Quality may be "job one" at Ford Motor Company, but managing the inbound flow of shipments from 4,000 global suppliers to nearly 100 plants worldwide has to be a close second. In fact, the goal at Ford has long been to devise a way to optimize its vast and complex global production network-and to use the internet to exchange and disseminate material movement and production planning data internally and with its suppliers and logistics service providers.

Earlier this year, Ford brought this goal to fruition with the help of Norcross, Ga.-based supply chain management solution provider, SynQuest. Called the Inbound Planning Engine (IPE), the optimization model developed by SynQuest and Ford now provides the mechanism to link together the inbound side of the automaker's production, supplier and service provider networks. Capable of simultaneously sifting through and evaluating a near-limitless assortment of factors to produce an optimized logistics plan, IPE gives Ford an alternative to the sequence-based decision-making processes on which managers of complex supply chain networks have depended for decades.

The IPE is essentially a supply chain decision-support tool. It takes material and production planning data and produces an optimized material flow in accordance with Ford's specified priorities. These priorities easily can be tweaked with each run of the model, which enables Ford to trade off elements and nuances within the supply chain network, thus providing the automaker with the luxury of playing "what if" with a high degree of reliability.

For example, certain production plant managers may want to apply specific policies and procedures for receiving and managing inventory and material at their locations, says Mary Jo Koenigbauer, manager of global logistics technologies at Ford.

"If we want to implement these specific business considerations, like having less than two hours of inventory on hand, we can plug in those constraints and see the change in logistics cost and the implications to the network," she says.

This scenario can be compared to the optimized and unconstrained logistics freight bill to support the plant.

"Now we can have a discussion," says Koenigbauer. "If it costs X to do that, is the new value greater than X? Is this the right business decision for the network?"

	"What excited us was solving the business problem holistically, simultaneously and optimally" -Mary Jo Koenigbauer, Ford Motor Company

And it's quite a complex network at Ford. The automaker's global logistics division employs a force of 300 logistics and trade professionals to ride herd on the inbound movement of materials to assembly points, finished vehicles from plants to dealers, and the global customs and trade operations for Ford and all of its affiliates. Approximately 4,000 global suppliers ship parts and components to 31 power train plants that produce engines and transmissions, 13 stamping plants and 54 assembly plants. From those assembly plants, Ford funnels finished vehicles to more than 20,000 dealers in more than 200 countries. The average vehicle requires about 2,500 parts delivered to the final assembly plant. At one time or another, says Jerry Joyce, Ford's direction of global logistics, Ford's $6.5 bn annual freight bill encompasses virtually every existing modern mode of transportation. The automaker consistently is the world's second largest international trader on a global basis, though the company occasionally overtakes General Motors Corp. as the world's top importer. At any given moment in time, Ford has a half-million tons of freight in transit, adds Joyce.

Ford's primary challenge as the company settles into the 21st century involves re-orienting the automaker from a traditional "iron-pumping industry flooding the dealer lots with vehicles and hoping that consumers find something close to what they want" to a build-to-order, consumer driven environment marked by lean manufacturing, says Joyce. This transformation requires a tremendous change for many different functions within Ford, and as the company moves to realign its order fulfillment and new product development process, the automaker expects the logistics group to provide "complete, timely, accurate and repeatable logistics cost estimates based on potential sourcing scenarios." Another key expectation centers on synchronizing inbound logistics with asynchronous material flow objectives and strategies within the plants, a challenge that has intensified with the high volumes of rail traffic that have been diverted to truck due to consistent service shortcomings in the nation's rail system.

"We're running plants at full capacity, and given the general volume of the auto industry combined with the diversions from rail to truck, we have a real problem with dock space and material-handling labor at our plants," says Joyce.

Congestion at the plant level often undermines planner's intentions to have inbound trucks unload their materials at pre-determined dock locations and feed those parts and components directly to points on the various assembly lines. Instead, the automaker racks up unexpected time and labor expenses by dropping and hooking inbound trailers and unloading those materials at alternate locations within the plant, thereby necessitating in-plant movements of parts and components.

Faced with the realities of its vast network, Ford's global logistics technologies group concluded that the tools on the shelf were inadequate for the pending challenges.

"Looking at the transformation underway at Ford and understanding how the key drivers in our business were going to change, we looked at our technology and quickly determined that it was not capable of solving the kind of problems our customers were going to have," says Koenigbauer. "We knew we needed to be able to solve this business problem, and we also knew we needed to have the ability to integrate our technology with our partners.

Ford logistics providers include Penske Worldwide Logistics, FedEx and Autogistics, which is a division of UPS. According to Koenigbauer, creating a seamless integration with these partners of the world was critical, as was the need to connect with the other Ford organizations that depended on production information.

Koenigbauer and a select group of associates began to search for an available technology that could meet those needs, attending conferences and expos and examining detailed assessments of different technologies. During one outing, Paul Bender of SynQuest made a presentation at Northwestern University that struck a harmonic chord within the Ford contingent.

"What excited us is the unique way he was talking about solving the business problem: holistically, simultaneously and optimally," Koenigbauer recalls. "That was radical. We started talking with him about the differences between true optimization in solving business problems vs. the more traditional method of approaching the problem in sequence."

Given the complexity of the Ford network, she adds, "you realize that to solve the problem from an optimization point of view, you have to be looking at all of your points and all of your material at the same time. This holistic view provides a significant advantage over looking at things in series."

The experience at Northwestern significantly altered Ford's approach to solving its business challenge.

Ford approaches the logistics planning life cycle for new vehicle programs in three stages: strategic, tactical and operational. The strategic stage involves sourcing decisions: various sourcing scenarios are developed based on a variety of drivers-plant locations, currency and trade issues, emerging market considerations, for example. This information then is fed into a tactical planning process, which is the first point for actually developing logistics plans. Logistics cost estimates are projected at this point and then fed back into the strategic process. As a sourcing scenario begins to take shape, the operational planning process commences, and Ford begins providing logistics requirements to the company's lead logistics providers (LLPs). These LLPs then design the logistics networks to support the plan.

Examining available technology that best suits the strategic task of weighing sourcing decisions, Ford selected as best of breed Supply Chain Designer, a SynQuest product. However, the team came up empty from the tactical planning perspective.

Available technologies, says Koenigbauer, "were not solving problems as complex as ours . . . and they weren't solving them simultaneously, they were solving them in series. They often were breaking apart the problem into the kind of mold that you wanted-or assumed you wanted-as an output."

SynQuest brought to the table a core competency in solving large, complex mathematical problems with an expanded cost point of view-an issue critical to Ford, she says-and the Ford team became convinced a joint venture with SynQuest that would allow the two companies to share the investment in time and intellectual property ownership was appropriate. Ford's management, persuaded by the potential of optimizing the automaker's inbound materials operation and convinced that the company would gain competitive advantage through the research and self-examination inherent in the development process, approved a proposal for a joint partnership with SynQuest to create an inbound planning engine, and the effort was launched in earnest.

Greatly assisting in the effort during the initial development stage and now as the model is operational is Ford's in-house modeling lab, a technology initiative launched at the beginning of 2000.

"The modeling lab really takes over a role that we historically had done through the use of outside consultants," explains Koenigbauer. "We now have brought logistics expertise and modeling expertise and are focused on developing the in-house skills to be able to conduct strategic infrastructure sorts of studies."

Existence of the lab enables Ford to focus it's in-house talent on unique and less frequent scenarios dealing with logistics infrastructure and logistics strategy while shifting the more standardized and frequent logistics modeling tasks to Penske Worldwide Logistics, Ford's lead logistics provider for inbound materials movements.

The lab strategy not only gives Ford the flexibility to adapt quickly to changing conditions, but its existence and capabilities increase the visibility within Ford of a logistics strategy, Koenigbauer adds. "Since we implemented the modeling lab at the beginning of this year, we are starting to get questions from product development, from production and purchasing, and from our affiliates in Europe and Asia on how we can work together on logistics strategies," she says. "It also gives us the ability to answer questions we never have been able to answer before." Ford will add technical assistance to the lab as required, Koenigbauer adds.

The first meaningful assignment for the lab was to determine the optimum number and ideal locations of cross-docks for inbound material movements to the automaker's North American assembly plants, with minimum total cost as a overriding concern. By using SynQuest's Supply Chain Designer product, Ford was able to model in one effort and with the relevant cost elements and operational constraints its logistics network and the facilities.

Included in the model run were 21 assembly plants, 1,500 suppliers and 46,000 different inbound vehicle parts and components, though certain assumptions were made to reduce the complexity of the calculation without sacrificing the accuracy of the results.

"We looked at inbound materials and return transportation costs, material handling costs, the number of cross-docks, the fixed costs of cross-docks, their capacities and the demand from the plants," says Koenigbauer. Ford also examined supplier locations and demand points and, based on demand volume, placed 45 possible origin-distribution centers (ODCs) into the network as possible locations for cross-docks. Creating the model took nearly two months, and the optimized solution called for 15 cross-docks in a logistics plan that provided significant cost advantages.

Then came the "what if" phase, where input from other sources such as others inside the Ford organization as well as external business partners, was considered. More than 40 scenarios were run through the model as Koenigbauer's team varied cost, volume, frequency and other factors.

"This is the part we never had been able to do before: taking those initial solutions and scenarios and doing the 'what if' sensitivity analyses," says Koenigbauer. It took approximately an hour between making the model change and having results suitable for business evaluations for each scenario.

Meanwhile, other technology teams worked on IPE with their counterparts at SynQuest. Data collection was a sticking point, as the smooth flow of data between points in the logistics network was critical to IPE functioning as envisioned. Eventually, the lab efforts produced a tool to extract required data from the Ford mainframe and re-format it to IPE standards not only initially but on a routine and periodic basis.

	"A company could use IPE to do tactical planning even down to the plant level." -Paul Bender, SynQuest

The traditional tactical study effort initially broke down as follows: 90 percent of the effort was spent on collecting and inputting data, five percent on analysis, and five percent on output. The numbers changed markedly when IPE became operational. As the model shifted to route optimization for inbound materials and using IPE, five percent of the modeling effort went to input, five percent to analysis, five percent to output, and 75 percent to analyzing the output. The remaining five percent was split between reviewing program history and tweaking the model with new alternatives.

"We now spend 75 percent of our effort analyzing the output from IPE and thinking of the next scenarios and what they really mean to our businesses," says Koenigbauer. "We also have the ability to integrate with other parts of the business and can coordinate with our internal logistics colleagues to solve in-plant material flow issues."

In its first application at Ford, IPE has helped Ford managers increase the frequency of parts deliveries to assembly plants without incurring greater total costs. Penske currently is in the midst of implementing an IPE-designed routing scheme within Ford's inbound materials network in North America. Though unwilling to share exact numbers given the midstream status of the rollout, Ford's Jerry Joyce finds the efficiencies generated through the IPE-optimized network encouraging, to say the least.

"If you just take a reasonably decent network and simply apply the IPE program, you can achieve from a 20-30 percent boost in efficiency," he points out. "In terms of efficiencies for the inbound materials program, we're not just looking to save freight costs at Ford - in some cases we're holding freight costs constant while significantly increasing delivery frequency to move toward more of a lean logistics network and ultimately to the lean manufacturing environment. And where we have implemented the IPE plan, we have gone from an average of 22 percent of our parts being delivered at least once a day to 97 percent being delivered once a day. That by itself is a huge benefit to Ford."

Ford uses IPE to validate and provide optimizing suggestions to the network designs produced by its lead logistics provider. Penske, however, presently relies on its own home-grown systems for routing and systems design and currently is evaluating with SynQuest the potential of IPE to the Penske operation. The automaker hasn't quite decided whether or to what extent or under what conditions it will make IPE available to its supplier network-those determinations presently are being made within Ford. However, IPE is commercially available to other companies with complex supply chain networks by virtue of a marketing agreement reached between Ford and SynQuest.

One of eight major supply chain modules offered by SynQuest, IPE is an integrated solution that contains five basic sub-modules: mode selection, container stowage, logistical configuration, rotation (frequency) and routing, and returnable container assignment, says Bender, who is president of Bender Consulting, a SynQuest company. What makes IPE so different, he points out, is that the model assimilates this vast assortment of data and simultaneously.

For example, rotation, or the frequency with which a company picks up at a particular supplier location, is an input that is specified up front in practically every system available today, he says, where IPE optimizes the rotation as part of its calculation.

"The five sub-modules are totally integrated and therefore can solve all of these aspects of a problem simultaneously at maximum profit and minimal cost, then they can be used by anybody that has the generic problem of a complex inbound supply chain," says Bender.

Though Ford presently limits the application of IPE to material movement from its tier-one suppliers inbound, the model can optimize the entire flow of materials from every supplier-tier one, two or three-all the way to the assembly plants, says Bender.

"What we have developed and implemented with Ford was by agreement a very general solution to solve a very general problem: to calculate the optimal way to pick up and deliver many different products from a wide range of suppliers to the plants," he says.

But the model can be very useful to any company that has a very complex inbound logistics network, not just to Ford and other automakers but to manufacturers, retailers, distributors and logistics companies-any business that deals with a large number of parts, products, SKUs or shipments and a complex network of pick-up and delivery points, Bender adds.

"These modules are very general and are not customized for Ford or the automotive industry," Bender says.

Once SynQuest and Ford, which together are in the process of finalizing the returnable container module-the final element of IPE, delivery of which is expected in the first quarter of 2001 - the model will be commercially available to other companies.

"We're talking right now to people who make construction equipment, agricultural equipment and complex electronic products as well as with third party logistics companies," says Bender.

A company could use IPE to access the model through the company's IT network and do tactical planning on a daily basis-or more frequently-even down to the plant level, he adds. Once the company establishes a clean flow of data-whether from a mainframe, a network of PCs, hand-held units or a combination of sources-the model essentially can provide complete real-time visibility of material flow throughout the network. This technology truly is cutting edge, says Bender.

"There are people that sell mode selection modules, or stowage optimization or routing modules, but nobody else has one single system where all these decisions are made in an integrated fashion on one pass," he says. Though IPE provides synchronization-real-time planning execution and control-and collaborative planning capabilities, companies seeking greater depth from the statistical perspective can incorporate other SynQuest modules such as their demand management module, which are designed to seamlessly integrate with IPE.