Transportation SCM

Transportation in Supply Chain Management

Muhammad Haikal Bin Ab RahimMH132024

Content• Supply Chain defined• Transportation defined• Modes of transportation• Strengths and weaknesses of each mode• Pricing• Role of IT in transportation• Making Transportation Decision• Summary

Supply Chain

All facilities, functions, activities, All facilities, functions, activities, associated with flow and associated with flow and

transformation of goods and services transformation of goods and services from raw materials to customer, as from raw materials to customer, as well as the associated information well as the associated information

flows.flows.

An integrated group of processes to An integrated group of processes to “source,” “make,” and “deliver” “source,” “make,” and “deliver”

productsproducts..

Transportation• Transportation involves the physical movement of

goods between origin and destination points (of goods and services) from one place to another

• Transportation is necessary to: a)Move purchased goods from suppliers to buyers b)Move finished goods to the customer.

• Transportation is what creates the efficient flow of goods between supply chain partners.

Supply Chain for

Denim Jeans

• Time utility- products are delivered at the right time.

• Place utility- products are delivered to the desired location.

Transportation & storage, getting through customs,

delivering to foreign locations.

Firms are often use outside agents or third-party transportation services to work in foreign locations.

The Objective of Transportation- Satisfying customers while minimizing costs & making a profit contribution.

Poor transportation management can bring a supply chain to its

knees!!

Impact of Transportation on Supply Chain Management

Modes of Transportation

• Trucks• Air• Rail• Water• Pipeline• Package Carriers

Trucks•Less-than-truckload (LTL) carriers or truck-load (TL) carriers. LTL carriers move small shipments & fees are higher.•Specialized carriers transport liquid petroleum, household goods, building materials, & other specialized items.Accessibility – trucks are able to access many more locations than planes or railroads. Regional truck lines are excellent for small, frequent shipments that require follow-up or expediting. They are most effective over short distances. •Lower costs•Accessibility (flexible)•Small, frequent shipments

Air Carrier• Air is considered a premium mode of

transportation because of the speed of delivery and the low impact on the cargo (items are less likely to be broken than those shipped by rail or truck)

• Airplanes are also able to cover much longer distances in a short time

• Savings resulting in speed of delivery (time) but outweigh extra costs

-Premium transportation-Speed delivery-Range

Rail Carrier

• Lowest overall cost per unit weight

• Consistent time schedule

• Recommended with most commodity types

• Weather

Railroads cost much less than other modes when shipping large quantities or bulky goods over long distances. Trains also run on a more consistent time schedule than trucks or airlines.

Trains are often able to travel in weather that would slow or stop trucks and airplanes.

Rail

• Disadvantages– Inflexibility limited as far as areas in which they can

travel (tracks must be present) (rail station-loading point)– Potential damage of goods (rail condition)

– Ineffective with small shipments

Water (Ships) Carrier• Ships are one of the oldest methods of

transporting goods and they are virtually the only way to transport large volumes of good over-seas.

• Although this method is slower than shipping by air, a ship can carry much more cargo than an airplane. Costs are reduced significantly by choosing ships over air transport.

-Large volumes-Long distances-Slower than air travel (time)-Limited access (port)

Pipeline

• Transport of homogeneous materials

• Lower transportation costs than other modes

• Higher initial costs• Unable to transport a variety

of materials

Pipelines are ideal for materials such as water, oil, and gas. Pipelines have high initial costs since they must be built but once they are constructed transportation costs are much lower than other modes.

Package Carrier• Companies like FedEx, UPS, USPS, that carry small

packages ranging from letters to shipments of about 150 pounds

• Expensive• Rapid and reliable delivery• Small and time-sensitive shipments• Preferred mode for e-businesses (e.g., Amazon, Dell)• Consolidation of shipments

Pricing

• Handling characteristics• Distance freight is moved• Weight of freight• Costs inversely related to speed of service

Role of IT in Transportation

• The complexity of transportation decisions demands to use of IT systems

• IT software can assist in:– Identification of optimal routes by minimizing costs

subject to delivery constraints– Optimal fleet utilization– GPS applications

Making TransportationDecisions in Practice

• Align transportation strategy with competitive strategy

• Consider both in-house and outsourced transportation

• Design a transportation network that can handle e-commerce (deal with international market)

• Use technology to improve transportation performance (eg. Drone)

• Design flexibility into the transportation network

Summary

• Each mode of transportation has its own strengths and weaknesses

• The effectiveness of each mode depends on several factors including distance, price, and timeliness