Reynolds Metals and Core Carrier Programs

This section summarizes the article in [88]. In 1988, Reynolds Metals Corporation was a 6.2 billion company that carried a variety of aluminum-intensive products—from aluminum foil to airplane parts. Reynolds had 120 shipping locations and 5,000 shipping destinations and used 200 van and flatbed carriers. Reynolds prided itself on being a decentralized corporation where the local plant manager chose the transport with an emphasis on quick delivery to meet customer schedules. Reynolds spent 80 million in transport costs. Transport was handled 

Reynolds achieved a 7 million annual reduction in transport costs, which consisted of a 70% reduction due to volume buying, and a 30% due to a 600% increase in continuous moves while increasing on-time delivery from 80% to 95%. This was achieved along with reducing the number of transport companies from 200 to 5 van carriers and 8 flatbed carriers. How are such dramatic improvements achieved within a corporation  

7 Coordinating Freight Operations—Core Carriers and Pareto Improvement 

Recall the Reynolds Metals case discussed in Section 1.6. This example shows how a volume commitment can be used to get a cost reduction and improved service while generating Pareto-improving benefits for the carrier. 

Consider a supply chain consisting of a manufacturer (Smart) who requires trucks to pick up material from one location every day to be delivered to a customer. The number of trucks required by Smart varies daily. A histogram of the history of daily truck usage indicates the following probability distribution (Table 1.1)  

---