Transportation

1
Transportation Supply Chain Systems

• John H. Vande Vate
• Spring 2007

2
Who am I?

• John H. Vande Vate
• Professor and EMIL Executive Director
• Office 222 of the Old ISyE bldg.
• Phone [phone]
• Prefer e-mail jvandeva_at_isye.gatech.edu
• Office Hours
• Tuesday, Thursday 2-330 (after class) or
• By appointment

3
Administrative Details

• Class Home Page
• www.isye.gatech.edu/jvandeva/Classes/6203/2007/sy
  llabus2007.html
• Keep up with information here!

4
Recommended Text

• Designing and Managing the Supply Chain
  Concepts, Strategies Case Studies, Second
  Edition, By David Simchi-Levi, Philip Kaminsky
  and Edith Simchi-Levi, McGraw-Hill/Irwin
  (October 11, 2002). ISBN 0072845538
• 106 on Amazon
• Used copies
• Not required
• Each team should have access

5
Other Resources

• You may also want to read
• Contemporary Logistics by Johnson, Wardlow, Wood
  and Murphy
• Logistic Systems Analysis by Daganzo
• Business Logistics Management 4th Edition by R.
  H. Ballou, Prentice Hall, 1999
• Bramel, J. and D. Simchi-Levi, The Logic of
  Logistics Theory, Algorithms and Applications
  for Logistics Management, Springer-Verlag, 1997
• Logistics and Supply Chain Management Strategies
  for Reducing Cost and Improving Service (2nd
  Edition) by Martin Christopher
• Modeling the Supply Chain by Jeremy F. Shapiro

6
Grading

• Exams 66
• February 19st       33    
• Final 33
• Project 33
• Groups of 4 to 6

7
Objectives

• Knowledge and understanding of the issues
  underlying transportation and supply chain
  management and
• Mastery of the tools and models to support
  intelligent resolution of those issues.

8
Projects

• Project Ideally a real application
• Team of 4 to 6 students
• Distance learning students encouraged to bring
  projects from their companies and recruit teams
  of on-campus students to work with them
• Every team must have at least 1 on-campus student
• Several projects already available

9
Project Contd

• Due February 19
• one member of your team should send me an e-mail
  with the subject "6203 Project" providing
• The names and contact information (e-mails and
  phone numbers)
• Resumes
• Your team's project preferences (list at least
  four alternatives) in order
• Your team's preferences for presentation dates
  (list all four) in order of preference
• A presentation and report to your company
• On April 11th, 16th, 18th or 23rd. Present in
  class ( 30 minute presentation)
• Self-contained CD of everything for me

10
Project Motivation

• Interviewing for job
• Learning by Doing
• Off-campus students

11
Projects

• European Auto manufacturer
• Shipping parts from European suppliers to average
  forecasted demand significantly better in terms
  of reducing the bullwhip effect.
• Simulation too time consuming and requires too
  much data.
• Tool for faster computation of good parameter
  values using less detailed information about the
  parts.

12
Projects

• XYZ Transportation optimization
• LTL consolidation
• Multi-stop TL
• Dynamic vendor assignment
• Milk runs
• Zone skipping

13
Other Projects

• Welcome to propose other topics
• Must
• Have a corporate sponsor
• Be of value to the company
• Give the team experience
• Relate to topics in this course

14
Deliverable

• Presentation to your company and to the class
  (These may have to be different)
• CD that includes
• Project Description
• Your presentation(s)
• Sufficient description that I can follow your
  presentation, understand the data and use the
  tools
• Data and data definitions
• Any tools (documented)

15
Supply Chain Management

• Deterministic View
• Transportation
• Inventory
• Finance
• Location
• Mid-Exam February 19rd
• Managing Variability Risk
• Revenue Management
• Safety Stock
• Inventory Pooling
• Supply Chain Applications Projects
• Exam Questions from Variability Risk and
  Projects

16
Transportation

• Modes
• Parcel
• Less-than-Truck load
• Multi-stop TL
• Truck load
• Less-than-Car Load (rail)
• Car Load (rail)
• Block train
• Less-than-Container load
• Container load

17
Trade offs

• Cost
• Speed
• Access
• Reliability
• Security
• Special Handling
• Risk

18
Typical Cost Factors

• Parcel (Up to 150 lbs)
• Zones (origin destination)
• Weight Cube
• Negotiated discount based on volume
• Delivery Options
• Location
• Timing Same day, next day am, next day, 2nd day,
  ground,
• UPS http//wwwapps.ups.com/calTimeCost?locen_US

19
Less-Than-Truck Load (LTL)
Why not just distance?

• Origin Destination
• Weight (up to 20,000 lbs)
• Class
• Discount based on volume of business
• Special Requirements
• Old Dominion
• http//www.odfl.com/rateestimate

Typically quoted as /CWT
Why is this important?

• /

20
NMFC Classes

• Density
• Helps carrier judge demands for capacity
• Value
• Helps carrier judge risk (liability limits
  associated with each class)
• Class 50 cheapest, e.g., sand
• Class 500 most expensive, e.g., Ping Pong Balls
• Maintained by the NMFTA (NMFTA.org)

21
Truck Load (TL)

• Up to 45,000 lbs
• Origin
• Destination
• Volume of business
• Special Services (accessorials)
• Detention, cleaning,
• Schneider National
• https//webapps.schneiderlogistics.com/pwschneider
  rate/schneider_rate_ext_customer

Typically quoted as /mile
22
Rail

• Commodity (Grain, Coal, )
• Origin, Destination
• Equipment (Box car, tanker, Tri-level)
• Number of cars in block
• Cars handle on the order of 70 tons
• Norfolk Southern
• http//www.norfolksouthern.com/nscorp/application?
  origincontent_home.jspeventbea.portal.framework
  .internal.refreshpageidDoingBusinesscontentId
  english/nscorp/doing_business/none1/home/agricultu
  re.html

23
Undiscounted LTL Rates
ATL to LB Class 50
0.53/CWT
1.12/CWT
24
Concave Cost
Cost per unit decreasing
So?!
Cost
Shipment Size
25
Consolidation

• Incentive to consolidate shipments
• Make fewer larger shipments
• Reduce frequency (!?)
• Hub Spoke
• Share transportation resources

26
Issues with Freight Rates

• Issue of how to estimate rates on lanes you dont
  currently use
• Levels of detail
• /mile as the crow flies
• /mile on the network
• Rate look up
• Caution Average cost of shipments can be smaller
  than the cost of an average shipment

27
Estimating Rates
Large shipments
Cost
Small shipments
Average shipment
Shipment Size
28
Why It Matters?

• Estimating transportation costs to customers
• Typically too many customers
• Aggregate them
• By region
• By state
• By 3-digit zip
• Use some care in estimating the transportation
  cost to aggregated customers

29
Why It Matters?

• Customers may order different quantities at
  different times
• Estimating the cost to serve the customer often
  look at average shipments
• Careful how you average

30
Summary

• Transportation mode basics
• Transportation rate basics
• Economies of scale promote consolidation
• Cautions on aggregating transportation rates

31
Next Time

• Inventory and Transportation