Transportation

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Transportation Supply Chain Systems

• John H. Vande Vate
• Spring 2006

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Who am I?

• John H. Vande Vate
• Professor and EMIL Executive Director
• Office 222 of the Old ISyE bldg.
• Phone [phone]
• Office Hours
• Tuesday, Thursday 3-5 (after class) or
• By appointment

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Our TA

• Office
• Hours TBA

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Administrative Details

• Class Home Page
• www.isye.gatech.edu/jvandeva/Classes/6203/2006/sy
  llabus2006.html
• Keep up with information here!

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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
• 76.24 on Amazon
• Used copies
• Not required
• Each team should have access

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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

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Grading

• Exams 75
• February 21st       25    
• March 28th 25
• Final 25
• Project 25
• Groups of 4 to 6

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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.

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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

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Project Contd

• Due January 17th
• 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
• Before April 28th A presentation and brief
  report to your sponsor company
• On April 6th, 13th, 20th or 25th. Present in
  class (approximately 30 minute presentation)

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Project Motivation

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

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Projects

• European Auto manufacturer (Not confirmed, but
  highly likely), several questions related to
  supplying parts from Europe
• Is it better to supply to long run average
  consumption and adjust inventory as necessary or
  to ship-to-forecast?
• Is the company distinguishing among different
  parts appropriately when setting
  safety-lead-time?
• For transmissions, there are two suppliers in
  different parts of Europe. Does it make more
  sense to combine shipments from these two
  suppliers or to try to achieve higher delivery
  frequency by using different routes from the
  different suppliers?
• Contact Section Manager

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Projects

• Pitney-Bowes Most likely something in the area
  of modeling the number of Strategic Stocking
  Locations for service and repair parts throughout
  the US, while minimizing transportation cost and
  inventory, and achieving a high service level
  such as parts to arrive in 2 hours, 4 hours,
  etc...
• Contact VP Sales, Inventory Operations
  Planning. Located in Stamford, CT.

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Projects

• Milliken Co.
• Study their floor covering shipments for 6 month
  time period.
• Review the results for possible routes that could
  be built to certain markets.
• Review the results for possible forward placement
  of inventory on some of their "commodities"
  products.
• Review and critique their freight "terms"
• Contact Mfg Supply Chain Leader in Lagrange
  Georgia

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Projects

• Disney Co. and Schneider Logistics
  Transportation optimization for supplying Disney
  Parks and Resorts around the world (Orlando,
  Anaheim, Tokyo, Hong Kong, Paris)
• Contacts Director of Segment Logistics
  Operations in Florida and General Manager of
  Inside Sales at Schneider.

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Projects

• Returns Management Company (not confirmed)
• They offer returns management for various
  retailers and are considering supporting the
  forward side (i.e., fulfillment services to
  customers). Want a group to investigate optimal
  locations of consolidation activities and
  assignments to Bulk-mail-Centers (they use the
  postal service for a significant portion of the
  transportation).
• Contact Director of Transportation.

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Projects

• Ace International (Family-owned Hardware retail
  company in Panama) Forecasting demand for
  purchasing and other related topics.
• Contact One of the owners.

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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

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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)

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Supply Chain Management

• Managing Flows/Network Design
• Transportation
• Inventory
• Finance
• Location
• Exam 1 February 23rd
• Managing Risk
• Revenue Management
• Safety Stock
• Inventory Pooling
• Exam 2 March 28th
• Supply Chain Strategy and Cases

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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

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Trade offs

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

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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

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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?

• /

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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)

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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
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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

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

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

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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

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Estimating Rates
Large shipments
Cost
Small shipments
Average shipment
Shipment Size
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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

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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

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Summary

• Get started on your projects
• Transportation mode basics
• Transportation rate basics
• Economies of scale promote consolidation
• Cautions on aggregating transportation rates

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Next Time

• Models for Transportation
• Transportation Models
• Transshipment Models
• Weight, Cube, Linear Cube
• Economies of scale
• Etc.