Chapter 14: Transportation in a Supply Chain

TEU

- Twenty-foot equivalent unit - typical size of a shipping container

Modes of transportation

- air - package carriers - truck - rail - water - pipeline - intermodal

Water transport

- best suited for carrying large loads at low cost - slowest of all modes and delays or typical - cheapest mode of transportation

Direct Shipment Network to Single Destination

- buyer structures the transportation network so all shipments come directly from each supplier to each buyer location - adv. is elimination of intermediate warehouses and its simplicity of operation and coordination - transportation time is short because shipments are direct

Tailored Network

- combination of previous options that reduces the cost and improves responsiveness of supply chain - uses combination of cross-docking, milk runs, TL, LTL, and package carriers

Air transportation

- fast and fairly expensive - usually transport small, high value items or time-sensitive emergency shipments

UPS Worldport in Louisville, KY

- fully automated package handling facility in the world

price structure and heavy load capability make rail an ideal mode for carrying:

- large, heavy, or high-density products over long distances - due to time products should also not be time sensitive

TL operations

- low fixed costs - characterized by shipments of 10,000 pounds or more - goal of carrier is to schedule shipments that provide high revenue while minimizing trucks's idle and empty travel time

Shipping via DC using Milk Runs

- milk runs can be used from a DC if lot sizes to be delivered to each buyer location are small - requires a significant degree of coordination and suitable routing and scheduling

Rail

- moves commodities over large distances - incur high fixed costs in terms of tracks, locomotives, cars, and yards

Transportation Infrastructure

- often require government ownership or regulation because of their inherently monopolistic nature - important to price usage to reflect marginal impact on the cost to society (tolls)

Package carriers are the preferred mode of transport for:

- online businesses - ex. Amazon

LTL

- priced to encourage shipments in small bits, usually less than half of TL - suited for shipments that are too large to be mailed as small packages but that constitute less than half a TL - takes longer than TL shipments because of consolidation

Pipeline

- primarily used for transport of crude petroleum, refined petroleum products, and natural gas - pricing usually consists of a fixed component related to shippers peak usage and a charge relating to actual quantity transported

All Shipments via Intermediate Distribution Center with Storage

- product is shipped from suppliers to a a central distribution center where it is stored until needed by buyers when it is shipped to each buyer location - product comes in large quantities into a DC, where it is held in inventory and sent to buyer locations in smaller replenishment lots when needed

Direct Shipment with Milk Runs

- supplier delivers directly to multiple buyer locations on a truck or a truck picks up deliveries destined for the same buyer location from many suppliers - lowers transportation costs by consolidating shipments

All Shipments via Intermediate Transit Point with Cross-Docking

- suppliers send their shipments to an intermediate transit point where they are cross-docked and sent to buyer locations without storing them - little inventory needs to be held and product flows faster in supply chain - Walmart uses this approach

Package Carriers

- transportation companies like FedEx, UPS< and USPS that carry small packages ranging from letters to shipments weighing about 150 pounds - use air, truck, and rail to transport - expensive but provide rapid and reliable delivery

Intermodal

- use of more than one mode of transport to move a shipment to its destination - most common is truck/rail

LTL Operators

- usually run a regional or national hub and spoke network that allow consolidation of partial loads

Two major segments of trucking industry

1. Truckload (TL) 2. Less than Truckload (LTL)

3 cost components of air transportation

1. a fixed cost of infrastructure and equipment 2. cost of labor and fuel that is independent of the passengers or cargo on a flight but is fixed for a flight 3. variable cost that depends on the passengers or cargo carried

4 parties whose actions influence effectiveness of transportation

1. shipper 2. carrier 3. owners of transportation infrastructure 4. bodies that set transportation policies

Three questions that need to be considered when designing a transportation network between two stages of a supply chain

1. should transportation be direct or through an intermediate site? 2. Should intermediate site stock product or only serve as a cross-docking location? 3. Should each delivery route supply a single destination or multiple destinations?

labor and fuel account for more than ______ % of railroad expenses

60

______% of the world's cargo moves by container

90%

First Container Ship

Ideal-X (1956) carried 58 containers and was a converted WWII oil tanker

2013 Port with most container traffic

Shanghai, China

Ocean Shipping Reform Act of 1998

allowed carriers and shippers to enter into confidential contracts, effectively deregulating the industry

Trains are not typically scheduled but are ___________

built; train leaves once there are enough cars to constitute the train

Advantages of trucking

offers door-to-door shipment and a shorter delivery time - require no transfer between pickup and delivery

Value-added services package carriers provide

package tracking and processing and assembly of products

Carrier

party that moves product

Shipper

party that requires the movement of the product between 2 points

Milk Runs

route on which a truck either delivers product from a single supplier to multiple retailers or goes from multiple suppliers to a single buyer location

Memphis International Airport is the:

second largest cargo airport in the world