US Pipe Experiences Significant Cost Savings with Improved Logistics System

Company Profile

U.S. Pipe is a manufacturer of ductile iron pipe mainly used in underground water lines.

Situation

U.S. Pipe requested that the Alabama Productivity Center (APC) develop a decision support system (DSS) to rank order company facilities (plants and stockyards) in terms of least cost to fulfill customer order. This would allow the company to optimize its shipping decisions and deliver pipe to its customers at the lowest possible cost.

The goal of the project was to provide U.S. Pipe with a PC-based, user friendly decision support tool that would minimize shipping costs.

A possible future project would be to enhance the tool with the addition of “real time” actual inventory and work-in-process information at pipe plants and stockyards, as well as manufacturing capacity constraints.

Solution

The Alabama Productivity Center utilized previously developed databases to serve as the backbone for the decision support tool. The tool was developed to output the manufacturing or distribution center/stockyard source and the different cost components such as the transportation cost, stockyard management cost in terms of per ton, per piece, and per foot bases. This will facilitate better shipping decisions when used in conjunction with production schedules.

Phase I is now complete. The logistics decision support software tool is now complete and has been turned over to U.S. Pipe for implementation. Additionally, two support documents were included. The first document is a user's manual, which walks any user through the steps of how to navigate through the tool. The second document is a systems manual, which provides detailed documentation and explanation for the entire source code for the logistics software tool.

Results

As a result of the Center’s services, U.S. Pipe was able to avoid $500,000 in unnecessary investments in inventory. The company was able to improve its business and strategic planning and gain an improved understanding of the actual costs involved in its management systems. The project made it possible for U.S. Pipe to save $200,000, which would have possibly been spent on labor, materials, inventory, or overhead. Engineering manager Glenn Davis noted that he expects his company to be more competitive as a result of the project and anticipates an improved profit margin.