11

Transportation in Transportation in the Supply Chainthe Supply Chain

Partnering and establishing Partnering and establishing

strategic alliancesstrategic alliances

22

Supply Chain ManagementSupply Chain Management

Definition: planning ,organizing, and Definition: planning ,organizing, and controlling the flow of goods and services controlling the flow of goods and services from suppliers to end users.from suppliers to end users.

Accomplishing effective supply chain Accomplishing effective supply chain processes usually requires a strategic alliance processes usually requires a strategic alliance or partnership relationship with others in the or partnership relationship with others in the chainchain

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Effective Supply Chain Effective Supply Chain ManagementManagement

Shared policies and strategies among Shared policies and strategies among participantsparticipants

Integrated business processes with data Integrated business processes with data sharingsharing

Mutual risk sharingMutual risk sharing Agreed upon performance measurementsAgreed upon performance measurements Long term alliancesLong term alliances

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Competitive Advantages in Competitive Advantages in Supply Chain Mgmt.Supply Chain Mgmt.

faster inventory turnsfaster inventory turns fewer stock outagesfewer stock outages lower inventory obsolescencelower inventory obsolescence lower distribution costlower distribution cost smaller s.c. staff and overhead costsmaller s.c. staff and overhead cost what else?what else?

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Carrier Management in the Carrier Management in the Supply ChainSupply Chain

Strategic alliance which requires adoption of Strategic alliance which requires adoption of your customers strategies into your operationsyour customers strategies into your operations

Requires dedicated personnel-sometimes on Requires dedicated personnel-sometimes on sitesite

Requires dedicated equipment availabilityRequires dedicated equipment availability Can require software integration-GPS via Can require software integration-GPS via

internet or EDIinternet or EDI

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Carrier Strategic Carrier Strategic Alliances/Partnerships in SCMAlliances/Partnerships in SCM

Agreement entered into voluntarily with the Agreement entered into voluntarily with the common goal of benefit to both shipper and common goal of benefit to both shipper and carriercarrier

goes beyond core carrier relationshipsgoes beyond core carrier relationships danger for the carrier is that rate danger for the carrier is that rate

concessions now and may continue in the concessions now and may continue in the future-ex. Greatwide Transportation* and future-ex. Greatwide Transportation* and WalmartWalmart

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Transportation “Partnering”Transportation “Partnering”

Given the general increase in competition Given the general increase in competition levels faced by firms in the levels faced by firms in the transportation industry since economic transportation industry since economic deregulation, strategies have been deregulation, strategies have been adjusted to remain competitive. Some adjusted to remain competitive. Some have:have: Expanded service offerings and/or Expanded service offerings and/or Focused on core competenciesFocused on core competencies

As a result, many carriers now partner As a result, many carriers now partner with other carriers or non-transportation with other carriers or non-transportation logistics providers to remain competitive logistics providers to remain competitive in the marketplace.in the marketplace.

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SCM Advantages to Carrier SCM Advantages to Carrier

guaranteed level of businessguaranteed level of business rates charged reflect service level-ex. rates charged reflect service level-ex.

equipment dedicated but not used is paid by equipment dedicated but not used is paid by shippershipper

possible future growth built inpossible future growth built in better information allows for better planning as better information allows for better planning as

how to handle anticipated volumeshow to handle anticipated volumes

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SCM DisadvantagesSCM Disadvantages

forming an alliance with one shipper may forming an alliance with one shipper may result in loss of relationships with other result in loss of relationships with other shippersshippers

rate levels constrained to protect shipper and rate levels constrained to protect shipper and give him a competitive advantagegive him a competitive advantage

equipment and personnel dedication can limit equipment and personnel dedication can limit taking advantage of more profitable taking advantage of more profitable opportunitiesopportunities

1010

Core CompetenciesCore Competencies

ARE:ARE: Skill and knowledge-Skill and knowledge-

basedbased Not easily copiedNot easily copied Institutionalized in the Institutionalized in the

organization’s organization’s structurestructure

Applicable to multiple Applicable to multiple markets and productsmarkets and products

Customer-centeredCustomer-centered

ARE NOT (usually)ARE NOT (usually) Hard assetsHard assets Customer or market-Customer or market-

specificspecific Necessarily the same as Necessarily the same as

activities being done activities being done nownow

In multiplesIn multiples Subject to outsourcingSubject to outsourcing

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Core Competence and Core Competence and Supply Chain StrategySupply Chain Strategy

What is a “core competence?”What is a “core competence?” Retailing (Wal-mart)Retailing (Wal-mart) Gateway Computer assembles computers Gateway Computer assembles computers

(outsources logistics to UPS)(outsources logistics to UPS)

How does the concept of “core How does the concept of “core competence” pertain to outsourcing competence” pertain to outsourcing issues in transportation?issues in transportation? Customer contactCustomer contact Hard to duplicate? (Asset specificity, Hard to duplicate? (Asset specificity,

frequency and uncertainty)frequency and uncertainty)

1212

Core Competence Core Competence and Outsourcingand Outsourcing

The need is to benchmark activities against The need is to benchmark activities against outside suppliers (World Class).outside suppliers (World Class).

Also, will outsourcing or alliance give away Also, will outsourcing or alliance give away vital knowledge (Boeing Aircraft)vital knowledge (Boeing Aircraft)

Remember to take into account transaction Remember to take into account transaction costs!costs!

If the market has failed (no viable outside If the market has failed (no viable outside suppliers), keep the activity internally.suppliers), keep the activity internally.