From Navy Oil Tankers to Amazon’s Diapers

NOVEMBER 27, 2013

8 ships returning to Caroline Islands anchorage, 1944

Amazon’s online diaper sales and the U.S. Navy’s refueling protocol for World War II appear unrelated and worlds apart. Nevertheless, they are both answers to an identical logistics problem: how can an organization shorten the time between a customer’s order and a supplier’s response?

Amazon is seeking a way to decrease its response time to online buyers. In the case of diapers, this means encouraging a supplier such as P&G to relocate its operations adjacent to Amazon’s warehouses. With co-location, both firms presumably can reduce their shipping costs, better manage their inventories, and speed up deliveries.

The Navy experienced a similar logistics problem during World War II, writesThe Wall Street Journal (Nov.25, 2013). In the early months of the war, the Pacific fleet engaged in hit-and-run tactics; it had to return to Pearl Harbor, where its oil supply tanks were located. When the Navy launched a 1943 offensive in the central Pacific, the geographical distance between consumer (fleet) and supplier (Hawaii) widened. Refueling consumed a precious commodity—time.

One  logistic solution: seize an enemy-held island, convert the island into an advanced base and construct oil-storage facilities for the fleet. That worked, but as the Navy accelerated its offensive, it outran the advanced base network. By 1944, the Navy introduced floating bases at Pacific anchorages. Commercial tankers delivered fuel oil to the anchorage, storing oil in barges. A gap, though, between oil demand and supply still persisted.

Then the Navy turned logistics on its head, dispatching 36 oilers to meet carrier task force units at prearranged locations in the forward area. Oilers now refueled fleet units on the move in “underway replenishment.” The results were dramatic. A carrier task force could remain free from a fixed base for 3 months. Fleet Admiral Nimitz termed the Pacific just-in-time supply chain as his “secret weapon.” Naval historians would describe Nimitz’s logistic plan as a “fleet within a fleet.” Amazon’s co-location has been called a “plant within a plant.”

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

How UPS is Using Telematics to Save $50 Million per Year

NOVEMBER 1, 2013

UPSAfter 10 years of research and development, United Parcel Service is officially launching an automated system that uses algorithms to devise optimal routes for its drivers, reports The Wall Street Journal (Oct. 31, 2013). It says the new tool will slash fuel consumption and costs, and support the creation of new services. UPS’ CIO said that the company believes that its on-road integrated optimization and navigation program—dubbed Orion—is the world’s largest operations research project. Ten thousand of its 55,000 drivers will be on the Orion system this year, and it will be fully deployed by 2017.

The effort involved a team of 500 workers. The computer scientists in the group have written an algorithm with 1,000 pages of code. It’s the largest technology project at UPS, which invests $1 billion a year in technology. First, the company had to install GPS sensors to track its drivers and vehicles, a technology known as telematics. That effort already has avoided about 100 million minutes of engine idling. UPS then devised its own mapping system, which includes about 250 million delivery points, a database that is updated continually.

The company’s operations research group devised algorithms that calculate the best route for each driver on a given day. In 2008, those calculations could take hours to perform. Now, they are done in 8 seconds.

The payoff on the investment will be measured in a variety of ways. The company stands to save $50 million a year if every driver can simply reduce the length of his or her route by one mile a day. That will help UPS reduce fuel consumption and environmental impact, while allowing drivers to make more deliveries per day. This year, technology will help the company save 1.5 million gallons of fuel and reduce CO2 emissions by 14,000 metric cubic tons.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.