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Management of
Transportation
Seventh Edition
Coyle, Novack, Gibson &
Bardi
© 2011 Cengage Learning
Chapter 14
Transportati...
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible...
Congestion and Transport
Infrastructure
• Congestion in transport network increases
supply chain costs
– Uncertainty creat...
Highway Congestion and
Infrastructure
• High percentage of National Highway
System operates under congested conditions
– T...
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible...
Railroad Congestion and
Infrastructure
• Surging demand for trailer-on-flatcar (TOFC)
and container-on-flatcar (COFC) serv...
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible...
Waterway Congestion and
Infrastructure
• Aging inland waterways infrastructure cause
bottlenecks
– 31% of vessel passages ...
Waterway Congestion and
Infrastructure
• Port congestion relief strategies
– Investments to deepen channels
– Investment i...
Sustainability: The Green Supply Chain
• Can “carbon footprint” and firm costs be
reduced simultaneously?
– More firms dis...
Sustainability: The Green Supply Chain
• What is “carbon footprint?”
– the amount of carbon (usually in tonnes) being
emit...
Sustainability: The Green Supply Chain
• What is “carbon footprint?”
– Your carbon footprint is the sum of all emissions o...
Sustainability: The Green Supply Chain
• What is “carbon footprint?”
– Greenhouse gases can be emitted through transport, ...
Sustainability: The Green Supply Chain
• Forces motivating business interest
– Corporate responsibility to society
– Desir...
Sustainability: The Green Supply Chain
• Logistics-related impacts on the green
supply chain
– Fuel consumption/efficiency...
Sustainability: The Green Supply Chain
– Systems interrelationships (cont.)
• Packaging for market appeal vs. transport co...
Sustainability: The Green Supply Chain
• Carrier efforts to reduce fuel consumption
– Purchase more fuel efficient equipme...
Sustainability: The Green Supply Chain
• Many opportunities for greener supply chain exist
– Subway restaurants provide on...
Fuel Cost and Consumption
• Wild swings in fuel prices since 2005 creates
significant supply chain cost uncertainty
– Fuel...
Fuel Cost and Consumption
• Air carriers
– Fuel intensive, the most sensitive mode to fuel
cost changes
– Fuel is now the ...
Fuel Cost and Consumption
• Water carriers
– Water carriage is relatively fuel efficient
– Nonetheless, fuel price increas...
Fuel Cost and Consumption
• Rail carriers
– Rail is a relatively fuel efficient mode
– Rail has not been impacted to the s...
Fuel Cost and Consumption
• Carrier responses
– Fuel surcharges have been the principal response
• Surcharges have become ...
Fuel Cost and Consumption
– Improve operating efficiency of carriers
• Fleet replacement
– More fuel efficient, lighter we...
Collaboration and Visibility:
Art and Science
• The “science” dimension
– Refers to the models and software apps. used to
...
Collaboration and Visibility:
Art and Science
• The “art” dimension
– Refers to the relationship building within and
betwe...
Collaboration and Visibility:
Art and Science
– Strategic level collaboration initiatives
• Many are focused on sharing in...
Collaboration and Visibility:
Art and Science
• Visibility – what does it mean?
– No universal definition
• Initially refe...
Collaboration and Visibility:
Art and Science
– Dole, Inc. track and trace program is example of
enhanced visibility capab...
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Transport Management & Theory Practices (14)

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Transcript of "Transport Management & Theory Practices (14)"

  1. 1. Management of Transportation Seventh Edition Coyle, Novack, Gibson & Bardi © 2011 Cengage Learning Chapter 14 Transportation Challenges and Issues 1© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  2. 2. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 Introduction • Transport is an enabler of economic, political, and social development • In recent decades, consistently low fuel prices and powers of intense competition push transport rates lower and improve service levels • Times may be changing. Pressures from: – Fuel price volatility – Capacity constraints – Environmental-related impacts
  3. 3. Congestion and Transport Infrastructure • Congestion in transport network increases supply chain costs – Uncertainty created by congestion delays requires retailers to carry additional inventory – Delays require carriers to purchase and operate additional transport equipment and utilize additional labor – Delays on the network also impose additional costs at transport terminals © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3
  4. 4. Highway Congestion and Infrastructure • High percentage of National Highway System operates under congested conditions – Top 10 bottlenecks create 1.5 million annual truck hours of delay at $30/hr. Cost does not include inventory-related shipper costs • Forecasts indicate congestion will worsen – Funding under existing tax structure not sufficient to even maintain existing service levels © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4
  5. 5. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5
  6. 6. Railroad Congestion and Infrastructure • Surging demand for trailer-on-flatcar (TOFC) and container-on-flatcar (COFC) services – Creating congestion on portions of mainline rail network – Projections indicate congestion will spread to 30% of network by 2035 if capacity not increased • Principal means for adding capacity –double tracking portions of mainlines – Investment expense is a constraint © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6
  7. 7. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7
  8. 8. Waterway Congestion and Infrastructure • Aging inland waterways infrastructure cause bottlenecks – 31% of vessel passages experience delays • Coastal ports, particularly on West Coast, under congestion pressures due to: – Growth of international trade traffic – Deeper channel draft and dockside requirements due to larger containership capacities © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8
  9. 9. Waterway Congestion and Infrastructure • Port congestion relief strategies – Investments to deepen channels – Investment in technology and equipment by carriers and port operators. Intended to: • Speed ship loading and unloading operations • Relieve landside congestion in terminals and improve access to port areas – Longer port operating hours – Challenge to balance with environmental concerns © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9
  10. 10. Sustainability: The Green Supply Chain • Can “carbon footprint” and firm costs be reduced simultaneously? – More firms discover the answer is yes • What is “carbon footprint?” – Generally associated with the amount of carbon dioxide (CO2) emissions – Some argue for more comprehensive definition encompassing full life cycle greenhouse gas emissions © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10
  11. 11. Sustainability: The Green Supply Chain • What is “carbon footprint?” – the amount of carbon (usually in tonnes) being emitted by an activity or organization (Global Footprint Network) – The total amount of greenhouse gases produced to directly and indirectly support human activities, usually expressed in equivalent tons of carbon dioxide (CO2). © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11
  12. 12. Sustainability: The Green Supply Chain • What is “carbon footprint?” – Your carbon footprint is the sum of all emissions of CO2 (carbon dioxide), which were induced by your activities in a given time frame. – Each of the following activities add 1 kg of CO2 to your personal carbon footprint: • Travel by public transportation (train or bus) a distance of 10 to 12 km (6.5 to 7 miles) • Drive with your car a distance of 6 km or 3.75 miles (assuming 7.3 litres petrol per 100 km or 39 mpg) • Fly with a plane a distance of 2.2 km or 1.375 miles. • Operate your computer for 32 hours (60 Watt consumption assumed) • Production of 5 plastic bags • Production of 2 plastic bottles © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12
  13. 13. Sustainability: The Green Supply Chain • What is “carbon footprint?” – Greenhouse gases can be emitted through transport, land clearance, and the production and consumption of food, fuels, manufactured goods, materials, wood, roads, buildings, and services – Scholars suggest the most effective way to decrease a carbon footprint is to either decrease the amount of energy needed for production or to decrease the dependence on carbon emitting fuels © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13
  14. 14. Sustainability: The Green Supply Chain • Forces motivating business interest – Corporate responsibility to society – Desire to increase or maintain brand reputation – Competitive pressures – Internal and external stakeholder pressures or expectations – Desire to lower fuel costs – Current and potential regulatory pressures © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14
  15. 15. Sustainability: The Green Supply Chain • Logistics-related impacts on the green supply chain – Fuel consumption/efficiency – Packaging and waste disposal – Systems interrelationships • Transport consolidation vs. inventory cost tradeoff – Transport maxims: “don’t ship air” and “don’t ship water” – Consolidation reduces network miles, fuel consumption – Consolidation means larger shipment sizes and may impact supply chain responsiveness © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15
  16. 16. Sustainability: The Green Supply Chain – Systems interrelationships (cont.) • Packaging for market appeal vs. transport cost – Market appeal often drives tendency toward larger packages – Larger packages contain more air and take up more space in transport vehicle – result is more transport used to move given amount of product • Adding water to product to “enhance” product and market appeal vs. transport cost – Adding water to liquid products gives appearance to consumer of getting more for the money – Adding water increases transport, warehousing, packaging and retail costs – Example: Walmart initiative with liquid detergents © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16
  17. 17. Sustainability: The Green Supply Chain • Carrier efforts to reduce fuel consumption – Purchase more fuel efficient equipment – Use of “clean” fuels and hybrid vehicles – Working with shippers to: • Reduce overall network miles • Increase load consolidation opportunities – Participation in the EPA’s “Smart Way Transport Partnership” © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17
  18. 18. Sustainability: The Green Supply Chain • Many opportunities for greener supply chain exist – Subway restaurants provide one example – Goal : to become the greenest quick-serve restaurant by eliminating waste and inefficiency in • Energy • Resource utilization • Waste materials • Food safety – Results • reduced carbon emissions by 120,000 metric tons • Reduced oil consumption by 277,000 barrels/annually • Reduced truck miles by 9.3 million miles and shipment by 16,653 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18
  19. 19. Fuel Cost and Consumption • Wild swings in fuel prices since 2005 creates significant supply chain cost uncertainty – Fuel price volatility impacts some modes more than others due to differences in fuel intensity • Motor carriers – Very fuel intensive, approaching annual labor costs as the largest expense category – Annual fuel cost rose 70% from 2004-2008 – Fuel surcharges used to pass along higher fuel prices when possible © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19
  20. 20. Fuel Cost and Consumption • Air carriers – Fuel intensive, the most sensitive mode to fuel cost changes – Fuel is now the largest operating expense item • Traditionally, fuel was 12%-15% of operating costs • In 2007, fuel rose to 30% of operating costs, contributing greatly to some airline bankruptcies – Surcharges used to recover higher fuel costs • However, intense competition deters surcharges © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20
  21. 21. Fuel Cost and Consumption • Water carriers – Water carriage is relatively fuel efficient – Nonetheless, fuel price increases do impact operating costs, particularly for ocean carriers • Marine bunker fuel prices rose 100% from 2005 to mid-2008 • For some, fuel reached 50%-60% of operating costs – Fuel surcharges have been imposed but again, competition puts downward pressure on prices and deters significant surcharges © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21
  22. 22. Fuel Cost and Consumption • Rail carriers – Rail is a relatively fuel efficient mode – Rail has not been impacted to the same degree as other modes by the rise in fuel prices – Rail benefits from fuel price increases as some traffic shifts to intermodal service for long hauls • Pipeline carriers – Pipelines are a relatively fuel efficient mode – Costs not significantly impacted by higher fuel costs © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22
  23. 23. Fuel Cost and Consumption • Carrier responses – Fuel surcharges have been the principal response • Surcharges have become more sophisticated, involving formulas that closely match fuel price fluctuations • However, no standard industry practice on surcharge formulas or policy – Service capacity and network rationalization • Reduce linehaul cruise speed • Focus efforts on shorter traffic lanes • Cutting or reducing service on unprofitable routes © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23
  24. 24. Fuel Cost and Consumption – Improve operating efficiency of carriers • Fleet replacement – More fuel efficient, lighter weight vehicles – Alternative fuel vehicles – Use IT to improve operations through greater visibility of assets • Track and trace equipment in real time – Improves security, enables fleet size reduction, increases responsiveness to exception reports • Enables more timely and accurate information sharing between carriers and shippers © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24
  25. 25. Collaboration and Visibility: Art and Science • The “science” dimension – Refers to the models and software apps. used to improve supply chain design and execution. Examples: • Network optimization models • Warehouse Management Systems (WMS) • Transportation Management Systems (TMS) • Scheduling models, inventory control models – Also refers to application of technology such as RFID tags and GPS systems © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25
  26. 26. Collaboration and Visibility: Art and Science • The “art” dimension – Refers to the relationship building within and between organizations that is necessary for collaborative supply chain management – Collaboration fosters leveraging opportunities – Operations level collaboration initiatives include: • Coordinating shipping and loading/unloading times at DCs • Longer hours of operation at drop yards and DCs • Faster payments for carriers • Sharing capacity needs forecasts with carriers © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26
  27. 27. Collaboration and Visibility: Art and Science – Strategic level collaboration initiatives • Many are focused on sharing information – In vendor managed inventory programs, customer data covering on-hand inventory, SKUs on order, sales and stockouts by SKU, inventory turns forecasts, and promotional forecasts are shared with the vendor – The same info is shared with the logistics service provider – The info enable the vendor and logistics provider to dramatically » Reduce DC out-of-stocks and number of expedited orders » Increase inventory turns » Smooth the flow of products through the supply chain » Improve scheduling of pickups/deliveries, reduce empty miles © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27
  28. 28. Collaboration and Visibility: Art and Science • Visibility – what does it mean? – No universal definition • Initially referred to ability to “see” assets, such as – Amount of inventory on-hand – Number and location of equipment – Visibility application capabilities have expanded • Status of orders, inventory turns, status of shipments across the supply chain, alerts on service disruptions • Information has become more useful for decision making © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28
  29. 29. Collaboration and Visibility: Art and Science – Dole, Inc. track and trace program is example of enhanced visibility capability • Application is fully automated – Uses RFID, GPS and cell phone technologies – Coverage starts in harvest fields and runs through cooling center warehouses, carrier terminals and sorting plants – Products are tagged as they leave the fields – Time and quantities are tracked, temperature will be added • Enables better understanding of how product moves through the supply chain • Provides alerts if time and temperature move out of control • May lead to supply chain design/operation improvement © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29
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