Unit 3

Unit III
Transportation Management
Transportation
“TRANSPORT is responsible for the physical movement of materials between
points in the supply chain.”
Some entity has to deliver the goods you purchased online

Total Logistics Cost Breakdown
Logistics Cost Breakup
Transportation Strategy - Decisions
 What mode of transport is best?
 Should we run our own transport or use a  Rail

third-party carrier?
 Road
 What kind of vehicles should we use?
 Water
 How do we deal with international transport?
 Air
 What routes should we use?
 Pipeline
 Can we back-haul?
Mode of Transport - Rail
 Rail transport is most commonly used for

heavy and bulky loads over long land journeys
 Trains can maintain a consistent, reasonably

high speed, and can link with other modes to
carry containers and bulk freight
 Monopoly because The main reason for this is

the large investments needed for tracks, rolling
stock and terminals
 One advantage of rail is that once the

infrastructure is in place, it has very high
capacity and low unit costs
Mode of Transport - Rail
 Another advantage of rail is that the unit

transport cost is low, so it can be used to
move large volumes of relatively low-priced
materials, such as coal and minerals
 The main disadvantage of rail is its

inflexibility. All train services have to be
timetabled in advance, so that they can all fit
onto the same tracks
 A more obvious concern is that trains can

only travel along specified routes between
fixed terminals, and cannot stop at
intermediary points. Most customers are
some distance away from these terminals, so
they have to transfer goods by road at both
ends of the journey.
Mode of Transport - Road
 The maximum speed on roads is limited, this ability to give a door-
to-door service avoids transfers to other modes and can give a
shorter overall journey time
 Road transport has the advantage of being able to use extensive

road networks. Unlike rail, these already exist, so users do not have
to build and maintain their own tracks.
 Delivery vans are the small delivery vehicles which can carry a tone
or two in a sealed body.
 Flat-bed lorries are basic, rigid vehicles with two or three axles, and
a flat platform that is used to stack materials. Materials are tied on,
or small sides are added
 Box-bodied lorries are like the flat beds, except they have bodies
added, traditionally with access from the rear.
 Lorry and trailer, which combine a rigid lorry pulling a two-axle

trailer
 weight and size limits mean that road transport is more often used
for smaller loads
Mode of Transport - Water
 over 90% of world trade is moved by sea
 There are basically three types of water transport – rivers and

canals (usually called inland waterways), coastal shipping (moving
materials from one port to another along the coast) and ocean
transport (across the major seas).
 General cargo ships are the standard design, with large holds
that carry any type of cargo
 Bulk carriers carry large quantities of cheap bulk materials in

large holds, such as grain or ores.
 Tankers carry any liquid, but by far the biggest movements are
oil. Because of the economies of scale, these ships are built as big
as possible.
 Container ships are specially designed to carry standard

containers
 Ferries are usually RO-RO (roll-on roll-off) vessels that carry road
vehicles over relatively short distances.
Mode of Transport - Air
 Airlines also carry a significant amount of freight, for
products where speed of delivery is more important
than the cost
 Most common movements are documents and parcel

delivery, with carriers such as Federal Express and UPS.
 There are three main types of operation. The first

type is regular service, where major airlines use the
cargo space in passenger aircraft that is not needed for
baggage
 The second type is cargo service, where operators

run cargo planes on regular schedules. These are
public carriers, moving goods for any customers.
 The third type is charter operations, where a whole

aircraft is hired for a particular delivery.
 To and fro movement & Cost

Choice of Mode
 Value of materials, as expensive items raise inventory
costs and encourage faster modes
 Importance, as even low-value items that would hold up

operations need fast, reliable transport
 Transit times, as operations that have to respond quickly

to changes cannot wait for critical supplies using slow
transport
 Reliability, with consistent delivery often being more

important than transit time
https://www.kearney.com/infrastructure/
 Cost and flexibility to negotiate rates article/?/a/harnessing-the-opportunities-in-
india-s-transportation-infrastructure
 Reputation and stability of carrier
 Security, loss and damage
 Schedules and frequency of delivery
 Special facilities available

Intermodal Transport
 INTERMODAL TRANSPORT refers to journeys that
involve two or more different modes of transport
 Intermodal transport only works if this transfer can be

done efficiently.
 The aim is to give a virtually seamless journey, and the

best way of achieving this is to use modular or unitized
loads
 In effect, all materials are put into standard containers,

and the equipment is arranged to move these containers
 A rule of thumb is that it takes one day to turn around a

containership when it used to take three weeks to turn
around a conventional ship. Over 70% of freight
movements now use containers
 piggy-back transport, where a lorry – or usually just

the trailer – is driven onto a train for fast movement over
a longer distance.
Benefits of Container
 Simplified transport and flow of goods
 Easier and faster handling
 Genuine door-to-door service
 Faster deliveries
 Reduced loss due to damage, misplacement and

pilferage
 Reduced packing costs
 Lower insurance costs
 Separation of incompatible goods
 Use of less congested routes
 Improved transport encourages trade

Ownership of Transport – Own Account
 This has an organization using its own transport fleet to

move its materials.
 This has the advantage of flexibility, greater control,

closer integration of logistics and easier
communications.
 Transport can also be tailored to the organization's

needs, with the best type of vehicles, fleet size, delivery
schedule, customer service, and so on.
 Most own account fleets are financed by some form of

hiring or leasing, which gives a means of acquiring
vehicles without having to find all the capital.
 own account transport must be run as efficiently as a

specialized transport company.
Ownership of Transport – 3PL
 Specialized transport companies offer a range of

services to other organizations.
 specialized companies run the transport, leaving the

organization to concentrate on its core operations
 They might also be large enough to reduce costs

through economies of scale, and they can get a number
of operational benefits
 Most third-party transport is provided by common

carriers
 an organization can form a long-term relationship with

a contract carrier
 This contract carrier then takes over a part – often

most of – the organization's transport for some extended
period.
Transportation Network
Transportation Network
Hub and Spoke model simplifies the network drastically

Transportation Modeling
Routing Vehicles - Traveling Salesman
 Imagine a salesman who has a number of
customers to visit before returning home, and
he or she wants to find the shortest journey
 This seems like a simple problem, until you

think about the huge number of possible routes
that have to be considered and compared
 The travelling salesman problem is the basic

routing problem, and real problems are much
more complicated. They typically contain
factors such as a fleet of different types of
vehicles, multi-compartment vehicles,
incompatible products, different logistics
facilities, time windows for deliveries, varying
speeds caused by traffic conditions, customers
with different importance and conditions for
deliveries, competing aims, variable delivery
times, special equipment needed for some
deliveries, uncertain costs, separate schedules
for vehicles and drivers, and so on.
Routing Vehicles - Typical Approach
 Adjust previous plans: Many routing problems are fairly stable, like
postmen delivering letters. Then a useful approach has an experienced router
reviewing present circumstances and updating previous routes to allow for
any changes. This has the benefit of being relatively easy and causing little
disruption.
 Maps: Schedulers often find it easier to work with some form of diagrams,
and the most popular are simple maps of key features. Then schedulers can
draw routes and iteratively improve them. There are many guidelines to help
with this, such as forming routes that are more or less circular, non-
intersecting, no doubling back, and so on
 Simulation: Simulation is one of the most flexible approaches to solving

problems. It gives a dynamic view by imitating real operations over a typical
period
 Mathematical models: Most of the previous approaches rely, at least to

some extent, on the skills of a router. More formal mathematical approaches
give optimal – or near optimal – solutions without any human intervention.
In practice, routing has to include so many subjective and non-quantifiable
factors, that optimal solutions in the mathematical sense may not give the
best answers for the organisation. The most common mathematical approach
uses linear programming.
Transportation Problem
Northwest Corner Rule
Lowest Cost Method
100
200 100
300
Lowest Cost Method
Lowest Cost Method
Lowest Cost Method
Lowest Cost Method
Lowest Cost Method
Special Issues in Modeling
Special Issues in Modeling
 Vogel’s Approximation
 MODI Method
 Stepping Stone
Vogel’s Approximation Method - Steps
Vogel’s Approximation Method
Vogel’s Approximation Method - Example
D1 D2 D3 D4 Supply
A1 3 1 7 4 300
A2 2 6 5 9 400
A3 8 3 3 2 500
Demand 250 350 400 200 1200

Vogel’s Approximation Method - Example
Suppl
D1 D2 D3 D4
y
A1 3 1 300
7 4 300 2 3
A2 2 6 5 9 400
250 150
3 1 1 1
A3 8 3 3 2 500
50 250 200
1 1 1 0
Dema
250 350 400 200 1200
nd
1 2 2 2
2 2 2
3 2 7
= 250x2+300x1+50x3+150x5+250x3+200x2
3 2
= 2850
Stepping Stone
Stepping Stone
Stepping Stone
Stepping Stone
100 200
0
100
Stepping Stone
Stepping Stone
Stepping Stone

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Unit III

Some entity has to deliver the goods you purchased online

 Should we run our own transport or use a  Rail

 Rail transport is most commonly used for

 Trains can maintain a consistent, reasonably

 Monopoly because The main reason for this is

 One advantage of rail is that once the

 Another advantage of rail is that the unit

 The main disadvantage of rail is its

 A more obvious concern is that trains can

 Road transport has the advantage of being able to use extensive

 Lorry and trailer, which combine a rigid lorry pulling a two-axle

 There are basically three types of water transport – rivers and

 Bulk carriers carry large quantities of cheap bulk materials in

 Container ships are specially designed to carry standard

 Most common movements are documents and parcel

 There are three main types of operation. The first

 The second type is cargo service, where operators

 The third type is charter operations, where a whole

 To and fro movement & Cost

 Importance, as even low-value items that would hold up

 Transit times, as operations that have to respond quickly

 Reliability, with consistent delivery often being more

 Security, loss and damage

 Schedules and frequency of delivery

 Special facilities available

 Intermodal transport only works if this transfer can be

 The aim is to give a virtually seamless journey, and the

 In effect, all materials are put into standard containers,

 A rule of thumb is that it takes one day to turn around a

 piggy-back transport, where a lorry – or usually just

 Easier and faster handling

 Genuine door-to-door service

 Reduced loss due to damage, misplacement and

 Reduced packing costs

 Lower insurance costs

 Separation of incompatible goods

 Use of less congested routes

 Improved transport encourages trade

 This has an organization using its own transport fleet to

 This has the advantage of flexibility, greater control,

 Transport can also be tailored to the organization's

 Most own account fleets are financed by some form of

 own account transport must be run as efficiently as a

 Specialized transport companies offer a range of

 specialized companies run the transport, leaving the

 They might also be large enough to reduce costs

 Most third-party transport is provided by common

 an organization can form a long-term relationship with

 This contract carrier then takes over a part – often

Hub and Spoke model simplifies the network drastically

 This seems like a simple problem, until you

 The travelling salesman problem is the basic

 Simulation: Simulation is one of the most flexible approaches to solving

 Mathematical models: Most of the previous approaches rely, at least to

Demand 250 350 400 200 1200

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