TSA Presentation

1
TSA Presentation

• Transportation Management
• A Logistics Perspective

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LOGISTICS MANAGEMENT DEFINED

• The part of supply chain management that plans,
  implements, and controls the efficient, effective
  forward and reverse flow and storage of goods,
  services, and related information between the
  point of origin and the point of consumption in
  order to meet customers requirements.
• -CSCMP

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LOGISTICS INCLUDES

• Demand forecasting
• Inventory management
• Warehouse management
• Materials handling packaging
• Order fulfillment
• Transportation management
• Sourcing and procurement

• Production planning/scheduling
• Supply/demand planning
• Network design / facility location decisions
• Parts and service support
• Third party logistics
• Returned products
• Salvage and scrap
• Information management

The output of logistics is customer service.
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Magnitude

• Logistics cost of a 3.60 box of cereal (field to
  table)
• 0.37
• of truckload shipments Chrysler receives each
  day
• 3,500
• Value of inventory in U.S. economy today
• approximately 1.9 trillion

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• Logistics is the U.S.s 2nd largest employer
  (behind healthcare)
• 8.6 of total U.S. labor force!
• U.S. has approx. 1.3 TRILLION logistics spend
  annually!
• gt GDP of all but 12 countries
• Logistics as a percent of GDP has been decreasing
  (more efficient)
• 16 in 1980
• 9.9 in 2006

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U.S. LOGISTICS COST
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Logistics Expenditures as of GDP

• 1997 2002
  
• Entire World 13.4 13.8
• North America (3) 11.0 9.9
• Canada 12.1 11.9
• Mexico 15.3 15.0
• United States 10.5 9.3
• Europe (11) 12.2 13.3
• Pacific Rim (7) 14.5 15.7
• South America (3) 14.3 14.3

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United Kingdom 10.1 11.3 Belgium 11.4 12
.1 Netherlands 11.9 11.8 France 12.0 11
.6 Italy 12.0 12.2 Japan 11.4 11.4
India 15.4 17.4 China 16.9 17.9 Ven
ezuela 12.8 12.0 Argentina 13.0 12.6 B
razil 15.0 15.0
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Logistics Role in the U.S. Economy

• Components of 2006 Logistics Costs (B)
• Inventory carrying costs (all business inventory
  1.86 trillion)
• Interest 93
• Taxes, obsolescence, depreciation, insurance
  252
• Warehousing 101
• Total Inventory-Related Costs 446
• Transportation costs
• Motor carriers
• Truck-intercity 432
• Truck-local 203
• Subtotal 635

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Logistics in U.S. Economy, cont.

• Other carriers
• Railroads 54
• Water (inter. 32 domestic 5) 37
• Oil pipelines 10
• Air (inter. 15 domestic 23) 38
• Forwarders 27
• Subtotal 166
• Total Transportation Costs 801
• Shipper Related Costs 8
• Logistics Administration 50
• TOTAL LOGISTICS COST 1,305

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WHY LOGISTICS IMPORTANCE HAS GROWN

• Transportation deregulation
• Recognition by prominent non-logisticians (e.g.,
  Drucker, Porter)
• Technology
• Power shift in the supply chain
• Globalization

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THE TOTAL LOGISTICS CONCEPT TOTAL INTEGRATION?

• Systems approach Logistics intra-functional
  interdependence cost trade-offs
• Transportation vs. Inventory
• Transportation vs. Packaging
• Transportation vs. Warehousing

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Another Way to View Cost Trade-Offs
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Importance of Transportation in Logistics
Management

• Transit time as part of order fulfillment/cycle
  time
• Time variability zero variance is required in
  tightly synchronized logistics systems
• Lean inventory systems put added pressure on
  transportation
• Global demands

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Carrier Management

• Shippers have very high expectations for carrier
  service performance
• On-time
• Fast
• Damage-free
• Accurate billing
• Electronic communications capability
• Track trace (inventory visibility)
• Non-transport services

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• Bargaining power usually resides with shippers,
  except when carriers face a capacity crunch
• Inter-organizational integration and
  collaborative relationships

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Selected Carrier IssuesCapacity

• Driver shortage (demographics security and
  safety regulations)
• Driver retention
• Hours-of-service rules
• Railroads struggling to meet demand in certain
  corridors

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Congestion

• Roads around cities (8B in 1982 - 70B in 2001)
• At ocean ports
• At inter-modal facilities
• At border crossings (U.S.-Mexico)

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• Physical supply dimension
• Temporal demand dimension
• Passenger and freight mix
• Government role and impact
• Provision and pricing of infrastructure
• Economic policy and regulations
• Social policy and regulations safety, labor,
  environmental, energy

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Security

• More random inspection of air cargo
• More random inspection of cross-border trucking
• Increased employee screening (particularly for
  hazmat)
• Increased security regulations (e.g., advanced
  notice for international food products)

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• Greater emphasis on risk management throughout
  supply chain physical security sourcing
  implications technology operating processes
  etc.

22
Intermodal Transportation

• Many economic and social factors favor
  intermodal
• High fuel prices
• Road congestion
• Environmental concerns
• Safety

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• But the potential has not yet been realized with
  respect to market penetration
• Rail-truck intermodal is lt 3 of freight
  transportation budget in U.S. though 32 of
  freight moves more than 750 miles

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• Complex operating system with many specialized
  intermediaries
• Multiple hand-offs time, consistency, damage
• Communication, visibility, and synchronization
  across modes
• Management of capacity (containers, trailers,
  chassis)
• Weakest link problem
• Need a channel captain

25

• Changing the economics to expand potential? e.g.,
  larger number of less capital intensive terminals
  
• Public sector involvement
• Must attain truck-competitive service levels

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Green Logistics

• Sustainability is a major social issue today
• Green practices can enhance brand and build
  goodwill with consumers

27

• Logistics impacts the environment in many ways
• Energy consumption
• Air and water quality
• Noise pollution
• Material waste

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• Corporate Social Responsibility and profitability
  are not mutually exclusive
• The Greening of Wal-Marts Supply Chain (SCMR,
  July 2007)
• Supplied by 100 renewable energy
• Create zero waste
• Sell products that sustain resources and the
  environment

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• Logistics as enabler
• Reverse logistics for recycling and
  reuse/remanufacture
• Supply management close, supportive relationship
  with green suppliers

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• Thats it
• questions and comments?