Facility Location Problems At Schneider Logistics Ted Gifford

Facility Location Problems At Schneider Logistics Ted Gifford Director – Research Group Schneider National Inc

General Background • Subsidiary of Schneider National – Largest truckload carrier in North America, 2001 Revenue $2. 4 B, 14, 000 tractors/drivers, 42, 000 trailers • SLI operates in 38 countries, employs 1, 200 associates • Freight Management Services – Global, Multi-Modal Transportation - Manage $2. 5 B purchased transportation • Engineering Services – Network and Route Design – Facility Location – Supply Chain Engineering • Payment Services & Bid Management – Pay $7. 5 billion third party invoices – Combined Value Auctions

Facility Location Design at SLI • 12 -15 distinct problems / year • 8 – 10 engineers participate, 30 engineers total • Problem size Average Max – Mfg facilities 2 -10 20 – DC sites 15 -30 50 – Customers 200 -300 500 – Products 5 -10 25 • Major Industries/Clients – Consumer Products – KC (US & Europe) – Manufacturing – Otis Elevator (US & Europe) – Automotive - Ford (US & Europe) & GM – Paper products – Polyone – Home Delivery (food) – Schwan’s

Problem Types

Operational Issues • Most problems are one-off -- A specific client request which often has unique complications or side constraints. • Time & budget constraints often argue against sophistication or pursuit of a mathematically elegant solution. • Limited availability or poor quality of data is often the main challenge and greatest consumer of effort. • Realistic cost models are often either complex or illdefined. Estimates of actual costs are highly variable. • Service requirements are often ambiguous. Cost/service tradeoffs are unclearly specified. • Forecasts of expected demand exhibit considerable uncertainty.

Current Process • Access Database / Excel with VB Add-ins – Basic user interface – Navigation per problem taxonomy – Data import & maintenance • AMPL w/ CPLEX – MIP models • Set Covering • P-center • Fixed Charge • P-median • Special algorithms

Problem Taxonomy - 1

Problem Taxonomy - 2

Use of off-the-shelf software • Some experience with CAPS Logic Tools, SLIM 2000, I 2 Strategist • Common difficulties – Underlying model and MIP Formulation not visible to user – Limited flexibility – rigid parameter options – Often necessary to “trick” the system for some simple problems – Poor performance for problem structures not anticipated by the model • Example - CAPS several hours • Excel add-in 15 seconds • High cost per use – not general enough to handle all problem types

Factors which tend to complicate problems • • • Ill-defined criteria Inconsistent or missing data Large number of candidate facilities Single sourcing requirements Disjunctive constraints Reverse logistics – container flow back Echelon skipping Minimum flow constraints Piecewise linear (or worse) cost functions

Current Development Activities • Monte Carlo Simulation – Risk Analysis – Probability Distributions for Cost & Demand • Constraint Programming – ILOG Solver / Dispatcher /OPL – Local Search Heuristics – Constraint Propagation / Domain Reduction – Index variables over enumerated sets – Special Purpose Algorithms for Global Constraints • Conversion of AMPL to OPL – Convert Excel Solver routines – Utilize global & set constraints – Hybrid optimization – Cooperative Solvers