CHAPTER 9- DOMESTIC AND INTERNATIONAL TRANSPORTATION Principles of Supply Chain Management:  A Balanced Approach Prepared ...
Introduction <ul><ul><li>In 2002 there was $8.4 Trillion in US freight </li></ul></ul>
Introduction <ul><li>Without transportation methods a supply chain can not exist… </li></ul><ul><li>But why wouldn’t we ev...
Impact of Transportation on Supply Chain Management <ul><li>Time utility-   products are delivered at the right time.  </l...
Fundamentals of Transportation   <ul><li>The Objective of Transportation-  Satisfying customers while minimizing costs & m...
Fundamentals of Transportation- Cont.   <ul><li>The Modes of Transportation </li></ul><ul><li>Motor Carriers  (trucks)- mo...
Fundamentals of Transportation- Cont.   <ul><li>Rail Carriers-  compete most favorably when the distance is long & the shi...
Fundamentals of Transportation- Cont.   <ul><li>Air Carriers-  Very expensive relative to other modes but also very fast. ...
Fundamentals of Transportation- Cont.   <ul><li>Water Carriers-  Inexpensive, slow & inflexible. Include inland waterway, ...
Fundamentals of Transportation- Cont.   <ul><li>Intermodal Transportation-   Combinations of the various transportation mo...
Fundamentals of Transportation- Cont.   <ul><li>Third-Party Logistics Services-  intermediaries facilitate use of the tran...
Fundamentals of Transportation- Cont.   <ul><li>Transportation Pricing </li></ul><ul><ul><li>Cost-of-service pricing-  var...
Warehousing <ul><li>Crossdocking -   to receive, breakdown, repackage, & distribute components to a manufacturing location...
Warehousing- Cont. <ul><li>Consolidation Warehouses - Collect large numbers of LTL shipments, consolidate, then transport ...
Warehousing- Cont. <ul><li>Public Warehouses-  owned by for profit organizations that contract their services to other com...
Warehousing- Cont. <ul><li>Warehouse Location </li></ul><ul><ul><li>As the number of warehouses increases, the system beco...
Warehousing- Cont. <ul><li>Warehouse Location Strategies proposed by Edgar Hoover </li></ul><ul><ul><li>Market-positioned ...
International Transportation Issues <ul><li>International Freight Security- Conflict between U.S. govt. & industry toward ...
International Transportation Issues- Cont. <ul><li>Land Bridges-   Intermodal movements between Europe & East Asia utilize...
E-Commerce and Transportation <ul><li>Electronic Invoice Presentment & Payment-   A recent development designed to create ...
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Chapter 8 Chapter 9

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Chapter 8 Chapter 9

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

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