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GLOBAL LOGISTICS,
CAUSES OF VARIATION
Background
Headquartered in Purchase, NY
World’s largest producer of paper and forest
products
Forward integrated into distribution (XPEDX)
Backward integrated into forestry mgt.
Products
papers, packaging products, building
materials, pulp, chemicals
International Shipping
Production facilities located worldwide
bulk is in eastern U.S.
Small margin on paper prevents
shipping large quantities internationally
Pulp makes up largest portion of
international shipments
higher margin allows for more international sales
Example: US to Australia
IP Mills
(Southeast US)
Ocean Freight
30-60 days
Rail 4-10 days
(depends on origin)
Freight Forwarder
(New Orleans)
Sydney, Melbourne,
Brisbane
Closer Look at Ocean Freight
New Orleans to Sydney
Statistics
Mean
Standard Deviation
Range
Minimum
Maximum
# Carriers
38
11
17
31
48
13
New Orleans to Melbourne
Statistics
Mean
Standard Deviation
Range
Minimum
Maximum
# Carriers
43
7
27
26
53
12
Statistics calculated from quoted transit
times for IP’s contracted carriers
Why the large discrepancy between
carriers ?
New Orleans to Brisbane
Statistics
Mean
Standard Deviation
Range
Minimum
Maximum
# Carriers
45
9
28
31
59
13
Carrier Differences
Primary Factor is Resource Allocation
If US to Australia is a primary lane
vessels make the trip non stop
shipments aren’t transferred at an intermediary
port
IF US to Australia is a secondary lane
vessels will stop in an intermediary port (most
likely Asia)
Shipments are transferred to different vessel
before reach final stop
Transit Time Variation by Carrier
Primary Carriers
Much less variable than by
secondary carrier
Typically more expensive
Primary factors
missing departure due to
fumigation requirements
mechanical failure
Human error
Usually no more than 7
days off
Secondary Carriers
More variable
But usually less expensive
Primary factors
Missing connections in
intermediary port
missing departure due to
fumigation requirements
mechanical failure
Human error
Anywhere from 7 -14 days
off
Profile
• Headquartered in Middletown, Ohio.
• A leader in the production of coated and coldrolled carbon and stainless steel products.
• Customers include automobile, appliance,
construction, and distribution and service
centers.
Operations
Operation facilities in
Ashland, Kentucky
Middletown, Ohio
Rockport, Indiana
Strategic partner in Mexico
Hylsamex in Monterrey, Mexico
Transportation Modes
Rail 3-4 days
AKSteel
Plants
1-3 days
Border
Barge 40-50 days
Brownsville, TX
Truck 2-4 days
Rail 1-2 days
Truck 1 day
Hylsamex
Affecting Factors
the time spent in Custom’s to process the
paperwork
the availability of capacity, such as containers,
trucks, and so on
traffic
weather
Smurfit-Stone
New Company (1998) merger of Jefferson
Smurfit Corporation and Stone Container
Corporation
Leading force in the paperboard and paper
packaging industry
Operates approximately 300 facilities
worldwide
Containerboard Mill Division
Operation:
12 kraft linerboard mills, 11 medium mills
Production:
Unbleached kraft linerboard and Medium
Products:
Commodity and specialty paperboards for
conversion into corrugated containers,
folding cartons, and related products.
Corrugated Container Operations
Operation:
More than 150 corrugated container plants
in North America and 33 plants in Europe,
Asia, Australia and South America
Production:
Nation’s largest supplier of corrugated
containers, made linerboard and
corrugating medium (supply by CMD)
Products:
High-quality corrugated containers
Operation between CMD and CCO-Mexico
Rail: From U.S. Mills to Mexican Border
Truck: From Mexican Border to plants
Project Scope:
Rail Operations
Causes of Variability in the Supply Chain
Mills:
Florida
Louisiana
Border:
Weslaco,
Tex
Plants:
Monterrey,
Mexico
From Florida to Mex. Border
Rail Shipments
Data
Avg
StDev
Max
Min
17
13.65
3.55
19.00
7.00
Normal Dist.
From Louisiana Mex. Border
Rail Shipments
Data
Avg
StDev
Max
Min
17
9.76
2.11
13.00
7.00
No Normal Dist.
Causes Of Variation
Supply Chain
Rail:
Not Direct Route
High Demand in Pick Season
Customs:
Shift to Truck
Paperwork
Traffic Congestion
Truck:
Availability
Fibras Quimicas
• Mexican company, Located in Monterrey, Mexico.
• Fibras Quimicas' parent company is Akra.
• Akra's holding company is Alpek.
• Alpek is the petrochemical division of Group Alfa.
• Group Alfa is one of the biggest industrial groups in Mexico.
• Group Alfa is an association of Mexican companies focused on
the diverse and quite varying industry sectors including the steel,
food, petrochemicals, synthetic fibers, aluminum auto parts,
mattresses, carpets and telecommunications.
Fibras Quimicas
Products
Poliester Products :
• Textured Yarns
• Flat Yarns
• Pre-oriented Yarns ( POY )
Final Uses :
• Wrapped Yarns
• Apparel
• Twisted Yarns
• Home Textiles
• Out wear
• Linings
• Narrows
• Upholstery
• Mattress and thicking
• Automotive fabrics
• Comfort fabrics
Operations of Fibras Quimicas
By Truck
Canada 8 to 9 Days
U.S. Eastern Coast 5 to 6 Days
This is where we got
raw data, and where we
will do a more
extensive analysis.
By Ship
Europe 28 to 30 Days
Africa 30 to 32 Days ( Morocco )
Middle East 38 to 40 Days ( Syria )
By Ship
South America 20 to 25 Days
By Truck
Colombia 12 to 15 Days
Central America 10 to 15 Days
Shipping to The United States and Canada
• We were able to gather raw data on 5 U.S.
customers and 2 Canadian customers.
• This customers account for 67% of Fibras
Quimicas sales in the North America
region.
# of
Shipments
up to March
Customer
Location
2000
Blumenthal Mills Inc. Sumter, SC
58
Burke Mills, Inc.
Valdese, NC
19
Culp Weaving Inc.
Monroe, NC
18
Dan River Inc.
Danville, VA
17
Guilford Mills Inc.
Monroe, NC
47
Huntindong Mills
Hawksbury, ON
21
Rayonese Textile Co. St. Jerome, PQ
39
Total
219
Buffer
Inventory
3 weeks
2 weeks
2 weeks
Average
Lead time in Std
Days
Deviation
5.3
0.34
5.1 *
0.74 *
5.9
0.18
6
0.22
5*
0.64 *
8.8
0.13
7.8
0.12
W/O Team W/O Team
drivers Avg drivers Std
Lead time
Deviation
5.3
0.34
5.3
0.21
5.9
0.18
6
0.22
5.2
0.19
8.8
0.13
7.8
0.12
* with the use of Team Drivers
• Team Drivers = the use of two drivers for the same truck ½ the lead time.
• We took out this effect, because it disrupted our data, only use less than
5% of the time ! Higher cost !
Crossing the Mexico – U.S. Border
• One of the greater sources for variability is
crossing the border.
• Although for Canadian shipments, this doesn't
affect that much!
• Crosses at Laredo Texas !
Final
Destination
Canada
The trucks, will
have to wait their turn
to cross, the traffic can
go up to 1 mile..
Final
Destination
U.S.
The Cargo is sealed as
Inbound, and passes
without inspection.
+ Var.
If Inspection needed
(determined randomly by
U.S. Customs)
It can delay the shipment
for one whole day.
The Truck is sent to a big facility,
where it waits for an American
driver, Mexican drivers still
are not allowed to cross the border.
Guilford Mills
• Located in Monroe,
NC.
• Produces
Automotive fabrics
FORD FOCUS.
• 47 Shipments
• Mean 5 Days
• Std Dev. 0.64
• Team drivers, we
took out 4 points,
mean went to 5.2
and std dev. to 0.19
• AKRA uses the same carrier.
• Inventory buffer on
site 2 weeks.
• Lower lead time than Culp, that
is on the same city !
• Pass the Normality
Test.
• Service important to this
customer.
Rayonese Textile
• Located in St.
Jerome, PQ.
• Produces Mattress
& thicking and
upholstery.
• 39 Shipments
• Mean 7.8 Days
• Std Dev. 0.12
• Canadian
Customer
• No Team drivers !
• Fail the Normality
Test.
• AKRA uses different carriers depending
on availability and price!
• The distribution is shifted to the right.
Other Customers
Burke Mills
Culp Weaving
Dan River
• Located in Valdese, NC.
• Located in Monroe, NC.
• Located in Danville, VA.
• Dye yarns and resell them.
• Produces Mattress & thicking
and upholstery.
• Produces Bed in a Bag.
• 19 Shipments
• Mean 5.1 Days
• Std Dev. 0.74
• Team drivers ! took out 2
points mean went to 5.3 days
and std dev. to 0.21
• Pass the Normality Test.
• 18 Shipments
• Mean 5.9 Days
• Std Dev. 0.18
• No Team drivers !
• 17 Shipments
• Mean 6 Days
• Std Dev. 0.22
• No Team drivers !
• Pass the Normality Test.
• Inventory buffer on site 2
weeks.
• Pass the Normality Test.
Bluementhal Mills
• Located in Sumter, SC.
Huntingdon Mills
• Located in Hawksbury, ON.
• Produces Mattress & thicking
and upholstery.
• Produces Polar fleece.
• 58 Shipments
• 21 Shipments
• Mean 8.8 Days
• Std Dev. 0.13
• Canadian Customer
• AKRA uses different
carriers in all of this
customers, depending on
availability and price!
• Mean 5.3 Days
• Std Dev. 0.34
• No Team drivers !
• No Team drivers !
• Inventory Buffer on site 3
weeks.
• Pass the Normality Test.
• Pass the Normality Test.
AKRA's Conclusions
We have found some important factors that affect variability, when
shipping by truck to The United States and Canada.
• Inspection by U.S. Customs.
• Driver availability at the border.
• Using different carriers or using a dedicated carrier, that
reduces variability.
• Traffic jams at border.
• Weather conditions.
Customer
Blumenthal Mills Inc.
Burke Mills, Inc.
Culp Weaving Inc.
Dan River Inc.
Guilford Mills Inc.
Huntindong Mills
Rayonese Textile Co.
Location
Sumter, SC
Valdese, NC
Monroe, NC
Danville, VA
Monroe, NC
Hawksbury, ON
St. Jerome, PQ
Normal Dist.
YES
YES
YES
YES
YES
YES
NO
General Conclusions
Lead-Time Variability
Volume
Costs
Medium
Truck
Mid-Small
Low
Mid-Small
Rail
Mid-Large
Mid-Low
Mid-Large
Low
Vessel
Large
High
Large
Low
Barge
Air
Large
Small
Mid-High
Low
Large
Small
Low
High