Competing on Freight Service Quality in Supply Chains

Now is the time of the holiday season that freight carriers are extremely busy, with Christmas only 3 days away and with the memories of the delivery delays of Christmas 2013 still fresh.

In an article in today's New York Times, "Crunch Time for FedEx and UPS as Last-Minute Holiday Shipping Ramps Up," Hiroki Tabuchi writes that "UPS announced that it was hiring up to 95,000 seasonal workers, more than twice the number it employed last year. FedEx said it had hired 50,000 workers for the holidays. And both say they have invested heavily in infrastructure." The planning for this year reads like a large-scale military logistical operation with, according to the article,  FedEx saying that it has strengthened its contingency planning, after shippers were summarily slammed for delivery delays last holiday season.

Last year's delays were attributed to bad weather as well as a surge in online shopping after Thanksgiving. 

Last year's delivery debacles inspired us to work on time-based supply chain network competition and the outcome was the paper, Supply Chain Network Competition in Time-Sensitive Markets, Anna Nagurney, Min Yu, Jonas Floden, and Ladimer S. Nagurney, which was published in  Transportation Research E 70: (2014) pp 112-127. In the paper, we discuss that delays in holiday freight deliveries are not solely a US phenomenon but even happen in Sweden! We also highlight the use of alternative modes, notably, air freight, as was used to speedup deliveries of paraphernalia prroduced in China and associated with the Disney movie Frozen because of the immense demand in clothing and other gear. I can attest to this since one of my nieces had a full-fledged Frozen birthday party for her 7th birthday, complete with the Princesses Elsa and Anna making appearances!

According to the Times article, UPS also pressed retailers early for forecasts with its volume forecasting for this holiday season beginning as soon as its handlers got through last year’s chaos.
A company that did not forecast the demand for one of its products, is the iconic retailer, L.L. Bean of Maine. The demand for its boots has been astronomical (my daughter is one of the disappointed customers) with a backorder of 600,000 units (she hopes to get her pair sometime in February, way after Christmas). NPR had a nice segment on this topic and even noted the great Lafayette College vs. Lehigh U. 150th  football rivalry game at Yankee Stadium that I was at and blogged about. 

L.L. Bean sent us a letter explaining the situation with a gift of a boot keychain, which is now hanging on our tree.

Freight services are a critical component of effective and efficient supply chains and, oftentimes, they are taken for granted. During the holiday season they are challenged to the max. Since I love logistics and care about not only the quality of products but also the quality of freight service provision, out latest paper is on precisely that topic: Supply Chain Network Competition in Price and Quality with Multiple Manufacturers and Freight Service Providers, Anna Nagurney, Sara Saberi, Shivani Shukla, and Jonas Floden.

Happy Holidays, everyone, and may your packages arrive in time and in good shape!

Hometown Heroes and Why I Wrote a Guest Editorial

Tomorrow morning, one of my Operations & Information Management students, who is in my Humanitarian Logistics and Healthcare class that I am teaching this semester, will be attending with me the Hometown Heroes event at the Mass Mutual Center in Springfield, MA.

We will be the guests of Mr. Rick Lee, the Executive Director of the Pioneer Valley Chapter of the American Red Cross, who spoke in my class in February.

The Pioneer Valley Chapter of the American Red Cross provides emergency response in Hampden, Hampshire and Franklin counties in western Massachusetts and is also behind a model call center for servicemen.

According to a lovely article in The Springfield Republican: The chapter created the Hometown Heroes program in the wake of the terrorist attacks of Sept. 11, 2001, Lee said. The idea was partially to help bridge gaps in funding left when so much charitable giving went to causes related to those attacks.
But the larger reason was, and remains, giving the community a way to honor people who go above and beyond to help others.

And in the beautiful words of Mr. Rick Lee:
"We are celebrating one of the most beautiful aspects of the human heart, which is kindness," Lee said.

This year 9 Hometown Heroes will be honored.

In addition to Mr. Rick Lee, this semester, we have hosted Mr. Jeff Hescock of UMass Amherst, Dr. Pierre Rouzier of UHS at UMass Amherst, Mr. Dave Madsen of WGGB, and even the other Dr. Nagurney, my husband, who gave a guest lecture on Disaster Communications.  The students and I were so inspired by these remarkable individuals that I wrote a Guest Editorial, Community Experts Enhance Disaster Management Education as Guest Speakers at the Isenberg School of Management at UMass,  about their talks (with the exception of my husband's since he was guest lecturing when I was out of town), which was published the other day on masslive.com.

I had to thank these very special people in a public way and that is why I wrote the Guest Editorial, which also features a photo of Mr. Rick Lee with the students in my class.

In addition, the Isenberg School of Management posted a two-part series on this course focusing on the presentation of Dr. Rouzier and also that of Mr. Madsen. Many thanks to the Communications Department and especially to Mr. Lou Wigdor who attended these lectures and wrote them up so eloquently.

We have amazing people in our midst, which deserve special honors and recognition and among those I include the above individuals.

We look forward to seeing Mr. Lee of the Red Cross again tomorrow and honoring this year's Hometown Heroes for their exceptional courage!  Even two UPS drivers will be honored (perfect humanitarian logistics example!)

Operations Research in Disruption Management May Have Helped UPS and FedEx with Timely Deliveries for Christmas

Many of us have enjoyed celebrating the special holidays this time of the year and  are recovering from all the wonderful and, yet, frenetic activities surrounding the shopping, decorating, cooking, visiting, and partying!

Not so for those who work for our logistics companies such as UPS and FedEx whose trucks you may have seen driving through your neighborhoods many times and even late in the evening this past week to deliver packages for Christmas, which was yesterday.

You may have also caught the news of the package shipment delays this season and were anxiously awaiting the package that you ordered for a relative, neighbor, or friend, which still has not arrived.

Timely deliveries are extremely important, especially when there is a big day such as Christmas. In fact, time is a strategic advantage, as important as cost and even quality, which we have argued in our paper:
A Supply Chain Network Game Theoretic Framework for Time-Based Competition with Transportation Costs and Product Differentiation,
Anna Nagurney and Min Yu, to appear in Optimization in Science and Engineering - In Honor of the 60th Birthday of Panos M. Pardalos, edited by S. Butenko, C. A. Floudas, and Th. M. Rassias, Springer, New York, 2014.

UPS, in a statement, reported on CNN.com, explained that "the volume of air packages in our system exceeded the capacity of our network immediately preceding Christmas so some shipments were delayed." "We know how hard it is for everyone to receive their holiday packages, and we're working around the clock to resolve this issue," UPS spokeswoman Natalie Black said.

I am sure that many out there who work (and even teach)  in operations and logistics and conduct research on this great subject had an "Aha!" moment. This sounded like the maximal flow problem in operations research, which is a classical problem, but which needed to include stochastic elements associated with possible disruptions. According to Black, UPS underestimated the volume of packages and the previous severe weather in the Dallas area had already created a backlog. Then came "excess holiday volume" during a compressed time frame, since the period between Thanksgiving and Christmas was shorter than usual this year. (Also, UPS gives their employees Christmas off, which they surely need.) This issue lit up social media on the Internet around the globe.

FedEX also apologized for some delays and noted that the company handled 275 million shipments this year between Thanksgiving and ChristmasSome FedEx custimers were able to pick up their packages at local FedEx centers that were open on Christmas day.  "We're sorry that there could be delays and we're contacting affected customers who have shipments available for pickup," said Scott Fiedler, a spokesman for FedEx Corp.

Those of us who work in disaster and disruption management (and soon I will be teaching again my Humanitarian Logistics and Healthcare course at the Isenberg School of Management) know that there are many synergies and crossovers between corporate logistics and humanitarian logistics and some of the best practices in one space can be adapted to the other.

In a special issue of the journal Transportation Research A on Network Vulnerability in Large-Scale Transport Networks, our article:  A Bi-Criteria Indicator to Assess Supply Chain Network Performance for Critical Needs Under Capacity and Demand Disruptions,
Qiang Qiang and Anna Nagurney,  appeared in volume 46(5): (2012) pp 801-812.  In this paper, we developed a supply chain/logistics network model for critical needs in the case of disruptions. The objective is to minimize the total network costs, which are  generalized costs that may include the monetary, risk, time, and social costs.  The model assumes that disruptions may have an impact on both the network link capacities as well as on the product demands. Two different cases of disruption scenarios are considered. In the first case, we assume that the impacts of the disruptions are mild and that the demands can be met.  In the second case, the demands cannot all be satisfied. For these two cases, we propose two individual performance measures. We then construct a bi-criteria measure to assess the supply chain network performance. An algorithm is described which is applied to solve a spectrum of numerical examples in order to illustrate the new concepts.

This bi-criteria measure  considers the following factors:

• Supply chain capacities may be affected by disruptions;
• Demands may be affected by disruptions; and
• Disruption scenarios are categorized into two types.

And, in order to determine whether the demands can be satisfied under a specific disruption scenario (which, of course, can include weather or another natural disaster)  we first solve the maximal flow problem, which is a classical network optimization problem in operations research.

Both UPS and FedEx perform, in general, amazing work and take advantage of advanced analytics but as this holiday season revealed there is more that can be done! As the incoming President of INFORMS, Dr. Stephen Robinson, alluded in an interview, sometimes it takes many years for research to make it into practice. I think that this needs to  change.

Logistics Companies that Recognize Academic Research with Major Awards

I heard the wonderful news the evening after the 2013 NOFOMA Logistics Conference in Gothenburg, Sweden had come to an end.

DB Schenker Award 2012 goes to Dr. Sönke Behrends

My colleague, Professor Johan Woxenius, who is also Head of the Department of Business Administration at the School of Business, Economics and Law at the University of Gothenburg, shared with me that his former doctoral student, now Dr. Behrends, received the 2012 DB Schenker Award valued at 10,000 euros and the great news is spreading virally in the transport and logistics media:

According to the DB Schenker website:

The DB Schenker Award 2012 goes to Dr. Sönke Behrends of the Chalmers University of Technology in Gothenburg, Sweden. The academic was recognized for his dissertation “Urban freight transport sustainability. The interaction of urban freight and intermodal transport.” The international logistics prize for up-and-coming academics, worth 10,000 euros, was handed over to Behrends at the transport and logistics trade fair in Munich by Karl Nutzinger, responsible for European Land Transport on the Schenker AG Board of Management.  

The work deals with the question of how rail freight and road freight can be integrated to minimize the impact of transports in towns and densely populated regions. Karl Nutzinger: “Mr. Behrends’ work unites fields that were, until now, analyzed separately and, moreover, incorporates logistical topics into urban development, thus demonstrating a high degree of innovation and a great deal of practical relevance.”

Isn't it fabulous that logistics companies are recognizing the importance of academic research and when practitioners and academics work together anything is possible!

You can read more about Dr. Behrends and his research on his homepage at the Chalmers University of Technology, where, coincidentally, is where the 2013 NOFOMA Conference took place.

And, I might add, that another logistics company, UPS, is also putting financial support to recognize outstanding academic research and programs.

UPS has been funding the UPS George D. Smith Prize for the past two years, and the winners are announced at the Edelman Gala held at the INFORMS Analytics Conference. This prize is awarded to an academic program or department and is named in honor of the late UPS Chief Executive Officer who was a champion of operations researchers at this leading Fortune 500 corporation. According to the INFORMS page on this award: The UPS George D. Smith Prize is created in the spirit of strengthening ties between industry and the schools of higher education that graduate young practitioners of operations research. 

The UPS Prize is for $10,000US and the 2013 and 2012 winners are:

2013 Winner(s)

Naval Postgraduate School

2012 Winner(s)

Tauber Institute for Global Operations at University of Michigan
 

For a photos of Professor Woxenius and me taken at NOFOMA, see my post here. He also is one of the two with the colorful socks.

Congratulations to Dr. Behrends and to the Naval Postgraduate School and the University of Michigan!

Thanks to these top logistics companies not only for all the goods that they deliver but also for recognizing academic research (and education) in logistics and supply chains, of course!