AI Marketing Cards

Marketing and Supply Chain Notes

Unit 4

Supply chain management

Chapter 5: Transportation

Trends impacting transportation

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Omnichannel retailing

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The Amazon factor

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Globalization

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increased risk

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Collaboration

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Outsourcing

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Cost and profitability

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system integration

Regulations

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Economic

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Originally very regulated

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Deregulation (1970s-1990s)

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Safety/environmental

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Increasing regulations

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DOT

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TSA

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C-TPAT

Transportation

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Five different types, or modes, of transportation

Air

motor carrier (truck)

Pipeline

Rail

WaterTransportation modes

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Cost

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Speed

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Reliability

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Capability

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Capacity

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Flexibility

The attractiveness of a particular mode depends on the following attributes

Airfreight

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Generally, the fastest mode for shipments exceeding 600 miles

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Expensive

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Best suited for high-value, lower volume, urgent, perishable, or time specific deliveries

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Reliablity is problematic due to delays caused by

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Congestion and resultant delays with air passenger transportation (belly freight)

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FedEx located its first primary air cargo hub in Memphis, tennessee

Motor carries

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Account for 70% of all freight tonnage moved in US

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most important business user of the interstate highway system

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The cost is generally lower when compared to airfreight

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less than truckload (LTL) versus truckload (TL)

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"accessibility to highway" – the most important factor in corporate location decisions

Truckload (TL)

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Focus on shipments greater than 10,000 pounds

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exact weight depends on the product

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close to the amount that would physically fill a truck trailer

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possible that large shipment from several customers can be consolidated

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Move directly from the shipper's location to the consignee's location, no terminals

involvedLess-than-truckload (LTL)

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150 to 10,000 pounds

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too big to be handled manually; too small to fill a truck

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LTL trucks carry shipments from many shippers at the same time, thus they operate

through a system of terminals

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Prominent LTL carriers include:

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ABF freight system

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FedEx freight

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UPS freight

Pipelines

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Pipeline carries - limited in variety they can carry

Only mode without vehicles

No need for vehicle operators

Transportation is one way; no fronthaul and backhaul

most reliable mode

tend to be the slowest mode

accommodates only liquid, liquefiable or gaseous products

capable of transporting large product volumes

high fixed cost but relatively low cost per unit due to large product volume

slurry system – lliquify bulk commodities by grinding the solid material to particle size

and mix it with liquid

Railroads

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Neither “best” or “worst” on any of the six attributes

superior to air, motor, and pipeline, but inferior to water, in its ability to transport

different kinds of products

less flexibility, the motor carriers, but more when compared to air, water, and pipeline

superior to ari and motor with regards to volume, but inferior to pipeline and water

less expensive than air and motor, but more expensive than pipeline and water

faster than pipeline and water, but slower than air and truck

Rail carriers

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Rail companies use each other's rail cars, but can be problematic, keeping track of rail

cars, and getting them where needed

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Real location systems (RTLSs) on rail cars have helped the problem. It uses active

Wi-Fi-enabled radio frequency identification (RFID) tags to track rail cars (and their

assets) in real time.Railroads

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Dominate rail carriers of north america

- Union Pacific (west of the Mississippi; largest carrier)

Burlington Northern (BNSF; west of the Mississippi)

CSX (east of the Mississippi)

Norfolk Southern (east of the Mississippi)

Canadian Pacific + Kansas City Southern (North and South)

Water Transportation

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Water carriers - inexpensive, slow, and inflexible. Includes inland waterway, coastal,

intercoastal, and deep-sea

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Somewhat unreliable

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Drought

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Icing

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An aging lock system

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Slow, average speed

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Relatively inexpensive

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Focuses on lower-value bulk commodities handled by mechanical means

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Carries greater volumes than rail or truck

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development in deep sea, transportation, and the use of super tankers and container ships

have made water transportation cheaper and more desirable.

Intermodal transportation

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Two or more modes work closely together to utilize advantages of each mode while

minimizing their disadvantages

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Examples

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piggyback transportation

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trailer on flatcar (TOFC)

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container on flatcar (COFC)

Transportation modes

Ancillary Modes

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freight forwarders

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Shippers Association or cooperatives

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transportation brokers

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Intermodal marketing companies

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small package carriersLegal Forms of Transportation

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transportation service companies are classified legally as either common, contract,

exempt, or private carriers.

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common carriers – offer transportation services to all shippers as published rates

between designated locations without discrimination

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contract carriers – not bound to serve the general public. Contract carriers serve

specific customers under contractual agreements.

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Exempt carries - exempt from regulation of services and rates, and if they

transport certain exempt products like produce, livestock, coal, or newspapers

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Private carrier - not subject to economic regulation and typically transports goods

for the company owning the carrier.

Core carrier concept

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Shippers use one or a few carriers to transport their freight

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Carrier-shipper relationships include the following components:

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understanding the carriers, ideal requirements, and having the shipper's freight

closely match those requirements

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Use technology to optimize the cost and service aspects of the relationship

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Implementation of a core carrier concept often results in a “win-win” for both the carrier

and shipper

Outsourcing

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Third parties (3PLs)

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Partnerships

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Strategic alliances

Last-Mile Delivery

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The most difficult part of moving product from producer to customer is delivering the

shipment, the "last mile.”

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Next-day delivery has become commonplace, and any delays in transportation can result

in late deliveries to customers

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The Internet of Things (IoT), transportation management software (TMS), and global

positioning systems (GPSs) are technologies that facilitate last-mile deliverycategories of transportation rates

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Line-haul rates

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class rates

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exception rates

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commodity rates

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miscellaneous rates

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accessorial charges

Transportation Infrastructure

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Without the proper infrastructure, freight does not move efficiently or effectively

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Infrastructure improvements have not kept pace with the expansion of global commerce

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Congestion impacts all modes of transportation

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Infrastructure improvements are typically financed by governments, and transportation

projects are managed by multiple agencies, committees, and commissions

So you want to work in transportation?

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Being aware of transportation rates being negotiated by shippers

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selecting optimal transportation, modes, intermodel combinations, and carriers within

modes

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making shipment routing and tracking decisions

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identifying consolidation and breakbulk opportunities

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Preparing a variety of transportation performance reports

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Identifying KPI's for important elements of transportation

Planning Support: Transportation Management Systems (TMS)

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TMS are software tools designed to manage transportation in the same way that WMS

systems are designed to manage warehouses.

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The adoption of TMS systems can be especially impactful because transportation is the

largest cost in the supply chain

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A unique feature of team systems is that they have the task of integrating and sharing

information among three different parties:

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Shippers

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Customers

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third-party, such as transportation and housing companiesTransportation Management Systems Functionality

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Carrier bidding

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This enables the firm to automate the bidding of freight over specific lanes to

pre-approved carriers

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Planning and execution

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It plans and processes each shipment until it is received from a supplier or

delivered to the customer

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This includes processing order data to select transportation modes, optimize load

building, and shipment routing.

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Audit and payment

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The freight payment environment is very complex

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The number of freight bills is generally large, with different carriers and prices

offered over many transportation lanes

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In addition, freight, billing, and payment can take many forms: EDI, internet, fax,

or mail.

Planning Support: Yard Management Systems (YMS)

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YMS are designed primarily to manage containers and trailers in yards adjacent to

manufacturing plants, warehouses, or other distribution facilities

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Their goal is to improve asset utilization and visibility in order to reduce cost and

improve customer service

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YMS systems are available either as a standalone software or as a part of WMS or TMS

packages

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The basic functionality of YMS systems are to automate control and to optimize

execution

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A control system typically tracks the number, contents, location, and ownership

of each container and trailer in the yard

YMS systems optimally assign trailers to drivers based on priority of movement,

driver availability, and minimization of travel distance.Supply Chain Management

Chapter 6: Warehouse Management

Introduction

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Warehousing is the primary link between producers and customers

Warehousing plays a vital role in providing a desired level of customer service at the

lowest possible total cost

Warehouses handle most products in four cycles (receive, store, pick, and ship)

Importance of warehousing in the supply chain

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To achieve transportation economies of scale

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To achieve production economies of scale

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To take advantage of quantity purchase discounts and forward buys

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To support customer service policies

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To meet changing market conditions

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To overcome the time and space differentials between producers and consumers

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To accomplish least total cost logistics given acceptable service levels

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To support the JIT programs of supply chain members and customers

The Role of Warehousing

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Well-run companies view warehousing as a strategic consideration

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Warehousing management is part of facility management

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It refers to “that part of the firm's logistics system that stores product, raw materials,

parts, goods-in-process, and finished goods) at and between points of origin and points of

consumption

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Warehousing and transportation are substitutes for each other, with warehousing

having been referred to as “transportation at zero miles per hour.”

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Well-run companies view warehousing as a strategic consideration

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Serves to match different rates or volumes of flow when patterns of production and

consumption do not coincide

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Facilitates the regrouping function in a supply chain

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Involves rearranging the quantities and assortment of products as they move

through the supply chain

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Warehousing can be provided by

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Warehouses

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Distribution centers

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Fillfillment centers

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Cross-docking facilitiesWarehouses vs distribution centers

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Warehouses

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Emphasize the storage of products

The primary purpose is to maximize the usage of available storage space

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Distribution centers

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ships inventory directly to a retailer, wholesaler, or directly to the consumer

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Emphasize rapid movement of products through the facility

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attempt to maximize throughput

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Throughput is defined as the amount of product entering and leaving a

facility in a given time period.

Fulfillment Centers vs. Cross-Docking Facilities

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Fulfillment centers

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Focused on e-commerce orders

Cross-docking facilities

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Defined as “the process of receiving product and shipping it out the same day or

overnight without putting it into storage.”

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Key benefits include improved service by allowing products to reach their

destinations more quickly, as well as reduced inventory carrying costs from less

stock because of faster product delivery

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has grown due to the increased emphasis on time reduction and supply chains.

The Design of Cross-Docking Facilties

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The design of the facility is an important consideration to facilitate the quick movement

of the product

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Should be designed with a minimal amount of storage space and truck doors on

two or more sides

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Some designs include point-to-point or hub-and-spokePublic, Private, Contract, and Multiclient Warehousing

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Organizations must also decide the proper mix in terms of warehousing ownership

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Owning

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private warehousing

Renting

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public warehousing

contract warehousing

Multi-client warehousing

Private Warehouses

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owned by the firm storing goods in the facility

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should only be considered by companies dealing with large volumes of inventory

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The largest uses of private warehousing are retail chain stores

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offers control to the owner

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assumes both sufficient demand volume and stability so that the warehouse remains

full

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high fixed cost

Public Warehouses

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Requires no capital investment on the user's part

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Allow users to rent space as needed

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Can be rented on a month-to-month basis

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Warehousing providers take responsibility for personnel decisions and regulatory issues

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warehousing labor, safety practices monitored by the Occupational Safety and

Health Administration (OSHA)

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Offer more locational flexibility

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May provide specialized services

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A lack of control by users

Types of Public Warehouses

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General merchandise warehouses

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refrigerated or cold storage warehouses

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bonded warehouses

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household goods and furniture warehouses

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special commodity warehouse warehouses

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bulk storage warehousesContract Warehousing

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Also referred to as third-party (3PL) warehousing or dedicated warehousing

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Refers to “a long-term, mutually beneficial arrangement which provides unique and

specially tailored warehousing and logistic services exclusively to one client, where the

vendor and client share the risks associated with the operation”

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less costly than private warehousing and more costly than public warehousing

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potentially offers the same degree of control as private warehousing due to the contract

specifications

Factors that determine when to utilize contract warehousing

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Capital investment is not required

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Costs are lower than for private warehousing

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Costs are fixed for the life of the contract

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Additional services are usually provided by the contract warehouse

Multiclient warehousing

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mixes attributes of contract and public warehouses

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Services are purchased through minimum one-year contracts.

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attractive to smaller organizations

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that don't have sufficient volumes to build their own storage facilities

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that don't have sufficient volume to justify using contract warehousing

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have regular but not continuous needs for specialized equipment or services

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can benefit from working with other companies that have similar needs or

requirements

Other warehousing options

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Drop shipping

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a retail fulfillment method where a seller doesn't keep the products it sells in

stock. Instead, when a store sells a product using the drop shipping model, it

purchases the item from a third party, such as a manufacturer or other

wholesalers, and has it shipped directly to the customer.Warehouse layout and design

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Randomized storage:

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Places items in the closest available slot, bin, or rack

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Dedicated storage:

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Places items in a permanent location within a warehouse

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Complementarity:

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Items that are typically ordered together are stored together.

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Popularity:

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Items are stored based on inventory turnover rates or demand rates

Design considerations in warehousing

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The efficiency and effectiveness of order picking and assembling

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Velocity slotting: slot the most frequently picked items in the most accessible location to

reduce travel distance

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A well-thought-out slotting plan can influence labor cost, pick and replenishment

efficiency, and order accuracy

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build out (horizontal) versus build up (vertical)

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The general rule of thumb is that it is cheaper to build up than build out

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Warehousing equipment costs tend to increase

Warehouse management strategies

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Warehouse management systems (WMS)

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Support of JIT operations

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Outsourcing of warehousing to third parties and the development of strategic partnerships

and alliances

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Minimizing environmental and energy impacts, improving the sustainability aspects of

warehousing.Planning Support: Warehouse Management Systems (WMS)

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WMS are software tools used mainly to control and optimize warehouse operations

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These systems have both transaction and planning capabilities

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The core capability is designed to parallel key warehousing functions such as product

receiving, putaway, packing, and shipment.

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For each function, the WS controls and optimizes operations

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WMS systems are designed not only to maintain control of operations, but also to

optimize them.

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The main benefits of a WMS system are:

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Better utilization of warehouse capacity, improved operational efficiency, better

visibility of the order process, and better utilization of labor resources

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On the other hand, WMS software:

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It is expensive to acquire an implement

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In many cases, warehouse processes have to be redesigned to match the

requirements of the WMS

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WMS software systems are generally best suited to large warehousing operations

Warehouse productivity

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Productivity

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The ratio of real output to real input (number of cases handled per labor-hour)

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Utilization

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ratio of capacity used to available capacity (warehouse employee-hours worked

versus employee hours available)

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Performance:

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Ratio of actual output to standard output (number of cases picked per hour versus

some standard rate)

Factors Determining the Size of Warehouses

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Cost of rental, leasing, or construction

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Synergies associated with increasing the height for storing products or materials

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customer service levels

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product characteristics, such as size, number, throughput rates, and return rates (reverse

logistics)

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type of materials handling equipment usedFactors determining the number of warehouses

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Cost of lost sales (varies)

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Inventory costs (increase with the number of facilities)

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Warehousing costs (increase with the number of facilities)

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Transportation costs (generally decline as the number of warehouses increases)

Warehouses Location Analysis

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Market positioned

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production positioneded

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Intermediately position