concept 1 transportation and commercial geography
TRANSCRIPT
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
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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)
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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)
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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)
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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)
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A schematic relationship among material managements, physical distribution and logistics
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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
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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)
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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
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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
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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
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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
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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
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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
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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
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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
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Warehousing (cont’d)
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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
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Warehousing (cont’d)
• What is the role a warehouse / DC in e-commerce?• Let’s look at this new era.
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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
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What’s the new era?
• Technology– IT– Communications: 2.4Ghz, bluetooth– Use of defense technology– GPS/Local Positioning System
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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
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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
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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.
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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
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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
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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) .
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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).
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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).
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Relationships between shippers and logistics service providers
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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)
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Typology of third-party logistics providers
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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?
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Forces behind third-party logistics
• Supply chain activities become more complex, expensive and capital intensive
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• 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:
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Forces behind third-party logistics
• Some empirical evidence of what firms have achieved:
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Developing a third-party logistics partnership
• Outsourcing decisions are both difficult and stressful
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• 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
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– 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:
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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