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Transportation & Supply Chain Systems

Transportation & Supply Chain Systems. John H. Vande Vate Spring 2007. Who am I?. John H. Vande Vate Professor and EMIL Executive Director Office: 222 of the Old ISyE bldg. Phone: (404) 894-3035 Prefer e-mail: jvandeva@isye.gatech.edu Office Hours:

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Transportation & Supply Chain Systems

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  1. Transportation & Supply Chain Systems John H. Vande Vate Spring 2007 1

  2. Who am I? • John H. Vande Vate • Professor and EMIL Executive Director • Office: 222 of the Old ISyE bldg. • Phone: (404) 894-3035 • Prefer e-mail: jvandeva@isye.gatech.edu • Office Hours: • Tuesday, Thursday 2-3:30 (after class) or • By appointment 2

  3. Administrative Details • Class Home Page: www.isye.gatech.edu/~jvandeva/Classes/6203/2007/syllabus2007.html Keep up with information here! 3

  4. Recommended Text • Designing and Managing the Supply Chain: Concepts, Strategies & Case Studies, Second Edition, By David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, McGraw-Hill/Irwin; (October 11, 2002). ISBN: 0072845538 • $106 on Amazon • Used copies • Not required • Each team should have access 4

  5. Other Resources • You may also want to read: • Contemporary Logistics by Johnson, Wardlow, Wood and Murphy • Logistic Systems Analysis by Daganzo • Business Logistics Management 4th Edition by R. H. Ballou, Prentice Hall, 1999 • Bramel, J. and D. Simchi-Levi, The Logic of Logistics: Theory, Algorithms and Applications for Logistics Management, Springer-Verlag, 1997 • Logistics and Supply Chain Management: Strategies for Reducing Cost and Improving Service (2nd Edition) by Martin Christopher • Modeling the Supply Chain by Jeremy F. Shapiro 5

  6. Grading • Exams: 66% • February 19st 33%     • Final 33% • Project: 33% • Groups of 4 to 6 6

  7. Objectives • Knowledge and understanding of the issues underlying transportation and supply chain management and • Mastery of the tools and models to support intelligent resolution of those issues. 7

  8. Projects • Project: Ideally a real application • Team of 4 to 6 students • Distance learning students encouraged to bring projects from their companies and recruit teams of on-campus students to work with them • Every team must have at least 1 on-campus student • Several projects already available 8

  9. Project Cont’d • Due February 19 • one member of your team should send me an e-mail with the subject "6203 Project" providing • The names and contact information (e-mails and phone numbers) • Resumes • Your team's project preferences (list at least four alternatives) in order • Your team's preferences for presentation dates (list all four) in order of preference • A presentation and report to your company • On April 11th, 16th, 18th or 23rd. Present in class (~ 30 minute presentation) • Self-contained CD of everything for me 9

  10. Project Motivation • Interviewing for job • Learning by Doing • Off-campus students 10

  11. Projects • European Auto manufacturer • Shipping parts from European suppliers to average forecasted demand significantly better in terms of reducing the bullwhip effect. • Simulation too time consuming and requires too much data. • Tool for faster computation of good parameter values using less detailed information about the parts. 11

  12. Projects • XYZ: Transportation optimization • LTL consolidation • Multi-stop TL • Dynamic vendor assignment • Milk runs • Zone skipping • … 12

  13. Other Projects • Welcome to propose other topics • Must: • Have a corporate sponsor • Be of value to the company • Give the team experience • Relate to topics in this course 13

  14. Deliverable • Presentation to your company and to the class (These may have to be different) • CD that includes • Project Description • Your presentation(s) • Sufficient description that I can follow your presentation, understand the data and use the tools • Data and data definitions • Any tools (documented) 14

  15. Supply Chain Management • Deterministic View • Transportation • Inventory • Finance • Location • Mid-Exam: February 19rd • Managing Variability & Risk • Revenue Management • Safety Stock • Inventory Pooling • Supply Chain Applications & Projects • Exam Questions from Variability & Risk and Projects 15

  16. Transportation • Modes • … • Parcel • Less-than-Truck load • Multi-stop TL • Truck load • Less-than-Car Load (rail) • Car Load (rail) • Block train • Less-than-Container load • Container load • … 16

  17. Trade offs • Cost • Speed • Access • Reliability • Security • Special Handling • Risk • … 17

  18. Typical Cost Factors • Parcel (Up to ~150 lbs) • Zones (origin & destination) • Weight & Cube • Negotiated discount based on volume • Delivery Options • Location • Timing: Same day, next day am, next day, 2nd day, ground, … • UPS: http://wwwapps.ups.com/calTimeCost?loc=en_US 18

  19. Less-Than-Truck Load (LTL) Why not just distance? • Origin & Destination • Weight (up to ~20,000 lbs) • Class • Discount based on volume of business • Special Requirements • Old Dominion • http://www.odfl.com/rateestimate Typically quoted as $/CWT Why is this important? 19 • /

  20. NMFC Classes • Density • Helps carrier judge demands for capacity • Value • Helps carrier judge risk (liability limits associated with each class) • Class 50: cheapest, e.g., sand • Class 500: most expensive, e.g., Ping Pong Balls • Maintained by the NMFTA (NMFTA.org) 20

  21. Truck Load (TL) • Up to ~45,000 lbs • Origin • Destination • Volume of business • Special Services (accessorials) • Detention, cleaning, … • Schneider National • https://webapps.schneiderlogistics.com/pwschneiderrate/schneider_rate_ext_customer Typically quoted as $/mile 21

  22. Rail • Commodity (Grain, Coal, …) • Origin, Destination • Equipment (Box car, tanker, Tri-level) • Number of cars in block • Cars handle on the order of 70 tons • … • Norfolk Southern • http://www.norfolksouthern.com/nscorp/application?origin=content_home.jsp&event=bea.portal.framework.internal.refresh&pageid=Doing+Business&contentId=english/nscorp/doing_business/none1/home/agriculture.html 22

  23. Undiscounted LTL Rates ATL to LB Class 50 $0.53/CWT $1.12/CWT 23

  24. Concave Cost Cost per unit decreasing So?! Cost Shipment Size 24

  25. Consolidation • Incentive to consolidate shipments • Make fewer larger shipments • Reduce frequency (!?) • Hub & Spoke • Share transportation resources • … 25

  26. Issues with Freight Rates • Issue of how to estimate rates on lanes you don’t currently use • Levels of detail • $/mile as the crow flies • $/mile on the network • Rate look up • Caution: Average cost of shipments can be smaller than the cost of an average shipment 26

  27. Cost of Average shipment Average Cost of shipment Estimating Rates Large shipments Cost Small shipments Average shipment Shipment Size 27

  28. Why It Matters? • Estimating transportation costs to “customers” • Typically too many customers • Aggregate them • By region • By state • By 3-digit zip • Use some care in estimating the transportation cost to “aggregated” customers 28

  29. Why It Matters? • Customers may order different quantities at different times • Estimating the cost to serve the customer often look at average shipments • Careful how you average 29

  30. Summary • Transportation mode basics • Transportation rate basics • Economies of scale promote consolidation • Cautions on “aggregating” transportation rates 30

  31. Next Time • Inventory and Transportation 31

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