chapter 14: Transportation in Supply Chain Management
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Questions and Answers

What is a primary role of transportation within a supply chain?

  • To facilitate the movement of products between different locations. (correct)
  • To eliminate the need for product movement between locations.
  • To ensure products are consumed in the same location they are produced.
  • To minimize the cost component associated with product storage.
  • Which mode of transportation typically handles the largest volume of freight in terms of tons?

  • Water
  • Rail
  • Air
  • Truck (correct)
  • Which of the following is a key issue to consider when dealing with air transportation?

  • Maintenance schedules.
  • The location and number of hubs.
  • Crew scheduling.
  • All of the above. (correct)
  • Which transportation mode has the lowest value added to the GNP?

    <p>Pipeline (A)</p> Signup and view all the answers

    Which of the following is the best definition of a 'shipper'?

    <p>The party that requires the product to be moved. (A)</p> Signup and view all the answers

    A company needs to transport a shipment of perishable goods across the country as quickly as possible. Which transportation mode is the MOST suitable?

    <p>Package Carrier (B)</p> Signup and view all the answers

    Which mode of transportation is MOST appropriate for transporting crude oil from a production site to a refinery?

    <p>Pipeline (A)</p> Signup and view all the answers

    A business is looking to minimize transportation costs for a very large shipment of goods from China to the United States. Which mode of transport should they use?

    <p>Water (A)</p> Signup and view all the answers

    A company wants to ship goods from a supplier in one country to a customer in another country, the company wants to ensure that they only deal with one entity throughout the shipping process. Which transportation solution is best suited?

    <p>Intermodal (B)</p> Signup and view all the answers

    What is a key challenge that must be addressed to ensure the effectiveness of intermodal transportation solutions?

    <p>The exchange of information to facilitate transfer between modes (B)</p> Signup and view all the answers

    A company wants to minimize inventory costs while maintaining simple coordination. Which network structure is most suitable?

    <p>Direct shipping (C)</p> Signup and view all the answers

    Which transportation network is MOST effective at minimizing inventory while potentially increasing coordination complexity?

    <p>All shipments via central DC with cross-dock (D)</p> Signup and view all the answers

    What is the primary disadvantage of using a 'tailored network' for transportation?

    <p>Increased coordination complexity. (B)</p> Signup and view all the answers

    A company aims to reduce transportation costs for small lots and decrease inventory levels. Which strategy would be MOST effective?

    <p>Direct shipping with milk runs (B)</p> Signup and view all the answers

    What is the main trade-off when deciding on a transportation mode?

    <p>Balancing transportation cost and inventory cost. (C)</p> Signup and view all the answers

    According to the ranking of transportation modes, which mode is generally the LEAST preferable when prioritizing low cycle inventory?

    <p>Water (D)</p> Signup and view all the answers

    When is inventory aggregation most beneficial for a supply chain?

    <p>When inventory and facility costs make up a large portion of total supply chain costs. (C)</p> Signup and view all the answers

    What is the primary trade-off when a company chooses to increase its customer responsiveness?

    <p>Increased transportation costs (A)</p> Signup and view all the answers

    A company decides to use different transportation modes based on the specific needs of its customers and the characteristics of its products. What is this strategy known as?

    <p>Tailored Transportation (D)</p> Signup and view all the answers

    What is the key difference between an intermediate transit point with storage and one with cross-docking?

    <p>Whether the goods are stored at the intermediate point or not. (C)</p> Signup and view all the answers

    How do delivery costs typically change as the number of deliveries increases in a tailored transportation strategy?

    <p>Delivery costs increase proportionally with the number of deliveries. (A)</p> Signup and view all the answers

    In the context of transportation network design, what does a 'milk run' primarily aim to achieve?

    <p>To reduce transportation costs by consolidating shipments. (A)</p> Signup and view all the answers

    If a company wants to minimize inventory holding costs while maintaining responsiveness to customer demand, which transportation network design should they choose?

    <p>All shipments via intermediate transit point with cross-docking. (C)</p> Signup and view all the answers

    In what scenario would a direct shipment network be most appropriate, compared to shipping via an intermediate distribution center?

    <p>When shipping large quantities to a single location. (B)</p> Signup and view all the answers

    When designing a transportation network, which consideration primarily addresses the trade-off between transportation cost and responsiveness?

    <p>Whether to use an intermediate site, and if so, whether to stock product or only cross-dock. (B)</p> Signup and view all the answers

    According to Table 14-10, which transportation option is most suitable for a scenario with medium customer density and a medium distance?

    <p>LTL carrier (B)</p> Signup and view all the answers

    Based on Table 14-10, what transportation strategy is generally recommended for areas characterized by high customer density and long distances?

    <p>Cross-dock with milk runs (B)</p> Signup and view all the answers

    As per Table 14-11, what inventory and transportation strategy is most appropriate for a product with high value and low demand?

    <p>Aggregate all inventories; if needed, use fast mode of transportation for filling customer orders. (B)</p> Signup and view all the answers

    Considering Table 14-11, which strategy is best suited for a product that has both high value and high demand?

    <p>Disaggregate cycle inventory. Aggregate safety inventory. Inexpensive mode of transportation for replenishing cycle inventory and fast mode when using safety inventory. (C)</p> Signup and view all the answers

    According to Table 14-11, what is the recommended approach for managing inventory and transportation when dealing with a low-value, low-demand product?

    <p>Aggregate only safety inventory; use inexpensive mode of transportation for replenishing cycle inventory. (C)</p> Signup and view all the answers

    Flashcards

    Package Carriers

    Transport small packages, typically under 150 pounds, quickly and reliably.

    Truckload (TL)

    Shipping method with low fixed costs for larger shipments, focused on full truckloads.

    Less than Truckload (LTL)

    Shipping of small lots using a hub and spoke system; may take longer than TL.

    Intermodal Transportation

    Using more than one mode of transport for a shipment; relies on container usage.

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    Pipeline Transportation

    Transport method primarily used for liquids like crude oil and natural gas; high fixed cost.

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    Supply Chain Transportation

    Movement of products from one location to another within a supply chain.

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    Types of Transportation Modes

    Different methods like air, truck, rail, water, and pipeline used to transport goods.

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    Freight Value in 2011

    Total value of freight transported in different modes, measured in billions of dollars.

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    Air Transportation Costs

    Expenses associated with air transport, such as infrastructure, labor, and fuel costs.

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    Key Issues in Air Transportation

    Challenges faced in air transport, including hub locations, fleet assignment, and maintenance.

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    Transportation Network Design

    The process of planning how goods are moved through various sites and routes.

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    Direct Shipment

    A transport method where goods are sent straight to one specific destination without stops.

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    Milk Run

    A delivery strategy where a vehicle collects from multiple suppliers or delivers to multiple buyers on one trip.

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    Cross-Docking

    A logistics practice where products are moved directly from inbound to outbound shipping without long-term storage.

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    Distribution Center (DC)

    A central hub where goods are stored before being distributed to various locations.

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    Direct Shipping

    Shipping method without intermediate warehouses, which is simple to coordinate but results in high inventories.

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    Trade-offs in Transportation Design

    Balancing transportation costs against inventory costs and customer responsiveness to find the best solution.

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    Tailored Network

    A transportation strategy that customizes choices based on specific product and store needs, increasing complexity.

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    Transportation Modes Ranking

    A ranking system that evaluates transportation modes from lowest (1) to highest (6) based on performance criteria like cost and time.

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    Inventory Aggregation

    A strategy that reduces safety inventories while potentially increasing transportation costs, primarily used when inventory costs are significant.

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    Trade-Off in Transportation Costs

    The relationship between transportation costs and customer responsiveness, where higher responsiveness leads to higher costs.

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    Tailored Transportation

    Using different transportation networks and methods based on specific customer and product needs to optimize efficiency.

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    Temporal Aggregation

    Combining orders across time periods to reduce transportation costs while potentially affecting delivery speed.

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    Transportation Options

    Methods of transporting goods based on customer density and distance.

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    Short Distance Transportation

    Utilizes private fleets for high density; third-party for medium and low density.

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    Medium Distance Transportation

    Requires LTL carriers for low density and third-party milk runs for medium density.

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    Aggregation Strategies

    Methods for managing inventory based on product value and demand levels.

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    High Demand Product Strategy

    Disaggregate cycles for high value products and use inexpensive transport for replenishment.

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    Study Notes

    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.

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    Description

    Explore the various modes of transportation used in supply chains. Understand the roles of air, package carriers, and trucking options. This quiz covers essential concepts crucial for effective logistics and cost management.

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