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Wal-Mart Logistics Network LT John Harrop and LT Aaron Baker

Wal-Mart Logistics Network LT John Harrop and LT Aaron Baker. Background (US 2010). 3708 Retail Units 117 Distribution Centers 1.8 million employees. Background (US 2010). Annual Sales $258.3 Billion Annual Operating expenses $15 Billion Annual Transportation Costs $3 Billion.

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Wal-Mart Logistics Network LT John Harrop and LT Aaron Baker

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  1. Wal-Mart Logistics Network LT John Harrop and LT Aaron Baker

  2. Background (US 2010) • 3708 Retail Units • 117 Distribution Centers • 1.8 million employees

  3. Background (US 2010) • Annual Sales $258.3 Billion • Annual Operating expenses $15 Billion • Annual Transportation Costs $3 Billion

  4. Background • Wal-Mart Imports $25-$30 Billion of Chinese goods annually • More than many countries • Russia • Australia • Canada

  5. Background • 8010 Driver Associates • 7150 Tractors • 46,650 Trailers

  6. Background • 1 Billion Miles/Year • 1.8 Million Store Deliveries; • 1.3 Million Deliveries from Suppliers

  7. Model Assumptions • $3 per mile Transportation Cost (includes cost of time at 65 mph) • $83.68 per hour • $50,000 in goods, value per container • $1500, cost to ship 1 container of goods from China to California. • Demand across network is 1317 cntrs./day

  8. Model Assumptions (cont.) • 3 Chinese suppliers • Each with supply of 350 containers/day • Shipping cost of $1500/container

  9. Model Assumptions (cont.) • 3 U.S. Suppliers • Each with Supply of 200 containers/day • Shipping cost of $860/container • $2000 import penalty added • Total cost $2860/container

  10. Model Assumptions (cont.) • Vancouver added as a back up port for Mira Loma. • Can receive imports from China if needed • Transportation cost according to actual mileage

  11. Vancouver U.S. Suppliers Chinese Suppliers Sams DC 6493 Port Mira Loma Import DC

  12. Supply (-) • Nodes/Arcs Chinese Suppliers Attack Arcs Port start Supply (-) U.S. suppliers Demand (+) Wmt St Wmt End Port End Imp DC ST Wmt End Wmt St RDC End RDC start Imp DC End Wmt End Wmt St Demand (+)

  13. Measure of Effectiveness • Solve a Min Cost Flow model using estimated costs to find the most cost effective way to meet all demands from DCs and individual stores on a given day.

  14. Vulnerabilities • Wal-Mart Imports $25 to $30 billion annually from china • Protesters might try to disrupt flow from Chinese Suppliers to shift business to U.S. merchants

  15. Results: First Run, Protest Causes 3 Hour Delay • No Interdictions: • Total transportation cost to meet demand is $3.6 million • 1050 containers from Chinese suppliers (Entire Supply) • 267 from U.S. suppliers

  16. Results: First Run, Protest Causes 3 Hour Delay • 1 Protest: • Routes unchanged • Protest location: • Port Mira Loma • Transportation cost increases by $263,592

  17. U.S. Suppliers Chinese Suppliers Sams DC 6493 Port Mira Loma Import DC

  18. Results: First Run, Protest Causes 3 Hour Delay • 2 Protests: • Routes unch. • Protest locations: • Port Mira Loma • CA Imports DC • Transportation cost increases by $527,184

  19. U.S. Suppliers Chinese Suppliers Sams DC 6493 Port Mira Loma Import DC

  20. Results: First Run, Protest Causes 3 Hour Delay • 3 Protests: • Routes unch. • Protest locations: • Port Mira Loma • CA Imports DC • RDC 7033 • Transportation cost increases by $723,497

  21. U.S. Suppliers Chinese Suppliers Sams DC 6493 Port Mira Loma Import DC

  22. Results: First Run, Protest Causes 3 Hour Delay • 4 Protests: • Routes unch. • Protest locations: • Port Mira Loma • CA Imports DC • RDC 7033 • South Sams DC • Transportation cost increases by $790,776

  23. U.S. Suppliers Chinese Suppliers Sams DC 6493 Port Mira Loma Import DC

  24. Results: First Run, Protest Causes 3 Hour Delay • 5 Protests: • Routes unch. • Protest locations: • Port Mira Loma • CA Imports DC • RDC 7033 • South Sams DC • RDC 6493 • Transportation cost increases by $815,854

  25. U.S. Suppliers Chinese Suppliers Sams DC 6493 Port Mira Loma Import DC

  26. Results: First Run, Protest Causes 3 Hour Delay • 6 Protests: • 45% increase in Supply from U.S. • Protest locations: • Port Mira Loma • CA Imports DC • RDC 7033 • South Sams DC • RDC 7047 • Transportation cost increases by $847,133

  27. U.S. Suppliers Chinese Suppliers Sams DC 6493 Port Mira Loma Import DC

  28. Operator Resilience curve Number of Protests

  29. Operator Resilience curve • Operator Resilience curve • Steady cost increases from 1 – 6 protests • Increase in cost of $200K for each protest • First two attacks were on the busiest nodes • Port Mira Loma & Imports DC • Costs gradually drop off as number of attacks increases because only lower value attacks are left and supply begins to shift more to U.S. suppliers.

  30. Results: Second Run, Protest Causes 24 Hour Delay • No Interdictions: • Same as first Run • Total transportation cost to meet demand is $3.6 million • 1050 containers from Chinese suppliers (Entire Supply) • 267 from U.S. suppliers

  31. Results: Second Run, Protest Causes 24 Hour Delay • 1 Protest: • Protest location: • Port Mira Loma • Now use China to Vancouver Route • Only 717 containers from China. • Transportation cost increases by $1.97 million/day

  32. Vancouver U.S. Suppliers Chinese Suppliers Sams DC 6493 Port Mira Loma Import DC

  33. Results: Second Run, Protest Causes 24 Hour Delay • 2 Protest: • Protest location: • Port Mira Loma • Vancouver • Imports from China Stopped completely. • 16% of demand cannot be met • Transportation cost increases by $2.1 million/day

  34. Vancouver U.S. Suppliers Chinese Suppliers Sams DC 6493 Port Mira Loma Import DC

  35. Operator Resilience curve $ Mil Number of Protests

  36. Operator Resilience curve • Operator Resilience curve • After 1 protest, supply from China is reduced from 1050 containers/day to 717. • After 2 protests, supply from China is cutoff completely • Additional cost to use U.S. suppliers instead of Chinese suppliers for same goods is $2 million/day

  37. Operator Resilience curve • Alternate Model 1 • Created 3 suppliers in US and 3 suppliers in China with slightly different prices. • Reduced competitive disadvantage of US suppliers from $2000 to an average of $1500 • Changed cost of 24 hour delay from nC to just the cost of the delayed resources (assumed longer term supply chain)

  38. Operator Resilience curve $ Mil Tons Number of Protests

  39. Operator Resilience curve • Operator Resilience curve • Steady cost increases from 1 – 6 protests • Increase in cost of $250K for each protest • First two attacks were on the busiest nodes • Port Mira Loma & Imports DC • US suppliers see immediate increase in demand, but run out of supply after 3 attacks. If US suppliers were available, it would reduce Walmart costs and provide more US sales. • Jumps in cost reflect cost increases to Chinese supply, and are mitigated when US supply is available.

  40. Operator Resilience curve $ Mil Number of Protests

  41. Operator Resilience curve • Operator Resilience curve • After 1 protest, supply from China is reduced from 1050 containers/day to 717. US suppliers reach max capacity immediately • After 2 protests, supply from China is diverted to Vancouver port. • 3rd attack is on Vancouver, which forces supply back to Port Mira Loma, at greatly increased cost

  42. Operator Resilience curve • 2nd Alternate Model • Added Portland port, restored average competitive disadvantage of US suppliers to $2000, increased range of supplier costs. • With a 3 hour delay, only one US supplier overcame competitive disadvantage (max US supply was 400/600), and Portland was never used. • With a 24 hour delay, US supply was maxed at first blockage of Port Mira Loma, and Portland was used at that point, but was second port blockaded. Then a second blockage at Mira Loma, and then Vancouver, at which point delay costs were almost $3 million

  43. Operator Resilience curve • Conclusion & Recommendations • Port Mira Loma, Vancouver, and CA Imports DC are the most likely places to cause a major disruption. • Goods go from Port Mira Loma to Imports DC • Coordinate with local law enforcement to ensure a protest at the Port can be contained quickly. • Use another DC as a back up to receive import goods if the Import DC is blocked. • Location of alternate port is less important than reliability of network, recruiting additional US suppliers would be key to keeping costs low during a disruption.

  44. Operator Resilience curve • Future work • Expand the network to encompass the entire U.S. • Assess actual cost difference between US and Chinese suppliers, and available supplier capacity. • Develop a metric to account for the “cost” of protesting to the protesters to estimate the amount of time a disruption would last.

  45. References • References • http://www.epi.org/publication/ib235/ • Wal-Mart 2010 notice to shareholders. • http://www.etrucker.com/2009/01/05/new-data-on-trucking-costs-available/

  46. References Questions ?????????

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