wal-mart logistics network lt john harrop and lt aaron baker

Wal-Mart Logistics NetworkLT 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

• Background

• Wal-Mart Imports $25-$30 Billion of Chinese goods annually

• More than many countries– Russia– Australia– Canada

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

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

• 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

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

• 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

• 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

ChineseSuppliers

Port Mira Loma

Import DC

U.S. Suppliers

Sams DC6493

Vancouver

• Nodes/ArcsChinese

Suppliers Port start

RDC start

RDC End

Port End

Imp DC ST

Imp DC End

Wmt St Wmt End

Attack Arcs

Supply (-)

Demand (+)

Demand (+)U.S.

suppliers

Wmt St

Wmt St

Wmt End

Wmt End

Supply (-)

• 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.

• 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

• 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

• Results: First Run, Protest Causes 3 Hour Delay

• 1 Protest: – Routes unchanged– Protest location:• Port Mira Loma

– Transportation cost increases by $263,592

ChineseSuppliers

Port Mira Loma

Import DC

U.S. Suppliers

Sams DC6493

• 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

ChineseSuppliers

Port Mira Loma

Import DC

U.S. Suppliers

Sams DC6493

• 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

ChineseSuppliers

Port Mira Loma

Import DC

U.S. Suppliers

Sams DC6493

• 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

ChineseSuppliers

Port Mira Loma

Import DC

U.S. Suppliers

Sams DC6493

• 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

ChineseSuppliers

Port Mira Loma

Import DC

U.S. Suppliers

Sams DC6493

• 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

ChineseSuppliers

Port Mira Loma

Import DC

U.S. Suppliers

Sams DC6493

Operator Resilience curve

Number of Protests

0 2 4 6 8 10 120

200,000

400,000

600,000

800,000

1,000,000

1,200,000

cost

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.

• 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

• 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

ChineseSuppliers

Port Mira Loma

Import DC

U.S. Suppliers

Sams DC6493

Vancouver

• 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

ChineseSuppliers

Port Mira Loma

Import DC

U.S. Suppliers

Sams DC6493

Vancouver

Operator Resilience curve

Number of Protests

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.51.9

1.95

2

2.05

2.1

2.15

Cost

$ Mil

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

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)

Operator Resilience curve

Number of Protests

$ Mil

1 2 3 4 5 6 7 8 9 10 110.0

100,000.0

200,000.0

300,000.0

400,000.0

500,000.0

600,000.0

700,000.0

800,000.0

900,000.0

0

100

200

300

400

500

600

700

800

900

ussupcost

Tons

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.

Operator Resilience curve

Number of Protests

$ Mil

0.5 1 1.5 2 2.5 3 3.5 4 4.50.0

500,000.0

1,000,000.0

1,500,000.0

2,000,000.0

2,500,000.0

3,000,000.0

3,500,000.0

Cost

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

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

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.

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.

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/

References

Questions?????????