Logistics Management Transportation Fundementals. Özgür Kabak, Ph.D.

Transcription

1 Logistics Management Transportation Fundementals Özgür Kabak, Ph.D.

2 Transport Fundamentals Transport: moving goods from one place to another. Transport involves equipment (trucks, planes, trains, boats, pipeline), people (drivers, loaders & unloaders), decisions (routing, timing, quantities, equipment size, transport mode). In underdeveloped countries we often find it necessary to locate production close to both markets and resources, while in countries with developed distribution systems people can live in places far from production and resources.

3 Transport Fundamentals Performance Average transit time Transit time variability Loss and damage Other factors including availability, capability, frequency of movement, and various less tangible services Cost Line haul Terminal/local Accessorial or special charges

4 Transport Cost Characteristics Fixed costs: Terminal facilities Transport equipment Carrier administration Roadway acquisition and maintenance Variable costs: Fuel Labor Equipment maintenance Handling, pickup, and delivery

5 Transport Choices Primary intercity carriers Air Truck Rail Water Pipe Coordinated services (intermodal transp n) Piggyback Birdyback Fishyback Small Shipment Carriers UPS Postal Services (PTT) Cargo Companies Agents Freight forwarders Ship associations Others Autos Bicycles Taxis Human Electronic

6 Pipeline example Baku Tbilisi Ceyhan pipeline The Baku Tbilisi Ceyhan pipeline is a 1,768 kilometres long crude oil pipeline from the Azeri-Chirag- Guneshli oil field in the Caspian Sea to the Mediterranean Sea. It connects Baku, the capital of Azerbaijan; Tbilisi, the capital of Georgia; and Ceyhan, a port on the south-eastern Mediterranean coast of Turkey. It is the second longest oil pipeline in the former Soviet Union after the Druzhba pipeline. The first oil that was pumped from the Baku end of the pipeline on 10 May 2005 reached Ceyhan on 28 May 2006 Source: 0%93Ceyhan_pipeline

7 Single-mode Service Choices and Issues Rail (long distance, heavy goods, slow mover) Carload (CL) vs. less-than-carload (LCL per hundredweight cwt.) Larger cars can carry around 83 tons Truck (Smaller goods than rail, medium time duration) Trucks can go door-to-door as opposed to planes and trains Can hold t. depending on the product density Air (Smallest size goods, quick transport) Low variability in lead time Requires transport to and from airport Water (Extremely slow, large goods, international trade) Up to 40,000 tons Requires transport to and from port Pipeline (limited product line, liquids, gases) Highly reliable Low product losses

8 Importance of modes By Volume Moved Transportation mode Percent of total volume Railroads 36.5% Trucks 24.9% Inland waterways 16.3% Oil pipelines 22.0% Air 0.3%

9 Transport Cost Characteristics Rail High fixed costs, low variable costs High volumes result in lower per unit (variable) costs Highway Lower fixed costs (don t need to own or maintain roads) Higher unit costs than rail due to lower capacity per truck Terminal expenses and line-haul expenses Water Air High terminal (port) costs and high equipment costs (both fixed) Very low unit costs Substantial fixed costs Variable costs depend highly on distance traveled Pipeline Highest proportion of fixed cost of any mode due to pipeline ownership and maintenance and extremely low variable costs

10 Relative Costs of Performance Transportation mode Price, /ton-mile Rail 2.28 Trucks Water 0.74 Pipelines 1.46 Air Rail Trucks Water Pipelines Air

11 Intermodal Use of more than one mode of Transportation to move a shipment to its destination without any handling of the freight itself when changing modes Most common example: rail/truck Also water/rail/truck or water/truck Grown considerably with increased use of containers Increased global trade has also increased use of intermodal transportation More convenient for shippers (one entity provides the complete service) Key issue involves the exchange of information to facilitate transfer between different transport modes Example: Roll-on/roll-off (RORO or ro-ro) ships are vessels designed to carry wheeled cargo such as automobiles, trucks, semi-trailer trucks, trailers or railroad cars that are driven on and off the ship on their own wheels.

12 Cross-docking unloading materials from an incoming semi-trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or rail cars, with little or no storage in between.

13 Transportation Rate Structures Volume-based rates (based on weight) Distance-based rates Typically some combination of both of the above Freight class also very important the class of an item depends on its density and bulkiness

14 Rate Types Line haul rates Class Freight classification of items Rate tables of tariffs Contract rates Drayage (local delivery) Commodity and contract rates Specific rates for given shipment sizes for specific products moving between designated points Special service charges Extra charges Stop-off privilege example Private carrier costing

15 Stop-Off Privilege Example Suppose 3 shipments of J=8,000 lb., K=12,000 lb., and L=10,000 lb. originating at I are to be delivered in the following way.

16 Stop-Off Privilege Example First, we compare the costs without the stop-off privilege. This would be to price as if each shipment is a separate shipment from I. Suppose we know the rates. Hence, Load, lb. Points Rate, $/cwt. Charges 8,000 I to J 3.05 $ ,000 I to K 3.35 $ ,000 I to L 3.60 $ Total $ Now, we price with the stop-off privilege. We assume that all the volume (30,000 lb.) is to be delivered to the farthest stop and we use the rate to that point ($3.00/cwt.). A small stop off charge of $15.00 is made for each stop including the last stop. Hence, Load, lb. Points Rate, $/cwt. Charges 8,000 I to L 3.00 $ stops at $15 each $45.00 Total $945.00

17 Design Options for a Transportation Network The design of the transportation network affects the performance of a supply chain by establishing the infrastructure within which operational transportation decisions regarding scheduling and routing are made. A well-designed transportation network allows a supply chain achieve the desired degree of responsiveness at a low cost.

18 Design Options for a Transportation Network Direct Shipment Network No intermediate warehouse. Simple to coordinate. High inventories (due to large lot size). Significant receiving expense.

19 Design Options for a Transportation Network Direct shipping with milkruns A milk run is a route in which a truck either delivers product from a single supplier to multiple retailers or goes from multiple suppliers to a single retailer Direct shipping provides the benefit of eliminating intermediate warehouses and milk runs lower transportation cost by consolidating shipments to multiple stores on a single truck

20 Design Options for a Transportation Network All shipments via central distribution center Crossdocking is appropriate for products with large predictable volumes and requires that DCs be set up such that economies of scale in transportation can be achieved on both the inbound and outbound sides

21 Design Options for a Transportation Network Shipping via distribution center using milk runs if lot sizes to be delivered to each retail store are small: Ex. 7-Eleven

22 Design Options for a Transportation Network Tailored network A suitable combination of previous options that reduces cost and improves responsiveness of the supply chain

23 Pros and Cons of Different Transportation Networks Network Structure Pros Cons Direct Shipping Direct shipping with milk runs All shipments via central DC with inventory storage All shipments via central DC with cross-dock Shipping via DC using milk runs Tailored network No intermediate warehouse. Simple to coordinate. Lower transportation costs for small lots. Lower inventories. Lower inbound transportation cost through consolidation. Very low inventory requirements. Lower transportation cost through consolidation. Lower outbound transportation cost for small lots. Transportation choice best matches needs of individual product and store. High inventories (due to large lot size). Significant receiving expense. Increased coordination complexity. Increased inventory cost. Increased handling at DC. Increased coordination complexity. Further increase in coordination complexity. Highest coordination complexity.

24 Next Class Transport Decisions