Lawrence D. Burns

Distribution Strategies that Minimize Transportation and Inventory Costs

This paper develops an analytic method for minimizing the cost of distributing freight by truck from a supplier to many customers. It derives formulas for transportation and inventory costs, and determines the optimal trade-off between these costs. The paper analyzes and compares two distribution strategies: direct shipping i.e., shipping separate loads to each customer and peddling i.e., dispatching trucks that deliver items to more than one customer per load. The cost trade-off in each strategy depends on shipment size. Our results indicate that, for direct shipping, the optimal shipment size is given by the economic order quantity EOQ model, while for peddling, the optimal shipment size is a full truck. The peddling cost trade-off also depends on the number of customers included on a peddling route. This trade-off is evaluated analytically and graphically. The focus of this paper is on an analytic approach to solving distribution problems. Explicit formulas are obtained in terms of a few easily measurable parameters. These formulas require the spatial density of customers, rather than the precise locations of every customer. This approach simplifies distribution problems substantially while providing sufficient accuracy for practical applications. It allows cost trade-offs to be evaluated quickly using a hand calculator, avoiding the need for computer algorithms and mathematical programming techniques. It also facilitates sensitivity analyses that indicate how parameter value changes affect costs and operating strategies.

ANALYZING TRADE-OFFS BETWEEN TRANSPORTATION, INVENTORY AND PRODUCTION COSTS ON FREIGHT NETWORKS

The purpose of this paper is to determine optimal shipping strategies (i.e. routes and shipment sizes) on freight networks by analyzing trade-offs between transportation, inventory, and production set-up costs. Networks involving direct shipping, shipping via a consolidation terminal, and a combination of terminal and direct shipping are considered. This paper makes three main contributions. First, an understanding is provided of the interface between transportation and production set-up costs, and of how these costs both affect inventory. Second, conditions are identified that indicate when networks involving direct shipments between many origins and destinations can be analyzed on a link-by-link basis. Finally, a simple optimization method is developed that simultaneously determines optimal routes and shipment sizes for networks with a consolidation terminal and concave cost functions. This method decomposes the network into separate sub-networks, and determines the optimum analytically without the need for mathematical programming techniques.

SYNCHRONIZING PRODUCTION AND TRANSPORTATION SCHEDULES

This paper examines whether it is cost-effective to synchronize production and transportation schedules on a production network. The network considered consists of one origin and many destinations. The origin produces parts that are shipped directly to each destination. Trade-offs between production set-up, freight transportation, and inventory costs on the network are analyzed, and total costs are compared for synchronized and independent schedules. The paper focuses on a simple production system, which can be modeled analytically and which allows the basic issues in synchronizing schedules to be addressed. Results suggest that cost savings from synchronization can be sufficiently large to warrant further research into more realistic albeit more complex production systems.

General Motors Increases Its Production Throughput

In the late 1980s, General Motors Corporation (GM) initiated a long-term project to predict and improve the throughput performance of its production lines to increase productivity throughout its manufacturing operations and provide GM with a strategic competitive advantage. GM quantified throughput performance and focused improvement efforts in the design and operations of its manufacturing systems through coordinated activities in three areas: (1) it developed algorithms for estimating throughput performance, identifying bottlenecks, and optimizing buffer allocation, (2) it installed real-time plant-floor data-collection systems to support the algorithms, and (3) it established common processes for identifying opportunities and implementing performance improvements. Through these activities, GM has increased revenue and saved over 2.1 billion in over 30 vehicle plants and 10 countries.

Truck backhauling on two terminal networks

Truck backhauling reduces empty truck-miles by having drivers haul loads on trips back to their home terminal. This paper 1) examines the impact on backhauling opportunities of terminal locations and directional imbalances in the flow of freight from the terminals, and 2) develops a method for determining which truckloads should be backhauled. Backhauling is studied for two terminals sending full truckloads to many customers under steady-state conditions. This research develops two backhauling models. The first is a continuous model that makes simplifying assumptions about customer locations and travel distances. It results in formulae showing that 1) savings from backhauling increase at a decreasing rate as the directional flow of freight between two terminals becomes more balanced and 2) backhauling is an important, but often ignored, factor in terminal (e.g. trucking terminal, warehouse, or plant) location and supplier selection decisions. The second model is a more general discrete model that determines which loads should be backhauled to minimize empty truck-miles.

THE ROLE OF ACCESSIBILITY IN BASIC TRANSPORTATION CHOICE BEHAVIOR

Accessibility measures reflect the level of service provided by transportation systems to various locations. Basic transportation choice behavior is defined to include those decisions of how many automobiles to own and how many trips to which destinations to make by automobile and by public transit. Here, these decisions are assumed to be made jointly by urban households and are conditional upon residential location decisions. It is the purpose of this paper to explore the role of accessibility as a causal factor in such basic transportation choice behavior.An economic utility theory model of choice behavior is postulated in which the benefits from making trips to specific destinations are reflected by measures of destination attraction. Through determination of utility-maximizing trip frequencies, indirect utility functions are developed which include accessibility concepts. Behavioral implications of these concepts are proposed and contrasts are drawn to accessibility measures used in conventional segregated models of trip distribution, modal choice, and automobile ownership.Sensitivity analyses of alternative empirical definitions of accessibility in the choice model are conducted using data from the Detroit Regional Transportation and Land Use Study — covering counties in southeastern Michigan. These analyses employ a multinomial logit estimation technique and focus on definitions of trip attraction. Results of these analyses indicate that more complicated attraction measures can be replaced by measures involving the proportion of either urban area population or urban area employment within a traffic analysis zone. Also, evidence is found that decision-makers in the case study area consider trips of up to 60 or even 90 minutes duration when evaluating accessibilities offered by alternative public and private transportation systems.

Assembly line job sequencing principles

The document was not made available for publication as part of the conference proceedings.

Designing a New Automotive DNA

The automotive industry stands on the threshold of a new opportunity - an opportunity that stems from the reinvention of the automobile using a new DNA that exchanges the internal combustion engine, petroleum, and mechanical linkages for fuel cells and batteries, hydrogen and electricity, and electronic systems and controls. Electrically driven vehicles and the introduction of advanced electronics and connected vehicle technologies will revolutionize how our vehicles operate, how we interact with them, and how they communicate with each other and the outside world. These new technologies will also, importantly, dramatically change how automobiles are designed and built. In this talk, Dr. Burns will highlight why the new automotive DNA will be paradigm shifting for the industry and address the design challenges and opportunities presented by the requirement for new electrical and electronics-based architectures, systems, and software for our vehicles.

CONSUMER PREFERENCES RELATIVE TO THE PRICE AND NETWORK CAPABILITY OF SMALL URBAN VEHICLES

Preferences of consumers for small urban vehicle concepts differing only with respect to their hypothetical purchase prices and network capabilities (i.e., whether they are capable of operating on expressways, major arterials or local streets) are analyzed using statistical techniques based on psychological scaling theories. Results from these analyses indicate that a vast majority of consumers are not readily willing to give up the accessibility provided by conventional automobiles. More specifically, over the range of hypothetical prices considered here, network capability dominates as a determinant of preferences for vehicle concepts. Also, the ability to operate vehicles on expressways is of utmost importance to consumers.