Figure 1: Synchronization of inbound, internal and outbound movements at central site and contact points between them.
(click here to view a larger version in a separate window)

Today, the handling of inbound logistics at a plant or distribution center is frequently based on dealing with traffic as it arrives, often on a first-come, first-served basis. In many cases this is not efficient and can lead to much wasted time by vehicles queueing at busy sites. Unregulated arrivals can cause congestion and make excessive demands on the unloading and materials handling process.Simple solutions based on limiting vehicle arrivals per hour can spread the work, but this does not take into account the nature of the loads arriving and the processes that have to take place upon arrival. At automotive plants, the whole manufacturing process requires the smooth flow of incoming parts and subassemblies to the production line. Some items only need to go to stores whereas just-in-time and just-in-sequence deliveries must go directly to specific locations in the right order.

This process can be organized and optimized by scheduling vehicle arrivals in synchronization with production requirements and internal material handling capacity. Based on the production schedule, the supplier is advised when and where in the plant the goods are needed. In some cases, the supplier will have goods for several stores or production units within the plant and will require more than one delivery slot in sequence. When a supplier logs into a Web-based application, he is offered a subset of available time slots that match the delivery requirements of his load.

SyncroTESS, developed by the German IT company INFORM (no relation to INFORMS), is a computer system that "intelligently synchronizes time-critical transport operations." Based on the planned arrival of vehicles, SyncroTESS can then schedule the allocation of material handling resources, such as unloading bays, forklifts and other equipment required to unload the goods and get them to their final location, including trucks used for internal movements or inter-factory transfers, resulting in greater throughput of inbound vehicles and gains in efficiency throughout the material handling process.

Figure 2 shows the requirement for unloading resources based on the unregulated arrival of trucks and the savings that can be achieved by organizing the arrival slots to spread the work. These savings are based on reduced resource requirements for internal transport, e.g., forklifts. Significant savings are also realized for the road fleet that spends less waiting time on site. This may result in a reduction in not only the automobile manufacturer's own road fleet cost, but also a reduction in suppliers' costs, allowing for the negotiation of lower delivery charges.

Figure 2: Requirements for unregulated unloading resources and potential savings by organizing arrival slots.

Case Study 1:
From truck point to assembly line at Audi Ingolstadt


The Ingolstadt factory in Germany's Bavarian region is Audi's largest production facility, occupying more than 2 million square meters. Roughly 850 cars leave the assembly line every day. These cars are built to order — a customer may choose from a long list of individual options, including, for example, more than 700 wheel and tire combinations, engine type, color, etc. This leads to an enormous number of variants of the basic models. On average, only 1.5 cars per year leave the factory with the exact same options. As a result, the material requirements are complex and material transports must be precisely synchronized with the production schedule.

To solve this challenging optimization task, Audi is using the SyncroTESS transport management system to manage the internal material flow and optimizes the execution of 60,000 internal transport orders per day. The system schedules transports by fork lifts, internal trucks and other vehicles to roughly 12,000 destinations within the plant. With material on stock for at most three days, the software organizes up to 3,000 stock-in and 4,000 stock-out movements per day.

In addition to being able to handle large numbers of transport orders and stock movements, Audi required that the Ingolstadt factory's transport management system optimize transport "chains" as well as single-step transports. In transport chains, SyncroTESS controls the flow and transport of materials from the parts warehouse to the assembly line. Materials are handed over at loading bays at the warehouse, transported to buffer areas by internal trucks and from there to assembly line by forklifts.

Following a concept study in 2004 and system introduction for internal transport optimization in 2005, the system was fully integrated into Audi's IT in 2006 and is still being extended. Since last year, SyncroTESS is now also scheduling approximately 500 inbound truck transports per day.

Case Study 2:
From assembly line to dealer at VW Mexico


The SyncroTESS transport management system controls and optimizes the finished vehicle logistics for Volkswagen Mexico. Based on the implementation described below, VW and INFORM have been awarded the elog@istics prize 2008 for innovative solutions in logistics by the German Automotive Congress AKJ, a group of industry experts working on concepts and solutions for optimization of automotive supply chains.

"It's already covered 10,000 kilometers with no mileage on the clock," jokes the VW dealer as he hands over the keys of a new Golf Variant that was ordered some weeks ago to its new owner. VW produces not only the Golf Variant, but also the New Beetle and the Jetta in Puebla in Mexico. Every year, 14,400 employees produce around 350,000 vehicles for the worldwide market that roll off the Mexican assembly line. And this is where this case study starts — right after the finished car has been handed over from production to logistics.

The most thorough transport planning possible is of crucial importance to ensure the effectiveness of the global supply chain for finished vehicles. VW Mexico faces up to the challenge of two production types: cars for the European market are mostly built-to-order (BTO) whereas cars for North America and Mexico are mainly built-to-stock (BTS). The demands are therefore quite different: The BTO car has to arrive on the agreed delivery date in the right country and at the correct dealer. Dealers in North America, on the other hand, want to have enough attractive cars in stock so the customer can choose from a wide variety of models and configurations.

This is why VW operates three sites in Mexico: a big yard at the plant in Puebla, an operation for import and export in the port of Veracruz and an export operation in Acapulco. VW works hard to constantly optimize the operations along this supply chain, which is handled mainly by two departments. Traffic & Transport manages the daily operations while a Logistics Planning group, led by Björn Beckmann, is responsible for, what else, logistics planning. In 2005, both departments came to the conclusion that the greatest benefits for further optimization could be gained by introducing a supply chain management system that offered the following features:

• highly integrated in Volkswagen IT;
  
  
• central system for all operations (and stop using a variety of different systems from third-party logistics providers (3PLs);
  
  
• process and system owner should be Volkswagen to assure independence from 3PLs; and
  
  
• AOS ("automize," optimize and synchronize to generate savings by doing more with less).

This is a complex task as the numbers show. The yard in Puebla has a capacity of 11,500 cars, plus 8,000 spaces in an "external yard" close to the plant and the yards in ports, with Veracruz providing a further 12,00 parking spaces. These yards are constantly filled with roughly 1,700 cars from the production in Puebla and import vehicles, the majority of which arrive at Veracruz in vessels from Europe and South America. A glance at these figures shows that the need to constantly ship vehicles out of the yards to their final destination is crucial to operations. "We ship about one train per day with 600 export cars to North America and one to the port in Veracruz," explains Hector Romero, responsible for the yard management in Puebla. On top of that, around 80 to 100 trucks are loaded every day to ship cars to Mexican dealers or to the ports. These so-called "Madrinas" are giant trucks with a capacity of up to 15 vehicles.

"As a result of the large number of cars leaving and entering our operations, most cars do not remain longer than 1.5 days in the yards," explains Beckmann, head of the logistics group.

After an in-depth analysis of the processes and demands of both departments in 2005, VW compiled a requirement specification that was used for a request for proposal with international software vendors in 2006.

After a careful examination of all proposed systems, VW Mexico agreed the best solution would be to use VW's own system, TOMCADS, which had been developed in Wolfsburg, Germany, for the global planning of vehicle routes, together with SyncroTESS. TOMCADS provides the global routes, such as Puebla -> Veracruz -> Emden -> Dealer together with all necessary vehicle information, such as destination, model, etc. SyncroTESS then uses this data to manage each single process step inside the yards and between them in Mexico. Thus, the people responsible for the daily logistics can concentrate on using SyncroTESS as the main supply chain execution system in place. The TOMCADS configuration only needs to be adapted if the general setup of a transport relationship has to be changed.

"After a car is entered in SyncroTESS, the system automatically generates the correct workflow and creates the different jobs such as inspections, moves, loading, maintenance and so forth in the right sequence," Beckmann says. The jobs are then assigned to the users by optimization algorithms. Furthermore, the transport management module, and in particular the trip optimizer, ensures savings by planning the trips for the more than 500 cars that are shipped every day to domestic Mexican dealers.

The solution with the internal project name Vehicle Distribution Network was implemented in Mexico in September 2007. "The first goal was to establish a central system that manages all transport stages within Mexico transparently and maps this in one system," Beckmann says, noting that VW Mexico began with the yard management in Puebla, followed shortly afterwards by Veracruz.

The process of "intelligent yard management" begins immediately after the cars produced in Puebla have been handed over from production to logistics. Approximately three to four hours beforehand, TOMCADS announces the arrival of the car at this point to SyncroTESS. The car is first subject to a reception inspection in which the condition of the car is checked. "In the event of any defects or damages the car is returned to production and SyncroTESS re-plans the car's route allowing for the necessary repairs," Beckmann says.

If the car passes the reception inspection, it is provided with protectors, bypacks such as the owner's manual (correct model, country and language) and other items. It is then moved to the yard where the SyncroTESS stacking optimizer decides on the best possible space by taking several characteristics of the yards and the car into account (destination, expected means of transport, slow mover, fast mover, etc.). If the car is scheduled for a trip in the near future, the system may even send it directly to the appropriate load lane. Pre-delivery inspections and damage handling are also part of the screening processes.

Transport management includes all movement of finished cars between the different operations and the trips from Veracruz or Puebla to domestic dealers, as well as the trains heading to North America with export vehicles. "Through the optimization of trips we want to compile the best possible transport routes to ensure an efficient and on-schedule delivery of all cars," Beckmann says. "Apart from the special requirements of some dealers or cars, the general rule for the optimization of dealer trips is: Keep the trip as short as possible and make the best possible use of the trucks.

"In order to make the best possible use of the means of transport we have to consider the correct sequence of delivered cars when removing the cars from stock," Beckmann adds. "For example, our rail wagons can hold 17 cars. But if the cars are in the wrong order during loading, we loose capacity or have to rearrange the sequence manually and find an appropriate car."

The correct order is ensured by the load configurations saved in SyncroTESS, which triggers the move orders in exactly the right sequence.

The organization of import/export cars is even more complex. "In this case, the synchronization has to consider the inbound and outbound flows of each operation and optimize the volumes between the operations with respect to the capacity of the yards, arrival and departure of vessels, with thousands of cars leaving or entering the operation, and the available means of transport," Beckmann explains. The optimizer balances, for example, the import transports from Veracruz to Puebla with the export transports from Puebla to Veracruz.

Successful implementation


With SyncroTESS, VW Mexico now has a highly integrative system that synchronizes and transparently controls all of the processes. "Following the normal misgivings of our users in the beginning, the system has now gained widespread acceptance," explains Hector Romero, the yard manager in Puebla who cooperated with the staff of INFORM and TOMCADS in the implementation phase. About 200 people work with SyncroTESS on each shift.

This spring, in Phase 2 of the project, carriers will be provided with a Web portal in which their trips are shown and data can be entered a day in advance (pickup time, truck number etc.). Furthermore, SyncroTESS will receive an interface to the trucks' onboard units and GPS, which enables SyncroTESS to not only display the position of a truck but also communicate with the driver or generate automatic alarms if a truck is late.

The introduction of the system has already paid off for VW. "In the past, we had different individual yard management systems from our logistics providers. These systems only collected data, but did not manage or optimize the workflow," Beckmann says. "We now have a system that works centrally and provides all of the information online. Next, we are able to optimize each process and synchronize this across operations. Finally, we have less manual work because of an automated workflow and a highly integrated system. Apart from the higher quality of the operation, the monetary aspects are, of course, of prime importance."

Conclusions


The application of operations research for real-time control in logistics management and other areas still has a very large potential. The optimization of automotive supply chains not only at the planning level but also at the operational and real-time control level is a prime example. In recent years, leading manufacturers such as Audi, BMW, Daimler and VW have successfully adopted this approach and have introduced an optimization system for supply chain execution. The savings for internal logistics alone typically lead to a break-even period of only two years, and additional significant savings are realized for inbound and outbound logistics.



Ulrich Dorndorf is the chief technical officer of INFORM. Matthias Berlit is director of Industrial Solutions within INFORM's Logistics Systems division. Hans-Jürgen Zimmermann is founder of INFORM and now chairman of the board and scientific adviser. INFORM, headquartered in Aachen, Germany, developed and markets SyncroTESS.

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