concept 1 transportation and commercial geography

Concept 1

Transportation and Commercial Geography

Commercial and Transport Geography

Commercial Geography

Transactions

Movements

Transport Geography

Commercialization of Transportation

Introduction (isolation / proprietary)

Expansion and interconnection

Standardization and integration

Integrated demand

Mark

et

Siz

e

Market Potential

Number of providers

Concept 2

Transport Costs and Transport Networks

Components of Transport Cost

A BFriction of Space

Transaction Costs

Shipment

Distance

Cos

ts

Distance

Cos

ts

Distance

Cos

ts

Distance

Cos

ts

1 2

3 4Transshipment Costs

Different Friction of Space Functions

Fixed Costs

Zone Change

FOB and CIF Transport Costs

} Production Costs

Distance

Cos

ts

Freight-on-Board

Cost-Insurance-Freight

Zonal Freight Rates

Distance

Cos

ts

I II III IV

Flat zonal rate

Real transport cost

D1

D2

Network Structures

Centralized Decentralized Distributed

Transport Structures

Hub / InterfaceFeeder

Warehousing

Financial / Insurance

Retail / Wholesale

Distribution

Node

LinkFlow

Corridor

Centrifugal and Centripetal Networks

Centrifugal Centripetal

Transport Hub

Point-to-Point Hub-and-Spoke

Hub

Impacts of Integration Processes on Networks and FlowsN

etw

ork

Flow

s

Before Integration After Integration

International border

Transport Rates and Network Structure

Low Average High

Concept 3

The Spatial Dimension of Transportation Networks

Topology of a Network

Node

Link

Unidirectional link

Bi-directional link

Entry and exit

ExitEntry

Types of Network Topology

Mesh Hub-and-Spoke

Linear Tree

For each node to be linked to another node

Even number of nodes Odd number of nodes

For all the nodes to be linked together

For each node to be linked to all other nodes Number of possible combinations

Network Geometry and Number of Links

Topology and Network Connectivity

Ave

rage

Pat

h Le

ngth

Network Length

Min

imum

Net

wor

k

Fully

Con

nect

ed N

etw

ork

Geographic Barrier

A

B or C

D

A

B

C

D

A Typology of Transportation Networks - I

Number of arcs and nodes

arcs = 6nodes = 7

Orientation and extent

N-E

S-E

500 km2

625 km2

Abstraction level

ConcreteAbstract

Relative position

A Typology of Transportation Networks - II

Distance, road type and control ofthe vehicle

Max= 100 km/hrMax= 60 km/hr

highway Secondary road125 km

90 km

Mode

Road

Maritime

Volume and direction

3500 t/hr 8000 t/hr

Type of traffic

Continuous

Divided

A Typology of Transportation Networks - III

Type of correspondence

Hierarchical Non- hierarchical

Pattern

Random

Uniform

Linear

Change (dynamics)

t

t + 1

Load and capacity

65% 95%

800 t/hr 1500 t/hr

Mode of Territorial Occupation by Transport Networks

Clearly defined Vaguely defined Without definition

Road

Rail Air corridor

Maritime corridor Cellular coverage

Overlap

“No service”

A B C

D E F

Network Strategies to Service a Set of Locations

Absolute and Relative Distance in a Network

10 km 30 minutes

Concept 4

Transportation Supply and Demand

Transport Supply and Demand

i j

Aij

i jExpressed Demand

Tij

Potential Demand

Modal Supply IntermodalSupply

Major Supply Variables for Transportation Modes

Road Rail Air Maritime•Lanes•Width•Speed limit

•Parking

•Speed•Passengers•Tonnage

Atmospheric Conditions

•Tracks•Grade

•Yards•Transshipment

•Speed•Passengers•Tonnage

•Corridors

•Speed•Passengers•Tonnage

•Runways•Dockways

•Canals•Locks

•Docks•Transshipment

•Speed•Tonnage

Route

sTerm

inals

Vehic

les

Impacts of Modal Competition and Intermodal Capacity on Transport Supply

Traf

fic

Assignment

Mode A Mode B

C

Cap

acity

C(A)

Terminal A Terminal B

C(B)

T(AB) = C(B)

T(A)

T(B)

C = T(A) + T(B)1

2

Modal Competition

Intermodal Capacity

Classic Transport Demand / Supply Function

Traffic

CostDemand Supply

T1

C1

D

S1S2

C2

T2

12

12

CC

TTElasticity

Equilibrium

Transport Elasticity by Activity

Traffic

Cost

100%

0%

Emergency

Commuting

Major Purchase

Special Event

Social Activities

Recreation

T>A

T<A

Transport Supply, Demand and Travel Time

Transport supply (A)

Transport Demand (T)

Time of the Day

Trav

el ti

me

Morningpeak

Afternoonpeak

Traf

fic

33

Basic Transport and Logistics Course

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Definition

• Materials Management:– The grouping of functions that support the complete cycle of material flow,

from the purchase of and internal control of production material , to the planning and control of work-in-progress (Chase et al, 1998)

35

Definition (cont’d)

• Physical Distribution management– …the efficient movement of finished product from the end of

the production line to the consumer, and in some cases includes the movement of raw materials from the source of supply to the beginning of the production line. These activities include freight transportation, warehousing, material handling, protective packaging, inventory control, plant and warehouse site selection, order processing, marketing forecasting and customer service. (National Council of Physical Distribution Management)

36

Definition (cont’d)

• Logistics Management:– The process of strategically managing the procurement, movement and

storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of (customer) orders (Christopher, 2008)

37

Definition (cont’d)

• Supply chain management– A supply chain is a network of connected and interdependent

organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users (Aitken, 1998)

– SCM is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole (Christopher, 2008)

38

A schematic relationship among material managements, physical distribution and logistics

39

Development of logistics & sc management

First phase:• Late 19th century to the early 1960s

– Secondary importance to sales and marketing, production– Little strategic impact outside of daily operations– Logistics functions were decentralized and split among marketing,

manufacturing or finance

40

Development of logistics & sc management (cont’d)

Second phase:• 1970s

– Becoming aware of the operational and cost deficiencies of the decentralized system

– Centralizing logistics functions into a single management system– Constructing logistical activities to achieve optimal total cost for the whole

system (TDC)

112/04/21 41

Development of logistics & sc management (cont’d)

Third phase:• 1980s

– A concerted attempt by companies to move away from a passive approach (cost oriented) to another where logistics was conceived as providing internal enterprise strategic advantage (customer oriented)

– More functions were being integrated to explore a continuous source of unassailable strategic competency

42

Development of logistics & sc management (cont’d)

Fourth phase: SCM comes into play• 1990s

– From being a source of internal competitive advantage to a source of external advantage

– To accelerate the cycle time of inventory and information along the chain– To optimize the linkages between internal functions and supply partners

43

Development of logistics & sc management (cont’d)

Fourth phase: SCM comes into play• 1990s

– To consecutively network the competencies of intersecting supply channels of focused around:

• the creation of shared marketplace and competitive visions

• Co-evolutionary alliances providing breakthrough in products and services

44

Elements of logistics

• Storage, warehousing and materials handling– Number, locations, size, layout and operations

• Transport– Functions, modes, types of delivery, load planning and route

scheduling• Inventory

– Functions, what, when and how much to order / reorder and stock

• Information technology and control– Systems, procedure

• Others– Order processing, procurement, maintenance, contracting

45

Warehousing

• Functions– Storage

• Temporary• Permanent:seasonal production, erratic demand, conditioning, speculation,

bulk purchase et al, strategic reserve– Movement

• Receiving, transfer, picking, shipping, cross dock, merge-in-transit

46

Warehousing (cont’d)

• Warehouse layout– For what:

• quality control, quarantine, pallet and trolley storage and repair, returned goods, waste disposal, battery charging, maintenance, fuel supply, services, offices. Amenities, security and special data link / communications lines

• Spare for expansion, plant area

47

Warehousing (cont’d)

• Warehouse layout– Principles to follow for layout design:

• Load unitization• Use of space: 40% (25% to have, 15% to maintain)• Movement minimization: 42% of manpower in picking activity• Control• Safety, security and environment• Total cost minimization

48

Warehousing (cont’d)

• Warehouse layout• Types of layout:

– “U” flow: goods in and out at the same end of warehouse– Through flow: goods in at one end and goods out at the other end– Adjacent flow: goods in at one side and goods out at the adjacent side

49

Warehousing (cont’d)

50

Warehousing (cont’d)

• Picking method– Order picking: one order or a small number of orders is picked on each

picking circuit– Batch picking or summary picking: quantity of orders is summarized and

picked simultaneously during 1 picking circuit– Zone picking: each order is split in different picking zone and subsequent

collation may be required

51

Warehousing (cont’d)

• What is the role a warehouse / DC in e-commerce?• Let’s look at this new era.

52

What’s the new era?

• Globalization:– Why:

• Economically: lower cost of production, large market• Politically: WTO, OECD, NAFTA, MERCOSUR, ASEAN• Technologically: Transport, IT, communication

– Impact on logistics• Greater distance• Conflicting infrastructure• Different standards and regulations• Cultures and (trusting) relationships over the chain

53

What’s the new era?

• Technology– IT– Communications: 2.4Ghz, bluetooth– Use of defense technology– GPS/Local Positioning System

54

What’s the new era?

• Some hard-earned lessons:– Botched orders– High stock out rates– Late deliveries

• Causes:– No integrated end-to end solution– Handoffs between all the different functions

55

What’s the new era?

• Customer demand– Ever-changing less brand loyalty and shorter product life-

cycle– Volatile demand forecasting almost impossible

• End result: agile logistics structure to put the end-customer in your focus

56

Requirements on logistics

• Quality and cost effectiveness (lean) are taken for granted

• Ever-shortening lead time And ever-increasing customer service level are the norm

• A direct channel which requires a short cycle time, no min. order size constraint, customized products

• Meaning much more orders w/ fewer lines in smaller qty.

57

Impact of e-commerce on logistics– 50% web-retailers losing on every package shipped (0.65 mil

packages/day in 1999, expected to reach 4.6 mils packages in 2003 by Forrester Research)

– Higher picking costs: many picks before of more smaller orders (trad. 43% of distribution cost is for picking)

– More frequent deliveries: short & shorter lead time– Decentralize Centralize Decentralize amazon.com

(DCs in US & UK), webvan (1 DC to cover 40 sq.m), Sameday.com (9 centres to cover 40% of US population in same day & 80% next day)

– Cash on delivery delivery men to take on the role of cashier (m-POS)

– Customer service representation– 3PL, 4PL

58

Warehouse (cont’d)

• Therefore, roles of a warehouse can be:– An assortment centre– A light manufacturing plant– A point to do merge-in-transit– A transit point for reverse logistics– A configuration centre– Other value adding services such as labelling, pre-retailing etc

Third-party logistics

59

Carrier / Logistics Service Provider

Supply chain Customer

What is third-party logistics?

• Definition 1:

– »... involves outsourcing logistics activities that have traditionally been performed within an organization. The functions performed by the third-party can encompass the entire logistics process or, more commonly, selected activities within that process« (Lieb & Randall, 1996) .

60

What is third-party logistics?

• Definition 2:

– »Activities carried out by a logistics service provider on behalf of a shipper and consisting of at least management and execution of transportation and warehousing (if warehousing is part of the process)« (Berglund et al., 1999).

61

What is third-party logistics?

• Definition 3:

– »A long-term formal or informal relationship between a shipper and a logistics provider to render all or a considerable number of logistics activities for the shipper. The shipper and the logistics provider see themselves as long-term partners in these arrangements. Although these alliances may start with a narrow range of activities, there is a potential for a much broader set of value-added services, including simple fabrication, assemblies, repackaging, and supply chain integration« (Bagchi & Virum, 1998a, b).

62

Relationships between shippers and logistics service providers

63

Markettransactions

Degree of integration

Degree of asset specificity

Outsourcing of transport & warehouse

Third-party logistics (3PL)

Fourth-party logistics (4PL)

Typology of third-party logistics providers

• Three waves of entrants into the third-party logistics market

– traditional market-based solutions

– asset-based logistics providers

– network logistics providers

– skill-based logistics providers (information-based)

64

Typology of third-party logistics providers

65

Physical services

Management services

Asset-based logistics providers

-Warehousing-Inventory management

-Postponed manufacturing

Information-based logistics providers

-Management consultancy

-Information services-Financial services

-SCM-IT Solutions

Traditional transport and forwarding

companies-Transport

-Warehousing-Customs clearance

Network logistics providers

-Express shipments-Track and Trace

-Electronic proof-of- delivery

-JIT deliveries

What is being outsourced?

66

Forces behind third-party logistics

• Supply chain activities become more complex, expensive and capital intensive

67

• Benefits of outsourcing– Conversion of fixed costs to variable costs

– Economics of scale and scope – A leaner organization – Faster access to new markets and distribution channels – Reconfiguration of European logistics systems

Forces behind third-party logistics

• Some empirical evidence of why firms do it:

68

Forces behind third-party logistics

• Some empirical evidence of what firms have achieved:

69

Developing a third-party logistics partnership

• Outsourcing decisions are both difficult and stressful

70

• Stages of developing a 3PL relationship– establishing objectives and selection criteria

– evaluating and selecting a third-party logistics provider

– making a contract between the partners implementing the partnership

– making continuous improvements– renegotiating

Obstacles in logistics outsourcing

• Turning over an internal logistics function to an external third-party provider involves risk.– Potential risk of loss of control over the flow of products and materials

71

– 3PL might go out of business or be taken over by another company with inferior services or geographic coverage

– Interorganizational cooperation itself presents inherent difficulties in the compatibility of corporate cultures, data systems and the level of employee knowledge and skills

Obstacles in logistics outsourcing

• Some empirical evidence for areas that need to be improved:

72

Operations Management a Sustainable perspective

Operations Managers

Globalization

Social responsibil

ity

Technology

Knowledge managemen

t

Environmental

responsibility

Five challenges for operations managers

Operations strategies have an ethical dimension

Product/service design - customer safety, recyclability of materials, energy consumption.

Network design - employment implications and environmental impact of location.

Layout of facilities - staff safety, disabled customer access.

Process technology - staff safety, waste and product disposal, noise pollution, fumes and emissions.

Job design - workplace stress, unsocial working hours.

Capacity planning and control - employment policies.

Inventory planning and control - price manipulation.

Management Systems

• EMAS, Environmental Management and Audit Scheme

• ISO 14000

Life cycle analysis

• Full explanation• link

Life Cycle Analysis (LCA)

• Method for investigating the impact of a product and its associate processes throughout its life cycle and disposal

• An Environmental and Financial assessment of viability• Portfolio analysis• Competitive analysis

INFORMATION RESOURCE MANGEMENT

INFORMATION AS AN INPUT TO MANAGEMENT DECISIONS

TECHNOOGY OFFERS AN INFRASTRUCTURE THAT CREATES NEW WAYS OF DOING BUSINESS

CHANGES IN THE WAY GOODS ARE PURCHASED, THE REP TRAVELLING THE ROAD, HOME SHOPPING, MANAGEMENT OF THE HOME, ENERGY ETC.(DISCUSS)

INFORMATION RESOURCE MANAGEMENT

• DESIGN AND SPECIFICATION

• WHAT INFORMATION

• WHAT INFORMATION IS ACCESABLE

• WHAT CAN BE EFFECTIVELY USED

INFORMATION RESOURCE MANAGEMENT

• THREE KEY MANAGERIAL ACTIVITIES

– STRATEGIC PLANNING( GOALS, STRATEGIES AND POLICIES)

– MANAGEMENT CONTROL (IMPLEMENTATION OF STRATEGIES)

– OPERATIONAL CONTROL (EFFICIENT AND EFFECTIVE PERFORMANCE OF INDIVIDUAL TASKS)

INFORMATION RESOURCE MANAGEMENT

• PLANNING SYSTEMS – SALES(PROFITS/EARNINGS) FORCASTING, OPERATING PLANS, CAPACITY

PLANNING, NEW LEGISLATION SCENARIOS

• CONTROL SYSTEMS– EMISSIONS AND ENERGY ANALYSIS, BUDGETRY CONTROL, MANAGEMENT

ACCOUNTING, INVENTORY MANAGEMENT

• OPERATIONAL SYSTEMS– ORDER-ENTRY PROCESSING, TRACKING WASTE DOCUMENTATION,

TRANSPORT SCHEDULING.

INFORMATION RESOURCE MANAGEMENT

• SOURCES OF INFORMATION– INTERNAL

• EMISSIONS • ENERGY• WASTE• RECYCLING• LEGISLATIVE COMPLIANCE• RESEARCH AND DEVELOPMENT• PRODUCTS • EXPERTISE• SKILL • SYSTEMS

INFORMATION RESOURCE MANAGEMENT

• SOURCES OF INFORMATION– EXTERNAL

• LEGISLATION• GLOBAL AGREEMENTS• MARKET DEVELOPMENTS• COMPETITIVE ACTIVITY• SCIENCE AND TECHNOLOGY• PRESSURE GROUP ACTIVITY