T&d_batch Ii (class1)

Transportation and Distribution Management PGDSCM –Sem2

Transportation and Distribution Management

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Transportation and Distribution Management PGDSCM –Sem2

Coverage for Today

 Introduction to SCM  Role of Distribution in SCM  Distribution Channel Design  Distribution Network Models

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Transportation and Distribution Management PGDSCM –Sem2

SCM Evolution Stage one : Baseline Material flow

Customer service

Purchasing Material Control Production SalesDistribution

Stage two : Functional integration Material flow Materials Management

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Customer service

Manufacturing Management Distribution 3

Transportation and Distribution Management PGDSCM –Sem2

SCM Evolution – Achieving an integrated supply chain

Stage three : Internal integration Material flow

Materials Management

Customer service

Manufacturing Management Distribution

Stage four : External integration Material flow

Suppliers © CII Institute of Logistics

Customer service

Internal supply chain 4

Customers

Transportation and Distribution Management PGDSCM –Sem2

Logistics --Introduction



Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory and the related information flows through the organization and its marketing channels for the cost effective fulfillment of customers’ orders.

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Transportation and Distribution Management PGDSCM –Sem2

Supply Chain Management-Definition



Supply chain Management(SCM) is the network of organizations that are involved through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer.

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Transportation and Distribution Management PGDSCM –Sem2

SCM Four key processes involved are • Plan • Source • Make • Deliver

PLAN

Vendors

SOURCE

DELIVER

Customers MAKE © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

SCM-Process flows OPERATIONS TECHNOLOGY supplies

Material storage

production

Distributetin

MATERIALS FLOW CASH

suppliers

---------------------------customers INFORMATION FLOW

Supply planning

Production scheduling

Production planning

INFORMATION TECHNOLOGY © CII Institute of Logistics

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Sales forecasting

Contribution of Integrated approach Using SCM principles

PURCHASE 30 to 50 %

MANUFACTURE 5 to 10 %

Transportation and Distribution Management PGDSCM –Sem2

DISTRIBUTE 30 to 50 %

Non durable Consumer goods E.g.. Toothpaste, Soap

60 to 70 %

10 to 15 %

10 to 25 %

Durable White goods E.g.. Washing Machine

30 to 50 %

30 to 50 %

5 to 10 %

Heavy Manufacturing E.g.. Industrial Equipment © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

Velocity – Visibility - Value In Today’s Environment:

Economic uncertainty  New competitors  Accelerated business cycles  Increased market and regulatory focus 

You Need:

Faster Access (Velocity) To Better Information (Visibility) For meeting customer expectations((Value) To Increase Your Business Sustainability

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Transportation and Distribution Management PGDSCM –Sem2

Goal and Principle of SCM



SCM goal:



SCM Principles:

     

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Providing enhanced value to customers at the least Total cost Value, Velocity and Visibility Ultimate customer focus Network of organizations working for common purpose and mutual benefits Process orientation Total systems thinking

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Transportation and Distribution Management PGDSCM –Sem2

Distribution Defined

The National Council of Physical Distribution Management (NCPDM) now known as The Council for Logistics defines Physical Distribution as: Physical distribution is a broad range of activities concerned with efficient movement of finished goods, products from the end of the production line to the customer. In some cases includes movement of raw material from the source of supply to the beginning of the production line. These activities include freight, transportation, material handling, protective packaging, order processing and customer service.

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Transportation and Distribution Management PGDSCM –Sem2

Inter-related activities in Distribution

 Transportation  Warehousing  Inventory  Order Processing  Location Planning

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Transportation and Distribution Management PGDSCM –Sem2

Key Decisions in Distribution Channel Design

 Cost  Service level

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Transportation and Distribution Management PGDSCM –Sem2

Customer Service Dimensions

 Delivery Lead Time  Product mix  Availability of products  Overall Customer satisfaction  Order visibility  Handling of returns

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Transportation and Distribution Management PGDSCM –Sem2

Cost Dimensions

 Inventory  Transportation  Warehousing  Information

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Transportation and Distribution Management PGDSCM –Sem2

Delivery Lead Time Number of Warehouses

Delivery Lead time

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Transportation and Distribution Management PGDSCM –Sem2

Inventory Costs

Inventory Costs

Number of Warehouses

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Transportation and Distribution Management PGDSCM –Sem2

Transportation Costs Transportation Costs

Number of Warehouses

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Transportation and Distribution Management PGDSCM –Sem2

Warehouse Cost Total Warehouse Facility cost

Number of Warehouses

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Transportation and Distribution Management PGDSCM –Sem2

Factors influencing Distribution Network Models

 Will the product be delivered directly to the customer? the customer pick up the product from the pre-decided  Will site? there be intermediaries (warehouse, retailers,  Will stockists) involved in the distribution network?

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Transportation and Distribution Management PGDSCM –Sem2

Major Network Design Decisions • Number & locations of facilities (plants, warehouses & stores) • Capacities (size) of facilities • Product mix at plants • Allocation of plants to warehouses • Allocation of warehouses to stores Store 1 Plant 1 WH 1

Store 2

WH 2

Store 3

Plant 2 Plant 3 Store 4 © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

Objective of Network Design

Balance service level against • Production/ purchasing costs • Inventory carrying costs • Facility costs (storage, handling and fixed costs) • Transportation costs Goal: find a minimal-annual-cost configuration of the distribution network that satisfies product demands at specified customer service levels. © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

Key Steps in the Network Design Process

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Transportation and Distribution Management PGDSCM –Sem2

Ex : Model

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Transportation and Distribution Management PGDSCM –Sem2

Distribution Network Model Options

 Direct Delivery from Manufacturer to customer through in-transit mixing from the manufacturer  Delivery storage facility  Delivery through the manufacturer distribution centre pick up from the manufacturer facility or  Customer distribution centre

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Transportation and Distribution Management PGDSCM –Sem2

Distribution Network Model Variables

 Response time  Product variety  Product availability  Customer experience  Order visibility  Inventory levels  Transportation cost  Warehousing cost  Information cost

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Transportation and Distribution Management PGDSCM –Sem2

Comparing Distribution Network Models

Direct delivery from the manufact urer to the customer

Delivery through in-transit mixing from the manufactur er storage facility

Delivery through packaged carrier delivery from the distributor storage facility

Customer pickup from the manufact urer/distri butor storage facility

Respo nse tim e

5

3

2

1

Pr od uc t va rie ty

1

1

3

3

Pr od uc t a va ila bi lit y

1

1

2

3

Cust ome r ex per ience

5

4

3

2

Ord er visib ilit y

5

5

3

2

Invent ory levels

1

1

3

3

Tra nspo rt ation co st

5

3

3

1

Wa rehousin g c ost

1

1

3

4

Infor ma tio n cost

5

5

2

3

© CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

The Best Distribution Model in the World

Error Rate : 1 in 16 million transactions • Six Sigma performance (99.999999) • Technological Backup : Nil. • Cost of service - Rs. 200/month ($ 4.00/month) • Standard price for all (Weight, Distance, Space) • Rs. 50 Cr. Turnover approx. [200,000*200=400,000,00 p.m. i.e 48 crore p.a.] • “No strike” record as each one a share holder • Earnings -5000 to 6000 p.m.

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Transportation and Distribution Management PGDSCM –Sem2

Dabbawallas - The Flow Logic Point of Aggregation And Sorting

Zones

Point of Aggregation And Sorting

Churchgate

T1

T5 T2

T3

T4 Collection

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Distribution By Carriers

Transportation and Distribution Management PGDSCM –Sem2

Transportation and Distribution Management Faculty : N. Chandrasekaran Sr. Consultant & Head CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

Coverage for Today

 Distribution Network Design  Role of Transportation in SCM  Transportation Design Options  Modes of Transportation and Performance Characteristics Transportation –issues and performance  Road characteristics  Performance Metrics for Road transportation

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Transportation and Distribution Management PGDSCM –Sem2

The Strategic Importance of Network Design • Considering the rate at which the business environment is changing, logistics facilities are under pressure to keep current. • In many companies, change has happened recently or is scheduled for the near future. • With capital being both scarce and expensive, facilities decisions become more important. © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

Major Network Design Decisions • number & locations of facilities (plants, warehouses & stores) • capacities (size) of facilities • product mix at plants • allocation of plants to warehouses • allocation of warehouses to stores Store 1 Plant 1 WH 1

Store 2

WH 2

Store 3

Plant 2 Plant 3 © CII Institute of Logistics

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Store 4

Transportation and Distribution Management PGDSCM –Sem2

Objective of Network Design Balance service level against • Production/ purchasing costs • Inventory carrying costs • Facility costs (storage, handling and fixed costs) • Transportation costs Goal: find a minimal-annual-cost configuration of the distribution network that satisfies product demands at specified customer service levels. © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

Key Steps in the Network Design Process

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Transportation and Distribution Management PGDSCM –Sem2

Ex : Model

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Transportation and Distribution Management PGDSCM –Sem2

Network Design Problem

• Problem :Given facility locations (plants, warehouses), find the best distribution strategy from plants to warehouses to markets.

Approaches to Use: Heuristics and Exact Algorithms

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Transportation and Distribution Management PGDSCM –Sem2

Finding Best Distribution Strategy

    

Single product Two plants p1 and p2 -- Plant p1 has unlimited capacity, p2 has an annual capacity of 60,000 units -- The two plants have the same production costs. Two warehouses w1 and w2 with identical warehouse handling costs, both having unlimited capacity Three market areas c1, c2 and c3 with annual demands of 50,000, 100,000 and 50,000, respectively Unit distribution costs: w1 w2

p1

p2

c1 c2

c3

0 5

4 2

3 2

5 2

4 1

Problem: Find a distribution strategy that specifies the flow of products from plants to warehouses to markets with minimum total distribution cost © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

Network - Problem

capacity unlimited

markets demand plants

0

P1

warehouses W1

2 2

W2

C2

40

100K

1 2 C3

© CII Institute of Logistics

50K

5

4 P2

C1

4

5

60K

3

50K

Transportation and Distribution Management PGDSCM –Sem2

A Heuristic approach For each market, choose the cheapest warehouse, and for each warehouse, choose the cheapest plant

plants unlimited

0

P1 140K

warehouses

P2

3

W1

50K

5 2 2

60K

W2

C2

100K

1 2

200K

For every market, W2 is picked

Total cost = 5×140 + 2×60 + 2×50 41+ 1×100 + 2×50 = 1120K

© CII Institute of Logistics

C1

4

5 4

60K

markets

C3

50K

Transportation and Distribution Management PGDSCM –Sem2

Linear Programming

Three components

 Objectives  Variables  Constraints

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Transportation and Distribution Management PGDSCM –Sem2

Solution by LP capacity

plants unlimited P1

0

warehouses W1

5 4

60K

P2

2 2

W2

markets demand C1 50K

3 4 5

C2 100K 1 2 C3 50K

Define Decision Variables: X(P1,W1) X(P1,W2) X(P2,W1) X(P2,W2)

© CII Institute of Logistics

= = = =

amount amount amount amount

sent sent sent sent

from P1 from P1 from P2 from P2

to to to to

W1 X(W1,C1) W2 X(W1,C2) W1 X(W1,C3) W2 X(W2,C1) X(W2,C2) X(W2,C3) 43

= = = = = =

amount amount amount amount amount amount

sent sent sent sent sent sent

from from from from from from

W1 W1 W1 W2 W2 W2

to to to to to to

C1 C2 C3 C1 C2 C3

Transportation and Distribution Management PGDSCM –Sem2

min Z = 0x ( p1,w 1) + 5x ( p1,w 2) + 4 x ( p2,w 1) + 2x ( p2,w 2) + 3x (w 1,c1) + 4 x (w 1,c 2) + 5x (w 1,c 3) + 2x (w 2,c1) + x (w 2,c 2) + 2x (w 2,c 3) subject to: x ( p2,w 1) + x ( p2,w 2) ≤ 60,000

Total Distributi on Cost

Capacity constraint at plant 2

x ( p1,w 1) + x ( p2,w 1) = x (w 1,c1) + x (w 1,c 2) + x (w 1,c 3) x ( p1,w 2) + x ( p2,w 2) = x (w 2,c1) + x (w 2,c 2) + x (w 2,c 3)

Flow conservation at warehouse 1 (flow in = flow out)

Flow conservation at warehouse 2

x (w 1,c1) + x (w 2,c1) = 50,000 x (w 1,c 2) + x (w 2,c 2) = 100,000

Flows to customer 1 has to be equal to its demand Flows to customer 2 has to be equal to its demand

x (w 1,c 3) + x (w 2,c 3) = 50,000

Flows to customer 3 has to be equal to its demand

All flows greater than or equal to zero © CII Institute of Logistics

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Non-negativity constraints

Transportation and Distribution Management PGDSCM –Sem2

Optimal Solution The solution to the problem can be obtained via Excel Solver (see Excel File) Facility Warehouse

Optimal Solution p1

p2

c1

c2

c3

w1

140,000

0

50,000

40,000

50,000

w2

0

60,000

0

60,000

0

Optimal Total Cost: $740,000 Recall: Total cost by Heuristic = $1120,000 © CII Institute of Logistics

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LP has huge advantage over heuristic!!

Transportation and Distribution Management PGDSCM –Sem2

A Framework for Structuring Drivers

Efficiency

Responsiveness Supply chain structure

Facilities

Transportation

Inventory

Drivers

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Information

Transportation and Distribution Management PGDSCM –Sem2

Cost Breakup* Supply Chain Cost --Break Up Across Processes Other Costs 6% Cost of dam ages 5%

Return Inventory Cost 4%

Cost of Transit Losses 5%

Return Processing Cost 4%

In bound Transportation Cost 28%

Inventory Carrying Cost 13% Warehousing Cost 7%

Out bound Transportation Cost 28%

Inbound and Outbound Transportation Costs together account for 55% of total supply chain costs. Inventory and Warehousing Costs account for 20%. *automotive industry © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

Transportation

 Role in the supply chain  Role in the competitive strategy  Components of transportation decisions

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Transportation and Distribution Management PGDSCM –Sem2

Transportation: Role in the Supply Chain

 Moves the product between stages in the supply chain  Impact on responsiveness and efficiency transportation allows greater responsiveness but  Faster lower efficiency  Also affects inventory and facilities

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Transportation and Distribution Management PGDSCM –Sem2

Transportation: Role in the Competitive Strategy responsiveness is a strategic competitive priority, then  Iffaster transportation modes can provide greater

  

responsiveness to customers who are willing to pay for it Can also use slower transportation modes for customers whose priority is price (cost) Can also consider both inventory and transportation to find the right balance Example 3.3: Laura Ashley

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Transportation and Distribution Management PGDSCM –Sem2

Components of Transportation Decisions

 Mode of transportation:  

air, truck, rail, ship, pipeline, electronic transportation vary in cost, speed, size of shipment, flexibility

 

route: path along which a product is shipped network: collection of locations and routes

 Route and network selection

 In-house or outsource  Overall trade-off: Responsiveness versus efficiency

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Transportation and Distribution Management PGDSCM –Sem2

Transportation - Importance

• • • • •

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Critical Driver of Economic Activity Provides place value for goods. Most Visible Element in Supply Chain Operations Usually corners 70% of the total supply chain costs. Larger the area to be serviced, the greater the complexity.

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Transportation and Distribution Management PGDSCM –Sem2

Transport Costs

© CII Institute of Logistics

•

Fixed Costs

•

Variable Costs

•

Mixed Costs

•

Weight Volume Conversion

• • • • •

For a Trip For a Period

Per Kg Per Km Fixed plus Variable

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Transportation and Distribution Management PGDSCM –Sem2

Trade Off in Transportation Choice

• • •

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Cost of Movement Cost of Inventory Cost of Obsolescence.

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Transportation and Distribution Management PGDSCM –Sem2

Transportation Design • Direct Shipment Network • Direct Shipment with Milk Runs • All Shipments via Central Distribution Center • Shipments via Distribution Center with Milk Runs • Tailored Network © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

Transportation Modes

MODES OF TRANSPORTATION

Roadways

Railways

Airways

Ropeways

Pipelines

Waterways

Intermodal

Regular freight Package carrier Domestic water trans port

Coasta l

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Foreign water

Inland

trans port

Transportation and Distribution Management PGDSCM –Sem2

Airways both freight as well as  Carry passengers costs and Manpower  Fuel costs are single biggest cost

 

drivers – Variable costs Benefit of faster delivery time Most expensive mode of transportation

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Transportation and Distribution Management PGDSCM –Sem2

Airways

 Key Issues  Location/Number of hubs  Location of fleet bases / crew bases  Schedule optimization  Fleet assignment  Crew scheduling  Yield management

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Transportation and Distribution Management PGDSCM –Sem2

Road Transportation

Road transportation is the pre-dominant mode of transportation of goods in the country and accounts for more than 75% of the total freight cost.

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Transportation and Distribution Management PGDSCM –Sem2

Road Transportation

 Can be classified as TL and LTL  Average growth of this mode is around 8% the backbone of the transportation network in the  Iscountry

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Transportation and Distribution Management PGDSCM –Sem2

Truckload (TL) Average haul = 350-400 Km/Day • Average Capacity = 9 -12 T • Low fixed and variable costs • Major Issues – Utilization – Consistent service – Backhauls

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Transportation and Distribution Management PGDSCM –Sem2

Less Than Truckload (LTL) • • •

Average haul = 450-500 km/day Higher fixed costs (terminals) and low variable costs Major Issues – Location of consolidation facilities – Utilization – Vehicle routing – Customer service

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Transportation and Distribution Management PGDSCM –Sem2

Rail Transportation

This is a mode of transportation operated only by the Government in India. But in other countries there are many private players like in North America the major operators are Canadian National, CSX Transportation.

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Transportation and Distribution Management PGDSCM –Sem2

Rail Transportation mode is used for transportation of high density or high  This weight cargo over very long distances in cases where the

  

cargo is not time sensitive –coal, food grains, cement The rail transport has a very high fixed cost because of the locomotives, wagons (cars) and the yards. The focus of the rail transportation operators is to reduce the idle time or wait time for the train. The major issues at rail roads are vehicle and staff scheduling, track maintenance and repair, availability of empty wagons.

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Transportation and Distribution Management PGDSCM –Sem2

Sea/ Water/Marine Transportation

Historically water transport is the earliest form of transportation. It can be classified as –domestic and foreign water transport

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Transportation and Distribution Management PGDSCM –Sem2

Sea/ Water/Marine Transportation mode of transport is ideally suited for shipment of  This very large shipments at low cost. slowest mode of transport because of the slower in  the transit time, wait time and ports and loading and

 

unloading time from ships In global trade this is the dominant mode of shipment. The range of products handled is also diverse –cars, food grains, fertilizers, cement, agricultural produce etc;

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Transportation and Distribution Management PGDSCM –Sem2

Sea/ Water/Marine Transportation major issues faced for the growth of this mode of  The transportation are:

   

© CII Institute of Logistics

Inadequate dredging facilities preventing usage of large capacity vessels Port equipment and operational constraints Lack of sufficient container handling facilities Usage of IT tools for planning and coordination is low

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Transportation and Distribution Management PGDSCM –Sem2

INTERMODAL TRANSPORTATION

 MORE THAN ONE MODE IS USED. ONLY OPTION FOR INTERNATIONAL  MOSTLY MOVEMENTS GROWING DUE TO RISE IN GLOBAL  CONSIDERABLY TRADE  CRITICAL FACTOR FOR SUCCESS ::

-EXCHANGE OF INFORMATION TO FACILITATE SHIPMENT TRANSFERS BETWEEN DIFFERENT MODES

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Transportation and Distribution Management PGDSCM –Sem2

Comparative Transportation Modes

Rail

High fixed cost in equipment, terminals, tracks, wagons etc and low variable cost

Road

Low fixed cost and medium variable cost (fuel, maintenance etc)

Water

Medium fixed cost (ships and equipment) and low variable cost

Pipeline

Highest fixed cost (construction, pumping equipment) and lowest variable cost

Air

Low fixed cost (aircraft, cargo handling) and high variable cost ( fuel labour, maintenance)

© CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

FUNCTIONS IN ROAD TRANSPORTATION

I N F R A S T R U C T U R E

M A T L. H A N D L I N G

PLANNING PLACEMENT LOADING & VANNING ROUTE MGMT & TRACKING DELIVERY

M A N P O W E R S K I L L S

EFFICIENT & EFFECTIVE FLEET MANAGEMENT. © CII Institute of Logistics

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M E T H O D S & P R O C

Transportation and Distribution Management PGDSCM –Sem2

LOGISTICS SERVICES

Production line

Suppliers / Sub. Contracts Plant Warehouse / Factory Plant Warehouse

CKD / Export Warehouse

Regional / Spare Parts Warehouse

AIR PORT / HARBOUR

Other - Regional / Spare Parts Warehouse © CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

EFFECTIVE & EFFICIENT FLEET MANAGEMENT



INGREDIENTS::

• • • • • •

© CII Institute of Logistics

CAPACITY UTILIZATION “ON ROAD” PERIOD MAINTENANCE OF TRANSIT TIME TRACKING TURN-AROUND TIME FUEL AND WEAR & TEAR MANAGEMENT

72

Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING DECISIONS IN TRANSPORTATION



TWO PLAYERS IN ANY TRANSPORTATION ACTIVITY

•

SHIPPER :: ONE WHO WANTS THE TRANSPORTATION DONE

•

CARRIER :: ONE WHO EXECUTES THE TRANSPORATION

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING DECISIONS IN TRANSPORTATION



FACTORS AFFECTING SHIPPER DECISIONS ::

• • • • •

© CII Institute of Logistics

TRANSPORTATION COST INVENTORY COST FACILITY COST PROCESSING COST SERVICE LEVEL COST

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING SHIPPER DECISIONS IN TRANSPORTATION



TRANSPORTATION COST

 

© CII Institute of Logistics

TOTAL AMOUNT PAID TO THE CARRIERS FOR TRANSPORTING GOODS FROM POINT ‘A’ TO ‘B’ INCLUDES ALL COSTS SUCH AS DOCUMENTATION, STATUTORY ETC.,

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING SHIPPER DECISIONS IN TRANSPORTATION



INVENTORY COST::

 

© CII Institute of Logistics

COST OF HOLDING THE INVENTORY INCURRED BY THE SHIPPER’S SUPPLY CHAIN NETWORK INCLUDES THE ACTUAL ICC & THE RISK COST DUE TO CARRIERS PERFORMANCE

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING SHIPPER DECISIONS IN TRANSPORTATION

 

FACILITY COST::



COST OF VARIOUS FACILITIES IN THE SUPPLY CHAIN NETWORK

PROCESSING COST :: COST OF LOADING / UNLOADING ORDERS & OTHER PROCESSING COSTS ASSOCIATED WITH TRANSPORTATION

© CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING SHIPPER DECISIONS IN TRANSPORTATION



SERVICE LEVEL COST::

  

COST OF NOT BEING ABLE TO MEET THE DELIVERY COMMITMENTS IN SOME CASES, IT IS SPECIFIED CLEARLY IN CONTRACTS, IN OTHERS IT IS REFLECTED AS CUSTOMER SATISFACTION CONSIDERED VITAL FOR STRATEGIC PLANNING & OPERATIONAL DECISIONS

© CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING DECISIONS IN TRANSPORTATION



FACTORS AFFECTING CARRIER DECISIONS

• • • • •

VEHICLE RELATED COST FIXED OPERATING COST TRIP RELATED COST QUANTITY RELATED COST OVERHEAD COST

© CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING CARRIER DECISIONS IN TRANSPORTATION



VEHICLE RELATED COST



COST THE CARRIER INCURS FOR THE PURCHASE / LEASE / HIRED THE MEDIUM OF TRANSPORT



WHEN PURCHASED / LEASED THIS COST IS INCURRED WHETHER THE MEDIUM IS USED OT NOT.

© CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING CARRIER DECISIONS IN TRANSPORTATION



FIXED OPERATING COST::

 

ANY COST ASSOCIATED WITH TERMINAL, AIRPORT GATES & LABOR ( INCURRED WHETHER MEDIUM IS USED OR NOT) THIS IS GENERALLY PROPORTIONALTO THE SIZE OF OPERATING FACILITY

© CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING CARRIER DECISIONS IN TRANSPORTATION



TRIP RELATED COST::



COST INCURRED EACH TIME THE TRANSPORTATION MEDIUM IS USED.

( eg. COST OF FUEL, WAGES FOR THE DRIVER / LABOR FOR A TRUCK)  DEPENDS ON THE LENGTH AND DURATION OF THE TRIP BUT INDPENDANT OF QUANTITY SHIPPED ( LARGELY)

© CII Institute of Logistics

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Transportation and Distribution Management PGDSCM –Sem2

FACTORS AFFECTING CARRIER DECISIONS IN TRANSPORTATION

 

QUANTITY RELATED COST::



LOADING / UNLOADING COST & THE THAT PROPORTION OF FUEL COST DUE TO QUANTITY VARIATION

OVERHEAD COST ::



COST OF PLANNING & SCHEDULING THE TRANSPORTATION NETWORK AND THE INVESTMENT IN “IT”.

© CII Institute of Logistics

83

Transportation and Distribution Management PGDSCM –Sem2

EFFECTIVE & EFFICIENT FLEET MANAGEMENT



INGREDIENTS::

• • • • • •

© CII Institute of Logistics

CAPACITY UTILIZATION “ON ROAD” PERIOD MAINTENANCE OF TRANSIT TIME TRACKING TURN-AROUND TIME FUEL AND WEAR & TEAR MANAGEMENT

84

Transportation and Distribution Management PGDSCM –Sem2

TRACKING IN TRANSPORTATION

    

© CII Institute of Logistics

VERY IMPORTANT ASPECT REMOVES THE UNCERTAINITY HELPS IN CONTIGENT ACTION IN CASE OF EXIGENCY DISCIPLINES THE DRIVERS AND BRINGS IN IMPROVED ROUTE MGMT HAS TO BE REAL TIME TRACKING

85

Transportation and Distribution Management PGDSCM –Sem2

DEVELOPMENTS ON TRACKING IN TRANSPORTATION

     

SIMPLE TELEPHONY ELECTRONIC DATA INTERCHANGE GLOBAL POISITONING SYSTEMS GROUND SATELITE MOBILE COMMUNICATION GEOGRAPHIC INFORMATION SYSTEM & INTELLIGENT VEHICLE – HIGHWAY SYSTEM HYBRID OF SOME OF ABOVE

© CII Institute of Logistics

86

METRICS

Transportation and Distribution Management PGDSCM –Sem2

PROCESS RESOURCE MANPOWER

DESPATCHING

MATL. HANDLING EQUIPMENT Loading Efficiency

TIME SPACE

Dispatching Efficiency

SOP SLA With CUSTOMER © CII Institute of Logistics

87

METRICS

Transportation and Distribution Management PGDSCM –Sem2

DESPATCHING RESOURCE Loading Efficiency MANPOWER 1. Load Volume (Value) / Man 2. Loading Time / Consignment 3. Equipment Up-time 4. Adherence to Vanning Plan 8. Adherence to pre-loading checklist

MATL. HANDLING EQUIPMENT TIME SPACE SOP SLA With CUSTOMER

© CII Institute of Logistics

88

METRICS

Transportation and Distribution Management PGDSCM –Sem2

DESPATCHING RESOURCE Dispatching Efficiency MANPOWER MATL. HANDLING EQUIPMENT

1. Vehicles handled / Man or Group 2. Turn-around Time / Vehicle 3. Correctness of Documents 6. Vehicle Departure Notification

TIME SPACE SOP SLA With CUSTOMER

© CII Institute of Logistics

89

Transportation and Distribution Management PGDSCM –Sem2

THE IMPACT OF SMALL IMPROVEMENTS IN ROAD TRANSPORTATION



PRODUCTIVITY IMPROVEMENT ::

  

© CII Institute of Logistics

1 HOUR MORE ON THE ROAD DAILY = 40 KM/DAY/TRUCK REDUCTION IN TURN-AROUND BETWEEN TRIPS FOR EVERY 1 HOUR SAVED / TRIP = RESULTS IN 40 KMs OF ADDITIONAL RUNNING

90

Transportation and Distribution Management PGDSCM –Sem2

CRITICALITY OF PRE DISPATCHING PROCESSES



Pre-dispatching Process::

•  

© CII Institute of Logistics

Vehicle / Container Planning ::Required / Planned / Placed Job Allocation ::Manpower, Equipment etc., Route Planning -Multiple Delivery Point & Load / delivery point

91

Transportation and Distribution Management PGDSCM –Sem2

CRITICALITY OF PRE DISPATCHING PROCESSES



Post Loading Process

• • 

© CII Institute of Logistics

Driver Briefing Ship-out Notification Truck / Container Number / Driver Name, Destinations etc.,

92

Transportation and Distribution Management PGDSCM –Sem2

OUTSOURCING OF TRANSPORTATION ACTIVITY

 

CURRENT LEVEL OF OUTSOURCING OF OUTBOUND & INBOUND IN INDIA BY COMPANIES IS OVER 54% FOR OUTSOURCING, O/B IS CONSIDERED IS PLACED SLIGHTLY HIGHER LEVEL OF IMPORTANCE AT 4 IN A 5 POINT SCALE, THAN I/B WHICH IS AT 3.4.

© CII Institute of Logistics

93

Transportation and Distribution Management PGDSCM –Sem2

CRITICAL SUCCESS FACTORS IN ROAD TRANSPORTATION

 DEPENDABLE PLACEMENT  RELIABLE TRANSIT  ERROR-FREE DELIVERY  DAMAGE-FREE HANDLING & DELIVERY  ACCURATE DOCUMENTATION

© CII Institute of Logistics

94

Transportation and Distribution Management PGDSCM –Sem2

Direct Delivery from supplier to XYZ Plant Supplier to Hub From Hub to XYZ Plant

Ludhiana = 20457

21

Gurgaon

68

610

04

48

71099

Ambattur

Katpadi 713

1

28

13

Mathura = 8910

Gudur

28

Haryana = 30143

43804

12

Faridabad

Delhi = 1494

42667

8694

0

1 66492

Madurai

Jamshedpur 13 2

Chennai

Trichy

5

2 79

21

3 39

1848 69

41

7

Ahmedabad = 3103

5

70

Kolhapur = 28187

76

190

29324

Bangalore

Thane =

11 36

© CII Institute of Logistics

Pune = 7

u gp a N

22

Na sik =

r=

8 43

4917

Pune

Mumbai = 24823

94

48599

51

Miraj = 600

31

4

15

Pondy XYZ PONDY

76746

Hosur

4 39

XYZ Chennai

Coimbatore 7

1034

Mysore 95

XYZ Mysore

Transportation and Distribution Management PGDSCM –Sem2

Coverage for Next Session

 Marine Transportation  Air Cargo Transportation  Role of IT in Transportation  Comprehensive case on Transportation and Distribution

© CII Institute of Logistics

96

Transportation and Distribution Management PGDSCM –Sem2

THANK YOU

© CII Institute of Logistics

97