Transportation Networks in SCM (Group 4) PDF

ANABEZA, DELA CRUZ, DE NIEVA, PRIELA, SULIT, VELACO TRANSPORTATION NETWORKS SUPPLY CHAIN MANAGEMENT ARELLANO UNIVERSITY MEMBERS  ROLE OF TRANSPORTATION IN SCM Transportation refers to the...

ANABEZA, DELA CRUZ, DE NIEVA, PRIELA, SULIT, VELACO TRANSPORTATION NETWORKS SUPPLY CHAIN MANAGEMENT ARELLANO UNIVERSITY MEMBERS  ROLE OF TRANSPORTATION IN SCM Transportation refers to the movement of product from one location to another as it makes its way from the beginning of a supply chain to the customer. Transportation is an important supply chain driver because products are rarely produced and consumed in the same location. The SHIPPER is the party that requires the movement of the product between two points in the supply chain. The CARRIER is the party that moves or transports the product Two other parties have a significant impact on transportation: (1) the owners and operators of transportation infrastructure such as roads, ports, canals, and airports (2) the bodies that set transportation policy worldwide. Actions by all four parties influence the effectiveness of transportation. MODE OF TRANSPORTATIO AND THEIR PERFORMANCE CHARACTERISTICS  MODE OF TRANSPORTATIONS The mode of transportation is the manner in which a product is moved from one location in the supply chain network to another. Companies can choose among air, truck, rail, sea, and pipeline as modes of transport for products. Today, information goods can also be sent via the Internet. Each mode has different characteristics with respect to the speed, size of shipments (individual parcels to pallets to full trucks to entire ships), cost of shipping, and flexibility that lead companies to choose one particular mode over the others. MODE OF TRANSPORTATION 01 AIR Major airlines in the United States that carry both passenger and cargo include American, Southwest, United, and Delta. Airlines. Air carriers offer a fast and fairly expensive mode of transportation for cargo. Small, high-value items or time-sensitive emergency shipments that have to travel a long distance are best suited for air transport. 02 PACKAGE CARRIERS Package carriers use air, truck, and rail to transport time-critical smaller packages. The major service they offer shippers is rapid and reliable delivery. Thus, shippers use package carriers for small and time-sensitive shipments. Companies such as FedEx, UPS, and the U.S. Postal Service, which carry small packages ranging from letters to shipments weighing about 150 pounds. 03 TRUCK Trucking is more expensive than rail but offers the advantage of door-to-door shipment and a shorter delivery time. It also has the advantage of requiring no transfer between pickup and delivery. In most of the world, trucks carry a significant fraction of the goods moved.  04 RAIL MODE OF TRANSPORTATION Rail carriers incur a high fixed cost in terms of tracks, locomotives, cars, and yards. Transportation time by rail, however, can be long. Rail is thus ideal for heavy, low-value shipments that are not time sensitive. 05 WATER Major global ocean carriers include Maersk, Evergreen Group, American President Lines, and Hanjin Shipping Co. Water transport, by its nature, is limited to certain areas. It is, however, the slowest of all the modes, and significant delays occur at ports and terminals. This makes water transport difficult to operate for short-haul trips 06 PIPELINE Pipeline is used primarily for the transport of crude petroleum, refined petroleum products, and natural gas. Pipelines are best suited when relatively stable and large flows are required. Pipeline may be an effective way of getting crude oil to a port or a refinery. 07 INTERMODAL Intermodal transportation is the use of more than one mode of transport to move a shipment to its destination. A variety of intermodal combinations are possible, with the most common being truck/rail. Intermodal traffic has grown considerably with the increased use of containers for shipping and the rise of global trade TRANSPORTATION NETWORKS The transportation network is the collection of transportation modes, locations, and routes along which product can be shipped. A well-designed transportation network allows a supply chain to achieve the desired degree of responsiveness at a low cost. Three basic questions need to be considered 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 the intermediate site stock product or only serve as a cross- docking location? WHY TRANSPORT NETWORKING DESICION IS IMPORTANT? Transportation is the backbone Incurs maximum cost Consideration of costumer’s deman Consideration of facilitites available Consideration of products transported Reduce the time involved Administrative skills DIFFERENT TYPES OF TRANSPORTATION NETWORKS DIRECT SHIPMENT NETWORK TO SINGLE NETWORK The buyer structures the transportation network so that all shipments come directly from each supplier to each buyer location. The route of each shipment is specified and the supply chain manager needs to decide only the quantity to ship and the mode of transportation to use. The major advantage of a direct shipment transportation network is the elimination of intermediate warehouses and its simplicity of operation and coordination. Home Depot started with a direct shipment network, given that most of the stores it opened until about 2002 were large stores. The stores ordered in quantities that were large enough that ordering was managed locally within the store and delivery to the store arrived directly from the supplier. DIRECT SHIPPING WITH MILK RUNS A milk run is a route on which a truck either delivers from a single supplier to multiple retailers or goes from multiple suppliers to a single buyer location. A supplier delivers directly to multiple buyer locations on a truck or a truck picks up deliveries destined for the same buyer location from many suppliers. Direct shipping provides the benefit of eliminating intermediate warehouses, whereas milk runs lower transportation cost by consolidating shipments to multiple locations on a single truck. Companies such as Frito-Lay that make direct store deliveries use milk runs to lower their transportation cost. If frequent small deliveries are needed on a regular basis and either a set of suppliers or a set of retailers is in geographic proximity, the use of milk runs can significantly reduce transportation costs. Toyota uses milk runs from suppliers to support its just-in-time (JIT) manufacturing system in both Japan and the United States.  ALL SHIPMENTS VIA INTERMIDIATE DISTRIBUTION CENTER WITH STORAGE Product is shipped from supplier to a central distribution center where it is stored until needed y buyers when it is shipped to each buyer location. Storing product at an intermediate location is justified if transportation economies require large shipments on the inbound side or the outbound side cannot be coordinated Product comes into a DC in large quantities where it is held in inventory and send to buyer locations in smaller replenishment lots when needed. W.W. Grainger has its suppliers ship products to one of nine DCs (typically in large quantities), with each DC in turn replenishing stores in its vicinity with the smaller quantities they need. It would be expensive for suppliers to try and serve each store directly When Home Depot sources from an overseas supplier, the product is held in inventory at the DC because the lot size on the inbound side is much larger than the sum of the lot sizes for the stores served by the DC.  ALL SHIPMENTS VIA INTERMIDIATE TRANSIT POINT WITH CROSS-DOCKING Suppliers send their shipments to an intermediate transit point (could be a DC) where they are cross-docked and sent to buyer locations without storing them. When a DC cross-docks product, each inbound truck contains product from suppliers for several buyer locations, whereas each outbound truck contains product for a buyer location from several suppliers. Major benefits of cross-docking are that little inventory needs to be held and product flows faster in the supply chain Wal-Mart has used cross-docking successfully to decrease inventories in the supply chain without incurring excessive transportation costs. Wal- Mart builds many large stores in a geographic area supported by a DC. Peapod has a DC in Lake Zurich from which it delivers to its customers using milk runs. This approach proved effective for customers in the northern and western suburbs of Chicago. The use of cross-docking at a transit point has allowed Peapod to increase the reach of the Lake Zurich DC without significantly increasing transportation expense  SHIPPING VIA DC USING MILK RUNS Milk runs can be used from a DC if lot sizes to be delivered to each buyer location are small. Milk runs reduce outbound transportation costs by consolidating small shipment Seven-Eleven Japan cross-docks deliveries from its fresh- food suppliers at its DCs and sends out milk runs to the retail outlets because the total shipment to a store from all suppliers does not fill a truck. Seven-Eleven Japan cross-docks deliveries from its fresh-food suppliers at its DCs and sends out milk runs to the retail outlets because the total shipment to a store from all suppliers does not fill a truck. The use of cross- docking and milk runs allows Seven- Eleven Japan to lower its transportation cost while sending small replenishment lots to each store The online grocer Peapod uses milk runs from DCs when making customer deliveries to help reduce transportation costs for small shipments to be delivered to homes. TAILORED NETWORK It is a suitable combination of previous options that reduces the cost and improves responsiveness of the supply chain. Here transportation uses a combination of cross-docking, milk runs, and TL and LTL carriers, along with package carriers in some cases. The goal is to use the appropriate option in each situation.. Operating a tailored network requires significant investment in information infrastructure to facilitate the coordination. RISK MANAGEMENT Delay arises either because of congestion along links such as roads or nodes such as ports and airports. In each case, it is important to identify the IN TRANSPORTATION sources of risk and their consequences and plan suitable mitigation strategies. There are three main types of risk to consider when transporting a shipment between two nodes on the network: The risk that the shipment is delayed The risk that the shipment does not reach its destination because intermediate nodes or links are disrupted by external forces. The risk of hazardous material MAKING TRANSPORTATION DECISIONS IN PRACTICE  Align transportation strategy with competitive strategy Managers should ensure that a firm’s transportation strategy supports its competitive strategy. They should design functional incentives that help achieve this goal. Historically, the transportation function within firms has been evaluated based on the extent to which it can lower transportation costs. Consider both in-house and out sourced transportation Managers should consider an appropriate combination of company-owned and outsourced transportation to meet their needs. This decision should be based on a firm’s ability to handle transportation profitably as well as the strategic importance of transportation to the success of the firm.  Use technology to imrpove transportation performance Managers must use information technology to decrease costs and improve responsiveness in their transportation networks. Software helps managers do transportation planning and modal selection and build delivery routes and schedules Design flexibility into the trasportation network When designing transportation networks, managers should take into account uncertainty in demand as well as availability of transportation. Ignoring uncertainty encourages a greater use of inexpensive and inflexible transportation modes that perform well when everything goes as planned. REFERENCES https://sfaaz.org/assets/documents/library/RECOMMENDED%20TEXTBOOKS/Chopra_Mein dl_SCM.pdf#:~:text=Fifth%20Edition%20Sunil%20Chopra%20Kellogg%20School%20of%20M anagement https://www.prologis.com/blog/role-transportation-supply-chain-manage ment https://transportgeography.org/contents/chapter2/geography-of- transportation-networks/ https://www.tandfonline.com/doi/full/10.1080/1556831060106007 7#d1e354 https://phantran.net/design-options-for-a-supply-chain- transportation-network/ https://supernet.isenberg.umass.edu/articles/SupplyChainsandTran sportationNetworks.pdf https://thesupplychainlink.com/network-design-in-supply-chain/