Logistics & Supply Chain Transportation MT307

Transcription

1 Logistics & Supply Chain Transportation MT307 What is logistics? Logistics involves getting, in the right way, the right product, in the right quantity and right quality, in the right place at the right time, for the right customer at the right cost 1

2 The evolution of the integrated supply chain Four perspectives on logistics versus supply chain management Larson, P. & Halldorsson, A. (2004) 2

3 The Role of Transportation in Logistics Transportation is the physical link connecting the firm to its suppliers and customers. In a nodes and links scenario, transportation is the link between fixed facilities (nodes). Transportation also adds value to the product by providing time and place utility for the firm s goods. Logistics Management Defined Logistics management is that part of SCM that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers requirements. - Council of Supply Chain Management Professionals 3

4 Key Logistical Decision Areas Transportation Warehousing (and more generally, location) Packaging Material handling Logistics information systems Logistics service providers Factors Affecting Transportation Decisions Carrier (party that moves or transports the product) Vehicle-related cost Fixed operating cost Trip-related cost Shipper (party that requires the movement of the product between two points in the supply chain) Transportation cost Inventory cost Facility cost 4

5 Third party logistics providers Distinguishing LSPs and 3PLs: All companies providing logistics services are defined as logistics service providers Those LSPs that provide multiple logistics services, often in an integrated fashion, are third party logistics companies Fourth party logistics A supply chain integrator that assembles and manages the resources, capabilities and technology of its own organisation, with those of complementary service providers, to deliver a comprehensive supply chain solution (Accenture, 1996) Fifth party logistics An emerging sub sector is the 5PL firm attributed to logistics service providers who plan, organize and implement logistics solutions on behalf of a contracting party (mainly information systems) by exploiting the appropriate technologies (conceptual level). 5

6 The Logistics Process Materials management is concerned with the inbound movement and storage of raw materials, purchased components, and subassemblies entering and flowing through the conversion process. Physical distribution focuses on the outbound transportation and storage of finished products from point of manufacture to where customers wish to acquire them. 6

7 Basic Logistics Activities Activity Customer Service Demand Forecasting Documentation Information Management Inventory Management Basic Roles and Responsibilities Customer service focus on understanding what customers want and measuring logistics performance against these customer requirements. Forecasts estimates of demand must be developed to help plan other logistics activities, allocate resources, and provide high levels of service at low costs. Accurate documentation helps assure that the product gets to the customer on time. Documentation is particularly vital in international shipments. Data on carriers, customers, and inventories must be turned into useful decision-making information. Information replaces inventory in today's logistics systems. Product must be available to meet production requirements and customer demand. However, inventory is expensive. Inventory control must support high levels of customer service with as little inventory as possible. Basic Logistics Activities Activity Material Handling Order Processing Packaging Parts and Service Support Site Selection Location Basic Roles and Responsibilities Because handling materials costs money and can lead to damage, factories and warehouses are designed to minimize the total amount handling. Order processing initiates work. Many orders are transmitted electronically, improving speed and accuracy of the fulfillment process. Packaging protects the product throughout the distribution process. Packaging also conveys information about the product and presents an attractive appearance. Needed spare and replacement parts must be available to support sales. Caterpillar promises delivery of needed replacement parts anywhere in the world within 48 hours. This type of support increases customer loyalty. Location can provide access to inputs like low-cost labor and materials. It can also affect customer service levels, providing access to important consumer markets. 7

8 Basic Logistics Activities Activity Return Goods Handling Salvage and Recycling Transportation Management Warehouse/DC Management Basic Roles and Responsibilities Defective products and inaccurate orders must be returned efficiently. Reverse logistics" is very important to achieving high levels of customer satisfaction. Handling excess materials is often overlooked. However, this is an important logistics activity, especially when hazardous materials or recyclable items must be managed. Transportation is the most visible logistics activity. Storing products until they are ready for use is the role of warehousing. A variety of products are also consolidated into a single customer shipment. Order Fulfillment Activities 8

9 The Transport Selection Decision The Transportation Supply Chain Relationship Firms need to recognize that the lowest cost carrier does not necessarily guarantee that this carrier will result in the lowest landed cost. Therefore, firms need to keep the big picture in mind when attempting to select a carrier. Carrier Selection Determinants and User Implications 9

10 Transportation Modes - Rail Cost Speed Quantities Geographical Coverage Environmental Concerns Distances Required Infrastructure Product Variety Reliability Flexibility High fixed, low variable cost structure Inexpensive, especially for bulk goods Relatively slow, average car speed 20 MPH (unless utilizing double stack unit trains, effectively doubling speed) Large quantities; full car load increments most cost effective Widespread on some continents; limited by tracks, landmass High impact of new tracks, low air pollution Medium to long Tracks, rolling stock Large variety of products; ideally suited for bulk goods Low loss, damage, less timely (delays at sidings, terminals) Routing limited to track location, little door to door delivery (side spur required) Transportation Modes Motor Carrier Cost Speed Quantities Geographical Coverage Environmental Concerns Distances Required Infrastructure Product Variety Reliability Flexibility High variable (90%), low fixed (10%) More expensive than rail Medium speed where sufficient roads exist, about twice as fast as rail (50 MPH) Limited capacity of about 80,000 lbs; larger capacity combination vehicles are geographically limited Widespread on some continents; limited by roads, landmass High pollution, especially in developing countries, high impact of new roads Short to Medium Roads, vehicles Routing limited by road location Large variety of products Limited loss, damage, more timely than rail Routing limited to road locations, but still good for JIT, extensive access in countries with well-developed highway systems, door to door delivery possible with appropriate roads 10

11 Transportation Modes - Pipeline Cost Speed Quantities Geographical Coverage Environmental Concerns Distances Required Infrastructure Product Variety Reliability Flexibility High fixed, low variable Very inexpensive Nature of product makes speed a non-issue Large quantities of limited products Widespread on some continents; limited by unidirectional movement, and the availability of landmass to support pipelines Pipeline leakage, high impact on wildlife, scenic value Medium most common Pipeline between two points required Primarily petroleum products; only practical for liquid, liquid-carried, or gas products Very low loss or damage, usually timely Routing limited to pipelines Transportation Modes - Ship Cost Speed Quantities Geographical Coverage Environmental Concerns Distances Required Infrastructure Product Variety Flexibility High variable, low fixed Very inexpensive, about $.008 /ton mile (1/4 cost of railroad) Less fuel needed Inland waterway: Slow, about 4 to 5 MPH Ocean: faster, fewer stops (10-12 days Pacific crossing) Large. Container ships carry up to forty equivalent unit containers. Global, but limited to natural and constructed waterways. Spillage from accidents, leakage, high impact on fisheries Long to very long Ports, ships Routing limited by waterway, ocean availability Low variety of heavy, bulk, or low-value-by-weight items, often commodities Port to port 11

12 Transportation Modes - Airplane Cost Speed Quantities Geographical Coverage Environmental Concerns Distances Required Infrastructure Product Variety Flexibility High variable, low fixed Very expensive (2 to 3 times as high as motor carriers, 12 to 15 times as high as rail); lower packing costs than ship Fast speed within and between continents; measured in hours or days Relatively small Widespread on some continents; limited by air terminal availability Noise pollution near major population centers Medium to very long Airports, navigational aids, airplanes Routing limited by airport location Large variety of small, high-value-by-weight, often perishable items Air terminal to air terminal Transportation Modes - Internet Cost Speed Quantities Geographical Coverage Environmental Concerns Distances Required Infrastructure Product Variety Flexibility Extremely inexpensive, where infrastructure is in place. Low fixed, low variable costs Extremely fast Limited by number of source transmission lines available, or satellite access Widespread on some continents; limited by transmission capability availability None except where new transmission line construction occurs, then less than other modes Very short to very long Telephone lines, satellite, cellular transmission capability Routing limited by transmission path Limited to digital information; software, music, video, documents, information Computer to computer 12

13 Logistics Manager Skills Logistics can be a major source of competitive advantage. To tap that advantage managers must understand: Logistics Outsourcing Shared Logistics Services Network Rationalization Intermodal transport Where freight moves within a loading unit (known as an ITU intermodal transport unit), this unit may move upon a number of different transport modes More convenient for shippers (one entity provides the complete service) Key issue involves the exchange of information to facilitate transfer between different transport modes But the freight remains within the unit at all times Various types of ITUs: Standard sized containers (typically 20 and 40 feet in length) Igloo containers used in air freight 13

14 Types of Intermodal Services Who owns goods? Goods on the move Where does handover take place? Who controls transport? 14

15 MV Tricolor, the 50,000 tonne, 25.1 million ($39.9m) worth Norwegian-flagged vehicle carrier Dec Cargo - approximately 2,862 cars & 77 units of RoRo-cargo, consisting mainly tractors and crane parts, could not be salvaged 15

16 The most commonly used incoterms, noting the point at which responsibility for goods is transferred between buyer and seller Source: Royal & Sun Alliance Insurance plc (2007). Carrier responsibilities When freight moves from consignors to consignees is to understand who has responsibility at various stages for the freight? If something happens to the freight, for example it becomes damaged, who will be held responsible? If charges for customs clearance are to be paid before the freight can be collected, then who should pay such charges, the consignor or the consignee? resolved by using Incoterms (an abbreviation for international commercial terms) 16

17 Risk Management in Transportation Three main risks to be considered in transportation are: Risk that the shipment is delayed Risk of disruptions Risk of hazardous material Risk mitigation strategies: Decrease the probability of disruptions Alternative routings In case of hazardous materials the use of modified containers, low-risk transportation models, modification of physical and chemical properties can prove to be effective Documentation: International Terms of Sale Incoterms 2000 and Incoterms 2010 E Terms(1) - departure contract Seller makes shipment available at plant. Buyer takes title at point of origin and arranges for transportation. F Terms(3) Seller only obligated to present the goods to buyer s carrier; buyer pays for all other costs. FCA Free delivery to the carrier FAS (Water only) Free Alongside Ship FOB (Water only) Free On Board 17

18 Documentation: International Terms of Sale C Terms (4) - seller pays main carriage and insurance costs. CFR - cost and freight - seller pays main carriage & insurance (water only). CPT - carriage paid to - same as CFR but no insurance, but used by modes other than water. CIF - cost, insurance, freight costs, water only CIP - carriage and insurance paid to, not water Documentation: International Terms of Sale D Terms (5) - seller incurs all costs relayed to delivery to destination. DAF - Delivered At Frontier - seller is accountable to a particular point; buyer thereafter to final delivery. DES - Delivered Ex Ship - seller pays to port; responsible until goods are made available to buyer onboard ship. DEQ - Delivered Ex Quay - seller pays to port; responsible until goods are unloaded onto dock (quay) and duties paid. DDU - Delivered Duty Unpaid - seller incurs all costs except customs duties. DDP - Delivered Duty Paid - seller incurs all costs including duties. Note: D Terms in italics have changed (see handout) 18

19 INCOTERMS (2000) EXW Ex Works Buyer takes title when taking delivery of the goods at supplier s facility. Buyer is responsible for the shipment and duties. FCA Free Carrier Buyer takes possession and title at the airport or truck terminal at the port of export in the seller s country after the goods clear customs. FAS FOB Free Alongside Ship Free of Board Buyer takes possession at the dock at the port of export after the goods clear customs. Buyer takes responsibility and title for the goods as they pass over the ship s rail during loading. INCOTERMS (2000) CFR CIF CPT CIP Cost and Freight Cost, Insurance, and Freight Carriage Paid Carriage and Freight Paid to Supplier arranges freight and pays as far as the buyer s port of entry. Title and risk of loss remain with the buyer. Supplier arranges freight and buys insurance for the goods as part of the sales price. Title and risk transfer to the buyer once the goods clear a ship s rail while being loaded. Title transfers to buyer when goods are loaded into a container. Seller selects and pays the carrier. Similar to CFR. Similar to CIF but applies to air or truck transport only. 19

20 INCOTERMS (2000) DAF DES DEQ Delivered at Frontier Delivered Ex Ship Delivered Ex Quay Goods are delivered to a border by truck or rail. Title transfers at the border after goods are cleared for export but not yet cleared through import customs. Seller pays freight costs to a port of import, and title transfers on the ship at arrival. Buyer is responsible for unloading the freight and clearing customs. Seller is responsible for having the ship unloaded at the port of entry. Title transfers when goods are unloaded from the ship, either before or after customs. Term must include Duty Paid or Duty Unpaid INCOTERMS (2000) DDU DDP Delivered Duty Unpaid Delivered Duty Paid Seller delivers goods with duty unpaid to a buyer s specified location. This location, where the title transfers, is different from the port of import. These goods have not cleared customs and require proper customs supervision and bonding. Seller delivers goods to the buyer with all duties paid. Title transfers at the buyer s designated receiving location. 20

21 Summary of Incoterms Cost Obligations (2000) 21