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Transportation

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Transportation & Supply Chain Systems John H. Vande Vate Spring 2005 – PowerPoint PPT presentation

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Title: Transportation

1
Transportation Supply Chain Systems

John H. Vande Vate
Spring 2005

2
Who am I?

John H. Vande Vate
Professor and EMIL Executive Director
Office 221(?) of the Old ISyE bldg. Used to be
the graduate student lounge. Same area as the
TLI.
Phone (404) 894-3035
Office Hours
Tuesday, Thursday 3-5 (after class) or
By appointment

3
Our TA

Claudio Santiago
csantiag_at_isye.isye.gatech.edu
Office
Hours TBA

4
Administrative Details

Class Home Page
www.isye.gatech.edu/jvandeva/Classes/6203/syllabu
s2005.html
Keep up with information here!

5
Text

Introduction to Logistics Systems Planning and
Control by Gianpaolo Ghiani, Gilbert Laporte,
Roberto Musmanno
Publisher Wiley
ISBN 0-470-84917-7
Edition Jan 2004 (This text was used in the Fall
Semester, 2004 so it should be possible to get
used copies. The hard cover copy lists for 148
at Amazon, the paperback edition lists for 65.12
which is even less expensive than the digital
version at 65.95)

6
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

7
Grading

Exams 40
January 27th 20
March 17th 20 May 2nd 1130 - 220 20
You may drop your lowest exam
Project 1 20
Groups of 6 or 7
Project 2 20
Homework 20

8
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.

9
Projects

Project 1 Financial Assessment
Team of up to 5 students
Assign a company to each team member
The companies must all be competitors
You will want to select publicly traded companies
at least 5 years old

10
Project 1 Contd

For your assigned company
Part A Due February 1st
Collect Balance Sheets, Income Statements, Annual
Reports, news articles, etc. going back at least
5 years
Over a period extending back at least 5 years
calculate
Days of Inventory
Days Sales Outstanding
Days Payments Outstanding
NOPAT/Revenue
Revenue/Capital
Return on Investment
Total Shareholder Return
Compare these across your teams companies
Draw conclusions about the relationships between
these metrics and Total Shareholder Return.

11
Project 1 Contd

For your assigned company
Part B Due April 21st
Imagine you have been hired as VP of Supply Chain
for your company, describe what initiatives you
would pursue and how they would affect the above
measures.

12
Project 1 Deliverables

Part A In a ZIP archive
An HTML page or Word document that organizes the
information about the companies (and identifies
who was responsible for each company) including
references (where possible include copies of the
referenced documents in the zip archive)
Part B A Powerpoint presentation (to the
executive committee of your company) motivating
and explaining your proposals and projecting
their value to the company.
Submit these documents in electronic format. DO
NOT SUBMIT PAPER COPIES

13
Project 2

Also in teams of up to 5
Regional Transportation and Supply Chain
Infrastructure and Issues
Asia
Latin America
Europe
Approved special topic

14
Project 2 Schedule

January 27th Submit your team composition and
selected topic to me via e-mail
February 15th Submit an outline of your report
with assigned responsibilities to me via e-mail
April 14th Submit your report to me via e-mail

15
Project 2 Topics

Asian Logistic Networks. This should provide a
comprehensive overview of the key freight
transportation systems in the region bounded by
China, India, Australia and Japan. It should
describe
the key goods moving in the region,
the flows of these goods,
the modes these goods move by,
the principal carriers,
the key transport facilities (ports, airports,
etc)
the different roles organizations play in the
process
special challenges to shippers and carriers in
the region
Include a comprehensive annotated bibliography
(describe the value of each entry in the
bibliography)
Example to build on and update available

16
Project Topics

Latin American Logistic Networks. This should
provide a comprehensive overview of the key
freight transportation systems in South and
Central America. It should describe
the key goods moving in the region,
the flows of these goods,
the modes these goods move by,
the principal carriers,
the key transport facilities (ports, airports,
etc)
the different roles organizations play in the
process
special challenges to shippers and carriers in
the region
Include a comprehensive annotated bibliography
(describe the value of each entry in the
bibliography)
Example to build on and update available

17
Project Topics

Central and Eastern European Logistic Networks.
This should provide a comprehensive overview of
the key freight transportation systems in Central
and Eastern Europe It should describe
the key goods moving in the region,
the flows of these goods,
the modes these goods move by,
the principal carriers,
the key transport facilities (ports, airports,
etc)
the different roles organizations play in the
process
special challenges to shippers and carriers in
the region
Include a comprehensive annotated bibliography
(describe the value of each entry in the
bibliography)
See Asian and Latin American examples

18
Project Topics

Alternative project proposals are welcome. E-mail
me an outline of the content of your report
before January 20th. Alternative projects must be
approved.
Video students may either join a team or work
alone as they prefer.
I encourage video students to select a project
related to their companies. Be careful to ensure
that proprietary concerns will not prevent your
sharing the project report with me.

19
Algebraic Modeling Languages

AMPL
www.ampl.com - Free student version
AMPL A Modeling Language for Mathematical
Programming, Fourer, Gay and Kernighan
No full version generally available
XPress-MP
Full version available in the graduate and
undergraduate labs.

20
More Options

AIMMS
This application is supported in the Lab.
Student version??
MPL or related tools
Can be downloaded free from www.maximal-usa.com/do
wnload/
No full version available
OPL Studio Free trial version at
www.ilog.com/products/oplstudio/trial.cfm

21
Worst Option

Solver in Excel
Not industrial strength
Not reliable
Model and data confounded
But if youre really struggling

22
Schedule

Working with Certainty
Introductory Example
The role of Frequency
Financial Implications
Network Design
Location
Routing
Case Study

23
Schedule

Working with Uncertainty
Forecasting
Planning
Variability and the Bullwhip Effect
Risk Pooling Postponement
Inventory
Hedging
Revenue Management

24
Schedule

Working Internationally
Incoterms
Customs, Duties, Free Trade Zones,

25
Illustrative Example

Develop a distribution strategy to minimize
inventory and transportation costs
Purpose
Outline issues covered in outbound logistics
The importance of transportation in the supply
chain
Illustrate costs and investments

26
Overview

Products
Computers CPU, Monitor, Keyboard
Televisions TV and Console
Distribution Centers
100 across the US
Sell 10 TVs and 10 computers per day
250 days/year

27
Components
Computers TV/Monitor Console
Cost 300 400 100
Weight 5 lbs 10 lbs 30 lbs
From Green Bay Indianapolis Denver
28
Initial Strategies to Consider

All direct shipments in full truckloads
Consolidate in Indianapolis. All shipments in
full truckloads

29
Simplification

Shipments on the order of 1,000 miles

Distances
30
What Costs?

Transportation
Pipeline inventory inventory in transit
Inventory at Plants
Inventory at DCs
Handling

31
DirectTransportation Cost

How many shipments/year?
Green Bay
Indianapolis
Denver
Total
100 stores Annual Store Demand /Items to fill a
truck
Items to fill a truck Cap. of truck/Weight of
Item
Green Bay
Indianapolis
Denver

1002,500/6,000 41.67 1005,000/3,000
166.67 1002,500/1,000 250 460
30,000/5 6,000 30,000/10 3,000 30,000/30
1,000
32
What Costs?

Direct
Transportation
1/mile1,000 miles/trip460 trips/year
460,000/year
Pipeline inventory
Inventory at Plants
Inventory at DCs
Handling

33
Pipeline Inventory

How long are goods in transit?
1,000 miles at 50 miles per hour
2 days
How much inventory is in transit on average?
Imagine we send the items one-at-a-time
How many items in the pipe?

34
Pipeline Inventory

One Day worth of sales at a store
10 TVs at 400100 each 5,000
10 Computers at 300400 7,000
Total 12,000 per day per store
Two days of system-wide sales
2 days 12,000/store/day 100 stores
2,400,000
Carrying cost 15 of 2,400,000 360,000

35
What Costs?

Direct
Transportation
1/mile1,000 miles/trip460 trips/year
460,000/year
Pipeline inventory
2,400,000 in capital
360,000 in annual carrying costs
Inventory at Plants
Inventory at DCs
Handling

36
Inventory at the Plants

Two Extremes
Simultaneous shipments
Staggered shipments

37
Simultaneous Shipments

A truckload of computers from Green Bay has 6,000
computers in it
A DC sells 2,500 per year
So we only need to replenish the DCs every
6,000/2,500 2.4 years

38
Inventory at Green Bay

Simultaneous Shipments

600,000
2.4 years
39
Simultaneous shipments

Green Bay ships once every 2.4 years
Inventory is 1.2 years demand or 300,000 CPUs
Inventory value is 90,000,000
Inventory carrying cost is 13,500,000
Denver ships 2.5 times per year
Inventory is 20 of annual demand or 50,000
Consoles
Inventory value is 5,000,000
Inventory carrying cost is 750,000
Indianapolis ships 1.6 times per year
Inventory is 500,000/3.2 or about 150,000 items
Inventory value is 60,000,000
Inventory carrying cost is 9,000,000

40
Why Not?

What are problems with simultaneous shipments?
When are simultaneous shipments likely?
What alternatives?

41
Inventory at Green Bay

Staggered Shipments

6,000
6 days
42
What Costs?

Inventory at Plants
Simultaneous Shipments
Capital Carrying Cost
Green Bay 90 million 13.5 million
Denver 5 million .75 million
Indianapolis 60 million 9.0 million
Total 155 million 23.25 million
Staggered Shipments (divide by 100!)
Capital Carrying Cost
Green Bay 900 K 135 K
Denver 50 K 7.5 K
Indianapolis 600 K 90 K
Total 1.55 million 232.5 K

43
What Costs?

Direct
Transportation
1/mile1,000 miles/trip460 trips/year
460,000/year
Pipeline inventory
2,400,000 in capital
360,000 in annual carrying costs
Inventory at Plants Staggered Shipments
1.55 million in capital
232.5 K in annual carrying costs
Inventory at DCs
Handling

44
DC Inventory from Green Bay
6,000
2.4 years
45
Inventory at DCs

At the DCs?
½ truckload or 3,000 CPUs at 300 each
900,000
½ truckload or 1,500 Monitors at 400 each
600,000
½ truckload or 500 Consoles at 100 each
50,000
1,550,000
Carrying cost 15 of 1,550,000 or 232,500
Total Carrying cost at the DCs 23,250,000!

46
What Costs?

Direct
Transportation
1/mile1,000 miles/trip460 trips/year
460,000/year
Pipeline inventory
2,400,000 in capital
360,000 in annual carrying costs
Inventory at Plants Staggered Shipments
1.55 million in capital
232.5 K in annual carrying costs
Inventory at DCs
155 million in capital
23.25 million in carrying costs
Handling

47
Total Cost Capital Direct

Costs
Transportation Costs 460,000
Pipeline Inventory 360,000
Inventory Costs at Plants 232,500
Inventory Costs at DCs 23,250,000
Total 24,302,500!
Capital Required
Pipeline Inventory 2,400,000
Inventory Costs at Plants 1,550,000
Inventory Costs at DCs 155,000,000
Total 158,950,000!

48
Consolidation

Strategy 2 Assemble Products in Indianapolis and
distribute by truckload from there
What will happen to costs?
Transportation
Pipeline
At plants
At Indianapolis Warehouse/Cross Dock
At DCs

49
Via Indianapolis
Facts
50
What Costs?

Transportation
To Indianapolis
From Indianapolis to DCs
Pipeline inventory
To Indianapolis
From Indianapolis to DCs
Inventory at Plants
Inventory at Indianapolis Cross Dock
Inventory at DCs
Handling

51
Indirect Transportation

To Indianapolis
Green Bay 400 miles 42 trips 16,800
Indianapolis 0 miles167 trips 0
Denver 1,100 miles250 trips 275,000
Total 291,800
From Indianapolis to DCs
Same as total transport before, we are moving the
same goods the same distance (roughly 1,000 miles
to each DC) 460,000

52
What Costs?