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Last Time. Course logistics Course goals What is Transportation Logistics and why is it important? Different approaches to Transportation Logistics. Supply Chain of an Individual Firm. Supply. Distribution. warehouse. Vendors Plants ports. warehouse. Destination Customers. Factory.

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  1. Last Time • Course logistics • Course goals • What is Transportation Logistics and why is it important? • Different approaches to Transportation Logistics

  2. Supply Chain of an Individual Firm Supply Distribution warehouse Vendors Plants ports warehouse Destination Customers Factory Transportation (e.g. local delivery truck) Transportation (e.g. long haul truck) Transportation (rail, marine, road) Transportation (e.g. LTL truck) Information flow (security, internal management, and control) Conflict between consumer oriented and inventory management Operators, owners, managers Spatial distribution

  3. Supply chains • In a pull chain finished products are manufactured when requested. • In a push chain production and distribution are based on forecasts. • This has integrated inventory management into business planning

  4. Transportation Goals • Reduce cost (5-10% of sales) • Meet reliability goals • Meet service quality goals • Simplify operations

  5. Integration of Logistics into Business Operations • Operational, or daily decisions are made by comparing transportation and inventory costs • Strategic, or long term decisions are made by comparing logistics costs (transportation and inventory) to manufacturing and production costs • Lengthening of supply chains as transportation cost decreased and new opportunities to reduce manufacturing cost were found

  6. Logistics Costs Initial gains from deregulation (restructuring of networks) dropping off $1000 reduction to each household annually

  7. How does REI get goods to market? West Coast Port Asian Factories Distribution Center Destination Store Container on marine vessel Short or Long-haul truck Drayage truck Due to infrastructure government infrastructure investments and decreases in Transportation cost, transportation cost is typically much less significant than the Reductions in manufacturing. Inventory management has been the area of attention.

  8. In-transit inventory or pipeline inventory: inventory that is in the process of movement from point of receipt or production and between points of storage and distribution. • Inventory-at-rest: inventory that is NOT in the process of movement from point of receipt or production and between points of storage and distribution, rather it is stationary, typically at a production facility, warehouse, distribution center, or consumption facility.

  9. How does REI get goods to market? West Coast Port Asian Factories Distribution Center Destination Store Container on marine vessel Short or Long-haul truck Drayage truck In transit inventory

  10. Cycle Inventory: the average amount of inventory used to satisfy demand between receipt of supplier shipments. The size of the cycle inventory is a result of the production or purchase of material in large lots. Companies produce or purchase in large lots to exploit economies of scale in the production, transportation, or purchasing process. With the increase in lot size, however, also comes an increase in carrying costs. The basic trade-off supply managers face is the cost of holding larger lots of inventory (when cycle inventory is high) versus the cost of ordering product frequently (when cycle inventory is low). Some of this inventory may be in-transit, while some may be inventory-at-rest. • Safety inventory: inventory held in case demand exceeds expectation; it is held to counter uncertainty. If they have too much safety inventory, goods go unsold and may have to be discounted. If the company has ordered too little safety inventory, however, the company will lose sales and the margin those sales would have brought. Therefore, choosing safety inventory involves making a trade-off between the costs of having too much inventory and the costs of losing sales due to not having enough inventory. Generally this inventory is inventory-at-rest, so that it is immediately available.

  11. Infrastructure Consequences • Global Flows • North American Flows • Regional Flows • Local Flows

  12. Global Trade Regions

  13. Growth in international trade Caused greater reliance on intermodal connections, ports, and air terminals

  14. Growth not from neighbors

  15. The West Coast? • Trade Statistics (see additional pdf)

  16. US Port Throughput (TEU)

  17. Major Gateways Importance of east-west corridors

  18. West Coast Terminal Area has increased

  19. Primarily at California ports

  20. Throughput density (TEUs/acre) variation across west coast ports

  21. Similarly with berth length

  22. Berth length (TEUs/ft) utilization at west coast ports

  23. Increasing vessel size

  24. Shifting warehousing patterns

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