Supply Chain Management: Transportation PDF

Supply Chain Management: Strategy, Planning, and Operation Seventh Edition Chapter 14 Transportation in a Supply Chain Copyr...

Supply Chain Management: Strategy, Planning, and Operation Seventh Edition Chapter 14 Transportation in a Supply Chain Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Transportation Modes and Their Role in a Supply Chain Movement of product from one location to another Products rarely produced and consumed in the same location Significant cost component Shipper requires the movement of the product Carrier moves or transports the product Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Modes of Transportation and Their Performance Characteristics (1 of 2) Air Package carriers Truck Rail Water Pipeline Intermodal Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Modes of Transportation and Their Performance Characteristics (2 of 2) Table 14-1 Transportation Facts Freight Value Added Freight Value Freight Tons Ton-Miles to GNP ($ billions) (millions) (billions) ($ billions) Mode in 2011 in 2011 in 2011 in 2009 Air (includes truck and air) 394 6 11 61.9 Truck 12,181 11,924 2,337 113.1 Rail 588 2,053 1,518 30.8 Water 201 645 434 14.3 Pipeline 889 1,912 1,018 12.0 Multimodal 1,985 583 489 Blank Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Air Cost components 1.Fixed infrastructure and equipment 2.Labor and fuel 3.Variable depending on passenger/cargo Key issues – Location/number of hubs – Fleet assignment – Maintenance schedules – Crew scheduling – Prices and availability Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Package Carriers Small packages up to about 150 pounds Expensive Rapid and reliable delivery Small and time-sensitive shipments Provide other value-added services Consolidation of shipments a key factor Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Truck Significant fraction of the goods moved Truckload (TL) – Low fixed cost – Imbalance between flows Less than truckload (LTL) – Small lots – Hub and spoke system – May take longer than TL Fatigue-related accidents Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Rail Move commodities over large distances High fixed costs in equipment and facilities Scheduled to maximize utilization Transportation time can be long – Trains ‘built’ not scheduled Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Water Limited to certain geographic areas Ocean, inland waterway system, coastal waters Very large loads at very low cost Slowest Dominant in global trade Containers Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Pipeline High fixed cost Primarily for crude petroleum, refined petroleum products, natural gas Best for large and stable flows Pricing structure encourages use for predicable component of demand Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Intermodal Use of more than one mode of transportation to move a shipment Grown considerably with increased use of containers May be the only option for global trade More convenient for shippers – one entity Key issue – exchange of information to facilitate transfer between different modes Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Transportation Infrastructure and Policies (1 of 2) Governments generally take full responsibility or played a significant role in building and managing infrastructure elements Without a monopoly, deregulation and market forces help create an effective industry structure Pricing should reflect the marginal impact on the cost to society Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Transportation Infrastructure and Policies (2 of 2) Figure 14-1 Impact of Average And Marginal Cost on Vehicle Flow Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Design Options for a Transportation Network When designing a transportation network 1. Should transportation be direct or through an intermediate site? 2. Should the intermediate site stock product or only serve as a cross-docking location? 3. Should each delivery route supply a single destination or multiple destinations? Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Direct Shipment Network to Single Destination Figure 14-2 Direct Shipment Network Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Direct Shipping with Milk Runs Figure 14-3 Milk Runs from Multiple Suppliers or to Multiple Buyer Locations Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved All Shipments Via Intermediate Distribution Center with Storage Figure 14-4 All Shipments via DC Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved All Shipments Via Intermediate Transit Point with Storage Suppliers send their shipments to a central distribution center Stored until needed by buyers Shipped to each buyer location Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved All Shipments Via Intermediate Transit Point with Cross-Docking Suppliers send their shipments to an intermediate transit point They are cross-docked and sent to buyer locations without storing them Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Shipping Via DC Using Milk Runs Figure 14-5 Milk Runs from DC Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Tailored Network Table 14-2 Pros and Cons of Different Transportation Networks Network Structure Pros Cons Direct shipping No intermediate warehouse High inventories (due to Simple to coordinate large lot size) Direct shipping with Lower transportation costs for small Increased coordination milk runs lots Lower inventories complexity All shipments via Lower inbound transportation cost Increased inventory central DC with through consolidation cost Increased handling inventory storage at DC All shipments via Low inventory requirement Increased coordination central DC with cross- Lower transportation cost through complexity dock consolidation Shipping via D C using Lower outbound transportation cost Further increase in milk runs for small lots coordination complexity Tailored network Transportation choice best matches Highest coordination needs of individual product and store complexity Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Trade-Offs in Transportation Design (1 of 2) Trade-offs – Transportation and inventory cost – Transportation cost and customer responsiveness Transportation and inventory cost trade-off – Choice of transportation mode – Inventory aggregation Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Trade-Offs in Transportation Design (2 of 2) Table 14-3 Ranking of Transportation Modes in Terms of Supply Chain Performance (Read Vertically, 1 = Lowest, 6 = Highest) Cycle Safety In-Transit Transportation Transportation Mode Inventory Inventory Cost Cost Time Package 1 1 1 6 1 Air 2 2 2 5 2 LTL 3 3 3 4 4 TL 4 4 4 3 3 Rail 5 5 5 2 5 Water 6 6 6 1 6 Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Inventory Aggregation Can significantly reduce safety inventories Transportation costs generally increase Use – When inventory and facility costs form a large fraction of a supply chain’s total costs – For products with a large value-to-weight ratio – For products with high demand uncertainty Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Trade-Off between Transportation Cost and Customer Responsiveness Closely linked to degree of responsiveness – High responsiveness, high transportation costs – Decreased responsiveness, lower transportation costs Temporal aggregation – combining orders across time Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Tailored Transportation (1 of 3) The use of different transportation networks and modes based on customer and product characteristics Factors affecting tailoring – Customer density and distance – Customer size  Transportation cost based on total route distance  Delivery cost based on number of deliveries – Product demand and value Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Tailored Transportation (2 of 3) Table 14-10 Transportation Options Based on Customer Density and Distance Blank Short Distance Medium Distance Long Distance High density Private fleet with Cross-dock with milk Cross-dock with milk runs runs milk runs Medium Third-party milk LTL carrier LTL or package density runs carrier Low density Third-party milk LTL or package Package carrier runs or LTL carrier carrier Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved Tailored Transportation (3 of 3) Table 14-11 Aggregation Strategies Based on Value/Demand Product Type High Value Low Value High demand Disaggregate cycle inventory. Disaggregate all inventories Aggregate safety inventory. and use inexpensive mode of Inexpensive mode of transportation for transportation for replenishing replenishment. cycle inventory and fast mode when using safety inventory. Low demand Aggregate all inventories. If Aggregate only safety needed, use fast mode of inventory. Use inexpensive transportation for filling mode of transportation for customer orders. replenishing cycle inventory. Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved