scm 4301 dale tibodeau exam 2

example of transportation metrics:

chart that helps identify deficiencies.

strategy and issues during a product's life:

"at what stage are these products in their life cycles?"

safety regulations:

*US department of transportation (DOT) -responsible for US national transportation policy -13 administration agencies and bureaus *examples: -federal highway administration (FHWA) -federal motor carrier safety administration (FMCSA) -compliance, safety, accountability (CSA) initiative -federal aviation administration (FAA) -federal railroad administration (FRA) -maritime administration (MARAD) -US coast guard (also branch of armed forces)

US trucking industry:

*USDOT - US department of transportation (trucking, rail, shipping, airlines) *FMSCA - federal motor carrier safety administration *FHWA - federal highway administration *EPA - environmental protection agency *9 million employed in truck-related jobs *15 million trucks operate in the US *70% of US freight transported by truck annually *$671 billion worth of manufactured and retail goods

national motor freight classification:

*a standard that provides a comparison of commodities moving in interstate, intrastate, and foreign commerce *commodities are grouped into one of 18 classes—from a low of class 50 to a high of class 500—based on an evaluation of four transportation characteristics: -density -stowability -handling -liability *the NMFC specifies minimum packaging requirements to ensure that goods are adequately protected in the motor carrier environment and can be handled and stowed in a manner that is reasonably safe and practicable.

agencies and small shipment services:

*agents -air and surface forwarders -shippers' associations -transport brokers *small shipment services -US postal service, UPS, fedex, etc -limited in size and weight

performance overview:

*air is generally fast over long distances *water is slow and moderately reliable *truck is moderately fast and reliable *rail is slower and less reliable than truck

intermodal services -- trailer on flatcar (TOFC):

*also called "piggyback" -truck trailers on railroad flat cars *advantages: -convenience and flexibility from trucking -long haul economy from rail -longer distances than trucks normally haul *TOFC offered in five different plans based on: -ownership of the highway and rail equipment -rate structure established

different abc classification:

*based on sales (previous examples) *based on hits -number of times a customer buys the product *based on profit margin on inventory investment -a high revenue product, could also be low on profit margin *combine all three dimensions

freight documentation:

*bill of lading -originates the shipment -provides all the information the carrier needs -stipulates the contract terms, including carrier's liability for loss and damage -acts as a receipt for the goods the shipper tenders to the carrier -in some cases, shows certificate of title to the goods *freight bill -carrier's invoice for the carrier charges listing -shipment -origin and destination -cosignee -items -total weight -total charges *freight claims form -loss, damage and delay claims -overcharges

intermodal services:

*can have more than two modes *rail and truck (piggyback) *rail and water *rail and air *rail and pipeline *truck and water (fishyback) *truck and air (birdyback) *truck and pipeline *water and pipeline *water and air *air and pipeline

transport management planning activities pt 3:

*carrier selection -selecting the individual transportation service providers within the mode -major difference between modal and carrier selection is the number of options and decision frequency -type of service provided within a mode impacts carrier selection -most carriers have the capabilities to provide a similar level of service *rate negotiations -centralized freight rate negotiations -developing contracts with carriers for a tailored set of transportation services at a specific price -leveraging volume with a small set of carriers

ports pt 2:

*challenges along POE -capacity -security *affect wait time at the port -inspection -storage/warehouse space close to the ports

line haul rates by product:

*class rates -function of distance between origin and destination and other factors - break weight = (rate (next) * weight (next)) / rate (current) *contract rates -blanket rates *freight all kinds

transportation management system (TMS)

*critical applications include the following: -routing and scheduling -proper planning of delivery routes has a major impact on customer satisfaction, supply chain performance and organizational success *load planning -effective preparation of safe, efficient deliveries *load tendering *status tracking *appointment scheduling

additional categories:

*d - very slow items *dead *new items (no revenue or sales history) *x and y items - if you don't stock them *categories that make sense - too many will not help

purpose of classification/stratification:

*define logistics strategy -where to stock? -how much to stock? -safety stock levels -service levels -set profit margin/prices -allocate resources -to sell or not to sell

US interstate highway system:

*dwight d eisenhower national system of interstate and defense highways *federal aid highway act of 1956 *original portion completed 1991 *cost $425 billion *47,182 miles as of 2010, second to china

port of houston:

*early history: -in houston's early days, the shallow draft of buffalo bayou to the foot of main street was used as a port -larger cargo was still offloaded near galveston *major factors for creation: -sept. 1900 - hurricane devastated galveston -1901 - discovery of oil at spindletop (beaumont) -increase in exports - crops such as rice and cotton along with oil *history of the port of houston -tom henry ball, a local congressman, proposed a plan to fund the port (city of tomball named for him in 1907) -16-1 vote to approve the port -jesse h. jones, a politician, persuaded banks to invest (became US secretary of commerce 1940) -work began in 1912 -completed sept. 7, 1914 *a busy port: -4th largest port in the US -busiest US port in terms of foreign tonnage -2nd busiest US port in terms of overall tonnage -13th busiest port in the world in terms of overall tonnage -nation's leading breakbulk post, handling 65% of all major US project cargo (large, heavy, high-value items, pieces of equipment) *a big impact -150+ private industrial companies along the 52 mile houston ship channel -200 million tons of cargo move through the port -ship channel businesses contribute 1,026,820 jobs throughout TX -generates $178.5 billion in statewide economic impact and $4.5 billion in state and local tax revenues *truck vs rail -ships are routinely turned around in 8-10 days -landside traffic -80% shipped by truck -an average of 1,600 trucks in or out each day -20% shipped by train -generally south and central american loads bound for the west coast *houston handles more than one million TEUs (twenty foot equivalent unit) each year

transportation metrics:

*ensures service quality *need to maintain in-transit visibility -security -integrity of shipment *key performance indicators (KPIs) can be used to evaluate: -current performance vs historical results -internal goals -carrier commitments *challenge lies in narrowing down metrics available to monitor performance to a manageable number of KPIs *primary categories include service quality and effiency

modes of transportation- pipeline:

*equipment fixed in place; product moves through in high volume *mass movement of liquid and gasses *lowest operating cost and unit costs *high fixed cost and low unit costs

regulations in transportation:

*federal motor carrier safety administration (FMCSA) hours of service (HOS) regulations -11 hours of driving time within a 14 hour shift, then 10 hours off duty -30 minute break after 8 hours of driving *bureau of customs and border protection (CBP) - 24 hour manifest rule -complete manifest information should be submitted a day in advance *environmental protection laws -noise protection -vehicle emission regulation -this is where CNG (compressed natural gas) trucks have advantage

stop off privilege example pt 2:

*first, we compare the costs without the stop-off privilege. this would be to price as if each shipment is a separate shipment from I. suppose we know the rates. loads (8,000 + 12,000 + 10,000) = 30,000 lbs charges ($244 + $402 + $360) = $1,006 *now, we price with the stop-off privilege. we assume that all the volume (30,000 lbs.) is to be delivered to the farthest stop and we use the rate to that point ($3.00/cwt.). a small stop off charge of $15.00 is made for each stop including the last stop. rate $/cwt = 3.00 3 stops = $15 = $15 * 3 = $45 30,000 * .03 = $900 charges = ($900 + $45) = $945

fob:

*fob pricing - "free on board" or "freight on board" -the fob factory (the fob origin) -the fob destination *different types

global intermediaries:

*foreign freight forwarders -typical surface/ocean freight forwarders -supplies expertise to international shippers -consolidate small shipments into more economical sizes -derives income from fees for service *airfreight forwarders -same services as surface forwarders but only for air shipments *non-vessel-operating common carriers -arose from inability to find outbound traffic after unloading inbound containers -consolidates and dispenses containers at inland points -uses the shipping expertise that NVOCCs possess -ocean carrier gains from the increased market area *export management companies: -EMCs act as agents for domestic firms in the international arena -obtain orders, selecting appropriate markets, distribution channels, and promotional campaigns *export trading companies -ETC exports goods and services to overseas buyers and handles most of the export arrangement -ETC allows small to medium size firms to engage in foreign trade *customs house brokers -typically seen in US-mexico border transactions -CHBs are licensed by dept of treasury -oversee the movement of goods through customs and ensure that the documentation accompanying a shipment is complete and accurate for entry into the country -operate under power of attorney from the shipper to pay all import duties due on the shipment -the importer is ultimately liable for any unpaid duties -keeps abreast of the latest import regulations and specific requirements of individual products

terms of sale - fob destination, freight collect:

*freight charges paid by buyer *title passes to buyer *buyer pays freight charges *buyer bears freight charges *seller owns goods in transit *seller files claims (if any)

terms of sale - fob origin, freight collect:

*freight charges paid by buyer *title passes to buyer *buyer pays freight charges *buyer bears freight charges *buyer owns goods in transit *buyer files claims (if any)

terms of sale - fob destination, freight collect and allowed:

*freight charges paid by buyer, then collected from seller by deducting amount from invoice *title passes to buyer *buyer pays freight charges *seller bears freight charges *seller owns goods in transit *seller files claims (if any)

terms of sale - fob origin, freight prepaid:

*freight charges paid by seller *title passes to buyer *seller pays freight charges *seller bears freight charges *buyer owns goods in transit *buyer files claims (if any)

terms of sale - fob destination, freight prepaid:

*freight charges paid by seller *title passes to buyer *seller pays freight charges *seller bears freight charges *seller owns goods in transit *seller files claims (if any)

terms of sale - fob origin, freight prepaid and charged back:

*freight charges paid by seller, then collected from buyer by adding the amount to invoice *title passes to buyer *seller pays freight charges *buyer bears freight charges *buyer owns goods in transit *buyer files claims (if any)

product pricing (in logistics):

*geographic pricing methods -fob pricing -zone pricing -single, uniform pricing - single price for all customers regardless of their location. ex: first class letter -freight equalization pricing - if two firms have equal efficiency in producing and selling which results in same product costs at factory locations then competitive pricing is a matter of transportation costs. the firm with higher transportation costs may wish to absorb the added cost to remain competitive -basing point pricing - establishes some point other than the one from which the product is actually delivered as the point which to compute price. if location chosen is the location of a major competitor, prices can be forced to be similar to the competition *incentive pricing

supply chain security:

*given the importance of global trade to the united states, a delicate balance exists between security and the efficient flow of global commerce -more cargo inspections -more paperwork -longer time to clear US borders *customs trade partnership against terrorism (C-TPAT) -established under US department of homeland security in november 2001 -is a cooperative effort to secure the global supply chain and to facilitate legitimate cargo and conveyance

importance of an effective transportation system:

*greater competition -opportunities to serve distant markets *economies of scale -decoupling of markets and production sites *reduced prices -inexpensive transportation, intense competition

intermodal services -- containerized freight:

*hauls only the container -eliminates the dead weight of understructure and wheels of a trailer *standardized containers allow flexibility -air truck -water truck

modes of transportation - air:

*high valued, time sensitive products *high variable cost relative to fixed cost *fastest for long distances *broad service range *88 air cargo carriers (22 major ones) -combination carriers -air cargo carriers -integrated carriers -nonintegrated carriers

product life cycle, sales, cost and profit:

*in the first stages of the product life cycle, there's a lot of money and resources spent but because significant volumes haven't been produced yet, break even or profit doesn't happen yet *profit comes in the later stages after there's been growth and mature products. *with this graph, you can see what period in the cycle there's profit or loss.

transport prices:

*line haul rates -by product -by shipment size -by route -miscellaneous rates *special service charges -special line haul services -terminal services

rail:

*lower frictional resistance than vehicles on roads *powered by locomotives, electric or diesel *railways safer than other forms of land transportation *1830 - US baltimore and ohio railway *1850-1890 - tremendous growth in US rail system *railway on land owned or leased by company

modes of transportation - water:

*lowest costs and large capabilities *major facilitator of international trade *international freight movement *domestic coastal, inland, and great lakes traffic *mass movement of bulk commodities -low valued (domestic shipment) -high valued (international shipment) *high terminal costs and low line haul cost *cost effectively moves large quantities -petroleum, coal, iron ore, chemicals, etc *two primary carrier types -liner -charter *options include: -container ships -bulk carriers -tankers -general cargo ships -roll on, roll off (RO-RO) vessels

modes of transportation - rail:

*mass movement of low valued goods *large capabilities *cost structure: high fixed cost and low variable cost *railroads are "natural monopolies" *seven class I railroads in the US -burlington northern santa fe railway -CSX transportation -grand trunk corporation -kansas city southern railway -norfolk southern combined railroad subsidiaries -soo line corporation -union pacific railroad *two carrier types: -linehaul freight carriers -shortline carriers

international transportation:

*mode of transportation -depends on the geography and proximity of the partners -water: major transportation mode -air: second important -truck, rail, and pipeline, etc *issues in international transportation -more paperwork -limited number of routes -expensive (additional packaging, increased shipment, etc)

modes of transportation - truck:

*moderately high valued, time sensitive; finished and semi finished products *point to point service *flexible and fast *cost structure: low fixed cost, high variable cost *sometimes called motor carriers -widely used mode of transportation in the domestic supply chain -economic structure of the motor carrier industry contributes to the vast number of carriers in the industry -comprised of for hire and private fleet operations -truckload carriers: greater than 15,000 lbs -less than truckload (LTL): from 150 to 15,000 lbs -small package carriers: less than 150 lbs

transport choice:

*modes of transportation -air -truck -rail -water -pipe *coordinated services (multimodal) -piggyback (UPS truck on top of a rail car) -birdyback (plane) -fishyback (ocean freight) *small shipment carriers (150 pounds or less) -UPS, fedex -postal services *agents -freight forwarders -shipper associations *others -autos -bicycles -taxis -human -electronic -drones ? -driverless trucks ?

global transportation options:

*ocean -the most pervasive and important global shipment method, accounting for 2/3 of all international movement -major advantages are low rates and the ability to transport a wide variety of product and shipment size -three major categories: -liner service -charter vessels -private carriers *air -fast transit times -an advantage in packaging -disadvantage of air carriage is high rates -belly cargo on passenger flights *motor -adjacent countries, e.g. between US-mexico, US-canada, or in between european countries *rail -international rail traffic is limited because border crossing points are scarce -but intermodal movements are increasing. an example (from text) -japan to europe by sea alone is 28-31 days -another intermodal route: -japan to seattle (by sea): 10 days -seattle to new york: 5 days -new york to europe (by sea): 7 days -total: 22 days -challenge: several countries and carriers are involved, therefore cost will tend to increase

storage facilities and packaging:

*packaging -export shipments moving by ocean transportation require more stringent packaging than domestic shipments normally do -the shipper may find settling liability claims for damage to export goods very difficult. usually, the freight handling involves many firms, and these firms are located in different countries

ports of entry (POE):

*ports are a critical part of global supply chains and a major focus for global security *america's ports are a vital part of its global commerce -over $2 trillion in trade value per year passes through US ports -over $18 billion is collected in industry fees and taxes

international transportation "foreign trade zones":

*potential advantages -process and reship to another country -no customs payment until the entry to the importing country's customer zone -no duties on product deterioration -ship unassembled and assembled in the zone -capital flexibility -privileged foreign trade status for importers -duties applied only on the parts imported

zone pricing:

*prices are same when you ship to any location within a zone *used in package shipping - usually defined by the distance or the network of the logistics provider *shipping time also is similar when you ship to any location within a zone *UPS and fedex websites provides zone details for any zipcodes

product characteristics:

*product offering -tangible part (physical characteristics) -weight, volume, shape, performance, durability, etc. -intangible part (service characteristics) -after-sales support, company reputation, timeliness, responsiveness, etc *product offering = tangible + intangible

port statistics:

*rankings vary by tonnage, number of containers and value of imports/exports *chinese ports dominate international rankings *by tonnage: -in US, no. 1 is port of south louisiana, no. 2 is houston, no. 3 is los angeles/long beach *by number of containers: -in US, no. 1 is los angeles/long beach and no. 2 is ny/nj

line haul rates by shipment size:

*rates quoted on a dollar per hundred pound (cwt) basis *rate quoted on minimum quantities, such as 5,000, 10,000, or etc *any single rate on all quantities (aq) *other incentive rates

special service charges:

*special line haul services -diversion and reconsignment -transit privileges -stop off to complete loading -stop off to partially unload -protection -interlining *terminal services -pickup and delivery -switching -demurrage and detention

global markets and strategy:

*success in the global marketplace requires developing a cohesive strategy, including: -product development -technology -marketing -manufacturing -supply chain management *global markets and strategy have four important characteristics -standardization reduces complexity -global competition reduces the product life cycle -traditional organizational structures and business models frequently change -globalization introduces more volatility

challenges in transportation:

*supply chain complexity (more customized solutions for customers, more robust processes, more links in the chain, higher number of products as far as the product mix vs the lower) *competing goals among supply chain partners (trying to buy from suppliers at the lowest price possible and they want to make the most profit possible, just in time goals, freight consolidation goals) *changing customer requirements (covid- surge in home delivery demand) *limited information availability (sparse in third world countries) *synchronizing transportation with other supply chain activities (challenging to get everything to work correctly) *capacity and rising rates (capacity constraints during holidays, have to prebook in time ; rising rates in transportation because of shortage of truck drivers) *government regulations -including regulations that have the potential to impact the quality of life, the safety of citizens, and the growth of commerce. -(impacted transportation because some administrations are more relaxed/lenient and others are stringent)

modes of transportation:

*the five basic modes of transportation and intermodal transportation each has different economic and technical structures, and each can provide different qualities of link service. *truck and rail are the most popular modes of transportation

NMFTA:

*the national motor freight traffic association (NMFTA), nonprofit organization consisting of 950 freight carriers. -NMFTA provides the national motor freight classification (NMFC), a standard that provides a comparison of commodities being transported -registers standard carrier alpha codes (SCAC) to identify transportation companies *american national standards institute (ANSI) -private non-profit organization that oversees the development of voluntary consensus standards for products, services, processes, systems, and personnel in the us. -ANSI accredits standards that are developed by representatives of standards developing organizations, government agencies, consumer groups, companies *SCAC for NYK line (nippon yusen kabushiki kaisha), headquartered in tokyo, japan

incentive pricing:

*there are choices that businesses make to save money on freight or transportation *if you're not filling a truckload, it'll cost more than if you fill a truck. so sometimes you'll bundle or consolidate orders you want to ship daily to a location. or queue up goods over 2 or 3 days until you have a full truck load quantity and this will give a larger savings amount. *there's also different freight choices such as rail which is cheaper than truck especially for longer distances but it is slower

storage and handling:

*transit sheds -provide temporary storage while the goods await the next portion of the journey -after a fixed number of free days, fees charged *hold-on-dock storage -carrier provides hold-on-dock storage free of charge until the vessel's next departure date *public warehouses -available for extended storage periods -services and fees similar to domestic shipments *bonded warehouses -operate under customs agency's supervision and are used to store, repack, sort, or clean imported merchandise entered for warehousing without paying import duties while the goods are in storage

intro to transportation:

*transportation involves the physical movement of goods between origin and destination points *transportation systems link geographically-separated partners, facilities and customers in a company's supply chain *transportation facilitates the creation of time and place utility in the supply chain *transportation has a major impact on company financial performance and efficiency and enhances the competitiveness of a supply chain

importance of modes - by volume moved:

*transportation mode & percent of total volume: -railroads: 36.5% -trucks: 24.9% -inland waterways: 16.3% -oil pipelines: 22% -air: 0.3% -total= 100

intermodal transportation:

*use of two or more different modes in movement *greater accessibility and overall cost efficiency *facilitates global trade *development of standardized containers that are compatible with multiple modes *containerized freight -hauls only the container -eliminates the dead weight of understructure -standardized containers allow flexibility -air truck -water truck *transload freight

transport cost characteristics:

*variable costs -vary with service or volume -ex: fuel, labor, handling, pickup, etc *fixed costs -constant, not dependent on service or volume -ex: terminal facilities, transport equipment, carrier administration *common or joint costs -cost allocations between shipments

rate profiles:

*volume-related rates -minimum or any quantity (aq) charge for low volume -less than vehicle load for shipment larger than minimum quantity and less than full vehicle load ( > min, but < full load) -full vehicle load: high volumes *distance related rates -uniform rates (us postage rates) -proportional rates -tapering rates -blanket rates *demand related rates

free trade zones:

*where manufacturing does not have to take place for trading privileges to be gained (retailing) *sometimes called export processing zones -- labor-intensive manufacturing centers that involve the import of raw materials and the export of factory products *an area that is located within a nation (e.g. the US), but is considered outside of the customs territory of that nation *FTZs provide many cash flow and operating benefits to zone users -duty deferral and elimination -lower tariff rates -lower tariff incidence -exchange rate hedging -tax breaks by host nations

transport management planning activities:

*which department will be responsible for transportation? -logistics -procurement -marketing *terms of sale -free on board (FOB) origin -FOB destination *decision to outsource transportation -firms choose to "make" or "buy" *modal selection -accessibility -advantage: motor carriage -disadvantage: air, rail, and water -transit time -advantage: air and motor carriage -disadvantage: rail, water, and pipeline -reliability -advantage: motor carriers and air carriers -disadvantage: water carriers and rail carriers -product safety -advantage: air transportation and motor carriage -disadvantage: rail and water -cost -advantage: the cost of transportation service varies greatly between and within the modes -disadvantage: motor carriage and air transportation

top US trading partners:

1. canada 2. china 3. mexico 4. japan 5. germany 6. united kingdom 7. south korea 8. france 9. taiwan 10. brazil total value ($ billions) 2008 = $2,124 2009 = $1,679 2010 = $2,059

break weight:

break weight = (rate (next) * weight (next)) /rate (current) break weight= weight above which the next higher weight break rate should be used for lower transport costs rate (next)= rate for next higher weight break weight (next)= minimum weight of next higher weight break rate (current)= rate for true weight of shipment

line haul rates by route:

for full vehicle load movements, a per mile charge + a stop-off charge is added if there is more than one stop *example: a truck shipment of 42,000 lbs. originates at atlanta, ga and makes three stops for delivery at dallas, texas, oklahoma city, oklahoma and st.louis, missouri. a stop-off charge of $75 per stop is assessed. the distance from atlanta to dallas is 822 miles, from dallas to oklahoma city is 209 miles and from oklahoma city to st. louis is 500 miles. per mile-cost at st. louis is $1.65. what is the cost of the trip? *(822 + 209 + 500) x 1.65 = $2,526.15 mileage *(3 stops x $75) = $225 stop off charge *total transport cost ($2,526.15 + $225) = $2,751.15

cumulative 80-20 curve:

see image

transport service:

set of performance characteristics purchased at a given price *performance -average transit time -average transit time variability -loss and damage -other factors *price -line-haul -terminal/local -accessorial or special charges

supply chains in a global economy:

*companies and entire economies could improve their "wealth" by allowing specialization of tasks -the assembly line -economies of scale in production *the advantage is true as long as you can sell the increased volume of production -role of logistics: to help extend the market area of companies/countries through improved efficiency

who owns?

*company controlled transportation -expected benefits -better operating performance -greater availability -higher transportation capacity -lower cost -downside -high volume needed to justify investment *outsourced -3pl -partial leases

product classification:

*consumer products -convenience -shopping -specialty *industrial products

line haul rates - miscellaneous:

*cube rates *import - export rates *deferred rates *released value rates *ocean freight rates

ports:

*land ports are also POE *examples -along US/mexico border -laredo -el paso -otay messa -along US/canada border -detroit (mi) -buffalo (ny)

relative costs of performance:

*mode and price, ¢/ ton - mile -rail: 2.28 -truck: 26.19 -water: 0.74 -pipeline: 1.46 -air: 61.20

busiest US ports:

1. south louisiana (new orleans to baton rouge), LA 2. houston, TX 3. new york, NY/NJ 4. long beach, CA 5. beaumont, TX

product life cycle:

introduction --> growth --> maturity --> decline

route sequencing:

minimize number of trucks by maximizing number of routes handled by a single truck

transportation planning and strategy:

modal selection- capabilities, product characteristics and pricing

transportation planning and strategy pt 2:

modal selection- performance ratings of modes

abc practice problem 1:

stratify the following items into a, b, c categories. 60% of the revenues represent a, 20% represent b, and 20% represent c

stop off privilege example pt 1:

suppose 3 shipments of J=8,000 lbs., K=12,000 lbs., and L=10,000 lbs. originating at I are to be delivered in the following way. what are the differences in freight charges with and without a stop-off privilege? *I -> J for 8,000 lbs, it is $3.05/cwt *I --> K for 12,000 lbs, it is $3.35/cwt *I --->L for 10,000 lbs, it is $3.60/cwt ; for 30,000 lbs, it is $3.00/cwt

break weight example:

suppose 9,000 lbs. of class 100 merchandise is to be shipped from new york to dallas. from table 6-5, the rate would be $52.21/cwt. however, should the shipment be priced at the next higher weight break rate of $40.11/cwt. for a lower cost? break weight = (rate (next) * weight (next)) /rate (current) break weight = (40.11 x 100) / 52.21 = 76.82 or 7,682 lbs since the 9,000 lb. shipment size exceeds the break weight of 7,682 lbs., size as if a 10,000 lbs., shipment for a total cost of $40.11x 100 = $4,011. otherwise, the shipment would have cost $52.21x90 = $4,699.

transportation charges based on shipment size:

suppose an item is rated at class 60, has a shipping weight of 1,000 lbs. (10 cwt.), and is to move from louisville, kentucky to chicago, illinois. what is the transportation charge? *from the selected class truck rates in $ per cwt by classification number and weight break quantity in pounds from louisville, kentucky to chicago, illinois, rate is $20.43 per cwt. from class 60 tariff. *the shipment charges are $20.43/cwt x 10 cwt = $204.3.

abc example:

suppose that in an inventory of 10 line items 15% of the items account for 80% of the annual sales volume. total annual sales (all items) are $90,000. classify the items according to abc analysis. *each item accounts for 10% so to get 15% of the items, you'd have to choose two because that equals 20%. that covers 15% rather than choosing just one item since that only accounts for 10% *80% * $90,000 = $72,000 *10% of $90,000 = $9,000 *$9,000 * 2 = $18,000 it *90,000 - 18,000 = $72,000 *there's not enough information to perform a full calculation

freight class rate example:

suppose we wish to ship 15,000 lbs. (150 cwt.) of wheat flour from new york to los angeles by truck. The trucker offers a 40% discount from the published tariff. what is the transportation charge? *from the freight classification table, item number = 1090--00 *minimum weight = 36,000 lbs *shipment = 15,000 lbs < 36,000 lbs, therefore it is LTL and the class rating is 55 *rate is 6,065 or $60.65 per cwt. from class 100 tariff *with a 40% discount, the effective rate is (1 - .40) x 60.65 = $36.39 *the shipment charges are (0.55 x 36.39 x 150) = $3,002.18 *(should always check to see if shipment can be declared at the next higher weight break for a lower rate and lower total charges)

the "savings" method for vehicle routing:

"savings" is better than "sweep" method -- has lower average error

land port distribution in US-canada border:

*80% of total traffic in 10 ports *detroit, MI: 26.46% *buffalo-niagara falls, NY: 16.69% *port huron, MI: 12.24% *champlain-rouses pt, NY: 6.08% *blaine, WA: 5.94%

land port distribution in US-mexico border:

*80% of total traffic in 5 ports *laredo, TX: 31.97% *el paso, TX: 15.76% *otay mesa/san ysidro, CA: 15.61% *hidalgo, TX: 9.79% *calexico east, CA: 6.59%

note on abc analysis:

*80-20 guideline is only a guideline *"a" items could be: -15% of items account for 75% of sales -25% of items account for 85% of sales -20% of items account for 90% of sales -30% of items account for 70% of sales

abc classification:

*80-20 rule -pareto's law -"80% of firm's sales are generated from 20% of the product line items" -useful in distribution planning and inventory control -vital few - trivial many

example:

*D = demand = 1,200,000 pounds *C = item cost at plant = $25 per pound *C' = item cost at destination (add transit rate per pound) *I = holding rate = 30% *T = transit times (days) *Q = quantity shipped *R = shipping rate in $ per pound

north american free trade agreement (NAFTA):

*NAFTA establishes free trade between the US, canada, and mexico and provides the way the agreement is to be interpreted -signed in 1994 -eliminated tariffs on over 1/2 of mexico's exports to the US and over 1/3 of US exports to mexico -all tariffs eliminated within 10-15 years *NAFTA has been positive for mexico's economy -- real incomes rose and poverty rates fell *commission for environmental cooperation (CEC) passed in 1994 to undertake environmental impact assessment of NAFTA

USDOT agencies:

*OST - office of the secretary of transportation *FAA - federal aviation administration *FHWA - federal highway administration *FMCSA - federal motor carrier safety administration *FRA - federal railroad administration *FTA - federal transit administration *MARAD - maritime administration *NHTSA - national highway traffic safety administration *OIG - office of inspector general *PHMSA - pipeline and hazardous material safety administration *RITA - research and innovative technology administration *SLSDC - saint lawrence seaway development corporation *STB - surface transportation board

mode/service selection terminology:

*R- rate *D- annual demand *I- inventory cost in % of cost of product *C- cost of product *Q- shipment size (quantity) *C'- includes shipping cost (that is cost of the product in warehouse - sometimes called landed cost)

multi vehicle routing and scheduling:

*a problem similar to the single vehicle routing problem except that a number of restrictions are placed on the problem -a mixture of vehicles with different capacities -time windows on the stops -pickups combined with deliveries -total travel time for a vehicle

what are the relevant costs?

*transportation costs -differ by transportation mode *inventory costs -inventory at plant (origin) -pipeline inventory (in transit) -inventory at warehouse (destination)

transport service selection:

*variety of service characteristics -cost -speed -dependability *basic cost trade-offs -channel inventories vs speed and dependability *competitive considerations -transportation can provide a competitive advantage *appraisal of selection methods -direct and indirect costs -other factors

a combination example:

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abc classification for 14 products:

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complexity of the facility location problem:

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cost-service tradeoffs in logistics planning:

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freight consolidation example pt 1:

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freight consolidation example pt 2:

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freight consolidation example pt 3:

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freight consolidation example pt 4:

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grid locations and sources of markets:

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grid technique analysis of plant location example:

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grid technique example:

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hourly compensation in manufacturing:

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impact of supply source change:

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impact of transportation rate change:

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practice problem - houston to austin pt 1:

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practice problem - houston to austin pt 2:

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practice problem - houston to austin pt 3:

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shortest path method example pt 1:

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shortest path method example pt 2:

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shortest path method example pt 3:

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transport selection analysis pt 1:

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transport selection analysis pt 2:

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transportation LP problem setup pt 1:

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transportation LP problem setup pt 2:

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typical truck shipment into mexico:

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weighted center of gravity method pt 2:

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weighted center of gravity method pt 3:

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weighted center of gravity method pt 4:

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weighted center of gravity method pt 5:

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what happens at the border?:

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advantages and limitations of grid technique:

*advantages -relatively simple -can provide a starting point for location analysis *limitations -static approach - solution optimal for only one point in time -assumes linear transportation rates; actual transportation rates increase with distance, but less than proportionally -does not consider topographic and other geographic conditions

mode/service selection example pt 2:

*annual transportation costs *what costs other than transportation are relevant to our decision?

traveling salesman problem:

*basic vehicle routing problem in which you have to visit every stop exactly once and return to the origin in the shortest possible route *very difficult; several heuristics are available to get a quicker (not necessarily the best/optimal) solution

location technologies today:

*being used to track the spread of covid-19

principles of good routing and scheduling pt 4:

*build routes beginning with the furthest stop from the depot *the most efficient routes are built using the largest vehicles available first (if vehicles are different) *pickups should be mixed into delivery routes rather than assigned to the end of the routes (if pickups and delivery are parts of the route) *a stop that is greatly removed from a route cluster is a good candidate for an alternate means of delivery *narrow stop time window restrictions should be avoided (relaxed if possible through negotiations)

transportation costs?

*calculate the annual transportation costs for each mode under consideration

challenges in cross-border traffic:

*capacity -number of operating lanes -hours of operations *truck movement restrictions *security *lack of integration -many intermediaries with no common objective

ten best territories - chicago consulting:

*chicago consulting has specified the best warehouse networks for the past 15 years, based upon changes in US population densities *the networks show the best configuration serving all demand from one warehouse, two warehouses, etc., all the way up to ten warehouses *selection criteria: -transportation costs (both inbound and outbound) -warehousing, inventory, and site-specific costs -customer patterns -competitive positioning and market penetration -sales strategy

freight consolidation:

*combine small shipments into larger ones *a problem of balancing cost savings against customer service reductions *an important area for cost reduction in many firms *based on the rate-shipment size relationship for for-hire carriers

complexity of the facility location problem:

*if there are n potential facility sites, there are 2^n - 1 different geographical configurations *example: 4 potential sites (A, B, C, D) -2^4 - 1 = 16 - 1 = 15

"sweep" method for vehicle routing:

*example: a trucking company has 10,000 unit vans for merchandise pickup to be consolidated into larger roads for moving over long distances. a day's pickups are shown in the image. how should the routes be designed for minimal total travel distance? 1. locate all stops (including origin/depot) on the map 2. extend a straight line from the depot and rotate in clockwise/counterclockwise direction (either one) until it intersects a stop. ask the question: if i include this stop, will i violate the constraints (capacity, travel time, time window)? a. if not, add the stop and proceed with line rotation b. if yes, exclude that stop and define the route 3. continue with a new line sweep with the last point that was excluded from the route. repeat this process until all stops are assigned to the routes

vehicle routing and scheduling:

*extension of the basic traveling salesman problem *more complex due to restrictions: -multiple vehicles with different capacities -pick-ups combined with deliveries -time windows on the stops -total travel time for a vehicle -time needed to drop-off or pickup (think about loading and unloading activities at the stops)

mode/service selection example pt 1:

*finished goods are to be shipped from a plant inventory to a warehouse inventory some distance away. the expected volume to be shipped in a year is 1,200,000 lbs. the product is worth $25 per lb. and the plant and carrying costs are 30% per year. what is the best alternative?

annual inventory costs:

*how do you calculate annual inventory costs? -annual average inventory (quantity/2) -holding cost (holding rate % multiplied by cost of item) -need to calculate -inventory at plant -inventory in transit -inventory at warehouse (destination)

example - using big data to locate stores:

*how does starbucks locate stores without cannibalizing at other stores? *how does petco locate stores close to pet owners? *esri - location analytics -arcGIS online

walmart stores inc.:

*founded in 1962 by sam walton *HQ is in bentonville, AR *world's third largest public corporation behind exxonmobil and royal dutch shell *revenues over $443 billion *largest private (non-government) employer with 2.1 million employees *3rd largest employer overall behind US DOD and china's people's liberation army *8,500 stores in 15 countries *1987 - completed $24 million satellite network linking all stores; the largest private satellite network, allowing the corporate office to track inventory and sales and to instantly communicate *1988 - introduced walmart supercenter *1998 - introduced walmart neighborhood market *walmart already has the power to persuade suppliers to create environmentally-friendly packaging and exclusive sizes of products *now walmart wants to be a chauffer for its suppliers -intends to take over supplier's US transportation services to reduce hauling costs -will take over delivery of suppliers' products when walmart can transport cheaper - and pass along the savings by reducing prices in the stores -by "insourcing" transportation, suppliers will give walmart better wholesale prices -will pick up product from manufacturing facilities - will carry more per truck and improve on-time delivery rates *walmart-canada has opened a new "green" distribution center in alberta -400,000 s.f. distribution center to serve 100 retail outlets in western canada -facility piloting use of alternative energy sources-wind turbines and solar panels on roof; hydrogen fuel cells for lift trucks and materials handling equipment -$4.8 million in energy cost savings through 2015 -model for future distribution center design and development

vehicle routing pt 2:

*how to find the quickest route? *how to find the shortest route? *cheapest route? -gas -tolls -time (labor)

grid technique with different rates:

*incorporate the transportation rates of different products *ri = raw materials rate/distance unit for raw material i *Ri = finished goods transportation rate/distance unit for finished good i *ri and Ri are the transportation rates per distance unit and we assume them to be linear with respect to distance. this assumption does not correspond to the tapering principle of rates but it does simplify the analysis

freight consolidation - four types:

*inventory consolidation -hold inventory until you reach a full vehicle load *vehicle consolidation -combine routes *warehouse consolidation -cross docking *temporal consolidation -customers are kept waiting until shipments can be combined along their route -different from inventory consolidation since there are many customers

questions to think about:

*is the shortest route the fastest route? *is the shortest route the cheapest route? *what changes would you make to the shortest route algorithm to find the fastest and/or cheapest route?

major factors in location consideration:

*labor climate *transportation services and infrastructure *proximity to markets and customers *quality of life *taxes and industrial development incentives *supplier networks *land costs and utilities *company preference

major factors in location decisions:

*labor climate *transportation services and infrastructure *proximity to markets and customers *quality of life *taxes and industrial development incentives *supplier networks *land costs and utilities *company preference

principles of good routing and scheduling pt 1:

*load trucks with stops that are in the closest proximity to each other

new directions:

*locating factories and logistics facilities in countries that use or consume the products -toyota plants in the US -ford and gm plants overseas *focused production (focused factory) -a plant produces only one or two products -tie focused plant to customer's location -transportation is the glue that holds that supply chain together

case casket company problem:

*manufactures and sells caskets to funeral homes *orders in small quantities since funeral homes have small inventory *case has over 50 distribution warehouses in the US *we are going to look at the warehouse in lansing, MI and its territory *the warehouse has 2 trucks with a capacity of 18 caskets each *deliveries are made 5 days a week *routing methodology: -segment territory into 5 customer clusters (one cluster served each day) -start with the furthest customer, then add progressively toward warehouse -construct 4 outlying clusters and one central cluster around warehouse -balance the workload between clusters to utilize the two trucks, but not need a third -then design route within each cluster to minimize crossing and backtracking

maquiladora operations:

*maquiladoras are factories in mexico run by a foreign company and exporting its products to the country of that company *a US manufacturer operates or subcontracts with a facility in mexico to manufacture, process or assemble products to capture labor savings -US manufacturers now operate more than 2,000 maquiladora facilities in mexico -limited tariff duties (if any) *sometimes called "twin plant" manufacturing program under which specialized production facilities (usually along the US-mexican border) can import components duty-free for in-bond storage, assembly, and subsequent re-export

weighted center of gravity method pt 1:

*method attempts to minimize total transportation costs -total volume -rate/importance multiplier -distance *several problems/limitations

what do you know about modes?

*transportation cost highest for rail, truck, or air? *in transit inventory cost highest for rail, truck, or air? *storage inventory cost is based on shipment size and cost of product *total cost = transportation cost +in transit inventory cost + storage inventory cost

vehicle routing pt 1:

*objective: -reduce cost -improve customer service *in general, many logistics routing problems involve many stops *a route could be -fastest -cheapest -shortest *even a small change can save a lot -UPS "no left turn" policy -saves 30 million miles -saves 3 million miles of gas

approaches to finding the best location:

*optimization models -precise mathematical procedures that are guaranteed to find the "best", or optimum, solution *simulation models -process of designing a model of a real system and conducting experiments -to understand system behavior -to evaluate various strategies -limits imposed by a set of criteria governing system operation *heuristics -the use of a heuristic approach can help to reduce a problem to a manageable size -to reduce the number of location alternatives, the decision maker should incorporate site characteristics considered to be the best

mode/service selection:

*problem -define the available choices -balance performance effects on inventory against the cost of transport *methods for selection -indirectly through network configuration -directly through channel simulation -directly through a spreadsheet approach as follows -alternatives: rail, truck, air, water -cost types: transportation, in transit inventory, source inventory, destination inventory

principles of good routing and scheduling pt 3:

*sequence of stops on a truck route should form a "teardrop" pattern -in a "teardrop" pattern, the paths do not cross each other -if you have time windows, this might be very difficult to achieve

route example pt 2:

*step 2: -left with (0-A-B-0) and (0-C-0) at a cost of 550 + 200 = $750 -add C to route -- could be between, after, or before AB 1. 0-A-C-B-0 = 250 + 75 + 150 + 200 = $675 2. 0-A-B-C-0 = 250 + 100 + 150 + 100 = $600 3. 0-C-A-B-0 = 100 + 75 + 100 + 200 = $475 - this is the cheapest option

principles of good routing and scheduling pt 2:

*stops on different days should be arranged to produce tight clusters

"sweep" method solution:

*sweep direction is arbitrary

asian emergence:

*the most significant trend in the past 25 years is that of the rise of pacific rim countries as important players in the global economy -many countries are now the worlds' preferred sources for raw material and components *another primary reason is labor cost -first it was china -then vietnam and thailand *but labor is only one piece of the puzzle -think about total logistics cost

savings method observation:

*the points that offer the greatest savings when combined on the same route are those that are furthest from the depot and closest to each other *this is a good principle for constructing multiple-stop routes

vehicle routing -- the shortest path method:

*the shortest path method determines the best path from origin to destination over a network of possible routes *this method is efficient for finding the route which minimizes cost *definition of terms: -nodes: connecting points between links -links (arrows): represent distance/costs or a combination *method: -you will have 2 sets of nodes: visited (solved) and unvisited (unsolved) nodes -find the closest unsolved node to a solved node -calculate the cost to the unsolved node by adding the accumulated cost to the solved node and the cost from the solved node to the unsolved node -select the unsolved node with the minimum time as the new solved node. identify the link -when the destination node is solved, the computations are complete. the solution is found by backtracking through the connections made

practice problem 1:

*the wagner company supplies electric motors to electronic distributors, inc. on a delivered-price basis. wagner has the responsibility for providing transportation. the traffic manager has three transportation service choices for delivery - rail, piggyback, and truck and has compiled the following information: -electronic distributors purchases 50,000 units per year at a delivered contract price of $500 per unit. inventory carrying cost for both companies is 25% per year. which mode of transportation should wagner select?

example of a heuristic modeling approach - the grid technique:

*this method determines the ton-mile center, or center of mass, and is similar in concept to the weighted center of gravity method *C = center of mass, or ton - mile center *Di = distance from 0 point on grid to the grid location of finished good i *di = distance from 0 point on grid to the grid location of raw material i *Mi = weight (volume) of finished good sold in market i *Si = weight (volume) of raw materials purchased at source i

routing from multiple points:

*this problem is solved by the traditional transportation method of liner programming

cost calculations:

*transportation cost - R x D *in transit inventory - (ICDT) / 365 *plant inventory - (ICQ) / 2 *warehouse inventory (using item cost + transit rate per pound) - (IC'Q) / 2

motor carrier equipment options:

LCV = longer combination vehicle

abc practice problem:

a drug retailer wants to apply pareto's law and conduct an abc analysis of its 12 line items in inventory *product code and annual sales are shown in the image *find the a, b, and c items in this inventory *got to take the sales volume and sort from highest to lowest. then add up total sales and look at how much the cumulative total is and see where you hit the 80-20 % you want to pick. because there's 12 items, each item would be 1/12.

route example pt 1:

consider a three customer route *depot --> A = 250 miles *depot --> B = 200 miles *depot --> C = 100 miles *A --> B = 100 miles *A --> C = 75 miles *B --> C = 150 miles *cost without combining nodes: $200 + $500 + $400 = $1,100 *step 1: -visiting A and B separately (2 round trips) is 500 + 400 = 900 -combine AB, route s 0-A-B-0, cost is 250 + 100 + 200 = 550 ; savings = 900 - 550 = 350 -for B and C separately = 400 + 200 = 600 -combine BC, route is 0-B-C-0, 200 + 150 + 100 = 450 ; savings = 600 - 450 = 150 -for A and C separately = 500 + 200 = 700 -combine AC, route is 0-A-C-0, 250 + 75 + 100 = 425 ; savings = 700 - 425 = 275 -combine AB since it provides the largest savings at $350