Class Presentation November 24th 2009

Project AoA – GaTech

Ahmad El Tannir, Christopher A. Klug, Felix Friemann,

Jason Philip, Manuel Klennert, Sven Christian Mueller

2 Project „Distribution from port to dealers, 11-24-09

Audi of America Supply Chain Optimization

Agenda

I. Project Introduction

II. Results

III. Discussion

IV. Summary

V. Recommendations

Source: http://www.ovwinsum.nl

3 Project „Distribution from port to dealers, 11-24-09

I. Project Introduction

► Audi of America

► Sells ~80k vehicles at ~260 dealerships

in USA

► Manufacture vehicles in Germany

► Ship to East, Gulf, and West coasts

► Train and truck network from 4 ports

► Bigger Picture

► Part of Volkswagen logistics network

• e.g. use of VW vessels, share rail cars

► Looking to merge Audi & Porsche

supply chains

► ~1% of cars sold in America

► ~2/3rds sold in California, Florida, &

New England

Source: http://www.hypertuned.com

4 Project „Distribution from port to dealers, 11-24-09

Planned Sales by Dealership 2009

5 Project „Distribution from port to dealers, 11-24-09

I. Project Introduction

► Project Goals

► Develop Greenfield approach from

port to dealer

► Evaluate current logistics network

► Evaluate synergies between

Porsche Logistics and Audi

► Develop concept on how to

differentiate between sold vs. stock

orders

► Evaluate logistics network with

target growth

Source: http://www.andreasbard.com

6 Project „Distribution from port to dealers, 11-24-09

II. Results – Cost Summary per Audi

0%

20%

40%

60%

80%

100%

120%

Current Greenfield Differentiated Porsche Projected Growth

Inventory

Transport

Time

-4 %-7%-14% -8%

+5%

-4% -6%+1 %

7 Project „Distribution from port to dealers, 11-24-09

Current SC Design

Greenfield Approach

Differentiated Projected Growth

Porsche

II. Results – Current Model

8 Project „Distribution from port to dealers, 11-24-09

Houston

San

DiegoBrunswick

Davisville

Kent

St. Paul

Denver

Chicago

Rail

Ports

Current Railheads

Audi USA Distribution Network – 4 Ports – 4 Railheads

Emden

9 Project „Distribution from port to dealers, 11-24-09

Current SC Design

Greenfield Approach

Differentiated Projected Growth

Porsche

II. Results – Greenfield Model

Minimal cost

10 Project „Distribution from port to dealers, 11-24-09

Houston

Los

Angeles

Baltimore

Newark

Denver

Chicago

Ports

Railheads

Greenfield Distribution Network – 6 Ports – 5 Railheads

Emden

Miami

Atlanta

San

Francisco

Framingham

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Key Differences

► Current Model

► 4 Ports

► 4 Railheads

► Greenfield

► 6 Ports

Close Brunswick, Davisville, San

Diego

Open Baltimore, LA, Miami,

Seattle, Newark

► 5 Railheads

Close Seattle, St. Paul

Open Atlanta, San Francisco,

Framingham0%

20%

40%

60%

80%

100%

120%

Inventory

Transport

Time-14%

+5 %

12 Project „Distribution from port to dealers, 11-24-09

Sensitivity Analysis – Ports

0%

20%

40%

60%

80%

100%

120%

3 Ports 4 Ports 5 Ports 6 Ports

Inventory

Transport

Time

Newark

Brunswick

LA

Newark

Miami

Houston

LA

Seattle

Newark

Baltimore

Miami

Houston

LA

Seattle

Newark

Miami

Houston

LA

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Sensitivity Analysis – Inventory Costs

0%

20%

40%

60%

80%

100%

120%

140%

0% 5% 10%

Inventory

Transport

TimeGreenfield<1%

less

+6%

~80 %

more

-9%+10%

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Current SC Design

Greenfield Approach

Differentiated Projected Growth

Porsche

II. Results – Differentiated Supply Chain

time focus for

sold order and high value

cars (trucking)

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Results – Differentiated Supply Chain

0

2

4

6

8

10

12

14

16

18

20

Days

Time

High Value Orders

Sold Orders

Stock Orders 0%

20%

40%

60%

80%

100%

120%

Cost

Inven

Trans-7 %

-4 %

Note:

Differentiated has 5%

higher costs than Greenfield

16 Project „Distribution from port to dealers, 11-24-09

Key Differences

► Current

► 4 Railheads

► 4 Ports

► Differentiated SC

► 3 Railheads (Chattanooga,

Chicago, Denver)

► Opens Chattanooga, Closes

Seattle and St. Paul

► 6 Ports (Baltimore, Houston, Los

Angeles, Miami, San Francisco,

Newark)

► Keeps only Houston

Source: http://www.aldarin-electronics.com

17 Project „Distribution from port to dealers, 11-24-09

Current SC Design

Greenfield Approach

Differentiated Projected Growth

Porsche

II. Results – Add Porsche to the differentiated Audi Supply Chain

Include Porsche volumes,

time focus for Porsche,

sold + high value Audis

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Key Differences

► Current

► Not a direct comparison

► Differentiated is more appropriate

► Add Porsche

► Opens Baltimore , Los Angeles,

Miami, San Francisco, Newark

► Closes Davisville, San Diego

0

5

10

15

20

Days

Time

High Value Orders

Sold Orders

Stock Orders

0%

50%

100%

Cost

Inventory

Transport-7% -8%

-7%

-4% -6%

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Current SC Design

Greenfield Approach

Differentiated Projected Growth

Porsche

II. Results – Projected Audi Growth

Increased volumes,

more sold and high value

(time focus as in diff.)

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Key Differences

►Current

► X% sold order

► Y% high value orders

►Projected Audi Growth

► Increased volume

► Higher amount of sold and high

value orders

0%

50%

100%

Cost

Inventory

Transport

0

5

10

15

20

Days

Time

High Value Orders

Sold Orders

Stock Orders

-4%

+1%

-7% -4%

+1%-4%

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III. Discussion – Assumptions

► Linear time and cost assumption

► Context: VW Network

► Inventory of 5 cars per rail lane usage

► Fixed opening cost for ports

► Times

► Port: 4 days (target of AoA)

► Railhead: 1 day

► Vessel: provided by AoA (VW vessels)

► Rail: Union Pacific + 2 days

► Trucking: distance / 500 miles

► Costs

► Avg. Audi Values: $ X / Y

► Avg. Porsche Value: $ Z

► Inventory holding costs: 5%

► Opening ports: $ P

► Transportation costs provided by AoASource: http://www.adcet.edu.au/

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Considered Supply Chain Facilities for Greenfield Approach

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Approach: Multiple Flow Model (AMPL)

► Choice of potential ports and railheads

► 4 “types“ of cars modeled separately:

► Audi‘s: Stock order / Sold order / High

Value

► Porsche

► Difference: different average values and

the option to focus on speed (by pure

trucking from east-/gulfcoast)

► Minimum # of cars per year to use a port

or a rail lane

► Objective: Minimize cost

(inventory + transport)

► Optional constraints (e.g. use certain #

of ports, focus on speed for certain type

of cars by trucking,..)

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IV. Summary

0%

20%

40%

60%

80%

100%

120%

Current Greenfield Differentiated Porsche Projected Growth

Inventory

Transport

Time

-4 %-7%-14% -8%

+5%

-4% -6%+1 %

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V. Recommendations

► Implementation

► Fast delivery of non-stock orders: 6% cost saving with 4 days delivery savings

► Change railheads: Serve Chicago via East coast port

► Due to low sensitivity over 3-6 ports: Brunswick to Miami (stay at 4 ports)

► Minimal impact of Porsche on Audi network: Assess savings on Porsche network

► Change current model assumptions for Growth model

► Non-linear increase in transportation costs under current assumptions

► Take advantage of concave costs & time

► Consider influence of VW in more detail

► Scale of synergies, e.g. share fixed costs, share trains, concave costs and time

► Possible disadvantages, e.g. choice of ports maybe optimal for VW but not for Audi

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Comments/Questions

Source: http://malcolmmarler.com/

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Thank you.