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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: [email protected]
• 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