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Managing Transportation in a Supply Chain

第十一單元 (2) ： Managing Transportation in a Supply Chain. Managing Transportation in a Supply Chain. 蔣明晃教授. 【 本著作除另有註明外，採取 創用 CC 「姓名標示－非商業性－相同方式分享」台灣 3.0 版 授權釋出 】. 1. Outline. Factors affecting transportation decision Key modes of transport and major issues Transportation System Design

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Managing Transportation in a Supply Chain

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  1. 第十一單元(2) ： Managing Transportation in a Supply Chain Managing Transportation in a Supply Chain 蔣明晃教授 【本著作除另有註明外，採取創用CC「姓名標示－非商業性－相同方式分享」台灣3.0版授權釋出】 1

  2. Outline • Factors affecting transportation decision • Key modes of transport and major issues • Transportation System Design • Tradeoffs in transportation design • Transportation and inventory: Choice of mode • Transportation and inventory: Consolidation • Transportation and service: Transit points at Merloni • Tailored Transportation • Routing and scheduling in transportation 2

  3. Factors Affecting Carrier Decisions • Vehicle-related cost: lease or purchase the vehicles • Fixed operating cost: terminals, airport gates, and labor • Trip-related cost: length, duration • Quantity related cost: loading, unloading, proportion of fuel • Overhead cost: planning, scheduling, IT investments 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 3

  4. Factors Affecting Shippers Decisions • Transportation cost • Inventory cost • Facility cost • Processing cost • Service level cost: delivery commitment 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 4

  5. Transportation Modes • Trucks • TL • LTL • Rail • Carload • Air • Package Carriers • Water • Pipeline • Intermodal 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 5

  6. Truckload (TL) • Average revenue per ton mile (1998) = 9.13 cents • Average haul = 289 miles • Average Capacity = 42,000 - 50,000 lb. • Low fixed and variable costs • Major Issues • Utilization: economies of scale • Consistent service • Backhauls 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 6

  7. Less Than Truckload (LTL) • Average revenue per ton-mile (1998) = 26.12 cents • Average haul = 629 miles • Higher fixed costs (terminals) and low variable costs • Major Issues • Location of consolidation facilities • Utilization (load assignment) • scheduling and routing of pickup and delivery • Customer service 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。 7 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46、52、65條合理使用。

  8. Rail • Average revenue / ton-mile (1998) = 2.40 cents • Average haul = 722 miles • Average load = 80 tons • Key Issues • Scheduling to minimize delays / improve service • Off track delays (at pick up and delivery end) • Yard operations • Variability of delivery times 8

  9. Air • Average revenue / ton-mile (1998) = 56.25 cents • Average haul = 1260 miles • Key Issues • Location/Number of hubs • Location of fleet bases / crew bases • Schedule optimization • Fleet assignment • Maintenance schedule • Crew scheduling • Yield management (price management) 9

  10. Package Carriers • Expensive but offer rapid, reliable service • Value-added services: • Order tracking • One-stop shipping • Key factors: • Consolidation of shipments • Location and capacity of transfer points • Information capability 10

  11. Water • Revenue/Ton-Mile (1998) = 0.73 cents • Average length of haul: • Rivers/Canals 481 • Great lakes 509 • Coastwise 1653 • Issue: • Delays at ports, customs • Management of containers used 11

  12. Pipeline • Transport petroleum and related products, natural gas • Revenue/Ton-Mile (1998): 1.37 • Average length of haul • Crude 761 • Products 394 • Stable and large flow applied 12

  13. Intermodal • Use more than one mode of transportation to move a shipment to destination • Examples: piggyback, fishyback, birdyback • Key issues: • Exchange of information to facilitate shipment transfer between different modes 13

  14. Design Options for Transportation Network--- Direct Shipment Network • Replenishment size close to TL 14

  15. Design Options for Transportation Network--- Direct Shipping with Mike Runs • Eliminate warehouse and consolidate the shipments from suppliers or to customers 15

  16. DC Design Options for Transportation Network--- Via Central Distribution Center • Reduce inbound costs • Cross-ducking 16

  17. DC Design Options for Transportation Network--- Via Distribution Center Using Mike Runs • Consolidate local small shipments 17

  18. Pros Cons Direct shipping Simple to coordinate Large shipping lot size Direct shipping with milk run Lower cost for small lots Lower inventories Increased coordination complexity Via central DC with inventory storage Lower inbound transportation cost Increased inventory cost Increased handling at DC Via central DC with cross-dock Very low inventory Lower cost through consolidation Increased coordination complexity Via DC using milk run Lower outbound cost for small lots Further increase in coordination complexity Tailored network Best matches needs of individual product and store Highest coordination complexity Pros and Cons of Different Transportation Networks 18

  19. Trade-Offs in Transportation Design • Transportation and inventory tradeoff • Choice of transportation modes • Inventory aggregation • Transportation cost and customer responsiveness trade-off 19

  20. Rail TL LTL Package Air Water Lot size 5 4 3 1 2 6 Safety inventory 5 4 3 1 2 6 In-transit inventory 5 4 3 1 2 6 Transportation cost 2 3 4 6 5 1 Transportation time 5 3 4 1 2 6 Impact of Transportation Modes 20

  21. Choice of Mode: Eastern Electric Corporation • Annual demand = 120,000 motors • Cost per motor = $120 • Each motor weighs 10 pounds • Current order size = 3,000 motors • Safety stock carried = 50% of demand during delivery lead time • Holding cost = 25%, annual cost of H = $120  0.25 = $30 21

  22. Carrier Range of Quantity Shipped (cwt.) Shipping Cost ($/cwt.) AM railroad 200 + 6.50 Northeast Trucking 100 + 7.50 Golden Freightways 50 – 150 8.00 Golden Freightways 150 – 250 6.00 Golden Freightways 250 – 400 4.00 Golden Freightways (new) 400 3.00 Eastern Electric Corporation 22

  23. Example: AM Rail Proposal • Minimum shipment 20,000 lb. or 2,000 motors. Replenishment lead time L = 5 + 1 = 6 days. Q = 2,000 motors • Cycle inventory = Q/2 = 2,000/2 = 1,000 • Safety inventory = L/2 = (6/2)(120,000/365) = 986 • In-transit inventory = 120,000 (5/365) = 1,644 • Total average inventory = 1,000 + 986 + 1,644 = 3,630 • Annual holding cost using AM Rail = 3,630  30 = $108,900 • Annual transportation cost = 120,000  0.65 = $78,000 • Total annual cost for inventory and transportation using AM Rail is $186,900 23

  24. Eastern Electric Corporation 24

  25. Physical Inventory Aggregation: Inventory vs. Transportation cost • As a result of physical aggregation • Inventory costs decrease • Inbound transportation cost decreases • Outbound transportation cost increases • Applications: • Inventory and facility costs are higher • Products with large value-to-weight ratio or high demand uncertainty or customer orders are larger 25

  26. Inventory Aggregation at HighMed • Highval (worth $200, .1 lbs/unit) demand in each of 24 territories, H = 2,H= 5 • Lowval (worth $30/unit, 0.04 lbs/unit) demand in each territory, L = 20, L = 5 • CSL in each territory is 0.997 for each product. Holding cost is 25%. • UPS rate: $0.66 + 0.26x (every 4 weeks for replenishments) 26

  27. Inventory Aggregation at HighMed • Option A: keep the current but start replenishing inventory once a week • Option B: Eliminate inventories in the territories, aggregate all inventories in a finished goods warehouse at Madison, and replenish the warehouse once a week • FedEx rate: $5.53 + 0.53x (one-week lead time to replenish goods at Madison. An average customer order is for 1 unit of HighVal and 10 units of LowVal) 27

  28. Inventory Aggregation at HighMed • Current situation: • Replenishment lead time L = 1 week • Reorder interval T = 4 weeks • CSL = 0.997 • HighVal inventory costs at each territory: • Average lot size QH = 4  2 = 8 • Safety stock = F-1(CSL)  T+L = F-1(0.997)  = 30.7 • Total inventory = 8 / 2 + 30. 7 = 34.7 • For 24 territories, HighVal invetory = 34.7  24 = 832.8 • LowVal inventory costs at each territory: • Average lot size QL = 4  20 = 80 • Safety stock = F-1(CSL)  T+L = F-1(0.997)  = 30.7 • Total inventory = 80 / 2 + 30. 7 = 70.7 • For 24 territories, HighVal invetory = 70.7  24 = 1696.8 28

  29. Inventory Aggregation at HighMed • Current situation: • Annual inventory holding cost = (832.8  $200 + 1696.8  $30 )  0.25 = $54,366 • Transportation cost: • Average weight of each replenishment order = 0.1 QH + 0.04QL = 0.1  8 + 0.04  80 = 4 lbs • Shipping cost per replenishment order $0.66 + $0.26  4 = $1.7 • Annual transportation cost for 24 territories = $1.7  13  24 = $530.4 • Total cost = $54,366 + $530.4 = $54,896.4 29

  30. Current Scenario Option A Option B Number of stocking locations 24 24 1 Reorder interval 4 weeks 1 week 1 week HighVal cycle inventory 96 units 24 units 24 units HighVal safety inventory 736.8 units 466 units 95.2 units HighVal inventory 832.8 units 490 units 119.2 units LowVal cycle inventory 960 units 240 units 240 units LowVal safety inventory 736.8 units 466 units 95.2 units LowVal inventory 1,696.8 units 706 units 335.2 units Annual inventory cost $54,366 $29,795 $8,474 Shipment type Replenishment Replenishment Customer order Shipment size 8 HighVal + 80 LowVal 2 HighVal + 20 LowVal 1 HighVal + 10 LowVal Shipment weight 4 lbs 1 lb. 0.5 lb. Annual transportation cost $530 $1,148 $14,464 Total annual cost $54,896 $30,943 $22,938 Inventory Aggregation at HighMed 30

  31. Inventory Aggregation at HighMed • If shipment size to customer is 0.5H + 5L, total cost of option 2 increases to $36,729. • Average weight of each customer order = 0.10.5 + 0.045 = 0.25 lbs • Shipping cost per customer order = $5.53 + 0.530.25 = $5.66 • Number of customer orders per territory per week = 4 • Total customer order per year = 42452 = 4,992 • Annual transportation cost = 4,992  5.66 = $28,255 • Total annual cost = $8,474 + $28,255 = $36,729 31

  32. Key Points • Inventory aggregation decision must account for inventory and transportation costs. Inventory aggregation decreases supply chain costs if the product has a high value to weight ratio, high demand uncertainty, customer orders are large. If a product has a low value to weight, low demand uncertainty, or customer orders are small, inventory aggregation may increase SC costs. 32

  33. Trade-off between Transportation Cost and Customer Responsiveness • High responsivenesshigh trans cost • Example: Alloy steel • Ship using an LTL with charge 100 + 0.01x, charge $10 per customer delivery • Currently ship on the day that order received, allow two days in transit, the response time is 2 days 33

  34. Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Week 1 19,970 17,470 11,316 26,192 20,263 8,381 25,377 Week 2 39,171 2,158 20,633 23,370 24,100 19,603 18,442 Daily demand at Alloy Steel 34

  35. Two day Response Three day Response Four day Response Day Demand Q shipped Cost Q shipped Cost Q shipped Cost 1 19970 19970 $299.7 0 - 0 - 2 17470 17470 $274.7 37440 $474.40 0 - 3 11316 11316 $213.16 0 - 48756 $587.56 4 26192 26192 $361.92 37508 $475.08 0 - 5 20263 20263 $302.63 0 - 0 - 6 8381 8381 $183.81 28644 $386.44 54836 $648.36 7 25377 25377 $353.77 0 - 0 - 8 39171 39171 $491.71 64548 $754.48 0 - 9 2158 2158 $121.58 0 - 66706 $767.06 10 20633 20633 $306.33 22791 $327.91 0 - 11 23370 23370 $333.70 0 - 0 - 12 24100 24100 $341.00 47470 $574.70 68103 $781.03 13 19603 19603 $296.03 0 - 0 - 14 18442 18442 $284.42 38045 $480.45 38045 $480.45 $4164.46 $3464.46 $3264.46 Quantity Shipped and Transportation Cost 35

  36. Tailored Transportation • Factors affecting tailoring • Customer distance and density • Customer size • Product demand and value 36

  37. Short distance Medium distance Long distance High density Private fleet with milk runs Crossdock with milk runs Crossdock with milk runs (public fleet) Medium density Third-party milk run LTL carrier LTL or package carrier Low density Third-party milk run or LTL carrier LTL or package carrier Package carrier Tailored Transportation---by Customer Density and Distance 37

  38. Tailored Transportation---by Size of Customer • Large customer: TL carrier • Smaller customer: LTL carrier or milk run • Depends on distance and number of deliveries • Visit larger customers with higher frequency than small customers 38

  39. Product Type High Value Low Value High Demand Disaggregate cycle inventory and aggregate safety inventory. Inexpensive mode for replenishing cycle inventory and fast mode for safety stock Disaggregate all inventories and use inexpensive mode for replenishment inventory Low Demand Aggregate all inventories. If needed, use mode of transportation for filling customer orders Aggregate only safety stock. Use inexpensive mode of transportation for replenishment cycle inventory Tailored Transportation---by Product Demand and Value 39

  40. Routing and Scheduling in Transportation • Two approaches: • Saving Matrix Method • Generalized Assignment Method 40

  41. Procedures of Saving Matrix Method • Step 1: identify the distance matrix • Step 2: identify the saving matrix • S (x, y) = Dist (DC, x) + Dist (DC, y) – Dist (x, y) • Step 3: assign customers to vehicles or routes • Initially, each customer assigned to a separate route • Two routes combined into a feasible route if the total deliveries across both routes don’t exceed the vehicle’s capacity • Combine routes with the highest savings into a new feasible route. • The procedure continues until no more combinations are feasible • Step 4: sequence customers within routes • Sequence customer visits to minimize the distance each vehicle travels 42

  42. Sequence Customers within Routes • Route Sequencing Procedure • Farthest insert: given a trip for each remaining customer, find the min increase in length for this customer to be inserted from all the potential points in the trips. Choose to insert the customer with the largest min increase to form a new trip. Continue until all remaining customers are included. • Nearest insert: given a trip for each remaining customer, find the min increase in length for this customer to be inserted from all the potential points in the trips. Choose to insert the customer with the smallest min increase to form a new trip. Continue until all remaining customers are included. • Nearest neighbor: start at DC, add the closest customer to extend the trip. • Sweep: any point selected and a line swept either clockwise or counterclockwise from the point. Sequence the customers in the order they are encountered during the sweep. 45

  43. Routes Improvement Procedures • 2-OPT: • Start with a trip and break it at two places which results in two separated paths. Reconnect in two possible ways. • The length of each reconnection is evaluated and smaller of the two is used to define a new trip. Continue until no further improvement results. • 3-OPT: • Break a trip at three points which results in three paths and reconnect to form up to 8 possible ways. • The length of each reconnection is evaluated and shortest trip is retained. Continue until no further improvement results. 46

  44. Generalized Assignment Method • Step 1: assign seed points for each route • Step 2: evaluate insertion cost for each route • Step 3: assign customers to routes • Step 4: sequence customers within routes 47

  45. Assignment Problem Formulation • cij = insertion cost of customer i and seed point k • ai = order size from customer i • bk = capacity of vehicle k • yik = 1 if customer i is assigned to vehicle k 48

  46. Making Transportation Decisions in Supply Chain • Align transportation strategy with competitive strategy • Appropriate combination of in-house and outsourced transportation • Design a transportation network that can handle e-commerce • Use technology to improve performance • Design flexibility into transportation network 49

  47. 版權聲明 50

  48. 版權聲明 51

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