Transportation Management in Supply Chain

Transportation

Physical Transport Handling (terminals, harbours)

Storage (warehousing)
Information systems

Transportation Strategy

Customer relationship

Timeliness
Mode selection Carrier choice Measurement Regulatory Impact Flexibility

Transportation Modes
Motorway

1.

2.
3.

Railways
Waterways

4.
5.

Airways
Pipelines

Modal Characteristics

Motorways

Flexible routing and scheduling Package size Small to medium Truckload Low fixed and variable costs Major Issues Utilization Consistent service Combining of loads Less Than Truckload (LTL) Higher fixed costs and low variable costs Major Issues Location of consolidation facilities Utilization Vehicle routing Customer service

Railways

Fixed routing and scheduling Freight Bulk, oversize, containers, intercity, regional. Key Issues

Scheduling to minimize delays/improve service

Off track delays (pick up & delivery) Yard operations Variability of delivery times Competitive rates by Indian Railways

Waterways

Short and deep sea ships, platforms Fixed routing and scheduling Natural or artificial channels Cargo Bulk, cargo, mostly containers

Airways

Planes, helicopters, balloons and zeppelins Rigid or semi-rigid routing and scheduling Enabler in Responsive supply chain Freight High value items. Key Issues

Location/Number of hubs Location of fleet bases / crew bases Schedule optimization Fleet assignment Crew scheduling Yield management

Pipelines

Commonly oil, also drinking water and natural gas Rigid or flexible routing and scheduling Typical uses

Fluids

Material handling in rough terrain

Tunnels High

(concrete, excavated material)

rise construction (concrete) constructor (concrete)

Bridge

Modal Choice

By appearance:

Bulk (dry and wet) Containers Neo-bulk, general cargo (pallets, sacks, drums, logs of wood, ...)

By value density

Low value bulk

High value bulk

High value non-bulk Low value non-bulk

Modal Choice

A good transportation plan must consider the efficiency & inefficiency of each mode, with respect to:

Cost Travel time

Convenience
Flexibility Reliability

Responsiveness.

They should complement each other

Multi-criteria Evaluation of Modal Choice

Attributes Weig ht w1 w2 w3 Mode 1 Mode 2 Mode 3 Mode m Cost Reliability Ease of availability S11 S21 S31 S12 S22 S32 S13 S23 S33 S1m S2m S3m

Convenience
Flexibility Carton size carried Environmenta l impact n th attribute
Total score

w4
w5 w6

S41
S51 S61

S42
S52 S62

S44
S53 S63

S4m
S5m S6m

w7

S71

S72

S73

S7m

wn

Sn1
TS1 =w1.S11 +w2.S21 w7.S71

Sn2
TS2= w1.S12+w2. S22w7.S7 2

Sn3
TS3= w1.S13+w2. S23w7.S7 1

Snm
TSm= w1.S1m+w2. S2mw7.S 7m

Transportation System Design

Alternative Transportation Design

1.

Direct Shipment Network

Goods are shipped directly to retailers

Routing of each shipment is known; the supply chain manager needs to decide the shipment size and mode of transportation.
Operation and coordination is very simple. Eliminate need for intermediate warehouses.

2.

Direct Shipping with Milk Runs

Delivery from single supplier to multiple retailers; from multiple retailers to single retailer

Supply chain manager has to decide the route of each run.

Also eliminate need for intermediate warehouses. Lowers the transportation cost.

Replenishment lot size at the retail store may require Less than truck Load (LTL), but with the use of this method, shipments can be consolidated for number of retailers. Toyota uses this method to implement its Just in time, shipping parts from single supplier to its many closely located assembly plants.

3.

Through central distribution center

Shipments routed through a distribution center The retail stores are divided into geographic regions served by a distribution center (DC), an extra layer between the supplier and the retailer serves two important functions:

to store inventory

to act as transfer location

DC are very useful if inbound supply is in large quantities and manufacturer is far from retailer.

DC can store these materials and ship to retailers whenever they need in smaller quantities.

4.

Cross Docking

Take a finished good from the manufacturing plant and deliver it directly to the customer with little or no handling in between. Reduces handling and storage of inventory

See lecture on distribution system design

To help manage above mentioned transportation and storage needs and concentrate more on their core activities companies have started outsourcing logistics. Outsourcing logistics in short span of time has become a multi-billion dollar industry. According to the director of outsourcing consulting, George Loge Mann, and outsourcing is $30 bullion to $ 40 billion global industry. And it is growing !! For companies whose core competency is not distribution and neither have the resources to make it one, outsourcing logistics function can be a smart decision. It can free resources both in terms of time and finance to focus on mission-critical and core activities.

Tradeoffs in Transportation Design

Transportation, facility, and inventory cost tradeoff

Choice of transportation mode Inventory aggregation

Transportation cost and responsiveness tradeoff

Concluding Remarks

Transportation as an enabler in Supply chain

Typical tradeoffs in transportation involves : responsiveness vs cost

Issues: selection and evaluation of various modes

Various models for such evaluation