From Smart Mobility to Supply Chain Management and Back. Ton de Kok School of IE

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1 From Smart Mobility to Supply Chain Management and Back Ton de Kok School of IE

2 Agenda Smart Mobility Supply Chain Management Transport Management Synthesis and outlook 2

3 Smart Mobility Objective Given the demand for mobility from private and public transport, and given safety requirements Minimize travel times, while respecting environmental constraints 3

4 Smart Mobility Options Car-to-Car Communication Efficient use of road by reduction of erratic driving behavior Car-To-Infra Communication Efficient use of road by preventive or corrective signals from traffic management systems to mitigate effect of temporary road congestion Distributed Traffic Management Efficient use of road by informing individual drivers on most favorable route Door-to-door Mobility Management Support individual in selecting optimal combination of transportation modes 4

5 Smart Mobility Options Car-To-Car communication Distributed Traffic Management Jack Joe 5

6 Supply Chain Management Supply Chain Management aims at minimizing capital investments required to deliver a product to the market at the right time at the right place in the right quantity according to customer requirements Supply Chain Management is faced with Ever shorter product life cycles, implying continually changing product portfolio Ever more demanding customer, causing demand volatility Global manufacturing causing substantial delays Ever more companies involved in creating a product causing more complex cross-company communication 6

7 Multi-item multi-echelon systems TUE research of Geert Jan van Houtum and Ton de Kok has lead to Tools to optimize product and service supply chains Coordination mechanisms implemented at high tech companies New research focuses on the impact of servitization on supply chain management Integration of installed base management and supply chain management 7

8 Supply Chain Operations Planning SCOP coordinates all activities in the supply chain Order release Order acceptance Order release frequency is the main coordination design parameter The higher the frequency, the lower the batch stock and safety stock The lower the frequency, the more efficient resources can be used The order release frequency for shipments from supplier to customer to consumer determines the demand for transportation of goods 8

9 Trends in SCM and Logistics Since early 1990 s focus is on speed and responsiveness Shorter delivery times Shorter PLC s Extensive outsourcing to low cost countries masks the de facto increase in inefficiency Longer lead times in the supply chain More waste of scarce resources Focus on speed towards the customer creates inefficient handling and transportation 9

10 Vertical integration en horizontal fragmentation scale scale scale integration PMC-1 integration PMC-2 contract manufacturing warehousing transport 10

11 Network density Low network density results into hub-and-spokes networks C A High network density results in point-to-point networks B A High network density yields high truck utilization, shorter travel times and higher customer service B 11

12 Daganzo to the rescue Carlos Daganzo (Berkeley) has engineered close-tooptimal routing schemes from which explicit (simple) cost expressions have been derived Cost expressions are based on number of destinations, depot distance from destinations, shipment frequencies, truck capacity, fixed and variable transportation costs and destination density 12

13 Daganzo s route design 13

14 Daganzo to the rescue Carlos Daganzo (Berkeley) has engineered close-tooptimal routing schemes from which explicit (simple) cost expressions have been derived Cost expressions are based on number of destinations, depot distance from destinations, shipment frequencies, truck capacity, fixed and variable transportation costs and destination density 14

15 Daganzo to the rescue Carlos Daganzo (Berkeley) has engineered close-tooptimal routing schemes from which explicit (simple) cost expressions have been derived Cost expressions are based on number of destinations, depot distance from destinations, shipment frequencies, truck capacity, fixed and variable transportation costs and destination density In essence it is just the EOQ model 15

16 Applying Daganzo s formula TC # deliveries/week NoC TC 4C TC 16

17 Network density 17

18 Qualitative insights Transportation costs for given customer demand volumes decrease when Density increases Vehicle capacity increases Distance between depot and delivery region decreases Shipment frequency decreases Number of drop points decreases This has implications for collaboration between LSP s 18

19 Impact of scale Increasing scale yields Lower per unit cost Lower per unit setup and process time Lower relative variability Higher resource utilization Resulting into Shorter throughput times Lower inventory 19

20 Horizontal integration scale scale scale PMC-1 PMC-2 warehousing transport contract Ton de Kok, Alumnidag manufacturing 12 april

21 Drivers of horizontal integration Transport network density drives transport efficiency Production volume drives production efficiency Sourcing volume drives transport and production efficiency and lower prices Scale allows to reduce per unit cost of product or service 21

22 Albert Heijn and Bol.com Albert Heijn s home delivery service Albert.nl continued to have too high transportation costs to cover The Netherlands area Last mile issue Too low customer density With increasing internet sales of books and consumer goods grocery deliveries would be cost efficient when integrated into the network of companies like Bol.com With the acquisition of Bol.com AH has a powerful position as customer to last mile networks 22

23 Horizontal Collaboration in FMCG 4C

24 Consortium 24

25 Simplification of today s FMCG logistics Mfg Mfg DC Retailer DC s & X-docks Retail shops Home delivery Out-of- Home stores 25

26 Phase 1 Collaboration between LSP s Mfg Mfg DC Retailer DC Increase economiesof-scale Sharing capacity Retail shops Home delivery FTL Out-of- Home stores 26

27 Phase 2 Collaboration between LSP s and manufacturers Mfg Category X-dock Retailer DC Increase economiesof-scope Sharing Category X-docks Mixed FTL Retailer Ready Racks Retail shops Home delivery Out-of- Home stores 27

28 Phase 3 Collaboration between LSP s, manufacturers and retailers Mfg Horizontal 4C Retailer specific Product combinations on mixed pallets Category DC/ X-dock Vertical 4C Shelf specific deliveries Horizontal 4C Shelf Fill-rate Score Cards Retail shops Home delivery Out-of- Home stores 28

29 Service Network Design TUE research of Tom van Woensel and Ton de Kok on socalled Rich VRP s has lead to new models and methods Time-dependent travel times Stochastic travel times Research of Tom van Woensel and Jan Fransoo has lead to new models and concepts for intermodal transportation Synchromodality Research of Jan Fransoo on mega cities and nano stores provide new insights into impact of urbanization 29

30 SCM and Smart Mobility Horizontal collaboration is only effective when shippers synchronize their shipments to retailer DC s Effectiveness of transportation implies efficiency of transportation The same volume/weight with less vehicles Effective SCM reduces the load on road, rail and water networks Effective transportation management enables modal shift Smart Mobility creates transparency of traffic Expected arrival times more accurate, which enables efficient handling at warehouses and stores Smart Mobility enables environmentally friendly transportation City Logistics 30

31 Outlook Research on optimization of value chain networks and transportation networks will provide insight into potential reduction in vehicles needed Linking quantitative modelling research on SCM and Transportation with research on inter- and intravehicle communication and management can lead to new insights and solutions Given huge investments in vehicles and infrastructure it should be right first time 31

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