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

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Presentation on theme: "Mode Selection John H. Vande Vate Fall, 2002 1."— Presentation transcript:

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

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

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

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

5 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

6 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

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

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

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

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

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