Logistics Modelling
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Logistics in SCM An Insight
Transcript of Logistics Modelling
Logistics in SCMLogistics in SCM
An Insight
Supply ChainSupply Chain
Warehouse
Warehouse
Warehouse
Customer
Customer
Customer
Customer
Customer
Customer
Manufacture
Manufacture
Manufacture
Components
Supplier
Supplier
Materials Assembly
Assembly Finished Goods
Material HandlingNetworks
TransportationNetworks
TransportationNetworks
Inter-facilityTransport
Supply Chain is the collection of all components and functions associated with the creation and ultimate delivery of a product or service
LogisticsLogistics
Logistics is the collection of activities associated with acquiring, moving, storing and delivering supply chain commodities
It encompasses the business functions of transportation, distribution, warehousing, material handling, and inventory management and interfaces closely with manufacturing & marketing.
LogisticsLogistics
ManufacturingManufacturing
Retailing FirmsRetailing Firms
Food Producers & Distributors
Food Producers & Distributors
MilitaryMilitaryTransportation
CarriersTransportation
Carriers
Postal DeliveryPostal
Delivery
UtilitiesUtilities
PetroleumPipelines
PetroleumPipelines
Service CompaniesService
Companies
Public Transportation
Public Transportation
Business Segments and Government Functions
Significance of LogisticsSignificance of Logistics
High costs involved in operating a Supply-Chain
Estimated total logistics costs in USA is 797 Billion $ in 1996 of which 451 Billion $ was on Transport. Roughly 11% of US GDP.
US Spending
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SocialSecurity
HealthServices
Defense Logistics
Area of Spending
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Costs as % ofSales turnover
Main companybusiness
TransportCost
%
Warehouse/DepotCost
%
InventoryInvestment/Holding
Cost
%
AdministrationCost
%
OverallDistribution
Cost
%
Office Equipment 3.2 10.7 .87 14.77
Health supplies 1.36 9.77 .66 .19 11.98
Soft Drinks 2.53 2.71 .44 5.68
Beer 8.16 2.82 .56 2.19 13.74
Spirits Distribution .37 .27 .07 .1 .81
Cement 25.2 9.1 7.1 4.6 46.00
Automotive parts 2.07 6.35 1.53 9.96
Gas Supply 9.41 2.45 .02 11.98
ComputerMaintenance
.45 .1 .29 .05 .88
Computer Supply .65 .78 .09 1.52
Healthcare .96 1.08 1.21 3.25
SpecialistChemicals
7.23 1.95 .2 .49 9.87
Fashion .38 1.31 .33 2.02
Food Packaging 3.14 3.73 .85 7.72
Significance of Logistics - Contd...Significance of Logistics - Contd...
Logistics - Other Influencing FactorsLogistics - Other Influencing Factors
Deregulation - Shift towards a free market industry
Global Markets - Business marketplace is getting global in scope
Customer Service - Above factors aid for better customer service
Environment - Current and future environmental regulations have significant implications on logistics
Technology - Accelerating advances in technology significantly change
and improve logistics operations.
Logistics ModelingLogistics Modeling
Key Questions faced in SCMKey Questions faced in SCM
Manufacture
Manufacture
Where to produce &assemble goods?How much to produce?When to produce?
Warehouse
Warehouse
Where to store finished goods?Where to store spare parts?How much to store?How to retrieve from storage?
Customer
Customer
Customer
Customer
What markets to serve?What level of service?What level of service cost?
How much to ship?When to ship?What modes of transportation?
What fleet size?What vehicle routes?What shipment routes?
Supplier
Where to acquirematerials &components?
Five Fundamental CharacteristicsFive Fundamental Characteristics
Multiple business functions are impacted- Like Product Costing, Budgets, Inventory Etc.
Tradeoffs among conflicting objectives- Logistics dept. holds the key in deciding where to compromise.
Impacts are difficult to precisely evaluate- A system/process should be in place to evaluate the impact
Business issues unique to each logistics system
Quantitative analysis is essential for intelligent decisions- Use of technology/decision support tools
Elements of ModelingElements of Modeling
Each of these concepts or tools contribute to the logistics analysis process.
Rationalization
LogisticsStrategy
Linear/IntegerProgramming
Algorithms
SpreadsheetsObject-Oriented
Data Models
Simulation
MovementRequirement
Data
HumanJudgement
Client/ServerArchitecture
DatabaseSoftware
HeuristicsTransportation
AssetData
VisualGraphical User
Interfaces
ModelingLanguages
Evaluation &
Benchmarking
Supply ChainInfrastructure
Data
Strategic, Tactical& Operational
Models
Activity-BasedCosting
GeographicInformation
Systems
DataAggregation &Hierarchical
Models
Logistics StrategiesLogistics Strategies
Provide a framework for the type and scope of specific logistics decisions Choosing the right strategy is more significant (from a financial or customer
service standpoint) than optimizing specific lower-level decisions
Specify Logistics Strategy
Answer specific logistics questions
Ship to a customer from a single warehouse?Ship to a customer from multiple warehouses?
Which warehouse should supply a customer?
At one level companies must choose smart logistics strategies, implying specific logistics questions to answer.
Logistics Strategies - Details...Logistics Strategies - Details...
Logistics Strategies includes the business goals, requirements, allowable decisions, tactics, and vision for designing and operating a logistics system.
General classes of applications in logistics modeling
Vehicle Routing& SchedulingShipment Planning
Supply ChainPlanning
TransportationSystems Planning
Warehousing
Logistic Strategies Details.. (contd..)Logistic Strategies Details.. (contd..)
General scope and properties of strategic, tactical, and operational model views.
•Supply chain design•Resource acquisition•Broad scope, highly aggregated data•Long-term planning horizons (1 year +)
Strategic
•Production/distribution planning•Resource allocation•Medium-term planning horizons (monthly, quarterly)
Tactical
•Shipment routing & scheduling•Resource routing & scheduling•Narrow scope, detailed data•Short-term planning horizons (daily, real-time)
Operational
Logistic Strategies Details.. (contd..)Logistic Strategies Details.. (contd..)
Logistics application areas by modeling views
Supply Chain Planning
Transportation Planning
Shipment Planning
Vehicle Routing Warehousing
Strategic Site Location Site Location Outsourcing Fleet SizingWarehouse Layout
Capacity Sizing Fleet Sizing Bid Analysis
Material Handling Design
Sourcing Fleet Sizing
TacticalProduction Planning
Routing Strategy
Consolidation Strategy
Routing Strategy
Storage Allocation
Network Alignment
Mode Strategy
Zone Alignment
Order Picking Strategies
OperationalMRP, DRP, ERP Load Matching
Shipment Dispatching
Vehicle Dispatching Order Picking
Possible StrategiesPossible Strategies
Just-in-Time Freight Consolidation Integration of Inbound & Distribution Fixed & Variable Routes DC Consolidation & Decentralizing DCs Hired Fleet & Private Fleet Fleet/Carrier Routing Material Sourcing
Just-in-Time LogisticsJust-in-Time Logistics
Inventory Costs• leaner supply chain• reduced inventory levels• reduced inventory costs
Transportation & Service Costs• smaller and more frequent shipments• increased transportation costs• much greater service required fromsuppliers and the transportation system
“JIT is a shift in thinking from inventory levels to inventory velocity or “turns.” For a specified time period, the turn rate for a product is calculated by dividing total throughput by the average inventory level.”
JIT
E.g.: Made to order Cars, Boilers, Power Plants (Rolls Royce, Alsthom, Wartsila Diesel…)
Freight Consolidation - RoutingFreight Consolidation - Routing
Shipments in the logistics system can be routed and scheduled independently of each other or can be combined to try and achieve
transportation economies-of-scale.
Vehicle routing: Individual shipments can be combined to share a transportation asset making pickup or delivery stops at different facilities. This type of consolidation is called multi-stop vehicle routing
E.g.: Courier collection (DHL, FedEx...)
Shipments Vehicle Routes
Freight Consolidation - Pooling & SchedulingFreight Consolidation - Pooling & Scheduling
Pooling: Individual shipments can be brought to a central locationor pooled, creating large shipments suitable for economy-of-scale transportation modes such as truckload or rail carload
E.g.: Home Delivery of Pizza, Consumable or Provisions
Scheduling: Sometimes shipment schedules can be adjusted forward or backward in time so they can be combined with other shipments.
E.g.: Courier collection (UPS, FedEx…) (Present Wipro Chennai Bus routes)
Individual Shipments Pooled Shipments
Integration of Inbound & Distribution LogisticsIntegration of Inbound & Distribution Logistics
Integrating separate pickup and delivery routes into combined routes.
E.g.: Bulk movement of Cargo/Parcels in Ships/Flights (Maersk, UPS..)
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Fixed/Master Routes & Variable/Dynamic RoutesFixed/Master Routes & Variable/Dynamic Routes
Fixed/VariableRoutesService & Control Costs
• Regular routes are easier to manage• Drivers develop familiarity with customers and territories
E.g.: Collection & Distribution of Govt. diary supply. (Aavin)
Transportation costs• Increased utilization of transportation assets.
E.g.: Courier/Food Delivery ( UPS, Pizza Corner)
Distribution Center Consolidation Vs. DecentralizationDistribution Center Consolidation Vs. DecentralizationCustomers can be served from smaller, regional distribution centers or from larger, centralized distribution centers.
DCConsolidation
Inventory & Facility Costs• Reduced facility costs• It may be possible to reduce inventory while maintaining equivalent customer service
E.g.: Retail consumer goods. (HLL, Palmolive)
Transportation & Service Costs• Lower volume outbound lanes• Increased transportation costs• Products further from customers• Increased service costs
E.g.: Oil Producers (ADNOC)
Decentralized Consolidated
Private Fleet Vs. For-Hire FleetPrivate Fleet Vs. For-Hire Fleet
Private Fleet
For-Hire Fleet
•More control over costs & service. But•Increased maintenance costs & labor charges
E.g.: Baskin & Robbins, USPost...
•Better service•Lesser overheads•Can negotiate/offer discounts
E.g.: Hyundai, Ford, L&T etc….
Continuos Move RoutingContinuos Move Routing
Continuous Move Routing:
Combine separate trips to increase vehicle utilizationTrucking companies offer discountsDrivers and tractors are highly utilized
E.g.: Domestic LTL carriers
Deadhead
Continuous move routeTruckload Shipments
Single & Split SourcingSingle & Split Sourcing
Single Sourcing is satisfying all product demand at a location from one supplier. E.g.: Exclusive Showrooms like Nike, Sony….
Split Sourcing refers to shipping the same product or multiple products from different origins. E.g.: Super Market Chains (Walmart, Sainsbury...)
Split sourcing - same product Split sourcing - multiple products
Customer
Product A
Product A
Warehouse #1
Warehouse #2
Warehouse #1
Warehouse #2
Product A
Product BCustomer
Transportation Mode SelectionTransportation Mode Selection
Overnight Package Parcel Less-than-Truckload (LTL) Truckload (TL) Railcar Load (CL)
Each mode offers different cost and service advantages and disadvantages
Transportation Mode Selection - Contd..Transportation Mode Selection - Contd..
Transportation mode impacts the inventory in three different ways.
Ship Intermodal Rail Truckload LTL Parcel Air Premium
Shipment SizeLarger Shipments Smaller Shipments
SpeedSlower Faster
Transportation CostLess Expensive More Expensive
Service CostSlower Faster
Inventory CostMore Expensive Less Expensive
Slower modes create more in-transit or pipeline inventory.
Larger shipment sizes may create order quantity inventory, which arises if the batch shipment size is more than the amount of current demand.
Slower transportation modes may raise safety stock inventories needed to protect uncertainties in supply and demand.
Impacts of Transportation of ModeImpacts of Transportation of Mode
Smaller shipments via faster modes reduces all three type of inventories, but associated transportation costs increase
Mode/Carrier selection decision process….Mode/Carrier selection decision process….
Customer requirements, dissatisfaction with
existing mode/carrier, changes in distribution
patters of the firm
Customer requirements, dissatisfaction with
existing mode/carrier, changes in distribution
patters of the firm
Problem recognition
Evaluate performance level through cost studies, audit,
on-time pickup & delivery performance
Evaluate performance level through cost studies, audit,
on-time pickup & delivery performance
Post Choice Evaluation
Transportation executives scan various sources to aid
decision making. Sources are experience,
carrier records, customers
Transportation executives scan various sources to aid
decision making. Sources are experience,
carrier records, customers
Search Process
choosing the best option which satisfy
customer service requirements at acceptable cost
choosing the best option which satisfy
customer service requirements at acceptable cost
Choice process
Evaluating AlternativesEvaluating Alternatives
Process of simulating a model and analyzing the
attractiveness of that supply chain configuration.
Its an iterative process.
It is composed of Evaluate, Benchmark, and Rationalize
steps each geared towards answering particular
analysis questions.
Evaluating Alternatives contd...Evaluating Alternatives contd...
What is a logical configuration of thesupply chain & transportation infrastructure?What are the potential movement requirements?
Does this alternative make sense?Are there opportunities to improve?
How does the supply chain operate?What are the service measures and costs?
How does the supply chain performancecompare to industry standardsor to a theoretical optimum?
ExistingLogistics System
ExistingLogistics System
BenchmarkAlternative
BenchmarkAlternative
GenerateAlternativeGenerateAlternative
EvaluateAlternativeEvaluate
Alternative
RationalizeAlternative
RationalizeAlternative
Evaluating Alternatives - CostingEvaluating Alternatives - Costing
CustomerManufacture
Manufacture
Warehouse
Warehouse
Customer
Customer
Customer
Supplier Assemble
Purchase $ + Transit $ + Manufacture $ + Assembly $ + Transit $ + Inventory $ + Transit $ + Inventory $ Inventory $ Inventory $ Inventory $ Handling $ Inventory $ = Landed $ Handling $ Handling $
The cost to deliver a unit of product to the customer is the landed customer cost.
The cost to get a product to two different customers is almost always different. E.g.: Automobile (Hyundai Cars)
10-20% of the product price is the transportation cost.
Benchmarking & RationalizationBenchmarking & Rationalization
Benchmarking is comparing the performance of a logistics supply chain to organizational or industry standards or to some theoretical ‘ideal’.
The Rationalize step is the interpretation of the Evaluation and Benchmark results, and the justification of the logistics supply chain configuration.
Generating AlternativesGenerating Alternatives
The 4 fundamental ways to generate alternatives: Existing system: If logistics supply chain already exists, then the first
alternative analyzed is the current system, and the analysis proceeds directly to the Evaluating Alternatives phase.
Specified: Specific strategic plan that the organization’s management had specified and would like to evaluate.
Automatic: Computer Generated Automatic Alternative using mathematical optimization, heuristics, rules, etc.
Interactive: The alternative could be generated interactively, in an exploratory or “what-if” style.
This phase includes any change to the logistics strategy, supply chain infrastructure, transportation infrastructure, movement requirements, or the relevant operating parameters.
Evolution of Decision Support ToolsEvolution of Decision Support Tools
Development of Operations Research
Introduction of High Level languages
Development of Network optimization
Large scale Mainframe‘black-box’ models
Logistics Modeling Languages,Visual object-oriented interfaces,Client/Server Architecture
PCs, Spreadsheets,Interactive graphical optimization
1940’s 1950’s 1960’s 1970’s 1980’s 1990’s
The evolution of logistics decision support tools and architecture over the past fifty years.
Logistics Objects - For a Object Oriented Computerized Model
Logistics Objects - For a Object Oriented Computerized Model
Basic Families:
Supply Chain Infrastructure (Includes physical sites like suppliers, plants, DCs etc…)
Movement Requirements (includes information like what, when and how to move)
Transportation Network (includes physical components of the transportation network)
Class HierarchiesClass Hierarchies
Hierarchical organization of logistics objects of a manufacturing firm
Higher-level views of a logistics system are found at the top of thehierarchy - one can “drill down” through the hierarchy for more focusedviews.
TransportationNetwork
MovementRequirements
Supply ChainInfrastructure
TransportationInfrastructure
TransportationAssets
DistributionNetwork
InboundNetwork
Vendors DepotsRoadsDriversEquipmentProductsCustomersDCsPlants
LogisticsSupply Chain
Logistics Decision Support System - 1Logistics Decision Support System - 1
Why? The scope and complexity of logistics systems/models
necessitate the use of computer based decision support systems
Types? Custom Built for unique situations and Off-the-Shelf systems for
more generic use
Logistics Decision Support System - 2Logistics Decision Support System - 2
Custom & Off-the-ShelfCombined
Custom & Off-the-ShelfCombined
Successful approachFlexibleCost-effectiveHigh productivity
Custom-BuiltCustom-Built
Can be tailored to unique situationsTakes long time to builtExpensiveDifficult to change later
E.g. Nike
Off-the-ShelfOff-the-Shelf
Does not fit to the unique logistics issuesReadily available and Easy to implementLess Expensive
E.g.Manhattan Associates, i2, Etc….
Logistics Modeling - SummaryLogistics Modeling - Summary
Suitable for Logistics Business decisions spanning a range from planning to operations.
Planning includes all of the analysis, and design. Operations refer to the actual management and execution of logistics
supply-chain.
Logistics modeling is an ongoing process and should iterate between planning and operations.
Implementation
Operations
Planning
Monitoring
LogisticsModeling
Distribution: Tactical & Operational TechniquesDistribution: Tactical & Operational Techniques
The Management of Assets
The Management of Money
The Management of People
Management of People - 1Management of People - 1
Training
Recruitment or Contracting
Compensation & Incentives
Driver training- Safety- Technology - Computer, communication devices- Maintenance - preventive - annual/routine- Government rules & regulations (traffics/law etc)
Driver Benefits- ATM- Cab CARD - Email from drivers cab unit- messaging - payroll access- Prepaid phone card - family touch- Cash advances
Driver efficiency tracking- Fuel consumption- Accident frequency- Timely delivery- Use of computers- analysis based on historical drivers data- Real time feedback to drivers online- retaining good drivers
Management of People - 2Management of People - 2
BestDriver
Management of People - 3Management of People - 3
Investigate the temporary staff agencies - (Need not be just the cheap-
set)
Check with other companies about the best agencies and why
Key points to be clarified from the agencies are
How are drivers selected?
How often are the licenses checked?
Are the drivers examined for their understanding of legislation?
Are Drivers’ employment histories and references checked?
Are drivers’ full-time employees of the agency
Training provided for their employees?
Ensure the rates of payment are agreed for a given period
Management of AssetsManagement of Assets
Management of Assets
Management of Assets
Vehicle Utilization Vehicle Utilization
Vehicle CapacityVehicle CapacityFleet UtilizationFleet Utilization
Vehicle UtilizationVehicle Utilization
For calculating Vehicle Utilization & Performance, the following fixed cost is included:-
- Depreciation- Insurance- Licenses (Vehicle excise duty & operator’s license)
Vehicle CapacityVehicle Capacity
Products carried in most situations are constrained by either volume or weight.
When the goods are heavy….- Unladen weight should be reduced as much as possible- Available payload should be increased to the maximum within the legal
permissible limits.
When the goods are huge (by volume)….- Weight or payload doesn’t carry any importance- Visual measurement by loaders is expressed as percentage- Despite difficulties with this visual approach some measure of capacity
utilization should be attempted
Fleet UtilizationFleet Utilization
Fleet Utilization
- Load Utilization
- Time Utilization
Fleet Utilization - LoadFleet Utilization - Load
Evaluate continuously the carrying capacity, for significant over/under use of capacity on a regular basis, by plotting on a straight line graph.
Load Utilization
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Fleet Utilization - TimeFleet Utilization - Time
Time Utilization:-
Actuals Hours 44Hrs 13 mins =80%
Available Hours 55 Hrs
Time Utilization
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Vehicle MaintenanceVehicle Maintenance
MAERSKMAERSKPreventiveMaintenancePreventive
Maintenance
BreakdownMaintenanceBreakdown
Maintenance
ConditionMonitoringConditionMonitoring
Condition MonitoringCondition Monitoring
Exhaust Emission
Trip meter / Fuel Consumption
Noise / Heat levels
Engine Condition
Braking SystemsMAERSK
Preventive MaintenancePreventive Maintenance
Overhauling
- Lubrication
- Changing of worn-out spares
- Refilling Brake and Engine oils Tyre Pressure
Breakdown MaintenanceBreakdown Maintenance
Damage Assessment
Replacing of damaged spares
Trial Run
Maintenance ManagementMaintenance Management
Service History (E.g..: When & What service was done?)
Maintenance Schedule Reports (E.g..: When & What part to maintain?)
Spares Stock Inquiry / Reports (E.g..: How many axles?) Supplier Info & PO Generation (E.g..: Where is XY Supplier, Buy 2 Tires?)
Vehicle License Renewal (E.g..: Truck TR34 license to be renewed today)
Insurance lapse reports, etc. (E.g..: TR12 Insurance elapsed by 12 days)
Vehicle Cost Analysis / Driver Cost Analysis Reports to Govt. Fleet costs
Money ManagementMoney Management
Zero Based Budgets
Normal budgets are just an incremental increase of the previous
year’s budgets. But Zero-based budgets are prepared as if it never
existed before and is being planned for the first time (hence the name
zero).
Useful when cost effectiveness is in question
Each element of the operating budget must be analyzed
It highlights areas of improvement
Operations need a fresh look
Money Management - CostingMoney Management - Costing
Why?
- The yearly financial (Profit & Loss) statement is too late for the management to act upon the increasing operational costs.
E.g.: Sudden increase in fuel consumption or vehicle pay-load being
unutilized to its fullest capacity.
- The yearly statement doesn’t detail upon the financial health of each and every
operation which could be vital for controlling costs.
- Helps in pricing the product or service (by including the transportation cost)
The 3 important aspects of an efficient costing system:
- To know, very quickly, that something is wrong;
- To be able to identify where the problem lies;
- To be able to take some form of remedial action and solve the problem;
Costing - TypesCosting - Types
Aspects of Costing:
- The recording of actual costs and performance in order to monitor and control the
transport operation.
- The measuring of costs to identify the amount to allow to cover costs and to budget for a
job.
Types of transport resources that need to be considered are:-
- Men
- Machinery
- Materials
- Money, and
- Minutes
Costing - Common TerminologyCosting - Common Terminology
Cost Unit E.g.: Cost per mile run, Cost per carton delivered
Cost Center E.g.: A lorry, A driver, A depot
Direct Costs E.g.: Fuel, Road License, Insurance
Indirect Costs E.g.: Office staff wages, Telephone charges, advertising
Fixed Costs E.g.: Cost of the vehicle, Vehicle excise duty, Vehicle Insurance
Variable Costs E.g.: Fuel, Oil
Costing - Vehicle Standing CostsCosting - Vehicle Standing Costs
Vehicle Standing Costs includes
- the cost of the vehicle i.e. by calculating depreciation
- Vehicle excise duty
- Operator’s License
- Driver’s License
- Vehicle Insurance (though varying, this is considered as part of the vehicle standing costs)
Cost
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(Years)Depreciation - Straight Line Method
Cost
($’000)
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(Years)Depreciation - Reducing Balance Method
Maintenance
Depreciation
Costing - Vehicle Running CostsCosting - Vehicle Running Costs
Variable costs vary with the level of activity or output.
Vehicle Running Costs includes
- Fuel
- Oil & Lubricants
- Tyre wear
- Driver’s overtime, subsistence & other expenses
- Repairs and Maintenance (Labor, Spare parts, Garage, Workshop)
Costing - Overhead CostsCosting - Overhead Costs
Overhead costs are the indirect costs which do not directly relate to a particular vehicle, but to the whole fleet of vehicles.
Overhead Costs includes
- Fleet Overheads (E.g.: Maintenance Labors, Spare trucks, Backup Drivers etc..)
These are apportioned by taking the total cost over a period of time (eg. A year) and then dividing by the number of vehicles in the fleet.
- Business Overheads
(E.g.: Salaries and wages of Managers & Schedulers, Cars, telephone, fax, rent etc..)
Company administrative overheads are those costs that are central to the running of business. It has to be apportioned between all the different company departments.
Costing - Whole Life CostingCosting - Whole Life Costing
Whole Life Costing is assessing the cost of owning and operating an asset. This type of costing is widely used nowadays in identifying the true cost of vehicle.
Major cost element includes
- Initial purchase price of Vehicle
PLUS
- the total operating costs incurred during its life time
LESS
- the achieved/guaranteed residual value of the vehicle.
Useful when companies replace vehicles frequently. Helps in comparing between different makes of truck’s performance and how different engine configurations and drive-train perform.
Costing - Vehicle Cost ComparisonsCosting - Vehicle Cost Comparisons
The relative importance of different elements of vehicle costs is considered vital.
It is also important that these comparative relationships may change according to the type and size of vehicle.
E.g.: The following is the comparison between a large articulated (38 Ton) and a smaller 7.5 ton vehicle.
7.5 Ton Vehicle 38 Ton Vehicle
Depreciation 15% 10%Driver 40% 25%Running 20% 35% - Fuel, Oil, Tyres - Repairs and MaintenanceLicense / Insurance }Overheads } 25% 30%
Costing - An exampleCosting - An example
Costing the operation is done by calculating fixed costs (no. of vehicles used) and variable costs (mileage traveled by the fleet).
Vehicle costs (Calculated on a daily basis):2 rigid vehicles @ $75 per day $150634KMs @ 20 cents per KM $127
3 articulated vehicles @ $146 per day $438662KMs @ 31 cents per KM $205
Total cost per day $920Annual Cost ($920 * 240days) $220,800
Cost per case delivered ($920/9863 cases) 9.3 cents / caseCost per kilometer ($920/1296KMs) 71.0 cents / km
Vehicle Utilization:Time Utilization actual hrs / available hrs 44hrs 13min / 55 hrs 80%
Load Utilization actual cases / max cases 9863 cases / 11200 cases 88%
Transportation RegulationTransportation Regulation
Transportation Regulation - CategoriesTransportation Regulation - Categories
Since transportation has a major impact on both domestic and international commerce, Govts. have often taken special interest in both controlling and promoting transportation activities.
Categories of Transportation Regulation:
- Economic Regulation of Business Practices, and
- Safety and Social Regulation
Economic Regulation
Safety Regulation
Social Regulation
Economic RegulationEconomic Regulation
Economic Regulation
Safety Regulation
Social Regulation
EconomicRegulationEconomicRegulation
ServiceRegulationService
Regulation
RateRegulation
RateRegulation
EntryRegulation
EntryRegulation
Smaller Markets
Entry Regulation- Controls the Carrier entry and also the markets served by the carriers.
- Dictates the region and origin-destination combinations served by each carrier.
- Attempts to reduce the cutthroat competitive characteristics in larger markets while safeguarding the service levels of smaller markets.
- Its counterparts are exit limitations i.e. a carrier’s ability to leave a market if it would result in a substantial reduction in service.
Economic Regulation Contd.. Economic Regulation Contd..
Rate Regulation (US Specific)- Focuses on rate related practices
- Specific considerations include rate making, rate changes,rate subsidies and actual rates
- Before deregulation, any rate changes, discounts were to be justified before the Interstate commerce commission.
- Rate subsidies assist one segment of carrier operation by allowing higher rates on a different segment.
Economic Regulation Contd.. Economic Regulation Contd..
Service Regulation regulates- Loading and Unloading
- Loss & Damage liability
- Shipment status & Invoicing
Not much of regulation in this area now as the industry is becoming more and more open.
Economic Regulation Contd.. Economic Regulation Contd..
Regulates- Transport & Handling of Hazardous material
- Labor work hours & Wages
- Vehicle Safety
- Pollution and Environmental issues raising due to vehicular traffic.
- Projecting and abnormal Loads
- Noise emissions
- Speed Limits
Safety & Social RegulationSafety & Social Regulation
Overtime?
Brainstorming SessionBrainstorming Session
What is ‘Reverse Logistics’?
ReturnedGoods
CustomerManufacturer / DC
Goods
- Its mainly the handling of returned goods from the customer
- Packaging material, scrap are also handled now which are also recycled, easing the environmental pollution.
- Efficient Management of reverse logistics impacts a company’s bottom line as well as its customer relations.
- Refurbishing, Reuse and transportation play a major role.
- Ebay sells returned goods over the net in an auction format.
(Saleable & non-saleable segregation, use of barcode for mass returns…)
How is the price of some consumer goods (Toiletries) maintained constant irrespective of their distance from manufacturing location?
Some benefits of J-I-T Logistics?
Rate the a) time efficiency, b) fuel-efficiency and c) service efficiency in the following 3 plans. Scale: Best, Good, Bad
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If your fleet’s running(utilized) time was 48hrs against the actual (available time) 60hrs? What was the percent of utilization of that particular fleet?
Major difference between TL & LTL…..
The two most common modes in multi-modal shipments...
Thank youThank you
