optimization of the worldwide supply chain at continental

OptimizationoftheWorldwideSupplyChainatContinentalTires:ACaseStudy

ScottJ.Mason,PhDmason@clemson.eduFluorEndowedChairinSupplyChainOptimizationandLogistics

ProfessorofIndustrialEngineering

Schlenker,H.,R.Kluge,andJ.Koehl.IBMJournalofResearchandDevelopment58.5/6(2014):11:1-11.

BusinessBackground

• Continentaltires– Worldwidemanufacturinganddistributionoftires– BothOriginalEquipmentManufacturing(OEM)aswellasReplacementtiressegments

• Continentaltiresbythenumbers

ScottJ.Mason(mason@clemson.edu)

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Category ValueYearlyRevenue 10billionEurosEmployeesworldwide 40000Productionplants 18Productvariation 10000Production stagespertire 100

ProductionStrategies

• Make-to-stock– Safetystock– Seasonalsaleforecasts

• Multipleproductionlocationsforsameproducts– Somerawmaterials:Longleadtimesandlessnumberofsuppliers

– Fulltruck-loadtransportation– Custom-mademanufacturingtools

ScottJ.Mason(mason@clemson.edu)

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MarketingStrategy

• OEMandreplacementtiremarkets– Alsoservessmalldealersandgarages

• Diverseproductportfolio– High-volume,low-marginproducts– Low-volume,high-marginproducts

• Seasonalsalesinsomemarkets• Needtoincreasepresenceinemergingmarkets

ScottJ.Mason(mason@clemson.edu)

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PlanningStrategiesatContinentalTires

• Long-termplanning(1to3yearsout)– Decidesallocationofproductstoglobalproductionlocations

– Capacityplanningforeachplantlevel– Transportationofproductsfrommanufacturinglocationtocustomerregions

• Mid-termplanning(12to18monthsout)– Definesproductionrequirementforweeklyrange

• Short-termschedulingandplanning(weekly/daily)– Executionofmid-termplanningstrategies

ScottJ.Mason(mason@clemson.edu)

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ChallengesofComplexPlanningProcess

• Long-termplanning– Performedworldwide– ImpactsbillionsofEuros(€)intermsofrevenueandcosts

• Objectives

ScottJ.Mason(mason@clemson.edu)

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Goals ExampleStrategyIncrease sales Optimalassignmentof productiontodemandReducecosts Selection ofproductionlocationBalancetrade-offs Supplyversusdemand

BusinessProblems

• Lackofdistributedandcollaborativeplanning• Highercustomerdemandvolatility• Timeconsuming,labor-intensiveplanningprocesses• Inconsistentdataacrossbusinesses– Forecastingissues

• Varioustypeoftoolsetswithdifferentcapacitiesacrossproductionlocations– Placementoftoolsetsamongproductionlocationsbasedonproductionstrategies

• Creatingbusinessscenariosforsimulationishighlycomplex

ScottJ.Mason(mason@clemson.edu)

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ConstraintstoConsider

• Limitedresources• Worldwidesupplynetworks• Multipleproductionlocations• Multipleproducts• Productioncomplexity• Capacitylimitation• Multipleplanningmodels• Variousshiftsforemployees

ScottJ.Mason(mason@clemson.edu)

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Solution

• ImplementedFutureAllocationandCapacityTracking(FACT)planningsolution– CreatesplanningdatarepositorywhichcanbeimportedtoERPsystemsandotherdatawarehouses

– Assignsproductionnumberstoproductsandresources– Providesdataformultipleplanninghorizons– Assignsproductionquantitiestoworldwideproductionlocations

– Constraintsincludeplantcapacity,availabilityofmachinesandvariabilityofproductcharacteristics

ScottJ.Mason(mason@clemson.edu)

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ScopeofFACTApplication

ScottJ.Mason(mason@clemson.edu)

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Schlenker,H.,R.Kluge,andJ.Koehl.IBMJournalofResearchandDevelopment58.5/6(2014):11:1-11.

SolutionArchitecture

• FACTapplicationisbuiltonIBMDecisionOptimizationCenter– CPLEXOptimizationStudiosolvesthemathematicalmodel– ScenarioRepositoryhasmultiple“what-if”scenariofortheplannerstoconsider

– Clientisthegraphicaluserinterface(GUI)fortheenduser

ScottJ.Mason(mason@clemson.edu)

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DecisionMaking

• Twolevelsofplanning:– Allocationplanningandcapacityplanning

• Allocationplanningatworldwidelevel– Yearlyproductionquantitiesatallproductionlocations– Needtoconsiderplantcapacity,criticalmachineavailability,

productioncomplexityateachplants– ConsidersBill-Of-Capacity(BOC)whileallocatingresources

• Capacityplanningatindividualplantlevel– TakesinputfromAllocationplanningresults– Separateoptimizationmodelforeachproductionplants– Considersproductsthataremanufacturedinrespectiveplants– ConsidersBill-Of-Materials(BOM)fordecisionmakingateachplant

level

ScottJ.Mason(mason@clemson.edu)

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CharacteristicsofFACT

• Actsasaplanningdatarepository• ExchangedatabetweensystemslikeERP,datawarehouses

andotherlegacysystems• Providegraphicalaswellastabularviewofresults• Supportsteamcollaboration,i.e.multiplelocationaccessand

multipleuserinputs– Easiertoconfigurecustomizeddataaccesstousersandlocation

• Computesresourceextensionstosolvecapacitylimits– Assigningadditionalworkshifts– Buyingnewmachines

• Comparescostduetoresourceextensionvs.benefitsfromincreasedsales

ScottJ.Mason(mason@clemson.edu)

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BenefitsofFACT

• Improvedmasterdataqualitybecauseofconsistentdatamodel

• Consistentinformationflowfromcentralheadquarterstoeachplantbecauseoftheuseofonestandardtool

• Easiertoidentifyandrectifyincorrectdataimportedfromlegacysystems

• Simulatemultiplebusinessscenariosandhenceprovidebetterplanninggranularity

• Identifyplantbottlenecksandsuggestsnecessaryresourceextensions

• Betterdecisionmaking,highercostsavingandimprovedcustomerservice

ScottJ.Mason(mason@clemson.edu)

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