chapter 14: Transportation in Supply Chain Management

Transportation in a Supply Chain

• Transportation is a significant cost component in a supply chain, moving products from one location to another.
• Products are rarely produced and consumed in the same location.
• The shipper initiates the movement, while the carrier transports the product.

Transportation Modes and Their Role

• Air: A fast mode, but with high fixed infrastructure and equipment costs. Variable costs depend on passenger/cargo. Key issues include hub locations, fleet assignments, maintenance, crew scheduling, and pricing/availability.
• Package carriers: Primarily for small packages up to 150 pounds. Characterized by high expense and rapid/reliable delivery, including value-added services and shipment consolidation.
• Truck: Relatively significant fraction of goods moved. Different classes exist, such as truckload (TL) with low fixed costs and imbalance between flows. Less than truckload (LTL) involves smaller lots, hub-and-spoke systems, and longer transit times, with potential for fatigue-related accidents.
• Rail: Moves commodities over long distances with high fixed costs in equipment/facilities. Scheduled for maximum utilization, transit time can be long as trains aren't as flexible as other modes.
• Water: Primarily for large loads at low costs, limited to geographic areas like oceans, inland waterways, and coastal waters. It's the slowest mode and dominant in global trade, frequently using containers.
• Pipeline: Primarily used for crude petroleum, refined petroleum products, and natural gas. High fixed costs and optimal for large, stable flows with predictable demand.
• Intermodal: Uses multiple transportation modes in a single shipment. Increased use of containers has led to greater efficiency and global trade conveniences. Key issue involves seamless information exchange between different modes.

Transportation Infrastructure and Policies

• Governments often take primary responsibility or play a significant role in managing infrastructure elements.
• Deregulation and market forces help create effective industry structure without monopolies.
• Pricing should reflect the marginal impact on society's overall cost.

Design Options for a Transportation Network

• Direct shipping decision: Directly from supplier to buyer, avoiding intermediate locations.
• Intermediate site stock/cross-docking: Whether the intermediate site stocks product or acts as a cross-docking location.
• Delivery routes: Should each delivery route supply one destination or multiple destinations?

Direct Shipment Network Diagrams

• Presented in images, illustrating direct shipping, milk runs, and use of intermediate distribution centers (DC) and cross-docking facilities

Transportation Network Trade-offs, Aggregation, and Modes

• Trade-offs between transportation cost, inventory costs, and customer responsiveness
• Inventory aggregation, particularly important for products with large value-to-weight ratios or high demand uncertainties.
• Choosing specific transportation mode depends on customer/product characteristics (customer density/distance, customer size), total route distance, number of deliveries, and product demand/value.
• A table (14-3) ranks transportation modes based on various factors like cycle inventory, safety inventory, in-transit cost, transportation cost, and transit time. See the Table for detailed rankings.
• Transportation trade-offs are closely linked to the degree of responsiveness desired. High responsiveness tends to come with higher transportation costs, while decreased responsiveness leads to lower transportation costs.
• Temporal aggregation involves combining orders across time to optimize transportation.