1、Chapter 10 TransportationManaging the Flow of the Supply Chain Learning Objectives After reading this chapter, you should be able to do the following: Explain the role transportation plays in the supply chain. Discuss the service and cost characteristics of the primary transportation modes. Discuss
2、the key activities involved in transportation planning and execution.,Learning Objectives (cont.) After reading this chapter, you should be able to do the following: Explain current transportation management strategies used to improve supply chain performance. Use service and cost metrics to analyze
3、 transportation performance. Describe how information technology supports transportation planning and execution.,Introduction Transportation involves the physical movement of goods between origin and destination points. The transportation system links geographically separated partners and facilities
4、 in a companys supply. Transportation facilitates the creation of time and place utility in the supply chain. Transportation also has a major economic impact on the financial performance of businesses.,Role of Transportation in Supply Chain Management Transportation provides the critical links betwe
5、en these organizations, permitting goods to flow between their facilities. Transportation service availability is critical to demand fulfillment in the supply chain. Transportation efficiency promotes the competitiveness of a supply chain,Challenges to Carrying out This Role supply chain complexity
6、competing goals among supply chain partnerschanging customer requirementslimited information availabilitysynchronizing transportation with other supply chain activities,Challenges to Carrying out This Role Transportation capacity constraints pose a challenge. Rising transportation rates present anot
7、her major concern for organizations. The transportation industry is impacted by governmental requirements that affect cost structures and service capabilities. Regulation is growing in areas where the transportation industry has the potential to impact the quality of life, the safety of citizens, an
8、d the growth of commerce.,Modes of Transportation primary modes of transportation truck rail air water pipeline intermodal transportation,Modes of Transportation moves approximately 19.5 billion tons valued at nearly $13 trillion Modal breakdown: Trucking 80.0 % $635 billion Rail 06.7% Air 04.7% Wat
9、er 04.6% Pipeline 01.2%,Modes of Transportation Motor Carriers widely used mode of transportation in the domestic supply chain 573,469 private, for hire, and other U.S. interstate motor carriers economic structure of the motor carrier industry contributes to the vast number of carriers in the indust
10、ry comprised of for-hire and private fleet operations Truckload carriers. Less-than-truckload (LTL) Small package carriers Low fixed cost, high variable,Modes of Transportation,Modes of TransportationRailroads7 Class I railroads revenues in excess of $290 million Activity levels have been achieved d
11、espite a lack of direct accessibility to all parts of the supply chain Railroads are “natural monopolies” Two carrier types: Linehaul Shortline carriersHigh fixed, low variable,Modes of TransportationWater Major facilitator of international trade 81% international freight movement 19% coastal, inlan
12、d, and Great Lakes traffic High variable and low fixed cost Two primary carrier types Liner Charter Options include Container ships Bulk carriers Tankers General cargo ships Roll-on, roll-off (RORO) vessels,Modes of TransportationAir Carriers 491 air cargo carriers Combination carriers Air cargo car
13、riers Integrated carriers Nonintegrated carriers Domestic market is dominated by 14 major carriers High variable and low fixed cost,Modes of TransportationPipeline Unique mode of transportation as the equipment is fixed in place and the product moves through it in high volume 174 operators of hazard
14、ous liquid pipelines that primarily carry crude oil and petroleum products Three primary types Gathering lines Trunk lines Refined product pipelines High fixed versus low variable,Modes of TransportationIntermodal Transportation Use of two or more different modes in movement Greater accessibility Ov
15、erall cost efficiency Facilitates global trade Development of standardized containers that are compatible with multiple modes. Product-handling characteristics Containerized freight Transload freight,Modes of Transportation,Functional Control of Transportation Which department will be responsible fo
16、r transportation? Logistics Procurement Marketing,Decision to Outsource Transportation Firms choose between “make” or “buy” Commercial carriers “buy” Private fleets “make” External experts move the freight and/or manage the transportation process “buy” Third-party logistics (3PL) “buy”,Modal Selecti
17、on Accessibility Accessibility advantage: Motor carriage Accessibility disadvantage: Air, rail, and water Transit Time Transit time advantage: Air and motor carriage Transit time disadvantage: Rail, water, and pipeline Reliability Reliability advantage: Motor carriers and air carriers Reliability di
18、sadvantage: Water carriers and rail carriers,Modal Selection Product Safety Safety advantage: Air transportation and motor carriage Safety disadvantage: Rail and water Cost Cost advantage: The cost of transportation service varies greatly between and within the modes Cost disadvantage: Motor carriag
19、e and air transportation,Modal SelectionThe nature of a productsize, durability, and value Durability Product value Shipment characteristicssize, route, and required speed,Carrier Selection selecting the individual transportation service providers within the mode major difference between modal and c
20、arrier selection is the number of options difference is the frequency of the decision type of service provided within a mode impacts carrier selection most carriers have the capabilities to provide a similar level of service Core carrier limited number of carriers leverage its purchasing dollars,Rat
21、e Negotiationscentralized 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,Shipment Preparation corporate transportation routing guide last-minute, cost-saving decisions conso
22、lidate freight coordinate shipment deliveries take full advantage of container capacity an accurate freight count should be taken,Freight Documentation bill of lading originates the shipment provides all the information the carrier needs stipulates the contract terms, including carriers liability fo
23、r 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 carriers invoice for carrier charges lists: shipment origin and destination consignee items total weight total charges,Freight claims form Filed wi
24、th the carrier to recoup monetary losses resulting if carrier fails to protect the shipment. Carriers are not liable for freight claims if the damage is attributable to: Natural disaster or some other “act of God” Military attack or similar “act of public enemy” Government seizure of freight or “act
25、 of public authority” Failure to adequately package the freight or other negligent “act of the shipper” Extreme fragility, perishability, or similarly problematic “inherent nature of the goods”,Maintain In-Transit Visibility manage key events as product moves across the supply chain technology facil
26、itates the ability to monitor product visibility tools must be linked to other capabilities and processes to have an impact on supply chain event management,Monitor Service Qualityanalyze the outcome of all their transportation strategy, planning, and decision-making key requirement for service qual
27、ity monitoring is information,Transportation Metrics key performance indicators (KPIs) can be used to evaluatecurrent performance versus historical resultsinternal goalscarrier commitments challenge lies in narrowing down metrics available to monitor performance to a manageable number of KPIs primar
28、y categories of transportation KPIs include service quality and efficiency,Transportation Management Systems (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 organiz
29、ational success Load planning effective preparation of safe, efficient deliveries Load tendering Status tracking Appointment scheduling,Summary Without question, transportation is a very dynamic activity and a critical supply chain process. Not only is it the largest logistics cost component in most
30、 supply chains, but it also directly impacts fulfillment speed and service quality. By providing the physical links between key participants across domestic and global supply chains, transportation facilitates the creation of time and place utilities. Organizations with highly efficient and effectiv
31、e transportation processes can differentiate their product in the marketplace through lower landed costs and greater inventory availability. Managing the transportation process for maximum supply chain impact requires considerable knowledge of transportation options, planning, decision making, analy
32、tical skills, and information sharing capabilities. Transportation is a key supply chain process and must be included in supply chain strategy development, network design, and total cost management. Numerous obstaclesglobal expansion of supply chains, rising costs, limited capacity, and government r
33、egulationmust be overcome to synchronize transportation with other supply chain processes. Fulfillment of supply chain demand can be accomplished through five modal options or the intermodal use of truck, rail, air, water, and pipeline transportation.,Summary (cont.) Multiple planning activities occ
34、ur prior to carrier and mode selection: who will be responsible for managing the transportation function within the organization, what terms of sale and payment will be used, and how goods will be transported must all be determined with a strategic supply chain focus. Mode selection is based on the
35、relative strengths of each modal/intermodal option in terms of accessibility, transit time, reliability, safety and security, transportation cost, and the nature of the product being transported. Carrier selection focuses on the type of service required (direct or indirect), geographic coverage, ser
36、vice levels, and carrier willingness to negotiate reasonable rates. Most commercial freight moves under contractual rates that are negotiated directly between freight buyers and transportation companies for specific volumes of tailored services at mutually agreed-upon prices.,Summary (cont.)Shipment
37、 routing guides help organizations ensure internal compliance with service contracts and maintain centralized control over freight tendering decisions. Freight documentation provides the details of each shipment, sharing critical information that promotes uninterrupted flows of goods through the sup
38、ply chain. Domestic transportation documents include the bill of lading, freight bill, and freight claims, while international freight requires additional paperwork such as a commercial invoice, shippers letter of instructions, certificate of origin, and insurance certificates. Organizations must co
39、ntinue to manage freight after it has been tendered to carriers by maintaining in-transit visibility of shipments and monitoring carrier performance. Numerous metrics are available to evaluate transportation service quality in terms of carrier timeliness, freight protection, accuracy, and perfect de
40、liveries. Service efficiency measures focus on spending proficiency, asset utilization, and labor productivity.,Summary (cont.) Transportation management systems are widely used information technologies that support the effective planning, execution, and analysis of transportation processes. Emerging tools such as event management and RFID have the potential to improve supply chain visibility and dynamic response to potential challenges.,
