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Transportation in the Supply Chain
Akash Bhasin
Supply Chain
• All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows
Transportation
• Transportation is jointing between stages in the supply chain.
• It is a way to move product from manufacturing to the final consumers.
• Transportation within a supply chain Example – Amazon sells products on the
internet and uses FedEx to deliver products to customers.
Kinds of Transportation costs
• Inbound costs – costs that includes for bringing materials in to the facility.
• Outbound costs – cost of sending material out of a facility
Supply Chain for Denim Jeans
Transportation• Rail
– low-value, high-density, bulk products, raw materials, intermodal containers
– not as economical for small loads, slower, less flexible than trucking
• Trucking– main mode of freight
transport in India– small loads, point-to-point
service, flexible– More reliable, less damage
than rails; more expensive than rails for long distance
Truckload (TL)
• Low fixed cost – carriers do not own or maintain roads
• Door-to-door convenience• Good speed and frequency (small dispatch lots)• Cannot carry large loads• Major Issues– Utilization– Consistent service
•Air–most expensive and fastest,
mode of freight transport–lightweight, small packages –high-value, perishable and
critical goods–less theft
•Package Delivery–small packages–fast and reliable–increased with e-Business–primary shipping mode for
Internet companies
•Water–low-cost shipping mode–primary means of
international shipping–slowest shipping mode
•Intermodal–combines several modes of
shipping-truck, water and rail–key component is
containers•Pipeline–transport oil and products
in liquid form–high capital cost,
economical use–long life and low operating
cost
Transportation Costs• 63% of total logistics expenditures• Fixed Costs
– road/railway acquisition and maintenance, terminal facilities, transport equipment, carrier administration
• Variable Costs
– fuel, labour, equipment maintenance, handling, pickup and delivery
Internet Transportation Exchanges
• Bring together shippers and carriers• Initial contact, negotiations, auctions
• Examples– www.nte.com– www.freightquote.com
There are two keys players in any transportation that takes place within a
supply chain
• Shipper - party that requires the movement of the product between two points in the supply chain
• Carrier - party that moves or transports the product
16
Transportation Network Designs
Suppliers Retailer Stores
Direct Supplier Network
Suppliers Retailer Stores
Direct Shipping
Suppliers Retailer Stores
All Shipment via DC
DC
Risk Management in Transportation
• Three main risks to be considered in transportation are:
– Risk that the shipment is delayed– Risk of disruptions– Risk of hazardous material
Risk mitigation strategies
– Decrease the probability of disruptions– Alternative routings– In case of hazardous materials the use of modified
containers, low-risk transportation models, modification of physical and chemical properties can prove to be effective
Choice of Transportation Mode
• A manager must account for inventory costs when selecting a mode of transportation
• A mode with higher transportation costs can be justified if it results in significantly lower inventories
Walmart Transportation system
• Fast and responsive transportation system.
• Distribution centers serviced by more than 3500 company owned trucks.
Cross-docking• To make its distribution process more
efficient, Wal-Mart makes use of a logistics technique called “cross-docking
• In this system, the finished goods are directly picked up from the manufacturing plant, sorted out and then directly supplied to the customers.
• The system reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores.
• The manufacturer directly forwarded the goods to a place called the “staging area.”
• The goods were packed here according to the orders received from different stores and then directly sent to the respective customers.
Video
• http://www.youtube.com/watch?v=ViLjw7b_0_U
Thank You