Bad locations – bad logistics? How Norwegian freight carriers handle transportation disruptions


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How are the supply chains of companies located in sparse transportation networks affected by transportation disruptions? What are typical disruptions in certain locations or for certain types of business, and how do businesses and carriers counter supply chain disruptions? A study commissioned by the Norwegian Public Roads Administration in 2008 investigated how companies located in sparse road networks are affected by and relate to supply chain disruptions.

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Bad locations – bad logistics? How Norwegian freight carriers handle transportation disruptions

  1. 1. Bad Locations – Bad Logistics?How Norwegian freight carriers handle transportation disruptionsInterviewees: 3 transportation-dependentbusinesses and 14 roadfreight carriers<br />Jan Husdal, Svein Bråthen<br />13 July 2010<br />
  2. 2. Introduction<br />Supply Chain Management often neglects the mundane side of physical distribution and transportation, and forgets that these activities form the backbone of SCM.<br />A supply chain disruption often starts with a transportation disruption.<br />A transportation disruption can have impacts across the whole supply chain.<br />
  3. 3. The importantroleofsparsetransportationnetworksin supplychains<br />5 ferry links<br />660 km<br /><ul><li>Sparsetransportationnetworks– few mode options and/or few link options
  4. 4. Vulnerable communities– nosuitable alternatives to or from locations</li></li></ul><li>Available transport networks= supplychain types<br />Freesupplychain – many mode options, many link modes<br />Directedsupplychain – many link options, butonly (a) certain mode(s)<br />Limitedsupplychain – many mode options, butonlyfew links<br />Constrainedsupplychain – few/one mode, few/one link<br />
  5. 5. Framework for survey<br />Perspective: Transportationinfrastructure and/or transportationmeans/mode as a contributingfactor in supplychaindisruptions.<br />
  6. 6. Risk managementframework<br />Vehiclereinforcement<br />Improperlymaintainedinfrastructure<br />Whatcontingent or mitigative risk managementstrategiesareemployed by businesses (freightowners) and transport operators (freight carriers)?<br />Bad weather<br />Rescue services<br />
  7. 7. Summaryofresults<br />Freight owners do not appear to be overly concerned about transportation disruptions, because both mitigative and contingent measures are handled by the freight carrier.<br />Freight carriers are acutely aware of their important role in the overall supply chain.<br />Freightownersseek vertical integration of one or several selected freight carriers into their supply chain, and are willing to pay a “risk premium” for securing on-time delivery.<br />Freight carriers establish asset-specific and flexible solutions to meet the contingent needs of different freight owners.<br />
  8. 8. Carriers’ contingent and mitigativemeasures I<br />Contingency contracts with companies offering maintenance, repair, rescue or towing services along the most frequently used road links.<br />Cooperation agreements with other carriers to secure replacement drivers or replacement vehicles for transferring goods from the broken vehicle to the replacement vehicle.<br />Structural and/or technical modifications of vehicles and equipment to improve operations, particular under winter conditions.<br />
  9. 9. Carriers’ contingent and mitigativemeasures II<br />Regular dissemination of information to drivers where to find which roadside assistance.<br />Neutral and non-descript packaging to avoid theft of valuable goods.<br />Sufficient slack in lead time of scheduled routes in order to account for possible delays.<br />Depending on the external circumstances, no guaranteed lead time or arrival time.<br />
  10. 10. Reducingtheimpactofsupplychaindisruptions<br />The impact of supply chain disruptions depends on thea) structure how well located?b) organization how well prepared?of the supply chain (Craighead et al., 2007)<br />These two sides are complementary – a deficiency in a) can be compensated by b) or vice versa. <br />In constrained supply chains, the structure (a) is fixed, and the organization (b) is (perhaps) the only possible point of improvement: badly located, but well prepared.<br />
  11. 11. Conclusions<br />Transportation networks (roads) are an integral part of supply chains and transportation disruptions can turn into supply chain disruptions. Preparing for transportation disruptions ought to be an integral part of supply chain risk management.<br />In practice, risk sharing: the freight carrier bears risks associated with equipment, vehicles or infrastructure-related events, while the freight owner (sender or receiver) handles risks associated with overall delivery failure related to the sender or receiverof the goods transported.<br />
  12. 12. Futureresearch?<br />How do different manufacturing processes (make to stock, make to order, engineer to order) reflect on the risks and consequences? <br />Which risk sources can cause transportation disruptions in ingoing or outgoing flows in supply and demand and flows internal to the company, and what are the consequences related to supplier, customer and the company itself? <br />What risks lead to which consequences and how are they handled and/or mitigated? <br />3<br />2<br />2<br />2<br />1<br />1<br />1<br />3<br />