Areas of Focus
Genuine Parts Company (GPC) distributes millions of products through four groups: The Automotive Parts Group distributes approximately 300,000 products through NAPA and other brand names. The Industrial Parts Group distributes over 2 million parts for industrial uses. The Oﬃce Products Group distributes thousands of business and oﬃce products through its subsidiary, the S. P. Richards Company (SPR). The Electrical/Electronic Materials Group operates through its subsidiary EIS, which distributes over 75,000 items.
Genuine Parts Company distributes oﬃce products and auto parts as follows. GPC is the parent company of Rayloc, which in turn has a subsidiary called Rayloc Merchandise Distribution Service (RMDS), which transports products from suppliers to distribution centers. RMDS owns and operates its own ﬂeet of trucks and crossdocks; third-party carriers are not used much. In addition to one crossdock in Atlanta and one in Indianapolis, there are also ﬁve Rayloc distribution centers that also function as crossdocks. RMDS operates its trucks, for the most part, according to a ﬁxed schedule that repeats every week.
RMDS product distribution. A typical RMDS truck departs from a crossdock with goods destined for one or more GPC distribution centers. After delivery of goods at the distribution centers, the truck next stops at one or more suppliers, and picks up goods that have been ordered. The truck then returns to the cross-dock, where goods are unloaded from the truck, sorted according to destination, and placed on appropriate trucks for later delivery. The trucks often pick up a small amount of returned goods or components for recycling from the distribution centers, and deliver returned goods at the suppliers, and components for recycling at processing facilities.
Each GPC distribution center manages its own ﬂeet of trucks, separate from the RMDS ﬂeet, to distribute their products to their customers. A typical operation works in the following way. Customers, mostly wholesalers and retailers, place their orders with the distribution center. The items are picked in the distribution center, then packed and loaded onto trucks. There are two main delivery runs per day. If the order is placed early enough in the day, then the shipment goes out with the early afternoon delivery run and is delivered to the customer on the same day. If the order is placed later in the day, then the shipment goes out with the overnight delivery run and is delivered to the customer’s facility during the night.
A truck operating from a distribution center typically makes deliveries to several customers during a route. Some distribution centers (NAPA distribution centers, for example) also send pick-up trucks, with smaller shipments for urgent delivery, to retail stores and even workshops. Other trucks, called shuttles, are available to move goods between diﬀerent distribution centers, when a distribution center needs an item urgently. Third-party carriers are used for some smaller shipments.
2.1. Product stocking at distribution centers. A number of issues arise when one takes a closer look at such a distribution system. Basic warehousing questions that GPC must address include:
GPC currently has a service policy whereby it promises customers that all SKUs will be supplied within 24 hours. As a result, each distribution center stocks most of the large number of SKUs. However, as is typical in many industries, a small fraction of the SKUs contribute a large proportion of the order lines and revenues. Conversely, a large fraction of the SKUs are hardly ever sold and contribute a small proportion of the order lines and revenues.
Many of the distribution centers are tight on storage capacity, and their available storage capacity could probably be used more proﬁtably if the selection and quantities of SKUs were changed. Therefore, a relevant question is to determine the proﬁt maximizing assortments of SKUs given the storage capacity constraints.
There are a number of alternatives to GPC’s current mode of operation:
Example: The S. P. Richards Company. An example of this kind of rethinking is found at the S. P. Richards Company, which is considering increasing their selection of oﬃce furniture. Due to limited storage capacity, some alternatives such as the following have to be considered:
The broad question in this project involves the optimal design of distribution networks. TLI’s activity involves the development of models that provide insight into which network designs are good under, which conditions. Questions that should be addressed in distribution network design include the following:
In addition, there are a number of questions related to how transportation operations are conducted: