Transportation Supply Chain Systems John H Vande Vate

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

Who am I? • • • John H. Vande Vate Professor and EMIL Executive Director Office: 222 of the Old ISy. E 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 2

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

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

Other Resources • You may also want to read: – Contemporary Logistics by Johnson, Wardlow, Wood and Murphy – Logistic Systems Analysis by Daganzo – Business Logistics Management 4 th 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 (2 nd Edition) by Martin Christopher – Modeling the Supply Chain by Jeremy F. Shapiro 5 5

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

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 7

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 8

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 11 th, 16 th, 18 th or 23 rd. Present in class (~ 30 minute presentation) • Self-contained CD of everything for me 9 9

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

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 11

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

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 13

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 14

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

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

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

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, 2 nd day, ground, … • UPS: http: //wwwapps. ups. com/cal. Time. Cost? loc=en_US 18 18

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

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 20

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

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/applicati on? origin=content_home. jsp&event=bea. portal. fr amework. internal. refresh&pageid=Doing+Busine ss&content. Id=english/nscorp/doing_business/non 22 22 e 1/home/agriculture. html

Undiscounted LTL Rates ATL to LB Class 50 $0. 53/CWT $1. 12/CWT 23 23

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

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

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 26

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

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 28

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 29

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

Next Time • Inventory and Transportation 31 31