Post on 01-May-2017
Transportation in Supply Chain Management
Muhammad Haikal Bin Ab RahimMH132024
Content• Supply Chain defined• Transportation defined• Modes of transportation• Strengths and weaknesses of each mode• Pricing• Role of IT in transportation• Making Transportation Decision• Summary
Supply Chain
All facilities, functions, activities, All facilities, functions, activities, associated with flow and associated with flow and
transformation of goods and services transformation of goods and services from raw materials to customer, as from raw materials to customer, as well as the associated information well as the associated information
flows.flows.
An integrated group of processes to An integrated group of processes to “source,” “make,” and “deliver” “source,” “make,” and “deliver”
productsproducts..
Transportation• Transportation involves the physical movement of
goods between origin and destination points (of goods and services) from one place to another
• Transportation is necessary to: a)Move purchased goods from suppliers to buyers b)Move finished goods to the customer.
• Transportation is what creates the efficient flow of goods between supply chain partners.
Supply Chain for
Denim Jeans
• Time utility- products are delivered at the right time.
• Place utility- products are delivered to the desired location.
Transportation & storage, getting through customs,
delivering to foreign locations.
Firms are often use outside agents or third-party transportation services to work in foreign locations.
The Objective of Transportation- Satisfying customers while minimizing costs & making a profit contribution.
Poor transportation management can bring a supply chain to its
knees!!
Impact of Transportation on Supply Chain Management
Modes of Transportation
• Trucks• Air• Rail• Water• Pipeline• Package Carriers
Trucks•Less-than-truckload (LTL) carriers or truck-load (TL) carriers. LTL carriers move small shipments & fees are higher.•Specialized carriers transport liquid petroleum, household goods, building materials, & other specialized items.Accessibility – trucks are able to access many more locations than planes or railroads. Regional truck lines are excellent for small, frequent shipments that require follow-up or expediting. They are most effective over short distances. •Lower costs•Accessibility (flexible)•Small, frequent shipments
Air Carrier• Air is considered a premium mode of
transportation because of the speed of delivery and the low impact on the cargo (items are less likely to be broken than those shipped by rail or truck)
• Airplanes are also able to cover much longer distances in a short time
• Savings resulting in speed of delivery (time) but outweigh extra costs
-Premium transportation-Speed delivery-Range
Rail Carrier
• Lowest overall cost per unit weight
• Consistent time schedule
• Recommended with most commodity types
• Weather
Railroads cost much less than other modes when shipping large quantities or bulky goods over long distances. Trains also run on a more consistent time schedule than trucks or airlines.
Trains are often able to travel in weather that would slow or stop trucks and airplanes.
Rail
• Disadvantages– Inflexibility limited as far as areas in which they can
travel (tracks must be present) (rail station-loading point)– Potential damage of goods (rail condition)
– Ineffective with small shipments
Water (Ships) Carrier• Ships are one of the oldest methods of
transporting goods and they are virtually the only way to transport large volumes of good over-seas.
• Although this method is slower than shipping by air, a ship can carry much more cargo than an airplane. Costs are reduced significantly by choosing ships over air transport.
-Large volumes-Long distances-Slower than air travel (time)-Limited access (port)
Pipeline
• Transport of homogeneous materials
• Lower transportation costs than other modes
• Higher initial costs• Unable to transport a variety
of materials
Pipelines are ideal for materials such as water, oil, and gas. Pipelines have high initial costs since they must be built but once they are constructed transportation costs are much lower than other modes.
Package Carrier• Companies like FedEx, UPS, USPS, that carry small
packages ranging from letters to shipments of about 150 pounds
• Expensive• Rapid and reliable delivery• Small and time-sensitive shipments• Preferred mode for e-businesses (e.g., Amazon, Dell)• Consolidation of shipments
Pricing
• Handling characteristics• Distance freight is moved• Weight of freight• Costs inversely related to speed of service
Role of IT in Transportation
• The complexity of transportation decisions demands to use of IT systems
• IT software can assist in:– Identification of optimal routes by minimizing costs
subject to delivery constraints– Optimal fleet utilization– GPS applications
Making TransportationDecisions in Practice
• Align transportation strategy with competitive strategy
• Consider both in-house and outsourced transportation
• Design a transportation network that can handle e-commerce (deal with international market)
• Use technology to improve transportation performance (eg. Drone)
• Design flexibility into the transportation network
Summary
• Each mode of transportation has its own strengths and weaknesses
• The effectiveness of each mode depends on several factors including distance, price, and timeliness