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Learning Objectives
You should be able to: Understand the strategic importance of transportation. Identify the various modes of transportation. Discuss the international aspects of transportation. Describe how transportation impacts supply chain management. Examine the interrelatedness of transportation, warehousing, & material handling. Identify third-party transportation service providers. Summarize aspects of transportation regulation & deregulation. Discuss e-commerce issues in transportation mgmt.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
Transportation Management
Transp. SBase Reduction Mode & Carrier Selection Contracting Transp. Svcs Outsourcing Transp. Measuring Transp. Performance Creating Strategic Alliances Performing Transp. Audits
Warehousing
Types of Warehouses Risk & Warehouse Loc. Just-in-Time Warehousing
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
Introduction
Transportation is necessary to:
Move purchased goods from suppliers to buyers
Move finished goods to the customer. Products have little value to the customer until they are moved to the customers point of consumption. Transportation is what creates the efficient flow of goods between supply chain partners.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
Fundamentals of Transportation
The Objective of Transportation- Satisfying customers while minimizing costs & making a profit contribution. Legal Forms of Transportation- Transportation service companies are classified legally as either common, contract, exempt, or private carriers. Common carriers- offer transportation services to all shippers at published rates between designated locations without discrimination. Contract carriers- not bound to serve the general public. Contract carriers serve specific customers under contractual agreements. Exempt carriers- exempt from regulation of services & rates & if they transport certain exempt products like produce, livestock, coal, or newspapers. Private carrier- not subject to economic regulation & typically transports goods for the company owning the carrier.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Warehousing
Crossdocking- to receive,
breakdown, repackage, & distribute components to a manufacturing location or finished products to customers warehouse. Todays warehouses are more correctly referred to as distribution centers.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Warehousing- Cont.
The Importance & Types of Warehouses Warehouses support purchasing, production, & distribution. Consolidation warehouses collect large numbers of LTL shipments then transported in TL or CL quantities. Private Warehouses- Refers to warehouses that are owned by the firm storing the goods. This arrangement reduces the cost of warehousing, offers greater control, provides better workforce utilization, & can generate income & tax advantages through leasing of excess capacity &/or asset depreciation. Nonetheless, owning a private warehouse represents a financial risk & loss of flexibility.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Warehousing- Cont.
Public Warehouses- owned by for profit organizations that contract their services to other companies. Breakbulk: shipments are broken down & items are combined into specific customer orders. Repackaging: items are repackaged for specific customer orders. Assembly: final assembly operations to satisfy customer requests. Quality inspections: perform incoming & outgoing quality inspections. Material handling, equipment maintenance, & documentation services. Storage. Pro- Provide the flexibility & investment cost saving. Con- Disadvantage lack of control. Reverse logistics services disposition of returned products
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Warehousing- Cont.
Risk Pooling & Warehouse Location As the number of warehouses increases, the system becomes more decentralized. Responsiveness & delivery service increase. However, warehousing operating & inventory costs also increase. Trade-off between costs & customer service must be considered. Risk Pooling Describes the relationship between the number of warehouses, inventory, & customer service. Risk pooling is estimated by square-root rule
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Warehousing- Cont.
Risk Pooling & Warehouse Location square-root rule
N 2
S2 =
Where:
N 1
(S1)
S1 = Total system stock for the N1 warehouses S2 = Total system stock for the N2 warehouses N1 = Number of warehouses in the existing system, and N2 = Number of warehouses in the proposed system
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Warehousing- Cont.
Warehouse Location Strategies proposed by Edgar Hoover Market-positioned strategy- warehouses close to customers to maximize distribution svcs & improve transp. economies of scale. Product positioned strategy- warehouses close to the sources of supply to enable the firm to collect goods & consolidate these. Intermediately positioned strategy- warehouses midway between the sources of supply & the customers when distribution requirements are high & product assortments come from various locations.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Warehousing- Cont.
Warehouse Location- Theories Von Thunen - transportation costs should be minimized when considering facility location. Market prices & production costs would be identical regardless of the location of the warehouse. Greenhut- based on profit instead of transportation costs. The optimum location would be the one that maximized profits, which may not coincide with the minimum cost location.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Warehousing- Cont.
Just-in-Time Warehousing Emphasis on warehousing to support JIT operations: A commitment to customers & service quality Reduced lot sizes & shipping quantities Greater emphasis on cross docking Increased automation Increased assembly operations
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Foreign Trade Zones (FTZs) secure sites in U.S. under supervision of U.S. Customs. FTZs bring goods into the site & offer storage, exporting, manufacturing, assembly, repacking, testing, & repairing services. North American Free Trade Agreement began on January 1, 1994, & removes most barriers to trade & investment among U.S., Canada & Mexico.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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Transportation Management
Transportation Supply Base Reduction- Use fewer providers & pick best-performing suppliers. Mode & Carrier Selection- Identify transportation modes & carriers using a decision model, such as weighted factor analysis. Contracting Transportation ServicesBenefits for shipper- contract assures pkg of services & prices. Benefits for carrier- ability to plan capacity and staffing Outsourcing Transportation- Firms increase service, decrease costs, improve int. processes, & apply resources to core functions. Measuring Transportation Performance- Allows the firm to identify problem areas & then make changes. Performing Transportation Audits- Study of constraints to determine improvements.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing
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