Mode Selection John H. Vande Vate Fall, 2002 1.

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Presentation transcript:

Mode Selection John H. Vande Vate Fall, 2002 1

Choices Parcel Airfreight LTL TL LCL Car load Unit train … 2

What Matters? Range of acceptable shipment quantities Delivery Commitments Special Handling requirements Infrastructure Security Reliability … 3

Costs Freight Packaging/Racking Pipeline Inventory Cycle Stock Q Safety Stock Shrinkage/Damage Forecast Accuracy Market Access 4

Packaging Moving axels to Detroit from Mexico 2,000 units per day on average 10 units per rack $1,500 per rack 2 days at supplier 7 days in-bound 2 days in-house 7 days return Rack Investment? 5

Rack Fleet Analogous to pipeline Rack cycle: Racks per day: 2 days at supplier 7 days in-bound 2 days in-house 7 days return 18 days + contingency Racks per day: 2,000 units/10 units/rack = 200 racks/day Fleet size: 200 racks/day * 18 days = 3,600 racks 6

Rack Investment $1,500/rack * 3,600 racks = $5.4 Million Annualized: $540,000 + Contingency fleet Attrition/loss damage … 7

Best Total Cost Freight Packaging/Racking Pipeline Inventory Cycle Stock Q Safety Stock Shrinkage/Damage Forecast Accuracy Market Access Integrated Transportation Costs 8

Effects of Speed Freight Packaging/Racking Pipeline Inventory Cycle Stock Q Safety Stock Shrinkage/Damage Forecast Accuracy Improves Market Access Improves 9

Organizational Issues Players: Purchasing unit price Transportation Freight cost/Loss/Damage/Reliability Manufacturing Cycle stock/Safety Stock/Reliability Finance Pipeline Inv. 10