Basic Aspects in Transportation Systems PDF

Basic aspects in Transportation system Learning objectives Understand business logistics/supply chain strategy and planning Evaluate transport decisions and forecast supply chain requirements. Know the dynamics of logistics/supply chain organization and control process. Basic Aspec...

Basic aspects in Transportation system Learning objectives Understand business logistics/supply chain strategy and planning Evaluate transport decisions and forecast supply chain requirements. Know the dynamics of logistics/supply chain organization and control process. Basic Aspects in Transportation Systems ⇒ Transportation systems move goods between origins and destinations using vehicles and equipment such as trucks, tractors, trailers, crews, pallets, containers, cars, and trains. Transportation represents the major role and most important element in logistics because of its considerable cost. ⇒ A transportation system is an organization that designs, arranges, sets up, and schedules freight-transportation orders during a given and limited time period with technical restrictions at the lowest possible cost. Role of Transportation in Logistics ⇒ The operation of transportation determines the efficiency of moving products. The progress in techniques and management principles improves the moving load, delivery speed, service quality, operation costs, the usage of facilities and energy saving. Transportation takes a crucial part in the manipulation of logistics. ⇒ Transportation is the base of efficiency and economy in business logistics and expands other functions of the logistics system. In addition, a good transport system performing in logistics activities brings benefits not only to service quality but also to company competitiveness. Distribution Channels and Physical Distribution Distribution Channel - mean the intermediaries or the process through which the products are transferred from the producers to ultimate users. They are distributors, retailers, agents, bankers etc. - A channel of distribution or marketing channel is the structure of intra-company organization units and extra company agents and dealers, wholesaler and retailer through which a commodity, product or service is marketed. - Marketing channel may be defined as “Pathways composed of intermediaries, also called middlemen, who perform such functions as needed to ensure a smooth floor of goods and services from the manufacturing ends to the consuming ends in order to achieve marketing of the product of a company.” Physical Distribution is concerned with the flow of goods to the ultimate consumers which includes transportation, warehousing and inventory management. Functions of Distribution: These broadly cover the following: o Transport services for a timely and safe physical movement of goods. o Warehousing facilities that irons out the market fluctuations and make the goods available to the customer’s when/where needed. o Sorting/grading of goods thus facilitating customers choice in selection of goods. Types of Channels: ⇒ Direct Channel ⇒ Indirect Channel ⇒ Specialty Channel Any channel of distribution that does not include a retail store. (e.g., Vending Machine, E-commerce, Catalogues, Telemarketing, etc.) Transportation Participants SHIPPER Shippers can move freights from origin to destination at the lowest cost and during a specified time period. The shipper ensures many transportation services such as particular pickup and delivery times, accurate and timely exchange of invoicing and information, zero loss and damage, and specified transit times. Some Shippers are producers of goods, this is while some others are just intermediary firms (brokers) which attribute demand to supply Transportation Participants ⇒ CARRIER o Carriers tender transportation services. Railways, shipping lines, trucking companies, intermodal container services, and postal services are different kinds of carriers. o Generally, carriers are classified into three main classes: ▪ common carriers is a business that offers its transportation services to the general public under license or the authority provided by a regulator. A common carrier holds itself out to provide transportation services to the general public without discrimination for “public convenience and necessity. ▪ private carriers ▪ contract carriers is a kind of for-hire carrier agent that serves a limited number of shippers under specific contractual arrangements. According to contract, they provide a specified transportation service at specified cost contract carriers are the same as private carriers except they do not hold serve the general public and in most instances have contract rates that are lower than those of common carriers. Transportation Participants GOVERNMENT o In most countries, public transportation systems and facilities such as rail facilities, roads, and ports are planned, constructed, and operated by governments. o Governments also control the shipment of certain items (e.g., hazardous and poisonous products) and tax the transportation industry. o Governments have traditionally been more involved in the practices of carriers than in most other commercial enterprises; their regulations include restricting carriers to certain markets and regulating prices they can charge. Delivery Frequency System ⇒ In an economic view, carriers must plan the frequency of service between any two points. Finding the best delivery frequency can decrease investment in equipment and facilities. ⇒ Delivery frequency systems can be chosen between three approaches: o customized transportation, o consolidation transportation, and o frequent operation Customized Transportation ⇒ In the customized transportation approach, truckload (TL) vehicles with a driver or driving team are dedicated to a specific customer. This transportation team starts its delivery trip when a customer asks for service. ⇒ The truck is sent to the customer’s origin site to begin loading. Then it moves to the customer’s specified destination to unload. When driving team finish their tour, call the carrier’s dispatcher to ask for next assignment if there is one. Otherwise, the team should wait for next location. Consolidation of Transportation ⇒ In the freight-transportation and logistics environment, there are many different ways to save transportation costs. ⇒ One way is to consolidate transportation. In this way, it is possible to take advantage of economies of scale in transportation by substituting large shipments for small ones. ⇒ Zhou et al. have delineated three general policies for transporting goods by vehicles. o (i) the quantity policy, according to which the maximum capacity of a vehicle should be used by carrying the maximum number of freight quantity. o (ii) the time policy, according to which the time of delivery is the most important factor and shouldn’t exceed a preplanned time limit. o (iii) the quantity and time policy, according to which both capacity and time are critical factors, so a vehicle is sent either when the delivery time limit arrives or when the freight quantity reaches to its maximum bound Consolidation of Transportation ⇒ Consolidation of small shipments can occur in three ways. o First, small shipments that must be transported over long distances or even short ones can be combined, just as when large shipments are transported over long distances (facility consolidation). o Second, several small shipments can be replaced by a single large shipment by using an adjusted forward or backward shipment schedule (temporal consolidation). o Third, when there are many pickup and delivery points, using a vehicle on a multi-stop route can serve less than truckload (LTL) pickup and deliveries associated with different locations (multi-stop consolidation) Frequent Operation ⇒ Another alternative for delivery services is frequent operations in which carriers provide fixed schedules that match their customers’ shipping requirements. ⇒ In this fixed schedule, delivery services are organized in advance—e.g., once a day or twice a week. In this approach, unpredictable numbers of customers in each service period cause uncertainty in shipping requirements. To cover the most possible demands, carriers need a higher-capacity investment (as compared to consolidating transport). However, predictability of operation schedules and the accuracy of anticipated shipping arrival dates are among the advantages of frequent service. Classification of Transportation Problems A lot of decision-making problems in a logistic system are directly or indirectly related to transportation activities. In addition to standard transportation problems, handling a transportation system creates and develops many other decision-making problems. Freight transportation plans as decision making problems involve many different variables and constraints. Some of them can be applied for all transportation systems, whereas others are only relevant to specific modes or particular ways of system operation. Planning Levels ⇒ Transportation systems are among the most complex organizations and involve many components such as human and material resources, complex connections, and balances between decision variables and management policies that directly or indirectly affect different components of the system. ⇒ To decrease this complexity, researchers have provided a general classification for transportation problems with three planning levels: strategic (long term), tactical (medium term), and operational (short term). Strategic (Long Term) Planning ⇒ Strategic planning involves decisions at the highest level of management and requires long-term investment. ⇒ Strategic decisions develop general policies and extensively structure the functional strategies of the system. Any physical changes or development in whole network such as locating main facilities (e.g., hubs and terminals) are examples of strategic decision planning. ⇒ Strategic planning takes place in international, national, and regional transportation systems. Tactical (Medium Term) Planning ⇒ Tactical planning needs medium term investment and is not as critical as strategic planning. This class contains a well-organized allocation and operation of resources to improve system performance. Examples of this category are decision making in the design of service networks, service schedules, repositioning fleets, and traffic routing. Most carriers’ decision making is at this level. Operational (Short Term) Planning ⇒ Operational planning is short term and urgent decision making performed by local management, yard masters, and dispatchers. ⇒ Decisions at this level do not need large investments. The completion and adjustment of schedules for services, crews, maintenance activities, and routing and dispatching of vehicles and crews are examples of this level. Variants of the Standard of TPs Time- minimization Transportation Problem (TMTP) ⇒ minimizes the time to transport goods from origin to destination under some constraint of available sources and requested destinations. Such problems especially arise when perishable goods are transported or when it is required to transport essential items such as food and ammunition in the shortest possible time in a war scenario. Cost-minimization Transportation (CMTP) and TMTP ⇒ is that the cost of transportation depends on the quantity of commodity being transported but the time involved is independent of this factor. ➔ Many different objective functions may be considered for a transportation problem such as minimization of transportation costs, minimization of labor turnover, minimization of risk to a firm or the environment, and minimization of deterioration of perishable goods Carrier Decision-Making Problems ⇒ A carrier decision-making problem is a problem whose objective function is defined in the same direction of maximization of a carrier’s profits. Some of the carrier decision-making problems are crew-assignment problems, vehicle allocation and scheduling problems, terminal design problems, allocation and operation problems, freight-traffic assignment problems, service network design problems, and fleet-composition problems. Dynamic Driver Assignment Problem (DDAP) ⇒ The first carrier decision-making problem introduced here is the dynamic driver assignment problem (DDAP) that arises in TL trucking. Crews are assigned to vehicles in order to support the planned operations. ⇒ In this problem, a fully loaded vehicle is assigned to a driver in a scheduled operation. It may take several days for a vehicle to be fully loaded because the customer’s demands are not known in advance and are received randomly. Here each driver is supposed to be assigned to just one demand at one time. ⇒ The DDAP is formulated as a minimum-cost problem during which, the cost of driver’s assignments (for empty moving from waiting location to pick-up point) is minimized. Fleet-Composition Problem ⇒ Carriers always try to decrease the investment in their own crew. In other words, paying attention to the variety of demands over a year, they avoid having their own maximum number of vehicles needed in peak periods during a year. They usually have a base number of their own vehicles to answer their usual demands, and they hire additional required vehicles in peak periods. In this way, carriers can save money by creating a balance point at which the total cost of their own and hired vehicles are minimized. For this problem, similarity of vehicles is an assumption. Vehicle Allocation and Scheduling Problem ⇒ Carriers can best use their vehicles by applying an optimum allocated schedule to respond to the maximum number of demands. A vehicle-allocation problem is a kind of carrier’s decision problem formulated as a minimum-cost flow problem in which carriers decide which demand should be responded to and which one should be rejected, which vehicle should be moved to a new pickup point, and which one should wait for a future assignment. ⇒ In this problem, it is supposed that all demands have been known in advance and all vehicles are the same in type, size, and capacity. Shipper Decision-Making Problems ⇒ A shipper decision-making problem is a problem with an objective function defined in the same direction as the maximization of a shipper’s profits. ⇒ Some of the shipper decision-making problems are transportation mode selection, a shipment consolidation and dispatching problem, a commodities load planning and packing problem, and a carrier-type decision problem. Shipment Consolidation and Dispatching ⇒ Shipment consolidation and dispatching problem is a kind of shipper decision making problem often faced by producers (if they do their delivery activities themselves) and contracted shippers. The manufacturer or shipper has to choose the best way for timely delivery of orders to customers during a time horizon (is a fixed point of time in the future at which point certain processes will be evaluated or assumed to end.). They should find the most suitable transportation mode for each shipment. ⇒ They also should choose the best design for consolidation of shipments and estimate the start time of dispatching. In this way, any related scheduling critical factor should be considered. Issues in Transport Management ⇒ Transport Managers/ Dispatchers are facing operational issues daily regarding the organization of the transportation network, the management of the fleet and the management of shipments. ⇒ Some of the problems that should be confronted either in the planning phase of a transportation network or during daily operations are: o Mode Selection o Route Selection o Fleet Sizing o Vehicle Scheduling o Shipment Consolidation Transport Operations Costs ⇒ Various cost factors have to be taken under consideration in order to generate the cost associated with Transport Operations. Costs are related to routes, terminals, vehicles, personnel. Cost can be separated in Capital and Operating and Costs Capital costs include: ▪ Financial cost (investment in route, terminals, distribution centers) ▪ Equipment Cost (vehicles, containers) Operating costs include: ▪ Maintenance cost (facilities, equipment) ▪ Transport cost (fuel, tolls) ▪ Personnel cost (drivers and admin salaries, overtimes)