TNT Express wins: ‘Super Bowl of O.R.’

Netherlands-based delivery company delivers the goods to capture 2012 Edelman Award.

Edelman Prize

The 2012 Edelman-winning team from TNT Express, led by Chris Goossens (third from left), celebrate on stage at the INFORMS Conference on Business Analytics & Operations Research. Yoshi Ikura (far right) coached the team.

By Peter Horner

Some organizations win the Edelman Award by optimizing operations, thus boosting profits by millions of dollars via a noteworthy application of operations research. Others win the Edelman for saving millions of dollars via O.R. applications, again positively impacting the bottom line. Still others earn the Edelman by making or saving millions of dollars while improving customer service. And then there’s TNT Express, one of the world’s leading business-to-business express delivery companies and the winner of the 2012 Edelman, which did all of the above while simultaneously reducing the company’s carbon footprint and making O.R. “a part of the company’s DNA.”

Presented by INFORMS, the Franz Edelman Award for Achievement in Operations Research and the Management Sciences is widely considered the “Super Bowl of Operations Research.” It honors the best application of O.R. following a nearly yearlong competition that begins with a nomination process, continues with a vetting process and concludes at the spring INFORMS Conference on Business Analytics & Operations Research with a series of finalists’ presentations and judges’ deliberations, capped by the naming of the winner at the Edelman Awards Gala.

In dramatic Oscar-like fashion, INFORMS President Terry Harrison announced the winner and welcomed the TNT team to the stage as the ballroom audience at the Huntington Beach (Calif.) Hyatt Resort & Spa stood and applauded.

“I always wanted to go to the academy awards. I just never thought it would be a technical one,” quipped Chris Goossens, TNT’s managing director of Networks and Operations, in accepting the coveted Edelman on behalf of TNT. “Little did we know that when the financial crisis hit us hard in 2008 that a few years later the team would be standing here.”

ORTEC and TiasNimbas joined TNT Express as members of the Edelman Award-winning team whose nominated work was titled, “Supply chain-wide optimization at TNT Express.”

After thanking team members (led by Marco Hendriks of TNT, John Poppelaars of ORTEC and Hein Fleuren and Ineke Meuffels of Tilburg University) and TNT CEO Marie-Christine Lombard (who was scheduled to attend the Edelman competition but appeared via video instead in order to attend a merger negotiation with UPS), Goossens gave special thanks to the 77,000 people at TNT Express and the 200 “supply chain masters” who graduated from the company’s GO Academy.

“I am really pleased that we can go home and show them that all their hard work has been recognized with the most prestigious award of all,” Goossens said.

  

Edelman presentation

For video of INFORMS President Terry Harrison announcing the winner of the Edelman Award winner along with TNT’s Chris Goossens’ brief acceptance remarks, visit: http://www.scienceofbetter.org/Edelman/index.htm

   

The Company & the Challenge

Edelman Prize

Headquartered in Hoofddorp, Netherlands, TNT Express boasts the largest express road and air network in Europe. Worldwide, it operates 2,600 hubs and depots, flies 50 aircraft and runs 30,000 road vehicles. TNT’s success is built on customer service; every week, it delivers 4.7 million parcels, documents and pieces of freight to more than 200 countries while maintaining strict service requirements.

Up until 2005, TNT Express addressed its logistics/service challenge without any mathematical support in decision-making. That’s when company leaders realized that in order to remain competitive, more fact-based decision-making was required, which ultimately led to the introduction of its Global Optimization (GO) program.

The competitive problem was magnified in 2008 during the height of the worldwide financial crisis when TNT Express’ air volume began dropping precipitously. TNT Express contracted with ORTEC – one of the world’s largest independent providers of advanced planning solutions, decision support systems and consulting services – to design a mathematical model that could quickly optimize TNT’s air operations.

Encouraged by the successful air operations application, TNT decided to make optimization and O.R. an integral part of the company’s entire supply chain decision-making process.

“After the success of the initial O.R. models, we felt we needed to have that expertise at every level of the organization,” Goossens said in a post-award interview. “We wanted to own it and apply it at the strategic level, at a technical level, even at a daily level. We wanted to have our own people constantly optimizing, so we developed the GO Academy.”

The quality of decision-making at TNT Express improved tremendously with the supply chain-wide introduction of operations research. The GO program enabled TNT Express to organize its operations in a better and smarter way, resulting in significant operational benefits. In the past seven years, TNT developed a portfolio of optimization solutions. The most significant savings originate from the company’s line-haul routing and scheduling solution (TRANS), the tactical route-planning solution for pickup and delivery (SHORTREC) and the supply chain optimization solution (DELTA), all of which drew on the following GO program principles:

  1. Match optimization complexity with the maturity level of optimization knowledge and data quality of the business and ensure full alignment with expectations.
  2. Involve experts and decision-makers in the development of the optimization solutions through “communities of practice,” a platform to exchange experience, best practices, logistics and optimization knowledge.
  3. Effectively educate decision-makers in using optimization; the GO Academy, a two-year global educational program teaching the principles of optimization, was developed to train TNT employees in understanding and applying optimization at TNT Express.

The results were impressive. From 2008-2011, the GO program produced more than 207 million euros in savings for TNT Express. The DELTA solution has been used to support strategic decisions with large impact. About 200 TNT senior managers and staff members have been trained at the GO Academy. These graduates – none of them mathematicians – recognize optimization opportunities and know which tools to use to solve them. They can share experience and knowledge on a global scale because they speak the same (optimization) language, basing decisions at each level of TNT on fact.

The GO Academy

Set up in conjunction with the TiasNimbas Business School at Tilburg University, the GO Academy is an intense, two-year education program designed to teach TNT managers and decision-makers the principles of optimization and how to apply it. Graduates of the program, considered “supply chain masters,” are then expected to share their knowledge with the employees they manage and to develop more job-specific optimization tools in conjunction with ORTEC and TiasNimbas. Thanks to the GO Academy, the knowledge, appreciation and application of optimization and O.R. spread throughout the entire company, becoming, as Goossens described it in the Edelman presentation, part of TNT’s DNA.

“If I included all the supply chain masters and cohorts and the people who are really using it on a daily basis, I would say we have about a thousand people directly involved in O.R.,” Goossens said in a separate interview. Needless to say, the GO Academy is a vital component of the company’s over-arching global optimization program.

The Competition

Each year, the Edelman Award attracts an impressive, international and diverse collection of nominations, and this year was no exception. Along with TNT Express, the 2012 finalists included Carlson Hotels, The Centers for Disease Control, Greek shipping management firm Danaos Corporation, Hewlett-Packard and Intel (see accompanying story). So what put TNT Express over the top?

“First of all, all of the finalists were great,” said Andy Boyd, a member of the INFORMS Board of Directors, a former executive and chief scientist at an analytics firm and one of the Edelman judges. “You hear this all the time, but it’s true; they were all really, really good.

“One thing I thought was special about TNT was the way operations research was integrated into the organization,” Boyd added. “The GO Academy not only helped roll out various technical components, but it also set up an infrastructure in which they taught people about operations research, brought it into an organization that wasn’t initially receptive to O.R., and showed that the company was truly committed to O.R. That was a real differentiator.”

Cynthia Barnhart, professor and associate dean at MIT, a past president of INFORMS and another Edelman judge, pointed to a number of things that impressed her about the TNT team. “They had a strong O.R. component and an incredible implementation, in my mind,” she said. “They talked about analytics and data-based decision-making as being the DNA of the company. I think they were very innovative in how they created O.R. communities and the GO Academy that really did accomplish fact-driven decision-making throughout the company.”

Boyd and Barnhart were joined as judges and members of the Edelman Award Committee by Chairperson Stephen Graves of MIT, Susan Albin of Rutgers University, Srinivas Bollapragada of General Electric, Anthony Brigandi of AT&T, Peter Kolesar of Columbia University, Russ Labe of Bank of America, John Milne of Clarkson University and Mike Trick of Carnegie Mellon University.

Yoshi Ikura of Saitech coached the prize-winning team from TNT Express. “I was nervous,” he said of the competition. “There were many good competitors. What impressed me about the TNT team was their integrity. They were very professional, hard-working and punctual. They took the competition very seriously, they had wide support from their company, and they worked well together. Any of the finalists could have won, but I’m not surprised it was TNT.”

As for Goossens, she also admitted to a case of nerves throughout the competition and into the long night (the Edelman Awards Gala, like the Oscars, went well beyond its scheduled time allotment despite the heroic efforts of Master of Ceremonies Graham Rand to mush things along and to ease the tension with humor).

“I was very nervous,” Goossens said, “and, yes, I was very surprised we won. Going in, I thought we had a chance because our story was compelling and all-encompassing, but then we saw the competitors and thought, ‘Hmmm. They’re going to give us a real run for the money.’ So when they called our name, we were surprised … and very, very happy.”

So what does Goossens, who comes from a non-technical background, think about operations research now that TNT Express has won the “Super Bowl of O.R.”?
“I’m not particularly a mathematician,” she said, “but I always believed there had to be a better way of looking at cost optimization without jeopardizing service. I’m thrilled that through operations research, we have proven that.”

Peter Horner (peter.horner@mail.informs.org) is the editor of OR/MS Today and Analytics magazines. Barry List, director of communications for INFORMS, contributed to this article.

The five (other) finalists

– By Barry List

While they didn’t win, this year’s five other Edelman Award finalists all demonstrated throughout the yearlong competition and particularly during their presentations that their work was all worthy of reaching the “Super Bowl of O.R.”

This list includes:

Carlson Rezidor Hotel Group

(United States) for “Carlson Rezidor Hotel Group Maximizes Revenue Through Improved Demand Management and Price Optimization, in Collaboration with JDA Software Group”
Carlson Rezidor Hotel Group has more than 1,065 hotels in 77 countries and a portfolio of brands – Radisson, Country Inns & Suites by Carlson, Park Inn by Radisson, Park Plaza and Hotel Missoni. They find themselves competing in a business climate that allows consumers to compare hotel room prices on the Internet at a time when occupancy levels are down and the hospitality business leans toward a buyer’s market. Accordingly, they partnered with JDA to respond to this challenge.
Utilizing O.R. expertise, they created Stay Night Automated Pricing, or SNAP, which optimizes prices and reduces problems associated with traditional revenue optimization programs. SNAP includes improved demand forecasting to anticipate demand for rooms.

The Centers for Disease Control

(United States) for “Advancing Public Health and Medical Preparedness with Operations Research”
The Centers for Disease Control (CDC) is charged with two worrisome tasks: preventing the outbreak of a public health emergency (whether a pandemic or a terrorist threat or the effects of a natural disaster) and planning a response to such an emergency if it actually occurs. The CDC provides support to state and local governments, so their role throughout the United States is key.

To carry out their mission, the CDC adopted RealOpt, a powerful decision support suite created at Georgia Tech for tactical and strategic operational planning. RealOpt has enabled the CDC to provide modern tools for dynamic operational planning for emergencies, plan at the strategic and tactical levels and establish a knowledge databank to furnish feedback about the deployment of various techniques. It has led, across the United States, to more efficient staffing, more strategically placed sites for dispensing relief supplies, the means to generate large cost avoidance and the potential to save millions of lives.

Danaos Corporation

(Greece) for “Operations Research In Ship Management”
Greece has long been well known for its shipping industry. Now the Greek company Danaos, much like last year’s South American competitor CSAV, is showing how mathematical modeling can improve the deployment of limited resources to stay vital in the shipping industry during a time of great international competition.
The optimal solutions provided by the new Danaos system known as ORISMA resulted in a revenue gain of many millions of dollars in a single year.

Hewlett-Packard

(United States) for “Delivering Profitable Growth for HPDirect.com using Operations Research”
HP for years has focused its sales and manufacturing on large customers and retailers. When company leadership determined that it was necessary to sell to consumers as well, they formed HPDirect.com.

Management then turned to their operations research department to help ramp up production and guide their marketing effort. The O.R. group applied demand generation models to determine the impact of online marketing efforts on customers; regression models, Bayesian hierarchical models and discriminant techniques to predict customer product choice, timing of purchase and marketing channel preference; and time series forecasting to guide warehouse order forecasts.

Intel Corp.

(United States) for “Optimizing Capital Investment Decisions at Intel”

Intel Corporate fights continually to keep up with the speed of computer manufacturing innovation that it was so instrumental in creating. In electronics and related industries, companies that command the market one year (think Compaq or Nokia) may be overtaken the next year. To keep up requires an enormous investment in manufacturing capacity. Calling on operations research, Intel optimized its capital investment decisions in a way that allows it to respond in the long term (four to six quarters in advance of sales) and in the short term (one to two quarters ahead).

The result is a system that allows Intel to take advantage when increased demand requires a rapid step-up in manufacturing yet also to avoid acquiring too much long lead- time manufacturing equipment and stocking too much costly inventory.

Barry List (barry.list@informs.org) is the director of communications for INFORMS.

Sloan-Kettering wins INFORMS Prize

INFORMS Prize

The 2012 INFORMS Prize for outstanding and widespread use and influence of operations research throughout an organization was awarded to Memorial Sloan-Kettering Cancer Center. One of the oldest and largest cancer hospitals in the world, Sloan-Kettering, based in New York City with other locations in Long Island, Westchester County (New York) and Basking Ridge, N.J., treats more than 25,000 patients a year.

Sloan-Kettering won the 2007 Edelman for the work of Dr. Marco Zaider in collaboration with Eva Lee of the Georgia Tech Institute of Technology for using optimization modeling to create more effective prostate cancer treatment. (Lee was the technical leader of the CDC team that was a finalist in this year’s Edelman competition.)

INFORMS Prize Committee Chair Michael Gorman made the presentation during the Edelman Awards Gala held in conjunction with the INFORMS Conference on Business Analytics & Operations Research in Huntington Beach, Calif. Gorman was joined on the INFORMS Prize Committee by Erica Klampfl of Ford Research, Stefan Karisch of Jeppesen, Ivan Oliveria of SAS, Jeffrey Stonebraker of North Carolina State University, Sridhar Tayur of Carnegie Mellon University and Julie Ward of HP Laboratories.

Unlike the Edelman Award, which honors a specific project, the INFORMS Prize recognizes organizations for ongoing and pervasive O.R. activity. For example, O.R. has improved the utilization of expensive radiation oncology equipment at Sloan-Kettering, thus avoiding capital expenditure, construction and operations costs of more than $20 million. The hospital O.R. methods in determined improved strategies for building a new leukemia center, resulting in a $43 million improvement in donations along with an 11 percent increase in treated patients per year. O.R. has also been integral in improving Sloan-Kettering’s patient forecasting and staffing decisions.

Because of the success of these projects, O.R. has continued to gain importance and influence at Sloan-Kettering to the point that now the role of operations research in the organization has taken hold in most major decisions. Sloan-Kettering continues to work with leading software providers to extend the use of O.R. as a central capability in hospital administration and cancer treatment.

Dr. Craig B. Thompson, the president of Memorial Sloan-Kettering Cancer Center, terms operations research as “institutional priority number one.”