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Transportation & Supply Chain Systems

John H. Vande Vate

Spring 2007

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Who am I?

• John H. Vande Vate

• Professor and EMIL Executive Director

• Office: 222 of the Old ISyE bldg.

• Phone: (404) 894-3035

• Prefer e-mail: jvandeva@isye.gatech.edu

• Office Hours: – Tuesday, Thursday 2-3:30 (after class) or– By appointment

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Administrative Details

• Class Home Page:www.isye.gatech.edu/~jvandeva/Classes/6203/2007/

syllabus2007.html

Keep up with information here!

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Recommended Text

• Designing and Managing the Supply Chain: Concepts, Strategies & Case Studies, Second Edition, By David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, McGraw-Hill/Irwin; (October 11, 2002). ISBN: 0072845538

• $106 on Amazon• Used copies• Not required• Each team should have access

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Other Resources• You may also want to read:

– Contemporary Logistics by Johnson, Wardlow, Wood and Murphy

– Logistic Systems Analysis by Daganzo

– Business Logistics Management 4th Edition by R. H. Ballou, Prentice Hall, 1999

– Bramel, J. and D. Simchi-Levi, The Logic of Logistics: Theory, Algorithms and Applications for Logistics Management, Springer-Verlag, 1997

– Logistics and Supply Chain Management: Strategies for Reducing Cost and Improving Service (2nd Edition) by Martin Christopher

– Modeling the Supply Chain by Jeremy F. Shapiro

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Grading

• Exams: 66%– February 19st       33%     – Final 33%

• Project: 33%– Groups of 4 to 6

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Objectives

• Knowledge and understanding of the issues underlying transportation and supply chain management and

• Mastery of the tools and models to support intelligent resolution of those issues.

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Projects

• Project: Ideally a real application– Team of 4 to 6 students– Distance learning students encouraged to bring

projects from their companies and recruit teams of on-campus students to work with them

– Every team must have at least 1 on-campus student

– Several projects already available

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Project Cont’d• Due February 19

– one member of your team should send me an e-mail with the subject "6203 Project" providing

• The names and contact information (e-mails and phone numbers)• Resumes • Your team's project preferences (list at least four alternatives) in

order• Your team's preferences for presentation dates (list all four) in

order of preference

• A presentation and report to your company • On April 11th, 16th, 18th or 23rd. Present in class (~

30 minute presentation) • Self-contained CD of everything for me

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Project Motivation

• Interviewing for job

• Learning by Doing

• Off-campus students

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Projects

• European Auto manufacturer• Shipping parts from European suppliers to

average forecasted demand significantly better in terms of reducing the bullwhip effect.

• Simulation too time consuming and requires too much data.

• Tool for faster computation of good parameter values using less detailed information about the parts.

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Projects

•XYZ: Transportation optimization– LTL consolidation

– Multi-stop TL

– Dynamic vendor assignment

– Milk runs

– Zone skipping

– …

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Other Projects

•Welcome to propose other topics

•Must:– Have a corporate sponsor– Be of value to the company– Give the team experience– Relate to topics in this course

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Deliverable

• Presentation to your company and to the class (These may have to be different)

• CD that includes– Project Description

– Your presentation(s)

– Sufficient description that I can follow your presentation, understand the data and use the tools

– Data and data definitions

– Any tools (documented)

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Supply Chain Management• Deterministic View

– Transportation– Inventory– Finance– Location– Mid-Exam: February 19rd

• Managing Variability & Risk– Revenue Management– Safety Stock– Inventory Pooling

• Supply Chain Applications & Projects• Exam Questions from Variability & Risk and Projects

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Transportation

• Modes– …– Parcel– Less-than-Truck load– Multi-stop TL– Truck load– Less-than-Car Load (rail)– Car Load (rail)– Block train– Less-than-Container load– Container load– …

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Trade offs

• Cost • Speed• Access• Reliability• Security• Special Handling• Risk• …

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Typical Cost Factors

• Parcel (Up to ~150 lbs)– Zones (origin & destination)

– Weight & Cube

– Negotiated discount based on volume

– Delivery Options• Location

• Timing: Same day, next day am, next day, 2nd day, ground, …

• UPS: http://wwwapps.ups.com/calTimeCost?loc=en_US

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Less-Than-Truck Load (LTL)

• Origin & Destination

• Weight (up to ~20,000 lbs)

• Class

• Discount based on volume of business

• Special Requirements

• Old Dominion

• http://www.odfl.com/rateestimate

Why not just

distance?

Why is this important?

•/

Typically quoted as $/CWT

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NMFC Classes

• Density– Helps carrier judge demands for capacity

• Value– Helps carrier judge risk (liability limits

associated with each class)

• Class 50: cheapest, e.g., sand• Class 500: most expensive, e.g., Ping Pong

Balls• Maintained by the NMFTA (NMFTA.org)

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Truck Load (TL)

• Up to ~45,000 lbs

• Origin

• Destination

• Volume of business

• Special Services (accessorials)– Detention, cleaning, …

• Schneider National• https://webapps.schneiderlogistics.com/pwschneiderrate/schneider_rate_ext_customer

Typically quoted as $/mile

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Rail

• Commodity (Grain, Coal, …)• Origin, Destination• Equipment (Box car, tanker, Tri-level)• Number of cars in block• Cars handle on the order of 70 tons• …• Norfolk Southern• http://www.norfolksouthern.com/nscorp/application?

origin=content_home.jsp&event=bea.portal.framework.internal.refresh&pageid=Doing+Business&contentId=english/nscorp/doing_business/none1/home/agriculture.html

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Undiscounted LTL Rates

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000

ATL to LBClass 50

$1.12/CWT

$0.53/CWT

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Concave Cost

Shipment Size

Cos

tCost per unit decreasing

So?!

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Consolidation

• Incentive to consolidate shipments– Make fewer larger shipments– Reduce frequency (!?)– Hub & Spoke– Share transportation resources– …

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Issues with Freight Rates

• Issue of how to estimate rates on lanes you don’t currently use

• Levels of detail– $/mile as the crow flies– $/mile on the network– Rate look up

• Caution: Average cost of shipments can be smaller than the cost of an average shipment

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Estimating Rates

Small shipments

Shipment Size

Cos

t

Large shipments

Cost ofAverage shipment

Average shipment

AverageCost of

shipment

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Why It Matters?

• Estimating transportation costs to “customers”– Typically too many customers– Aggregate them

• By region

• By state

• By 3-digit zip

– Use some care in estimating the transportation cost to “aggregated” customers

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Why It Matters?

• Customers may order different quantities at different times

• Estimating the cost to serve the customer often look at average shipments

• Careful how you average

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Summary

• Transportation mode basics

• Transportation rate basics

• Economies of scale promote consolidation

• Cautions on “aggregating” transportation rates

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Next Time

• Inventory and Transportation