Description
The PPT includes the importance of transportation in the supply chain management.
Transportation Management
Click to edit Master subtitle style
11
Role of Transportation in SCM
?outbound shipping cost of $750 million
?Amazon Example ?shipping revenue accounted for $511 million.
incurred by firm.
?Amazon net profit = $359 million on net sales
of $8490 million in the Year 2005.
22
Webvan -Grocery on net: Failure
?Launched in 1999 and raised $ 800 million
from venture capitalists.
?Market Cap went to 16 billion dollars at one
time.
?Company made huge losses and declared
bankruptcy in 2001.
33
Growing importance of Transportation in India
?Imports have increased at the average
rate of 8.8 % annually.
?Exports have increased at the average
rate of 9.3 % annually.
?Increased consumption in the domestic
market as a result of growing economy.
?Clearly, efficient transportation System is
required.
44
Logistics Costs for the Indian Economy
Year
Inventory Total Transport Carrying Cost Cost % % 40.45 43.44 45.06 47.89
Administration Cost % 3.85 3.85 3.85 3.85
95-96 97-98 01-02 03-04
55.70 52.72
51.09
48.26
Source: Raghuram & Shah 2004
55
Decisions Involved
?Design of Transport network ?Designing the most effective way of reaching products to the customers and raw materials to factories. ?Selection of the transport mode ?Choosing the most effective way of transport from the available options.
66
Cost Involved
?Transportation cost ?Inventory cost ?Facility cost ?Handling cost ?Service level cost
77
Amazon Transport Network
significantly in Warehouses.
?Amazon started with one warehouse. ?To reduce total costs , Amazon has invested
?In 2006, It has 7 warehouses in the USA and 5
warehouses outside the USA.
88
Sabare InternationalOutsourcing Decision
labor and plant investments costs and transported pillows to the USA.
?Sabre manufactured pillows in India to reduce
99
Norway Fish SupplierExample
?The supplier has found that ?in Norway, the labor costs to convert the fresh
catch into fillets is high : 1.36 dollars per pound. ?In China, it can be done at 23 cents per pound. ?Shipping needs to be done in refrigerated storage from Norway to China and back. ?What should he do ?
1010
?What do you think about the following
statement?
?European countries such as Britain
significantly imports flowers and fruits instead of producing it .
1111
Environmental Implications of Transportation Decisions ?Increased global warming gas in some
situations.
?European commission is planning to levy tax
on the international fuel and (or) include international freight in Emissions Trading program.
?Should every such transport be taxed ?
1212
Design of Transport Network
Direct Shipping with/without milk run
Warehousing
Cross-docking
1313
What is Direct Shipping?
?Point-to-point service
?manufacturer delivers goods directly to
the retail outlet ?Eliminates need for intermediate facilities (e.g., warehouses and distribution centers)
?Direct shipping beneficiaries
?Commonly used for warehouse club
stores, mass merchandisers
1414
What items are Direct Shipping candidates?
?Direct shipping candidates
items, specialty products
?Perishable items, high volume goods, high bulk
According to Stores Magazine, twenty-five percent of grocery products never see the inside of a warehouse. They go directly to the Store.
1515
Advantages of Direct Shipping?
?Less handling and less
opportunity for product damage ?Faster production to store shelf time sales, service, satisfaction ?Improved accuracy – invoices match receiving records, correct products enter the store
1616
challenges associated with direct shipping?
?Greater hassle for store personnel
activity ?No risk pooling benefit ?Stock out risk for a supplier problem ?Transportation costs can be higher ?Not well suited to high variation products and situations
1717
?More deliveries, paperwork,
Shipping Via Distribution Center
Receiv e Putaw ay
Reserve Storage
Replen ish
Ship
Pick
Active Storage
1818
When do you use DC?
? This format works well for products that:
? Have long manufacturing lead times ? Are slow moving items that you can’t directly deliver
from suppliers discounts
? Are bought in large quantities in order to obtain quantity ? Are manufactured by suppliers who cannot support the
value added services needed to get merchandise “store ready”
1919
Traditional Cross dock
Definition: A one-step, direct move from receiving dock to shipping dock; trailer to trailer. Cross Dock Moved as cartons but mostly pallets. Automation is minimal in these sites
•
Supplier 1 Regional DC 3 Supplier 2 Regional DC 2
Examples: Inbound automotive networks Breaking down local
2020
Regional DC 1
•
2121
Type 2 - Traditional Cross dock
What does it look like?
This material will sit no more than an hour or so.
2222
When to use cross docking?
?Use this format …
of inventory.
?To consolidate inter-facility transfers ?To build production facility bound ?Toyota Kirloskar Cross docking
loads from multiple supplier loads
2323
Short-Term Staging Crossdock Timing Mismatch Between Inbound & Outbound
Supplier 1 Stores 3, 4, & 7 Supplier 2 Store 2 Store 1
Definition: Cross Dock
Inbound items are received & staged (shortterm) until needed for outbound load
Staging / Storage
Merchandise is in cartons and store ready and store specific
This material will sit as long as a
2424
Flow Thru Center
Definition
Supplier 1 Supplier 2 Supplier 3 Supplier 4
Buyers pre-allocate purchases to stores.
DC
Pallets or cases removed from inbound trailers and immediately cross-docked to store-bound trailer.
Store 1
Wal-Mart, Office Depot
Store x
Store 5
Store 4
Store 3
Store 2
…
One outbound door dedicated to each store. Lots of automation typically 2525 involved.
When do you use Flow Through?
?Use this for high volume flow-thru
merchandise to marry it with slow movers
Pareto of SKUs Based on Total Lines
100 100
80
Store these items
80
60
60
40
40
20
0
Flow these fast moving items thru
# Of SKUs
20
0
2626
What is the advantage of Flow Through?
Conventional process RECEIVE Flow-Thru process $.8 5 RECEIVE $.8 5 PUTAWA $.5 Y 8 ORDER $.9 PREP 7 PICK/STA $.9 GE 1 LOAD/SH $.8 IP 9
$4.2 0 per ton
ORDER $.9 PREP 7 STAGE $.6 5 $.8 LOAD/SH IP 9
$3.3 6 per ton
2727
? Requires strong IT capabilities & real-time info sharing with
Flow Thru Center Requirements
suppliers ? ASN via EDI ? Requires sophisticated suppliers who can get product store ready ? Price ticketing ? Barcode labeling ? Pick & pack not just case pick product ? Automation is needed to deliver the speed and accuracy of sortation ? Requires buyer cooperation and timely decisions ? Maintaining product visibility as it moves through the system ? Product availability, accuracy, & quality are critical
2828
Cross Docking Issues in India
?Trucking industry contains many
nonprofessional small operators.
?Managing delivery reliability is crucial ?Quality problems-Goods are kept in open
spaces due to non availability of space.
2929
Temporal Aggregation- useful idea in practice
?Combines orders over a period of time before
the shipment.
? Reduces transportation cost. ?Reduces variability and improves planning ?Reduces the responsiveness.
3030
Value Density
?Ratio of rupee value of the product to weight. ?Importance of transportation cost in overall
product cost.
?Examine tradeoff between inventory and
transportation cost
3131
Value Density-Example
Price Weight Value Transport Shipping cost Density Cost Kg As % of price $500/kg $ 12.4 $30 / kg $ 6.0 $5 / kg $ 18.2 0.8 13.3 36.4 $1500 3 $ 15 $5 0.5 1
3232
Milk Runs
? Daily transportation of goods from company
warehouse to company retail outlets.
For example- Subhiksha
?
? Transportation of components from vendors
to factories.
?
For Example- Tata Motors
3333
Tailored TransportationCustomer Density and Distance
Short Distance Medium Distance
Long Distance
High Density Private fleet Cross Dock Cross dock with with milk runs with milk runs milk runs Medium Density Low Density Third party milk LTL runs LTL
Third party milk LTL/ package Package carrier runs/ LTL carrier
3434
Transport Mode Selection
3535
Factors that influence the transportation mode decision
?Economics of distance. ?Fixed costs such as vehicle charges, driver rates spread over long distance ?Economics of load ?Economics of vessel size
? Total cost per container per annum (4000 TEU )=$2315 ? Total cost per container per annum (9000 TEU )=$1449
?Asymmetry of rates
3636
Best Practices In Transportation
?Use of 20 TEU and 40 TEU Containers
3737
Disadvantages without containercosts due to piece by piece use ?Higher labor
loading and counting. ?Higher Transport time due to piece by piece loading unloading. ?Chances of higher damage due to extensive handling. ?Higher losses due to theft, ignorance. ?Use of container significantly reduces these problems as there is no need for piece by piece loading, unloading counting etc
3838
doc_752365909.pptx
The PPT includes the importance of transportation in the supply chain management.
Transportation Management
Click to edit Master subtitle style
11
Role of Transportation in SCM
?outbound shipping cost of $750 million
?Amazon Example ?shipping revenue accounted for $511 million.
incurred by firm.
?Amazon net profit = $359 million on net sales
of $8490 million in the Year 2005.
22
Webvan -Grocery on net: Failure
?Launched in 1999 and raised $ 800 million
from venture capitalists.
?Market Cap went to 16 billion dollars at one
time.
?Company made huge losses and declared
bankruptcy in 2001.
33
Growing importance of Transportation in India
?Imports have increased at the average
rate of 8.8 % annually.
?Exports have increased at the average
rate of 9.3 % annually.
?Increased consumption in the domestic
market as a result of growing economy.
?Clearly, efficient transportation System is
required.
44
Logistics Costs for the Indian Economy
Year
Inventory Total Transport Carrying Cost Cost % % 40.45 43.44 45.06 47.89
Administration Cost % 3.85 3.85 3.85 3.85
95-96 97-98 01-02 03-04
55.70 52.72
51.09
48.26
Source: Raghuram & Shah 2004
55
Decisions Involved
?Design of Transport network ?Designing the most effective way of reaching products to the customers and raw materials to factories. ?Selection of the transport mode ?Choosing the most effective way of transport from the available options.
66
Cost Involved
?Transportation cost ?Inventory cost ?Facility cost ?Handling cost ?Service level cost
77
Amazon Transport Network
significantly in Warehouses.
?Amazon started with one warehouse. ?To reduce total costs , Amazon has invested
?In 2006, It has 7 warehouses in the USA and 5
warehouses outside the USA.
88
Sabare InternationalOutsourcing Decision
labor and plant investments costs and transported pillows to the USA.
?Sabre manufactured pillows in India to reduce
99
Norway Fish SupplierExample
?The supplier has found that ?in Norway, the labor costs to convert the fresh
catch into fillets is high : 1.36 dollars per pound. ?In China, it can be done at 23 cents per pound. ?Shipping needs to be done in refrigerated storage from Norway to China and back. ?What should he do ?
1010
?What do you think about the following
statement?
?European countries such as Britain
significantly imports flowers and fruits instead of producing it .
1111
Environmental Implications of Transportation Decisions ?Increased global warming gas in some
situations.
?European commission is planning to levy tax
on the international fuel and (or) include international freight in Emissions Trading program.
?Should every such transport be taxed ?
1212
Design of Transport Network
Direct Shipping with/without milk run
Warehousing
Cross-docking
1313
What is Direct Shipping?
?Point-to-point service
?manufacturer delivers goods directly to
the retail outlet ?Eliminates need for intermediate facilities (e.g., warehouses and distribution centers)
?Direct shipping beneficiaries
?Commonly used for warehouse club
stores, mass merchandisers
1414
What items are Direct Shipping candidates?
?Direct shipping candidates
items, specialty products
?Perishable items, high volume goods, high bulk
According to Stores Magazine, twenty-five percent of grocery products never see the inside of a warehouse. They go directly to the Store.
1515
Advantages of Direct Shipping?
?Less handling and less
opportunity for product damage ?Faster production to store shelf time sales, service, satisfaction ?Improved accuracy – invoices match receiving records, correct products enter the store
1616
challenges associated with direct shipping?
?Greater hassle for store personnel
activity ?No risk pooling benefit ?Stock out risk for a supplier problem ?Transportation costs can be higher ?Not well suited to high variation products and situations
1717
?More deliveries, paperwork,
Shipping Via Distribution Center
Receiv e Putaw ay
Reserve Storage
Replen ish
Ship
Pick
Active Storage
1818
When do you use DC?
? This format works well for products that:
? Have long manufacturing lead times ? Are slow moving items that you can’t directly deliver
from suppliers discounts
? Are bought in large quantities in order to obtain quantity ? Are manufactured by suppliers who cannot support the
value added services needed to get merchandise “store ready”
1919
Traditional Cross dock
Definition: A one-step, direct move from receiving dock to shipping dock; trailer to trailer. Cross Dock Moved as cartons but mostly pallets. Automation is minimal in these sites
•
Supplier 1 Regional DC 3 Supplier 2 Regional DC 2
Examples: Inbound automotive networks Breaking down local
2020
Regional DC 1
•
2121
Type 2 - Traditional Cross dock
What does it look like?
This material will sit no more than an hour or so.
2222
When to use cross docking?
?Use this format …
of inventory.
?To consolidate inter-facility transfers ?To build production facility bound ?Toyota Kirloskar Cross docking
loads from multiple supplier loads
2323
Short-Term Staging Crossdock Timing Mismatch Between Inbound & Outbound
Supplier 1 Stores 3, 4, & 7 Supplier 2 Store 2 Store 1
Definition: Cross Dock
Inbound items are received & staged (shortterm) until needed for outbound load
Staging / Storage
Merchandise is in cartons and store ready and store specific
This material will sit as long as a
2424
Flow Thru Center
Definition
Supplier 1 Supplier 2 Supplier 3 Supplier 4
Buyers pre-allocate purchases to stores.
DC
Pallets or cases removed from inbound trailers and immediately cross-docked to store-bound trailer.
Store 1
Wal-Mart, Office Depot
Store x
Store 5
Store 4
Store 3
Store 2
…
One outbound door dedicated to each store. Lots of automation typically 2525 involved.
When do you use Flow Through?
?Use this for high volume flow-thru
merchandise to marry it with slow movers
Pareto of SKUs Based on Total Lines
100 100
80
Store these items
80
60
60
40
40
20
0
Flow these fast moving items thru
# Of SKUs
20
0
2626
What is the advantage of Flow Through?
Conventional process RECEIVE Flow-Thru process $.8 5 RECEIVE $.8 5 PUTAWA $.5 Y 8 ORDER $.9 PREP 7 PICK/STA $.9 GE 1 LOAD/SH $.8 IP 9
$4.2 0 per ton
ORDER $.9 PREP 7 STAGE $.6 5 $.8 LOAD/SH IP 9
$3.3 6 per ton
2727
? Requires strong IT capabilities & real-time info sharing with
Flow Thru Center Requirements
suppliers ? ASN via EDI ? Requires sophisticated suppliers who can get product store ready ? Price ticketing ? Barcode labeling ? Pick & pack not just case pick product ? Automation is needed to deliver the speed and accuracy of sortation ? Requires buyer cooperation and timely decisions ? Maintaining product visibility as it moves through the system ? Product availability, accuracy, & quality are critical
2828
Cross Docking Issues in India
?Trucking industry contains many
nonprofessional small operators.
?Managing delivery reliability is crucial ?Quality problems-Goods are kept in open
spaces due to non availability of space.
2929
Temporal Aggregation- useful idea in practice
?Combines orders over a period of time before
the shipment.
? Reduces transportation cost. ?Reduces variability and improves planning ?Reduces the responsiveness.
3030
Value Density
?Ratio of rupee value of the product to weight. ?Importance of transportation cost in overall
product cost.
?Examine tradeoff between inventory and
transportation cost
3131
Value Density-Example
Price Weight Value Transport Shipping cost Density Cost Kg As % of price $500/kg $ 12.4 $30 / kg $ 6.0 $5 / kg $ 18.2 0.8 13.3 36.4 $1500 3 $ 15 $5 0.5 1
3232
Milk Runs
? Daily transportation of goods from company
warehouse to company retail outlets.
For example- Subhiksha
?
? Transportation of components from vendors
to factories.
?
For Example- Tata Motors
3333
Tailored TransportationCustomer Density and Distance
Short Distance Medium Distance
Long Distance
High Density Private fleet Cross Dock Cross dock with with milk runs with milk runs milk runs Medium Density Low Density Third party milk LTL runs LTL
Third party milk LTL/ package Package carrier runs/ LTL carrier
3434
Transport Mode Selection
3535
Factors that influence the transportation mode decision
?Economics of distance. ?Fixed costs such as vehicle charges, driver rates spread over long distance ?Economics of load ?Economics of vessel size
? Total cost per container per annum (4000 TEU )=$2315 ? Total cost per container per annum (9000 TEU )=$1449
?Asymmetry of rates
3636
Best Practices In Transportation
?Use of 20 TEU and 40 TEU Containers
3737
Disadvantages without containercosts due to piece by piece use ?Higher labor
loading and counting. ?Higher Transport time due to piece by piece loading unloading. ?Chances of higher damage due to extensive handling. ?Higher losses due to theft, ignorance. ?Use of container significantly reduces these problems as there is no need for piece by piece loading, unloading counting etc
3838
doc_752365909.pptx