Upload
johnathan-lindsey
View
605
Download
15
Embed Size (px)
DESCRIPTION
Key Transportation Decisions Selection of Transportation Strategy: –Transportation strategy would involve designing the most effective way of reaching products to geographically dispersed markets from plants in a cost effective way. Choice of Transportation Mode: –Choosing the most effective mode of transport from among several feasible options.
Citation preview
Chapter 7
Transportation
Content…..
• Drivers of transportation decisions• Modes of transportations• Devising a strategy for transportation• Vehicle scheduling• Transportation cost in e-retailing
Key Transportation Decisions
• Selection of Transportation Strategy: – Transportation strategy would involve
designing the most effective way of reaching products to geographically dispersed markets from plants in a cost effective way.
• Choice of Transportation Mode: – Choosing the most effective mode of
transport from among several feasible options.
C1
C2
C3
C4
C5
C6
VENDORS INBOUND TRANSPORTATION
PLANTS CUSTOMERS INTERFACILITY TRANSPORTATION
DISTRIBUTIONCENTERS
OUTBOUNDTRANSPORTATION
Drivers of Transportation Decisions
• Transportation cost structure• Economies of distance & scale
– FTL versus LTL• Product and demand characteristics
– Value density– Demand characteristics – Customer requirements ( Delivery time)
Truck Freight Rates (Rs/ tonne) for a Nine-tonne Shipment
Source: The Hindu Business Line, 06 November, 2006
Transportation Modes
• Transportation modes– Air– Pipeline– Rail– Road– Water
• Mix mode services– Package carriers– Intermodal containers
• Impact on SCM performance measures
Impact of Mode of Transportation on Supply Chain Performance Measures
• Freight cost:• Lot size: Differences in required shipment sizes
translate to differences in cycle stock related inventory.
• Delivery time: pipeline inventory and safety stock carried in supply chain is a function of lead-time in transport
• Delivery time variability: safety stock carried in a supply chain is function of the variability in lead time in transport,
• Losses and DamagesTotal cost = Fright cost + Cycle stock inventory carrying cost + Pipeline Inventory carrying cost + safety stock inventory costs + Cost of losses and damages
*1 is most favourable & 5 is least favourable from shipper point of views* * Delivery time variability in absolute terms
Relative Ranking* of Transportation Mode by Performance Measures
Choice of Mode of Transport: Illustration
Product : Printer
High End Standard Low endValue/unit ( Rs.) 20,000 15,000 10,000Inv. Carrying cost/unit/year 4,000 3000 2000Mean Demand/week (units) 100 100 100 SD of demand /week(Units) 30 30 30
Option Sea AirLot size (units) 400 100Fright/unit (Rs.) 90 360Led time(weeks) 4 1
Target service level: 98%
Cost Comparisons for Different Modes of Transport Under Stable Demand*
Impact of Value DensityOptimal Decision : For high end :Air. For standard and low end : Sea* Assumption : SD of demand = 0 ( No demand uncertainty)
Cost Comparisons in Situation of Demand Uncertainty
Impact of Value density and Demand UncertaintyOptimal Decision : For high end and standard: Air. For low-end: Sea
Design of Distribution Network
– Direct shipment– Milk Run from each plant (Aggregate demand across
depots)– Shipment via Depot– Cross Docking– Hub- and spoke model– Different Strategy for different category of
products/customers
Direct Shipping
Shipping Using Milk Run
Shipping via a Central Distribution Centre
HLL Supply Chain
Supplier Factory100
Depot 80
Redistribution Stockists 10,000 +
Retailers1Mn +
Consumer
Supplier Factory100
Depot 80
Redistribution Stockists 10,000 +
HPC Business:More than 400 SKUs (110 brands in 950 packs)
Restructuring of HLL Supply Chain
Redistribution Center (RDC)
Factory DepotRedistribution Stockiest (RS)
DRP
Daily Resource Planning (DRP) Continuous
Replenishment
Dispatches against order
High Volume Items
Low Volume Items
Comparison of Distribution Network Design Options: Illustration
• Manufacturing firm has three plants (A, B &C), each manufacturing a different product line and serving a stable market through three depots ( X, Y &Z). Plant A is manufacturing menswear, plant B is manufacturing ladies wear and plant C is manufacturing children’s wear.
• Weekly demand = 100 units for each of the three types of garments at each of the three depots
• Truck can carry 300 units of garments and the transport cost is Rs 2 per km. for TL shipments. To obtain economies of scale firm has decided to work with TL shipments.. Inventory carrying cost is at 20% per annum.
• All the products cost Rs 200 per unit, so inventory carrying cost is Rs 40 per unit per year. Facility cost of maintaining a DC is Rs 12,000 per year.
Transportation Strategy: Linking Plants to Markets
Comparison of the Three Transportation Strategies
How would network design change if demand at each depot is 300 units per week for each of the product?
Vehicle Scheduling
• Basic Vehicle scheduling formulation• Heuristics
– Saving Matrix Method
Typical Vehicle Scheduling Problem
Depot at location 0 serving 10 retailers
Saving Algorithm• Construct distance matrix• Calculate savings for all the pairs of customer i
and j Sij = C1i - Cij + Cj1
• Order savings in descending order• Start at the top link, do following:
– If making a given link results in feasible route( feasibility constraints, can be used to extend one of the existing route or starting a new route), append this link to solution, if not reject the link
– Repeat above step until no more links are left
Two Independent Routes Versus Merged Routes
Saving Algorithm
Node i Node j
Depot(1)
Ci1 Cj1
C1jC1i
Savings if routes are merged = Ci1+Cj1-Cij
Consider an instance of the VRP with the deport at vertex 1 andsix customers at vehicles 2, …., 7. The symmetric distance matrix is shown in table. There are two vehicles with capacities Q1=Q2=6. The customer demands are (q2,….q7) = (2,3,1,1,2,1).
Distance matrix for a VRP
1 2 3 4 5 6 71 -2 28 -3 21 47 -4 14 36 26 -5 17 25 37 15 -6 18 20 30 31 29 -7 22 35 20 34 39 16 -
-
Vehicle Scheduling Exercise
2 3 4 5 63 2 4 6 9 5 20 1 16 6 26 9 1 6 7 15 23 2 0 24
Saving Matrix
Suggested routes based on Saving algorithm:Route1 : 1-5-2-6-7-1Route 2 : 1-3-4-1
Spatial Representation of Depot and Dealers
Cost Matrix
Distance and load related data
Saving Matrix
Final Routes Based on Saving Heurstics
Example
Dealer 1 2 3 4 5 6 7 8 9 10Distance from depot
16 18 10 17 26 18 7 12 15 21
Avg. Demand (tons)
8 4 6 6 4 8 8 6 8 4
Design the vehicle route for a consumer goods company that has 10 dealers. The capacity of the vehicle is 25 units and other relevant data are as follows:
Distance matrix in kilometers1 2 3 4 5 6 7 8 9 10
1
2 34
3 7 27
4 33 12 27
5 41 8 35 19
6 31 13 24 23 14
7 19 20 14 15 28 24
8 24 20 19 12 28 27 6
9 12 32 12 26 40 33 12 15
10 32 23 28 12 31 33 15 9 22
Vehicle Route Planning:Extensions
• Vehicle can operate multiple routes• Time window for a customer• Business may involve both deliveries and
collections• Vehicles ( drivers) may have a time window• Time consuming activities other than travel:
– Loading & unloading– Queuing at loading and unloading
Vehicle Routing: Strategic Decisions
• Fixed versus dynamic routes• Temporal consolidation
– Time based– Quantity based
• Nature of relationship with transport carrier– Short term versus long term contract
• Special vehicle versus standard vehicle– Load and volume optimization
E-Retailing
• Provides the convenience of shopping from home• E-retailer can provide higher variety compared to
Brick and Mortar store and still mange higher inventory turns– Centralisation versus decentralisation of
inventory• Transportation cost is higher for e-retailer
– Small shipment size– Last-mile transportation
• Product/market Characteristic– Value density, Nature of demand uncertainty,
Volume of demand• Cases
– Dell Computers, Amazon, Webvan• Grocery on net : Webvan Versus Tesco• Indian Experiences: firstandsecond.com, and
Rediff.com, Indiaplaza.com