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Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
Chapter 8 Chapter 9
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Chapter 8 Chapter 9


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  • 1. CHAPTER 9- DOMESTIC AND INTERNATIONAL TRANSPORTATION Principles of Supply Chain Management: A Balanced Approach Prepared by Daniel A. Glaser-Segura, PhD
  • 2. Introduction
      • In 2002 there was $8.4 Trillion in US freight
  • 3. Introduction
    • Without transportation methods a supply chain can not exist…
    • But why wouldn’t we ever have transportation methods in the world???
    • 1934 Longshoreman Strike
    • 2002 Slowdown , The Resolution
    • Current ILWU Situation
    • But its not just strikes… Katrina
  • 4. Impact of Transportation on Supply Chain Management
    • Time utility- products are delivered at the right time.
    • Place utility- products are delivered to the desired location.
  • 5. Fundamentals of Transportation
    • The Objective of Transportation- Satisfying customers while minimizing costs & making a profit contribution.
    • Legal Forms of Transportation-
    • Common carriers- Offer transportation services to all shippers at published rates between designated locations without discrimination. TSI Website
    • Contract carriers- Not bound to serve the general public. Contract carriers serve specific customers under contractual agreements .
    • Exempt carriers- E xempt from regulation of services & rates & if they transport certain exempt products like produce, livestock, coal, or newspapers.
    • Private carrier- Not subject to economic regulation & typically transports goods for the company owning the carrier.
  • 6. Fundamentals of Transportation- Cont.
    • The Modes of Transportation
    • Motor Carriers (trucks)- most flexible mode of transportation & account for over 80 % of U.S. freight. Trucks compete w/rail & air for short-to medium hauls. Weather is primary disadvantage.
    • Less-than-truckload (LTL) carriers or truck-load (TL) carriers . LTL carriers move small shipments & fees are higher.
    • General freight carriers carry the majority of goods shipped & include common carriers.
    • Specialized carriers transport liquid petroleum, household goods, building materials, & other specialized items.
  • 7. Fundamentals of Transportation- Cont.
    • Rail Carriers- compete most favorably when the distance is long & the shipments are heavy or bulky.
      • Rail relatively slow & inflexible, rail roads have begun purchasing motor carriers & can thus offer point-to-point pickup & delivery service known as trailer-on-flatcar (TOFC) service.
      • Rail companies use each other’s rail cars. Keeping track of rail cars & getting them where they are needed can be problematic.
      • Railroad infrastructure & aging equipment are also problems for the railroads.
  • 8. Fundamentals of Transportation- Cont.
    • Air Carriers- Very expensive relative to other modes but also very fast. Air carriers transport about 5 % of the U.S. freight bill.
      • Airlines cannot carry extremely heavy or bulky cargo.
      • For light, high value goods that need to travel long distances quickly, most small cities & towns do not have airports.
      • Half of the goods transported by air are carried by freight–only airlines, ex. Fedex.
  • 9. Fundamentals of Transportation- Cont.
    • Water Carriers- Inexpensive, slow & inflexible. Include inland waterway, coastal & intercoastal, & deep-sea.
      • Inland waterway transportation is used for heavy, bulky, low-value materials (e.g., coal, grain). Competes w/rail & pipeline.
      • Water carriers are paired w/trucks to enable door-to-door delivery.
      • Supertankers are +1,500 ft long & 200 ft wide.
    • Pipeline Carriers- Limited in variety they can carry.
      • Little maintenance once pipeline is running.
      • Materials hauled in a liquid or gaseous state.
  • 10. Fundamentals of Transportation- Cont.
    • Intermodal Transportation- Combinations of the various transportation modes, is becoming an extremely popular method.
      • Trailer-on-flatcar (TOFC), container-on-flatcar (COFC), piggy-back service . The same containers can be placed on board containerships & airliners.
      • ROROs or roll-on-roll-off containerships truck trailers & containers to be directly driven on & off the ship, without the use of cranes.
  • 11. Fundamentals of Transportation- Cont.
    • Third-Party Logistics Services- intermediaries facilitate use of the transportation alternatives.
      • Freight forwarders- consolidate shipments to fill trucks or rail cars.
      • Transportation brokers- handle transportation requirements of shippers. legally authorized to act as agents on shippers behalf.
      • Shipper’s Associations- non-profit orgs that move member’s cargo. Consolidate members’ shipments to get volume discounts.
  • 12. Fundamentals of Transportation- Cont.
    • Transportation Pricing
      • Cost-of-service pricing- varies based on volume and distance.
      • Value-of-Service Pricing- services priced at market bearing competitive levels. A profit maximizing pricing approach.
      • Terms of Sale- price includes transportation FOB destination free on board to the shipment’s destination.
        • FOB Destination
        • FOB Origination
  • 13. Warehousing
    • Crossdocking - to receive, breakdown, repackage, & distribute components to a manufacturing location or finished products to customers warehouse. Today’s warehouses are more correctly referred to as distribution centers.
  • 14. Warehousing- Cont.
    • Consolidation Warehouses - Collect large numbers of LTL shipments, consolidate, then transport in TL or CL quantities.
    • Private Warehouses- Refers to warehouses that are owned by the firm storing the goods.
      • Owning offers greater control, provides better workforce utilization, & can generate income & tax advantages through leasing of excess capacity &/or asset depreciation.
      • Nonetheless, owning a private warehouse represents a financial risk & loss of flexibility .
  • 15. Warehousing- Cont.
    • Public Warehouses- owned by for profit organizations that contract their services to other companies.
      • Breakbulk : shipments are broken down & items are combined into specific customer orders.
      • Repackaging: items are repackaged for specific customer orders.
      • Assembly: final assembly operations to satisfy customer requests.
      • Quality inspections: perform incoming & outgoing quality inspections.
      • Material handling, equipment maintenance, & documentation services.
      • Storage.
    • Pro- Provide the flexibility & investment cost saving.
    • Con- Disadvantage lack of control.
    • Reverse logistics services disposition of returned products
  • 16. Warehousing- Cont.
    • Warehouse Location
      • As the number of warehouses increases, the system becomes more decentralized . Responsiveness & delivery service increase.
      • However, warehousing operating & inventory costs also increase. Trade-off between costs & customer service must be considered.
  • 17. Warehousing- Cont.
    • Warehouse Location Strategies proposed by Edgar Hoover
      • Market-positioned strategy- warehouses close to customers to maximize distribution svcs & improve transp. economies of scale.
      • Product positioned strategy- warehouses close to the sources of supply to enable the firm to collect goods & consolidate these.
      • Intermediately positioned strategy- warehouses midway between the sources of supply & the customers when distribution requirements are high & product assortments come from various locations.
  • 18. International Transportation Issues
    • International Freight Security- Conflict between U.S. govt. & industry toward more security & restrictions for inbound shipments.
    • International Intermediaries
      • Customs Brokers- move shipments through customs & handle documentation.
      • International Freight Forwarders- move goods from production to foreign destination w/ surface & air transportation.
      • Trading Companies- Put foreign buyers & sellers together & handle all of the export/import arrangements.
      • Non-Vessel-Operating Common Carriers- operate like freight forwarders but use scheduled ocean liners.
      • Global Logistics Service Providers- Companies like DHL & UPS offer total global logistics solution.
  • 19. International Transportation Issues- Cont.
    • Land Bridges- Intermodal movements between Europe & East Asia utilize the United States as a land bridge .
    • Foreign Trade Zones (FTZs) secure sites in U.S. under supervision of U.S. Customs. FTZs bring goods into the site & offer storage, exporting, manufacturing, assembly, repacking, testing, & repairing services.
    • North American Free Trade Agreement began on January 1, 1994, & removes most barriers to trade & investment among U.S., Canada & Mexico.
  • 20. E-Commerce and Transportation
    • Electronic Invoice Presentment & Payment- A recent development designed to create greater efficiency among companies.
    • Supply Chain Visibility Technologies- Time managed benefit. Consisting of planned movement of freight; immediate rates & special service fees; make orders; trace shipments; manage other elements of shipments.
    • Third-Party Electronic Transaction Platforms- Allow shippers & carriers to perform various transactions over the Web. These sites provide freight matching services, auctions, & on–line communities or marketplaces.
    • Offshore Information Technology Outsourcing- U.S. IT service providers are contracting with offshore IT providers for software development services.