CHP 13
CHP 13
CHP 13
Some of this material is covered in the Sustainable Supply Chain overview, and we will skip much of the chapter
The role of Transportation in the Supply Chain Factors affecting transportation decisions Modes of transportation and their performance characteristics Trade-offs in transportation design Tailored transportation The role of IT in transportation Risk management in transportation Making transportation decisions in practice
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2. Shipper (party that requires the movement of the product between two points in the supply chain)
May need to balance Transportation costs with Inventory and Facility costs
Transportation Modes
Trucks
TL LTL
Rail Air Water Pipeline (highly limited by geography and product) Package Carriers (still using trucks, but the focus is on delivery of a few packages)
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LTL Typically used for smaller shipments Average haul = 646 miles Higher fixed costs (terminals/consolidation centers) but low variable costs Major issues:
Location of consolidation facilities Utilization can still be an issue Vehicle routing, other IT complexities Customer service
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Rail
Cheapest of the land-based modes
Uses less fuel, so also greener
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Air
Fastest mode, often used for global transit of expensive items
Use is growing (14% per year in US, see usage in Europe in graph below)
Key issues:
Complex: Location/number of hubs, Location of fleet bases/crew bases, Schedule optimization, Fleet + Crew assignment, yield management.
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Package Carriers
Companies like DHL, FedEx, UPS, USPS, that carry small packages ranging from letters to shipments of about 150 pounds Expensive Rapid and reliable delivery Small and time-sensitive shipments Preferred mode for e-businesses (e.g., Amazon) Consolidation of shipments (especially important for package carriers that use air as a primary method of transport)
Interestingly, a lot of package carriers have, through their own need for such networks, expanded into being full service 3PLs (DHL is worlds largest)
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Water
Ocean, inland waterway system, coastal waters
Limited to certain geographic areas
Slowest
Also subject to bottlenecks at Ports
Dominant in overseas trade (autos, grain, apparel, etc.) Book example of successful usage: IKEA
As per 2008: 250 stores in 24 countries, sales: 21+ billion euro Internationally sourced goods IKEA makes very strong use of water and other low cost transport
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Pipeline
High fixed cost Primarily for crude petroleum, refined petroleum products, natural gas Best for large and predictable demand Would be used for getting crude oil to a port or refinery, but not for getting refined gasoline to a gasoline station
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Intermodal
Use of more than one mode of transportation to move a shipment to its destination
rail/truck, 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 can provide the complete service) Key issue involves the exchange of information to facilitate transfer between different transport modes
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We wont cover all the networks in the book, i.e. milk runs etc.
Instead we will look at a transportation LP (SRH students- we dont even do this!)
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Tailored Transportation
The use of different transportation networks and/or modes based on customer and product characteristics Factors affecting tailoring:
Customer distance and density Customer size Product demand and value
Some examples:
GAP primarily imports from its contract manufacturers worldwide by cargo ship. However, for some high-margin or otherwise key products, they may use some air freight for mid-season replenishment Keeco, LLC supplies home furnishings. They primarily use trucking to deliver goods from their warehouse to retail stores, but occasionally they will use parcel delivery for small replenishment orders instead of sending out a mostly empty truck.
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Role of IT in Transportation
The complexity of transportation decisions demands use of IT systems
Especially crucial with intermodal transportation, need for cross-enterprise collaboration
Risk of hazardous material issues, theft, terrorism (the dirty secret about dirty bombs.)
Evaluate both in-house and outsourced transportation options Design a transportation network that can handle e-commerce, if that is part of your business plan Use technology to improve transportation performance Design flexibility into the transportation network
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