Roadrailers are considered a multimodal solution when all of their capabilities are utilized.

SCM 304 Principles of Supply Chain Management

Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved

Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.

1

Logistics

Chapter 8

1

You will learn

Describe why logistics is important and discuss the major decision areas that make up logistics.

List the strengths and weaknesses of the various modes of transportation and discuss the role of multimodal solutions.

Identify the major types of warehousing solutions and their benefits.

Discuss the purpose of a logistics strategy.

Identify design options for a distribution network

2

Introduction (1 of 2)

Logistics management – That part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.

© CSCMP – Council of Supply Chain Management Professionals

Source: financemonks.com

3

Introduction (2 of 2)

Logistics Management Activities:

Transportation

Warehousing

Material handling

Packaging

Inventory management

Logistics information systems

4

Why Logistics is Critical

Challenges and opportunities in managing logistics

Advances in information systems

Globalization of markets

Push toward sustainability

Significant impact on delivery speed and reliability

5

Logistics Decision Areas (1 of 19)

Five Transportation Modes:

Highway

Water

Air

Rail

Pipeline

Source: cststudy.blogspot.com

Source: asia.nikkei.com

6

Logistics Decision Areas (2 of 19)

Table 8.1 Modal Shares of U.S. Domestic Freight for 2012 (% Change, 2002 – 2012)

Transportation Mode Value (Billion $) Tons (Millions) Ton-Miles (Billions)
Highway (trucking) $10,132 (+63%) 8,060 (+3%) 1,248 (−1%)
Rail $473 (+52%) 1,629 (−13%) 1,211 (−4%)
Water $302 (+238%) 576 (−15%) 193 (−32%)
Air $451 (+70%) 5 (29%) 6 (0%)
Pipeline $543 (+264%) 636 (−7%) Not available
Multimodal $1,951 (+81%) 357 (+65%) 272 (+20%)
Source: U.S. Department of Transportation, National Transportation Statistics, April 2017, Washington, DC, Table 1-58, www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_58.html.

7

Logistics Decision Areas (3 of 19)

Highway

Dominates the U.S. logistics infrastructure due to:

Geographic extension of supply chains

Greater emphasis on delivery speed and flexibility

Continues to grow because it is one of the most flexible modes of transportation

Very few goods are moved without highway transportation at some point in transit

8

Logistics Decision Areas (4 of 19)

Highway

Has become more cost effective over time due to:

Better scheduling and use of vehicle capacity

More efficient and reliable vehicles

Increased cost competition due to deregulation

Involves different types of shipments

Direct truck – Shipment made with no stops

Less than truckload (LTL) – Smaller shipment combined with other loads

9

Logistics Decision Areas (5 of 19)

Water

Ideal for materials with high weight-to-value ratio, especially if delivery speed is not critical.

Examples of these materials include farm produce, timber, petroleum-based products.

Has one of the lowest ton-mile rates of any mode which helps to keep costs down.

10

Logistics Decision Areas (6 of 19)

Air

Ideal for customers with a low weight-to-value ratio, especially if delivery speed or delivery reliability is critical.

Is the least-used mode in terms of tons and ton-miles

11

Logistics Decision Areas (7 of 19)

Rail

Has characteristics similar to water transportation but is somewhat more flexible.

To accommodate growth, rail carriers have doubled the number of lines along busy corridors, changed the physical configuration of the trains, and utilized multimodal solutions.

12

Logistics Decision Areas (8 of 19)

Table 8.2 Strengths and Weaknesses of the Major Transportation Modes

Transportation Mode Strengths Weaknesses
Highway Flexibility to deliver where and when needed. Often the best balance among cost, flexibility, and reliability/speed of delivery. Neither the fastest nor the cheapest option.
Water Highly cost-effective for bulky items. Most effective when linked to a multimodal system. Limited locations. Relatively poor delivery reliability/speed.
Rail Highly cost-effective for bulky items. Can be most effective when linked to a multimodal system. Limited locations, although less so than with water. Not as fast as highway, but improving over time.
Air Quickest mode of delivery. Flexible, especially when linked to the highway mode. Often the most expensive mode on a per-pound basis
13

Logistics Decision Areas (9 of 19)

Multimodal solution – A transportation solution that seeks to exploit the strengths of multiple transportation modes through physical, information, and monetary flows that are as seamless as possible

Roadrailer – A specialized rail car the size of a standard truck trailer that can be quickly switched from rail to ground transportation without changing the wheels.

Source: trovestar.com

14

Logistics Decision Areas (10 of 19)

Warehousing – Any operations that stores, repackages, stages, sorts, or centralizes goods or materials.

Warehousing can be used to:

Reduce transportation costs

Improve operational flexibility

Shorten customer lead times

Lower inventory-related costs.

15

Logistics Decision Areas (11 of 19)

Reducing Transportation Costs

Consolidation warehousing – A form of warehousing that pulls together shipments from a number of sources in the same geographic area and combines them into larger and more economical loads.

16

Logistics Decision Areas (12 of 19)

Reducing Transportation Costs

2. Cross-docking – A form of warehousing in which large incoming shipments are received and then broken down into smaller outgoing shipments to demand points in a geographic area.

17

Logistics Decision Areas (13 of 19)

Reducing Transportation Costs

3. Hub-and-spoke system – A form of warehousing in which strategically placed hubs are used as sorting or transfer facilities.

18

Logistics Decision Areas (14 of 19)

Improving Operational Flexibility

Postponement warehousing – A form of warehousing that combines classic warehouse operations with light manufacturing and packaging duties to allow firms to put off final assembly or packaging of goods until the last possible moment.

19

Logistics Decision Areas (15 of 19)

Shortening Customer Lead Times

Assortment warehouses – A form of warehousing in which a wide array of goods is held close to the source of demand in order to ensure short customer lead times.

Spot stock warehouses – A form of warehousing that attempts to position seasonal goods close to the marketplace.

20

Logistics Decision Areas (16 of 19)

Lowering Inventory-Related Costs

Using inventory pooling can enable firms to reduce inventory-related costs.

Consolidating safety stock for stores into one centralized location can provide same-day service to all the stores and would reduce the amount of inventory needed to protect the stores against demand surges.

21

Logistics Decision Areas (17 of 19)

Logistics Information Systems

Decision support tools

Cost and travel time estimations

Simulation and optimization

Planning systems

Selecting carriers

Scheduling deliveries

Execution systems

Monitor logistics systems and identify problems before they get out of hand

22

Logistics Decision Areas (18 of 19)

Material handling system – A system that includes the equipment and procedures needed to move goods within a facility, between a facility and a transportation mode, and between different transportation modes.

Packaging – The way goods and materials are packed in order to facilitate physical, informational, and monetary flows through the supply chain.

Source: cisco-eagle.com

23

Logistics Decision Areas (19 of 19)

Inventory Management

Implications for transportation:

Using slower and cheaper transportation modes will cause inventory levels within the supply chain to rise.

Using faster and more expensive transportation modes will enable firms to lower inventory levels.

Implication for warehousing:

Warehousing and inventory managers must work closely to achieve the desired business outcome.

24

Amazon’s Logistics System

https://www.youtube.com/watch?v=Yiafb0-gqF4

Questions:

Can other retailers such as Walmart and Target compete with Amazon for one-day shipping? How?

Amazon is not working with FedEx anymore. Does this mean Amazon will let go all shipping partners one day?

What are the advantages and disadvantages of building their own distribution network?

Logistics Strategy (1 of 7)

Logistics strategy – A functional strategy which ensures that an organization’s logistics choices are consistent with its overall business strategy and support the performance dimensions that targeted customers most value.

27

Logistics Strategy (2 of 7)

Owning versus Outsourcing

Does the firm have the volume needed to justify a private logistics system?

Would owning the logistics system limit the firm’s ability to respond to changes in the marketplace or supply chain?

Is logistics a core competency for the firm?

Common carriers

Contract carriers

Third-party logistics providers

28

Logistics Strategy (3 of 7)

Table 8.3 The Linkage between Key Performance Measures and Transportation and Warehousing Choices

Performance Dimension Transportation Mode Warehousing System
Delivery reliability—Deliver on time consistently Highway None (direct ship)
Blank Air Assortment
Blank blank Spot stock
Delivery speed—Minimal time from order to delivery Air None (direct ship)
Blank Highway Assortment
Blank blank Spot stock
Mix flexibility—Support a wide range of different products/delivery needs Highway Assortment
Blank Air Spot stock
Blank Rail blank
Design flexibility—Support design changes/unique customer needs Highway Postponement
Blank Air blank
Volume flexibility—Provide products/delivery services in whatever volume the customer needs Highway None (direct ship)
Blank Air Assortment
Blank blank Spot stock
Cost—Minimize the cost of transportation Rail Consolidation
Blank Water Cross-docking
Blank Pipeline Hub-and-spoke
Blank Highway blank
29

Logistics Strategy (4 of 7)

Measuring Logistics Performance

The perfect order represents the timely, error-free provision of a product or service in good condition that is:

Delivered on time (according to buyer’s delivery dates)

Shipped complete

Invoiced correctly

Undamaged in transit

30

Logistics Strategy (5 of 7)

Landed cost – The cost of a product plus all costs driven by logistics activities, such as transportation, warehousing, handling, customs fees, etc.

Freight forwarder – An agent that serves as an intermediary between an organization shipping a product and the actual carrier, typically on international shipments.

Customs broker – An agent who handles customs requirements on behalf of another firm.

31

Logistics Strategy (6 of 7)

Reverse logistics system – A complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.

© 2016 APICS Dictionary

Source: systemsplusgroup.blogspot.com