1 Dickson K.W. Chiu PhD, SMIEEE Text: Ballou - Business Logistics Management, 5/E (Chapter 6,7)Business Logistics Management, 5/E Transportation

Dickson Chiu 2006Transport-2 Learning Objectives To understand some basic domain knowledge of transportation To anticipate typical problems involved in transportation planning and decisions

3 4a.1 Transport Fundamentals Business Logistics Management, 5/EBusiness Logistics Management, 5/E (Chapter 6)

Dickson Chiu 2006Transport-4 Transport System Defined Performance Average transit time Transit time variability Loss and damage Other factors including availability, capability, frequency of movement, and various less tangible services Cost Line haul Terminal/local Accessorial or special charges

Dickson Chiu 2006Transport-5 Transport Choices Primary intercity carriers Air Truck Rail Water Pipe Coordinated services Piggyback Birdyback Fishyback Small shipment carriers UPS Federal Express Postal services Bus Package Express Agents Freight forwarders Shipper associations Others Autos Bicycles Taxis Human Electronic !!

Dickson Chiu 2006Transport-6 Importance of Modes by Products Hauled Air - very high-valued, time sensitive products Truck - moderately high-valued, time sensitive products. Many finished and semi- finished goods Rail - low-valued products including many raw materials Water - very low-valued products moved domestically, high -valued if moved internationally Pipe - generally limited to petroleum products and natural gas

Dickson Chiu 2006Transport-7 Importance of Modes by Volume Moved Transportation mode Railroads Trucks Inland waterways Oil pipelines Air Total Percent of total volume 36.5%

Dickson Chiu 2006Transport-8 Performance vs Cost Air generally fast over long distances and a fair degree of relative variability Water is very slow and moderately reliable Pipe is very slow but reliable Truck is moderately fast and reliable Rail is slower and less reliable than truck Mode Rail Truck Water Pipeline Air ¢/ton-mile

Dickson Chiu 2006Transport-9 Rate Types Line haul rates Class Freight classification of items Rate tables of tariffs Contract rates Drayage (local delivery) Commodity and contract rates Specific rates for given shipment sizes for specific products moving between designated points Special service charges Extra charges Stop-off privilege example Private carrier costing

Dickson Chiu 2006Transport-10 Rate Profiles by Distance

Dickson Chiu 2006Transport-11 Rate Profiles by Volume Should always check to see if shipment can be declared at the next higher weight break for a lower rate and lower total charges

12 4a.1 Transport Decisions Business Logistics Management, 5/EBusiness Logistics Management, 5/E (Chapter 7)

Dickson Chiu 2006Transport-13 Typical Transport Decisions Mode/Service selection Private fleet planning Carrier routing Routing from multiple points Routing from coincident origin-destination points Vehicle routing and scheduling … Freight consolidation

Dickson Chiu 2006Transport-14 Mode/Service Selection The Problem Define the available choices Balance performance effects on inventory against the cost of transport Methods for selection Indirectly through network configuration Directly through channel simulation Directly through a spreadsheet approach

Dickson Chiu 2006Transport-15 Carrier Routing Determine the best path between origin and destination points over a network of routes Shortest route method is efficient for finding the minimal cost route (cf. taught in algorithm course) The procedure can be paraphrased as: Find the closest unsolved node to a solved node Calculate the cost to the unsolved node by adding the accumulated cost to the solved node to the cost from the solved node to the unsolved node. Select the unsolved node with the minimum time as the new solved node. Identify the link. When the destination node is solved, the computations stop. The solution is found by backtracking through the connections made.

Dickson Chiu 2006Transport-16 Mapquest at CR (2004) Prentice Hall, Inc. Mapquest Solution

Dickson Chiu 2006Transport-17 Routing from Multiple Points This problem is solved by the traditional transportation method of linear programming Plant 1 Requirements = 600 Plant 2 Requirements = 500 Plant 3 Requirements = 300 Supplier A Supply  400 Supplier C Supply  500 Supplier B Supply  a a The transportation rate in $ per ton for an optimal routing between supplier A and plant 1.

Dickson Chiu 2006Transport-18 Routing with a Coincident Origin/Destination Point Typical of many single truck routing problems from a single depot. Mathematically, a complex problem to solve efficiently. However, good routes can be found by forming a route pattern where the paths do not cross - a "tear drop" pattern

Dickson Chiu 2006Transport X coordinates D Y coordinates X coordinates D Y coordinates (a) Location of beverage accounts and distribution center (D) with grid overlay (b) Suggested routing pattern CR (2004) Prentice Hall, Inc Single Route Developed by ROUTESEQ in LOGWARE

Dickson Chiu 2006Transport-20 Multi-Vehicle Routing and Scheduling A problem similar to the single-vehicle routing problem except that a number of restrictions are placed on the problem. Chief among these are: A mixture of vehicles with different capacities Time windows on the stops Pickups combined with deliveries Total travel time for a vehicle Heuristic solution (see textbook) “Sweep” Method “Savings” Method

Dickson Chiu 2006Transport-21 Warehouse Funeral home CR (2004) Prentice Hall, Inc. One Example Methodology Determine typical weekly demand and pickups Divide territories of equal size to minimize number of trucks Route design within territories

Dickson Chiu 2006Transport-22 Freight Consolidation Combine small shipments into larger ones A problem of balancing cost savings against customer service reductions An important area for cost reduction in many firms Based on the rate-shipment size relationship for for- hire carriers Cheaper, but what about the service effects of holding early orders for a longer time to accumulate larger shipment sizes?

23 4a.3 Summary

Dickson Chiu 2006Transport-24 Summary Much domain knowledge required Scheduling and planning involves cross-disciplinary knowledge artificial intelligence, algorithms, optimization … Note the data / information requirements and how IT helps to collect / integrate the data for calculations and decision making Note many elementary methods are just static planning beforehand – more advanced dynamic handling required to handle exceptions and violation of assumptions (e.g., traffic jam / accident, order cancellation) Note the quality of service implication, especially service delay