FTL LTL

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Frequency 3:

Shipment Type Region Size

LTL from Plant 59%

DC1 in NC 17%

DC2 in AL 11%

DC3 in CA 12%

Total Assignment to DCs

41%

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Frequency 3: LTL from Plant

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Frequency 3: DC1 in NC

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Frequency 3: DC2 in AL

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Frequency 3: DC3 in CA

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Implementation

First Approach: Ship from Plant to DC`s in a pre-agreed

frequency-regardless of the loads Second Approach:

Estimate a Threshold Level for each DC Check accumulated shipments

If total load is greater than Threshold Send a Full Truck to DC

Else LTL to customer from Plant

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Conclusion & Future Work

Develop implementation techniques Estimation of Threshold Levels

Take more product types into consideration (such as chemicals)

Try to use LTL rates from current carriers instead of Czarlite for a more accurate model solution

Consider other costs related to consolidation DC space cost Material Handling cost

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Thanks..

Milliken Company Prof. Vande Vate

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Additional Slides

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Frequency 2: LTL from Plant

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Frequency 2: DC1 in NC

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Frequency 2: DC2 in AL

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Frequency 1: DC3 in CA