Chapter 9 logistics management

LEARNING OBJECTIVESYou should be able to:  Understand the impact of transportation on company and SCM  Identify the various modes of transportation  Understand the impact of warehousi

LOGISTICS

MANAGEMENT

Chapter 9

LEARNING OBJECTIVES

You should be able to:

 Understand the impact of transportation on company and SCM

 Identify the various modes of transportation

 Understand the impact of warehousing on company and SCM

 Understand the key issues of international

transportation

 Examine the interrelatedness of transportation,

warehousing, & material handling

LEARNING OBJECTIVES

(Continued)

 Identify a number of third-party logistics service providers

 Summarize the important aspects of transportation

regulation and deregulation

 Describe the various reverse logistics activities

 Discuss some of the e-commerce issues in logistics

management

CHAPTER OUTLINE

• Introduction

• The Fundamentals of Transportation

• Warehousing and Distribution

• The Impacts of Logistics on Supply Chain Management

• Environmental Sustainability in Logistics

• Logistics Management Software Applications

• Global Logistics

• Reverse Logistics

Logistics is necessary to:

 Move goods from suppliers to buyers

 Move finished goods to the customer

Products have little value to the customer until they are moved to the customer’s point of consumption

 Time utility- products are delivered at the right

time

 Place utility- products are delivered to the

Introduction (Continued)

Logistics is:

“…that part of supply chain management that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from point

of origin to point of consumption in order to meet customer requirements.”

Council of Supply Chain Management

Professionals

Importance of transportation

• Transportation cost account from 3% -6% of

In Viet Nam

 Logistics cost of VN : Est 20 - 25% GDP

 Transportation cost of VN accounts from 60% Logistics cost.

40- Transportation cost accounts around 20-25% product cost which is produced in VN

The Objective of Transportation

 Minimize transportation cost to help reduce

product/service cost for firm

 Deliver goods/services to correct address,

correct timing for clients

 Satisfy customer needs

The Fundamentals of Transportation

Legal Forms of Transportation Transportation

service companies are classified legally as either

common, contract, exempt, or private carriers.

 Common carriers- offer transportation services

to all shippers at published rates between

designated locations without discrimination.

 Contract carriers- not bound to serve the general public Contract carriers serve specific

customers under contractual agreements.

The Fundamentals of Transportation (Continued)

Legal Forms of Transportation

 Exempt carriers - exempt from regulation of

services & rates & if they transport certain exempt products like produce, livestock,

coal, or newspapers.

 Private carrier - not subject to economic

regulation & typically transports goods for

the company owning the carrier

The Fundamentals of Transportation (Continued)

Modes of Transportation

Motor Carriers (trucks)- most flexible mode of

transportation & carries > 80% of U.S freight

Competes w/rail & air for short-to-medium hauls

 Less-than-truckload (LTL) & truck-load (TL) carriers

move small shipments & fees are higher

 General freight carriers carry the majority of goods shipped & include common carriers

 Specialized carriers transport liquid petroleum,

household goods, building materials, & other

specialized items

The Fundamentals of Transportation (Continued)

Modes of Transportation

Rail Carriers- compete when the distance is long & the

shipments are heavy or bulky

 Rail slow & inflexible, but have begun purchasing motor carriers & can thus offer point-to-point pickup & delivery service known as trailer-on-flatcar (TOFC) service.

 Rail companies use each other’s rail cars Keeping track

of rail cars & getting them where needed can be

problematic

The Fundamentals of Transportation (Continued)

Modes of Transportation

Air Carriers - Expensive relative to other modes but

fast Air carriers transport about 5 % of U.S freight.

 Airlines cannot carry extremely heavy or bulky cargo

 For light, high value goods over long distances quickly Most small cities & towns do not have airports

 Half of the goods transported by air are carried by

freight–only airlines, FedEx.

The Fundamentals of Transportation (Continued)

Modes of Transportation

Water Carriers- Inexpensive, slow & inflexible

Includes inland waterway, coastal & intercoastal, & deep-sea.

 Inland waterway transportation is used for heavy,

bulky, low-value materials (e.g., coal, grain)

 Competes w/rail & pipeline

 Water carriers are paired w/trucks for door-to-door

The Fundamentals of Transportation (Continued)

Modes of Transportation

Pipeline Carriers - are limited in variety they can carry

 Little maintenance once pipeline is running

 Materials hauled in a liquid or gaseous state

The Fundamentals of Transportation (Continued)

Modes of Transportation

Intermodal – the use of multiple modes of

transportation

 Rail & motor carriers can offer point-to-point pickup &

delivery service known as trailer-on-flatcar (TOFC) service,

container-on-flatcar (COFC), or piggy-back service

 Water & motor can offer point to point service for overseas manufacturers

 RO-ROs or roll-on-roll-off containerships truck trailers &

The Fundamentals of Transportation (Continued)

Transportation Pricing

 Cost of service pricing - varies based on fixed & variable costs

 Value of Service Pricing - services priced at market

bearing competitive levels

 Terms of Sale - includes transportation FOB (free on

board) destination or dock

 Pricing Negotiation - Since deregulation, negotiating

prices has become more common

 Rate Categories - Classified as line haul rates, class rates, exception rates, commodity rates, & miscellaneous rates

The Fundamentals of Transportation (Continued)

 Provides faster & more frequent deliveries & better

customer service

Crossdocking

 To receive, breakdown, repackage, & distribute

components to a manufacturing location or finished

Warehousing &

Importance & Types of Warehouses

 Support purchasing, production, & distribution

 Consolidation warehouses collect LTL shipments for transport in TL or CL quantities

 Disadvantages: Owning a private warehouse

represents a financial risk & loss of flexibility

Public Warehouses

 Owned by for profit orgs & contracted out

combined into specific customer orders.

• Repackaging

• Assembly

• Incoming & outgoing quality inspections.

• Material handling, equipment maintenance, &

documentation services

• Storage

Warehousing &

Warehouse Location

 As the number of warehouses increases, the system

becomes more decentralized

because goods can be delivered faster

 However, warehousing operating & inventory costs also

increase Trade-off between costs & customer service must

be considered

Warehousing &

Warehouse Location

Edgar Hoover recommended –

customers to maximize distribution services &

improve transportation through economies of scale

for firm to collect goods & consolidate

supply source & customers when distribution

Warehousing &

Warehouse Location

 Von Thunen – Optimum location of warehouse is where the transportation cost is minimum So Von Thunen recommended that transportation costs should

be minimized when considering facility location This idea is similar with Weber”s location theory

transportation costs The optimum location is one that maximizes profits, which may not be min cost location

 Other location theory will be discussed more in Chapter 11

Warehousing &

JIT warehousing (Lean Warehousing)

Emphasis on warehousing to support responsive operations:

 Emphasis on cross docking

 Reduced lot sizes & shipping quantities

 Commitment to customers & service quality

 Increased automation

 Increased assembly operations

Warehousing &

Other issues in Transportation &

Warehousing

Third Party Logistics (3PL)

 Provide reliable & timely delivery required by SCM

 Used to significant degree by international

logistics

 Favored by small businesses

 Some firms outsource all of their logistics

needs to a lead logistics provider or fourth

party logistics provider (4PL)

Other issues in Transportation &

International Transportation Issues

International Freight Security

 Transportation across national boundaries

introduces added complexity, particularly

security.

 Since 9/11 there is more conflict between

U.S govt & industry toward more security & restrictions for inbound shipments.

International transportation cost will be more costly and complexly

International Transportation

Global Logistics Intermediaries

 Customs Brokers- move int’ shipments through

customs & handle documentation for firms

 International Freight Forwarders- move goods to

1 Transportation supply base reduction

Performance

Transpotation Management