Supply-Chain Analysis at Volkswagen of America

• Published in: Interfaces (Providence) Vol. 30; no. 4; pp. 46 - 55
• Main Authors: Karabakal, Nejat, Gunal, Ali, Ritchie, Warren
• Format: Journal Article
• Language: English
• Published: Linthicum INFORMS 01.07.2000; The Institute for Operations Research and the Management Sciences (INFORMS); Institute for Operations Research and the Management Sciences
• Subjects: Automobile dealers; Automobile industry; Automobiles; Case studies; Cash flow; Cost allocation; Cost control; Cost reduction; Costs; Customer services; Customers; Distribution costs; Economic analysis; INDUSTRIES—TRANSPORTATION; Innovation; Inventories; Inventory; Linear programming; Load forces; MARKETING—CHANNELS OF DISTRIBUTION; Measurement; Modeling; OEM; Operations research; Optimization; Production management; Shipments; SHIPPING; Simulation; Simulations; SIMULATION—APPLICATIONS; Supply chains; Supply-side economics; Transport; Transportation costs; Truck facilities; Trucking; U.S.A; Vehicles; Volkswagen; United States > US
• ISSN: 0092-2102; 2644-0865; 1526-551X; 2644-0873
• DOI: 10.1287/inte.30.4.46.11648

In 1995, Volkswagen of America began a review of its vehicle-distribution system looking for opportunities to improve customer responsiveness and simultaneously reduce system costs. An analytical tool was required to evaluate alternative designs in terms of cost and customer service level, both of which are functions of probabilistic and dynamic elements. These elements include inventory policies, demand seasonality and volume, customer-choice patterns, and transportation delays. By using an innovative combination of simulation and discrete optimization models, we addressed the problem of analyzing a large number of alternatives efficiently. Our analysis indicated opportunities for significant savings in estimated annual transportation costs, and it provided insights on how to implement the proposed system.