Chapter 9 - Transportation and Logistics - SCM

Reverse Logistics

" _________ is all about damage control and making the process as customer-friendly as possible"

Rail Carriers

(1) Compete for transportation when the distance is long and the shipments are heavy or bulky (2) slow and inflexible (3) Paired with trucks for door-to-door delivery

Types of Warehouses

(1) Cross-Docking (2) Consolidation and/or Break-Bulk (3) Public (4) Private

Air Carriers

(1) Expensive relative to other modes of transportation (2) Generally the fastest mode of transportation. (3) Transport about 5% of U.S. freight. (4) Cannot carry extremely heavy or bulky cargo. (5) Mostly for light, high value goods over long distances quickly. (6) Paired with trucks for door-to-door delivery

Transportation Regulation

(1) Granger Laws (2) Interstate Commerce Act of 1887 (3) Transportation Act of 1920 (4) Motor Carrier Act of 1935 (5) Transportation Act of 1940 (6) Federal Aviation Act of 1958

Features of LEAN Warehousing

(1) Greater emphasis on cross docking (2) Reduced lot sizes and shipping quantities (3) Commitment to customer service and quality (4) Increased automation (5) Increased assembly operations (6) A tendency to be green

Water Carriers

(1) Inexpensive (2) Slow and Inflexible (3) Includes inland waterway, coastal and intercostal, and deep-sea. Competes with rail and pipeline. (4) Paired with trucks for door-to-door delivery.

Pipeline Carriers

(1) Lowest per unit cost for transportation (2) Limited in the variety of commodities they can carry. (3) Most reliable form of transportation (4) Little maintenance needed once it is running. (5) Materials are transported in a liquid or gaseous state.

Private Warehouses (con)

(1) Represents a financial risk (2) Loss of flexibility.

Shipping Act (of 1984)

Allowed ocean carriers to pool shipments, assign ports, publish rates, and enter into contracts with shippers

Decentralized

As the number of warehouses increases, the system becomes more ________. Causes responsiveness and delivery service increase (However, warehouse operating costs and inventory costs also increase).

Reverse Logistics (Returns Management)

Backwards flow of goods from customers in the supply chain

Transportation Broker (Load Broker)

Bring shippers and carriers together

Green Reverse Logistics

Can have a positive impact on the environment though activities such as recycling, reusing materials and products, or refurbishing unused products. These programs can reduce environmental impact on landfills and deal with dangerous contaminants.

Rate Categories

Classified as line haul rates, class rates, exception rates, commodity rates, and miscellaneous rates.

Product Positioned Strategy

Close to supply source to collect goods and consolidate.

Freight Forwarder

Consolidates LTL shipments into FTL shipments

Global Logistics Intermediaries

Customs Brokers, International Freight Forwarders, Trading Companies, Non-Vessel-Operating Common Carriers (NVOCC)

Distribution Center (and/or Warehouse)

Facility designed to receive, breakdown, repackage, and distribute components to a manufacturing location or finished products to customer's warehouse / location.

Backhauling

Hauling cargo back from the destination to the originating point. Since it costs almost as much time and fuel to drive empty as fully loaded this makes economic sense as it pays for the trip back for the trucker.

Poor Reverse Logistics

Inability of information systems to handle returns or monitor reverse product flow Lack of worker training in reverse logistics procedures Little or not identification on returned packages Need for adequate inspection and testing of returns Danger of placing potentially damaged returned products back into sales stocks

INCOTERMS

International Chamber of Commerce transportation terms.

Intermediately Positioned Strategy

Midway between supply source and customers when distribution requirements are high and product comes from various locations.

Customs Brokers

Move global shipments through customs and handle documentation.

Shippers' Association

Nonprofit cooperatives which arrange for members' shipping

Contract Carriers

Not bound to serve the public. Serve customers under contractual agreements.

Private Carriers

Not subject to economic regulation. Typically transport goods for the company owning the carrier.

Non-Vessel-Operating Common Carriers (NVOCC)

Operate like freight forwarders but use only scheduled ocean liners.

Private Warehouses

Owned by the firm storing the goods.

Transportation Security

Particularly important since September 11, 2001

Point of Consumption

Products have little value to the customer until they are moved to the customer's _________.

Public Warehouses (pro)

Provides flexibility and investment cost savings.

Global Trade Management Systems (GTM)

Provides global visibility, standardization, and documentation to comply with international trade regulations.

Trading Companies

Put buyers and sellers from different countries together and handle export/import arrangements, documentation and transportation.

6% : 10%

Retail returns account for _____ to _____ of sales.

4 : 5

Reverse logistics costs _____ to _____ times as much as forward logistics.

12

Reverse logistics requires _____ processing steps on average.

Common Carriers

Serve the public at published rates between locations without discrimination.

Negotiating

Since deregulation, _____ prices is common.

Warehouse Network

The relationship between the number of warehouses, inventory, and customer service.

Intermodal Transportation

The use of multiple modes of transportation to execute a single transport

International Freight Forwarders

This type of intermediary moves goods to and from foreign destinations

Logistics Management Software

Transportation Management Systems (TMS), Warehouse Management Systems (WMS), Global Trade Management Systems (GTM)

Deregulated

U.S. transportation industry remains mostly _______

Transportation Management Systems (TMS)

Used to select the best mix of transportation services and pricing.

Public Warehouses (con)

Users may feel that they have a lack of control.

Market Positioned Strategy

Warehouses close to customers to maximize distribution services and improve delivery.

Truck-load (TL)

carriers that are used when you have enough to fill the truck, or you don't want other supplier's cargo on your truck (security, faster delivery).

Less-than-Truckload (LTL)

carriers that move small shipments, when you don't have enough to fill a truck. Stop at depots and transfer locations to match load to the final location.

General Freight Carriers

carry the majority of goods shipped. Includes common carriers.

Intermodal Transportation

combinations of modes of transportation

Roll-On-Roll-Off (RO-RO)

container ship truck trailers and containers can be directly driven on and off the ship without the use of cranes.

Motor carriers deregulated (in 1980)

deregulation to promote competitive, safe and efficient motor transportation

Regulation (con)

discourages competition and does not allow prices to adjust based on demand or by negotiation.

Deregulation

encourages competition and allows prices to adjust as demand and negotiations dictate.

Rail Carriers

have begun purchasing motor carriers and can now offer point-to-point pickup and delivery service known as trailer-on-flatcar (TOFC) service.

Terms of Sale

includes transportation FOB (free on board) destination or dock.

Lead Logistics Provider (LLP) (4PL)

manage the activities of all the 3PL's

Value of Service Pricing

priced at what the market will bear .

Breakbulk

shipments are broken down and items are combined into specific customer orders.

Regulation (pro)

tends to assure adequate transportation service throughout the country. Protects consumers from monopoly pricing, safety, and liability.

FOB Origin

the transfer of ownership occurs as soon as the goods are safely on board the transport.

Specialized Carriers

transport commodities like liquid petroleum, household goods, building materials, and other types of specialized items.

Cost of Service Pricing

varies based on fixed and variable costs.

Transportation Pricing Considerations

(1) Cost of Service Pricing (2) Value of Service Pricing (3) Terms of Sale (4) Pricing Negotiation (5) Rate Categories

North American Free Trade Agreement (NAFTA)

(1) Created in 1994 (2) Removes most barriers to trade and investment among U.S., Canada and Mexico.

Objectives of Transportation

(1) Maximize the value to the firm through negotiation to provide profit contribution (2) Make sure service is provided effectively (3) Satisfy customer needs.

Modes of Transportation

(1) Motor Carriers, trucking (2) Rail Carriers (3) Air Carriers (4) Water Carriers (5) Pipeline

Functions of Logistics

(1) Move goods and materials from suppliers to buyers (2) Move goods and materials between sites, internal and external (3) Move finished goods to the customer.

Third Party Logistics (3PL)

(1) Outside agents who provide reliable and timely delivery as required by Supply Chain Management. (2) Used to a significant degree for international logistics (3) Favored by small businesses

Public Warehouses

(1) Owned by for profit organizations and contracted out. (2) provide storage, both short-term and long-term (3) provide breakbulk (4) provide repackaging, for specific customer orders (5) provide final assembly, to satisfy customer requests (6) provide quality inspections, incoming and outgoing (7) provide material handling, equipment maintenance, and documentation services.

Transportation Deregulation

(1) Railroad Revitalization and Regulatory Reform Act (1976) (2) Air freight deregulated in 1977 (3) Motor carriers deregulated in 1980 (4) Shipping Act of 1984 (5) ICC Termination Act of 1995 (6) Ocean Shipping Reform Act of 1998

Problems with Rail Carriers

(1) Railroad infrastructure and aging equipment. (2) Rail companies use each other's rail cars. Keeping track of rail cars and getting them where needed can be problematic.

Private Warehouses (pro)

(1) Reduces cost (2) Provides greater control (3) Better workforce utilization (4) Generate income and tax advantages through leasing of excess capacity and/or asset depreciation.

Foreign Trade Zones (FTZ's)

(1) Secure sites in U.S. under supervision of U.S. Customs. (2) offer storage, exporting, manufacturing, assembly, repacking, testing, and repairing services. (3) Import duties and taxes are paid only when the goods leave to enter US commerce.

Carrier Classifications

(1) contract carriers (2) private carriers (3) common carriers (4) exempt carriers

Motor Carriers

(1) most flexible mode of transportation (2) carries >80% of freight (3) competes with rail and air for short-to-medium hauls.

Exempt Carriers

Exempt from regulation of services and rates if they transport exempt products like produce, livestock, coal, or newspapers.

Warehousing

Function that allows firms to store purchases, work-in-process (WIP), and finished goods and also perform break bulk and assembly activities while allowing faster and more frequent deliveries and better customer service.

Intermodal Marketing Company

Purchase blocks of rail capacity and sell it to shippers

Trailer-on-Flatcar (TOFC) Container-on-Flatcar (COFC)

Rail and motor carriers or rail and water carriers offering point-to-point pickup and delivery service

Railroad Revitalization and Regulatory Reform Act (1976)

Railroads could change rates without ICC approval

Ocean Shipping Reform Act (of 1998)

Requirement for ocean carriers to file rates ended

FOB Destination

The seller pays and bears the freight charges and owns the goods while they are in transit. Title passes at the buyer's location.

Warehouse Management Systems (WMS)

Track and control the flow of goods from receiving dock to outbound shipment. New technologies, such as RFID tags, facilitate tracking.

Half

_________ of the goods transported by air are carried by freight-only airlines, e.g., FedEx.

Inland Waterway

_________ transportation is used for heavy, bulky, low-value materials (e.g., coal, grain). Barge

Logistics

that part of supply chain management that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption in order to meet customer requirements.