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Managing Transportation in a Supply Chain Chapter 13

Managing Transportation in a Supply Chain Chapter 13. Parties Involved in Transportation. Shippers , consolidator of shipments; E.g. Postal service; Administrative assistants; Care about Transportation cost -paid to carriers Inventory cost Consolidating facility cost

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Managing Transportation in a Supply Chain Chapter 13

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  1. Managing Transportation in a Supply ChainChapter 13

  2. Parties Involved in Transportation Shippers, consolidator of shipments; E.g. Postal service; Administrative assistants; Care about • Transportation cost -paid to carriers • Inventory cost • Consolidating facility cost • Processing cost • Service levels, customer satisfaction Carriers, owners of the vehicles; E.g. Passengers by Southwest airlines; Cargo by Cargolux airlines, only freight; Passengers and cargo by railways Care about • Vehicle related costs • Fixed operating costs, hubs • Trip related costs • Quantity related cost • Overhead cost Is FedEx a Carrier or a Shipper?

  3. 14.3: Transportation Modes • Trucks • TL: Truckload. High utilization of trucks. • LTL: Less than truckload. Fast delivery. • Suffering from high transportation costs, Lennox wants to use more TL in the future. • Rail • Carload • Intermodal • Air • Package Carriers • Water • Pipeline

  4. Truckload (TL) • Average revenue per ton mile in 1996 = 9.13 cents • Average haul = 274 miles • Average Capacity = 17.5 to 21 tons = 42,000 - 50,000 lb. • Low fixed and variable costs • Major Issues • Coordination of local and interstate hauls • Utilization • Backhauls • Return trips are empty • What to send back to China from the U.S.? • Consistent service among different companies • Dynamic pricing, is the industry ready?

  5. Less Than Truckload (LTL) • Average revenue per ton-mile in 1996 = 25.08 cents • Average haul = 646 miles compare to 274 miles of TL • Higher fixed costs (terminals) and low variable costs • Major Issues • Location of consolidation facilities • Utilization • Vehicle routing • Customer service

  6. Rail • Average revenue / ton-mile in 1996 = 2.5 cents • Average haul = 720 miles • Average load = 80 tons • Key Issues • Scheduling to minimize delays / improve service • Off track delays (at pick up and delivery end) • Yard operations • To build a train – on the next page • Variability of delivery times

  7. Yard operations to build a train 2 1 3 Disassembling and assembling a train 3 2 1 2 3 2 3 3 1 3 2 1 3 3 Cities: 1 2 1 2

  8. Air • Key Issues for Passenger Airlines, $250 B /year • Cost cutting, costs in 2004 are about $0.1 per customer per mile • Location/Number of hubs • Depeaking: Moving operations away from rush hours • Location of fleet bases / crew bases • Schedule optimization, Fleet assignment, Crew scheduling • Recent idea: Always keep the same crew with the same aircraft • Yield management • Cargo Airlines, $40 B /year • Shape, weight, volume of the cargo • Cargo shippers, consolidators • Safety: Risk sharing between shipper and carrier. New legislation expected. • Service supply chains deal heavily with airline issues

  9. How far does1 Ton of Cargo go with1 Gallon of Fuel? Source: Brian Wickett Fall 2007 SCM student

  10. An Example of Multimodal Cargo Transportation Source: “A Threat in Every Port”. By L. M. Wein. NYT OpEd article on June 14, 2009.

  11. 14.4: Transportation System Design • AC Delco: Very high value, low volume parts • Three plants: Milwaukee(Wisc), Kokomo(Ind), Matamoros(Mex) • 21 assembly plants (customers for above plants) • Products: ACs, batteries, hoses, brakes, belts, etc. • What are the distribution options?

  12. All Shipments Direct All Shipments Via Kokomo (with or without cross dock) Milwaukee Milwaukee Kokomo Kokomo Matamoros Matamoros

  13. Milk Runs Milk run is a loop containing either a single supplier or a single retailer. Milk Runs From Plants Milk Runs From Kokomo Milwaukee Milwaukee Kokomo Kokomo Matamoros Matamoros

  14. Shipments via a Central Warehouse Shipments via a Central Warehouse Using Milk Runs Milwaukee Milwaukee Kokomo Kokomo Matamoros Matamoros

  15. This approach is useful if deliveries are time sensitive and there are several small dropoffs in proximity, not all of which can be delivered on a single truck. Items are shifted from one truck to another without going in to storage. Timing of truck arrivals/departures is very crucial. Cross Docking Milwaukee Kokomo Matamoros

  16. Summary • Key modes of transport and major issues • Transportation options

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