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11
Transportation & Supply Chain Systems
John H. Vande Vate
Spring 2008
22
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: [email protected]
• Office Hours: – Tuesday, Thursday 2-3:30 (after class) or– By appointment
33
Administrative Details
• Class Home Page: On T-square
http://t-square.gatech.edu/portal
Keep up with information here!
• TA: Huizhu “Crystal” Wang
44
Recommended Texts (Not Required)
• Chopra, Sunil, and Meindl, Peter, Supply Chain Management: Strategy, Planning and Operations, Prentice-Hall, 2001. Good on Inventory models.
• 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. Source for case studies
• Both weak on Transportation!
55
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
66
Grading
• Exams: 66%– February 21st 33% – Final 33%
• Project: 33%– Groups of 4 to 6
77
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.
88
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– Encourage teams to include off-campus students
99
Project Cont’d• Due January 31st
– 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 8th, 10th, 15th, 17th . Present in class (~ 30
minute presentation) • Self-contained ORGANIZED! CD of everything for
me (and for your sponsor)
1010
Project Motivation
• Interviewing for job
• Learning by doing
• Share lessons with the class
• Off-campus students
1111
Projects
• BMW
• Predict the variance between system stock and physical stock for major parts and use this information to schedule physical counts. The goal is to simultaneously reduce the effort involved in maintaining accurate inventory levels (e.g., the physical counts) and to avoid expedited shipments
1212
BMW Project
Estimates of:
• Data availability: medium
• Technical requirements: high
• Computational requirements: medium
• Initiative and Creativity requirements: medium to high
• Potential for impact: medium
1313
Projects
•Intel – Low Cost PC Supply Chain– Planning and forecasting– Production and distribution– Two aspects:
• Characteristics: how• Structure: what & where
•Educational Objective: Comprehensive overview of differences between high value and high volume supply chains that dives beneath superficial aspects in key areas of planning and distribution.
1414
Intel Project
Estimates of:
• Data availability: low
• Technical requirements: low
• Computational requirements: low
• Initiative and Creativity requirements: very high
• Potential for impact: medium to high
1515
Projects
• ABC Pharma Co. – CRO Sourcing opportunity
– Quantify uncertainty in requirements– “Optimize” sourcing of CRO capacity to
balance• Lower price available from contracts• Reduced commitment from “spot”
•Educational Objective: In-depth investigation of matching supply and demand in the face of forecast uncertainty.
1616
ABC Pharma Project
Estimates of:
• Data availability: high
• Technical requirements: medium to high
• Computational requirements: high
• Initiative and Creativity requirements: medium
• Potential for impact: medium
1717
Projects
• FMCG Co. – Fleet Composition– Quantify uncertainty in requirements– “Optimize” balance between
• Lower cost available from owned fleet
• Flexibility from outsourced fleet
•Educational Objective: In-depth investigation of matching supply and demand in the face of forecast uncertainty.
1818
Coca Cola (FMCG) Project
Estimates of:
• Data availability: high
• Technical requirements: high
• Computational requirements: medium
• Initiative and Creativity requirements: medium
• Potential for impact: high
1919
Projects
• CARE – Emergency Preparedness– Improve disaster forecasting– Translate forecasts into expected requirements – Develop appropriate sourcing plans– Develop appropriate distribution and response
plans
•Educational Objective: In-depth supply chain study in emergency response setting.
2020
CARE Project
Estimates of:
• Data availability: low
• Technical requirements: low
• Computational requirements: low
• Initiative and Creativity requirements: high
• Potential for impact: high
2121
Projects
• GE Energy – Transportation Planning– Two components:
• User interface to interact with supply and demand data for wind turbines
• Optimization engine to automate assignments
•Educational Objective: Implementing transportation management tools for a changing world.
2222
GE Energy Project
Estimates of:
• Data availability: high
• Technical requirements: medium to high
• Computational requirements: medium
• Initiative and Creativity requirements: medium to high
• Potential for impact: high
2323
Projects
• Dell Malaysia – Order Cycle Time Reduction
– Reduce order-to-delivery variability– Determine whether it is possible to achieve
sufficient lead-time consistency to offer a service commitment
•Educational Objective: Interactions among manufacturing, transportation and customer service.
2424
Dell Malaysia Project
Estimates of:
• Data availability: mixed
• Technical requirements: medium
• Computational requirements: medium
• Initiative and Creativity requirements: high
• Potential for impact: medium
2525
XYZ Project
Analyze the company’s LTL and TL shipments to identify opportunities for:– Consolidation points – Multi-stop routes – Dynamic assignment to consolidation points – Impacts on cycle time and inventory
2626
XYZ Project
Estimates of:
• Data availability: high
• Technical requirements: medium
• Computational requirements: high
• Initiative and Creativity requirements: medium
• Potential for impact: medium
2727
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
2828
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)
2929
Supply Chain Management• Deterministic View
– Finance – Transportation– Inventory– Consolidation– Location– Mid-Exam: February 21st
• Managing Variability & Risk– Forecasting– Matching supply & demand
• Sourcing• Manufacturing• Distribution
– Revenue Management– Inventory Management
• Supply Chain Applications & Projects• Exam Questions will also come from Projects!• Exam: 8 – 10:50 am May 1st (Period 10)
3030
Transportation
• Modes– …– Parcel– Less-than-Truck load (LTL)– Multi-stop Truck load– Truck load (TL)– Less-than-Container load (LCL)– Container load– Less-than-Car Load (rail) – Car Load (rail)– Block train– …
3131
Trade offs
• Cost • Speed• Access• Reliability• Security• Special Handling• Risk• …
3232
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
3333
Less-Than-Truck Load (LTL)
• Origin & Destination
• Weight (up to ~20,000 lbs)
• Class
• Discount based on volume of business
• Special Requirements
• Old Dominion
• http://www.odfl.com/rateestimate
Why not just
distance?
Why is this important?
•/
Typically quoted as $/CWT
3434
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)• Part of the contract negotiation!
3535
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
3636
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/nscportal/nscorp/Customers/Industrial%20Products/Agriculture/
3737
Undiscounted LTL Rates
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
ATL to LBClass 50
$1.12/CWT
$0.53/CWT
3838
Concave Cost
Shipment Size
Cos
tCost per unit decreasing
So?!
3939
Consolidation
• Incentive to consolidate shipments– Make fewer larger shipments– Reduce frequency (!?)– Hub & Spoke– Share transportation resources– …
4040
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
4141
Estimating Rates
Small shipments
Shipment Size
Cos
t
Large shipments
Cost ofAverage shipment
Average shipment
AverageCost of
shipment
4242
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
4343
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
4444
Summary
• Transportation mode basics
• Transportation rate basics
• Economies of scale promote consolidation
• Cautions on “aggregating” transportation rates
4545
Next Time
James R. Kellso, P.E.Manager of Supply Network Research & Supply Chain MasterIntel
James R. Kellso, P.E., has more than 35 years of experience in industrial engineering, consulting and logistics/supply chain management. He has extensive experience in a variety of manufacturing and distribution operations from his 16 years in consulting and 19 years at Intel. During this time, Kellso has managed all aspects of world-wide logistics, including systems development and deployment, network construction, transportation management, engineering and business process development; and construction and start-up of new integrated facilities world-wide. Kellso currently is heavily involved in the strategies and supply chain aspects of the growth in new businesses and supply chain optimization for Intel.