7-1 transport decisions cr (2004) prentice hall, inc. chapter 7 if you are planning for one year,...

7-1

Transport Decisions

CR (2004) Prentice Hall, Inc.

Chapter 7

If you are planning for one year, grow rice. If you are planning for 20 years, grow trees. If you are planning for centuries, grow men.

A Chinese proverb

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Transport Decisionsin Transport Strategy

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Transport Strategy• Transport fundamentals• Transport decisions

Customer service goals

• The product• Logistics service• Ord. proc. & info. sys.

Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply

scheduling decisions• Storage fundamentals• Storage decisions

Location Strategy• Location decisions• The network planning process

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Transport Strategy• Transport fundamentals•Transport decisions

Customer service goals

• The product• Logistics service• Ord. proc. & info. sys.

Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply

scheduling decisions• Storage fundamentals• Storage decisions

Location Strategy• Location decisions• The network planning process


7-3

Just a few of the many problems in transportation

Typical Transport Decisions


Mode/Service selection Private fleet planning

- Carrier routing - Routing from multiple points - Routing from coincident origin-destination

points - Vehicle routing and scheduling

Freight consolidation

7-4

Mode/Service Selection


The problem Define the available choices Balance performance effects on inventory against

the cost of transport Methods for selection

Indirectly through network configuration Directly through channel simulation Directly through a spreadsheet approach as follows:

Alternatives Cost types Air Truck Rail Transportation In-transit inventory Source inventory Destination inventory

7-5

Mode/Service Selection (Cont’d)Example Finished goods are to be shipped from a plant inventory to a warehouse inventory some distance away. The expected volume to be shipped in a year is 1,200,000 lb. The product is worth $25 per lb. and the plant and carrying costs are 30% per year.

Other data are:


Transport choice

Rate, $/lb.

Transit time, days

Shipment size, lb.

Rail 0.11 25 100,000

Truck 0.20 13 40,000

Air 0.88 1 16,000

Include transport rate

Transport Selection AnalysisCosttype

Compu-tation Rail Truck Air

Trans-portation

RD .11(1,200,000)= $132,000

.20(1,200,000)= $240,000

.88(1,200,000)= $1,056,000

In-transitinventory

ICDT

365[.30(25)1,200,000(25)]/365= $616,438

[.30(25) 1,200,000(13)]/365= $320,548

[.30(25) 1,200,000(1)]/365= $24,658

Plantinventory

ICQ

2[.30(25) 100,000]/2= $375,000

[.30(25) 40,000]/2= $150,000

[.30(25) 16,000]/2= $60,000

Whseinventory

IC'Q2

[.30(25.11) 100,000]/2= $376,650

[.30(25.20) 40,000]/2= $151,200

[.30(25.88) 16,000]/2= $62,112

Totals $1,500,088 $ 861,748 $1,706,770

Improved serviceCR (2004) Prentice Hall, Inc. 7-6

7-7

Carrier Routing Determine the best path between origin and destination points over a

network of routes

Shortest route method is efficient for finding the minimal cost route

Consider a time network between Amarillo and Fort Worth. Find the minimum travel time.

The procedure can be paraphrased as:

Find the closest unsolved node to a solved node

Calculate the cost to the unsolved node by adding the accumulated cost to the solved node to the cost from the solved node to the unsolved node.

Select the unsolved node with the minimum time as the new solved node. Identify the link.

When the destination node is solved, the computations stop. The solution is found by backtracking through the connections made.


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OriginAmarillo

OklahomaCity

DestinationFort Worth

AB E

I

C

D G

F

H

J

90 minutes 84 84

138

348

156

48

132

150

126

13212066

126

48

60

Note: All link times are in minutes

90

Carrier Routing (Cont’d)

Can be a weighted index of time and distance


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Sh

ort

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Ro

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Met

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d


Step

Solved Nodes

Directly Connected to Unsolved

Nodes

Its Closest Connected Unsolved

Node

Total Cost Involved

nth Nearest

Node

Its Minimum Cost

Its Last Connection a

1 A B 90 B 90 AB* 2 A C 138 C 138 AC B C 90+66=156

3 A D 348 B E 90+84=174 E 174 BE* C F 138+90=228

4 A D 348 C F 138+90=228 F 228 CF E I 174+84=258

5 A D 348 C D 138+156=294 E I 174+84=258 I 258 EI* F H 228+60=288

6 A D 348 C D 138+156=294 F H 228+60=288 H 288 FH I J 258+126=384

7 A D 348 C D 138+156=294 D 294 CD F G 288+132=360 H G 288+48=336 I J 258+126=384

8 H J 288+126=414 I J 258+126=384 J 384 IJ*

7-10

MAPQUEST SOLUTION

Mapquest at www.mapquest.com


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Plant 1Requirements = 600



Supplier ASupply 400

Supplier CSupply 500

Supplier BSupply 700

4a

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aThe transportation rate in $ per ton for an optimal routing between supplier A and plant 1.

Routing from Multiple PointsThis problem is solved by the traditional transportation method of linear programming


7-12

TRANLP problem setup

Solution


7-13

Routing with a Coincident Origin/Destination Point

D DDepot Depot

(a) Poor routing-- paths cross

(b) Good routing-- no paths cross

Typical of many single truck routing problems from a single depot.

Mathematically, a complex problem to solve efficiently. However, good routes can be found by forming a route pattern where the paths do not cross a "tear drop" pattern.


Single Route Developed by ROUTESEQ in LOGWARE

0 1 2 3 4 5 6 7 8

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X coordinates

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Y coordinates

0 1 2 3 4 5 6 7 8

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D

Y coordinates

(a) Location of beverage accountsand distribution center (D) withgrid overlay

(b) Suggested routing pattern

CR (2004) Prentice Hall, Inc.7-14

7-15

Multi-Vehicle Routing and Scheduling

A problem similar to the single-vehicle routing problem except that a number of restrictions are placed on the problem. Chief among these are:

- A mixture of vehicles with different capacities - Time windows on the stops - Pickups combined with deliveries - Total travel time for a vehicle


7-16

Practical Guidelines for Good Routing and Scheduling

1. Load trucks with stop volumes that are in closest proximity to each other

(a) Weak clustering

Depot

(b) Better clustering

D DDepot

Stops


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Guidelines (Cont’d)

2. Stops on different days should be arranged to produce tight clusters

F

F

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T T

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DDepot

F

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F

F

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F T

F

T

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DDepot

(a) Weak clustering--routes cross

(b) Better clustering

Stop

May need to coordinate with sales to achieve

clusters


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Guidelines (Cont’d)3. Build routes beginning with the farthest stop from the depot

4. The stop sequence on a route should form a teardrop pattern (without time windows)

5. The most efficient routes are built using the largest vehicles available first

6. Pickups should be mixed into delivery routes rather than assigned to the end of the routes

7. A stop that is greatly removed from a route cluster is a good candidate for an alternate means of delivery

8. Narrow stop time window restrictions should be avoided (relaxed)

7-19

Application of Guidelines to Casket Distribution

WarehouseFuneral home Typical weekly demand

and pickupsCR (2004) Prentice Hall, Inc.

7-20

Application of Guidelines to Casket Distribution (Cont’d)

WarehouseFuneral home

Division of sales territories into days of the week

Territories of equal size

to minimize number of trucks


7-21

Application of Guidelines to Casket Distribution (Cont’d)

WarehouseFuneral home Route design within territories


7-22

“Sweep” Method for VRP

Example A trucking company has 10,000-unit vans for merchandise pickup to be consolidated into larger loads for moving over long distances. A day’s pickups are shown in the figure below. How should the routes be designed for minimal total travel distance?


7-23

Geographicalregion

Depot

1,000

2,0003,000

2,000

4,000

2,000

3,000 3,000

1,000

2,0002,000

2,000

Pickuppoints

Stop Volume and Location


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Sweep directionis arbitrary

Depot

1,000

2,0003,000

2,000

4,000

2,000

3,000 3,000

1,000

2,0002,000

2,000

Route #110,000 units

Route #29,000 units

Route #38,000 units

“Sweep” Method Solution


The “Savings” Method for VRP

Depot Depot

(a) Initial routing Route distance = d0,A +dA,0 +d0,B+ dB,0

(b) Combining two stops on a route Route distance = d 0,A +dA,B +dB,0

A

B

dA,0

d0,Ad0,B

dB,0

A

BdB,0

d0,A

dA,B

Stop

Stop

0 0

“Savings” is better than “Sweep” method—has lower average error

CR (2004) Prentice Hall, Inc.7-25

7-26

Savings Method Observation

The points that offer the greatest savings when combined on the same route are those that are farthest from the depot and that are closest to each other.

This is a good principle for constructing multiple-stop

routes


Route Sequencing in VRP

8 9 10 11 12 1 2 3 4 5 6Route #1 Route #10

AM PM

Route #6

Route #9 Route #4

Route #5 Route #8

Route #2 Route #7

Route #3

Truck #1

Truck #2

Truck #3

Truck #4

Truck #5

Minimize number of trucks by maximizing number of routes

handled by a single truckCR (2004) Prentice Hall, Inc. 7-27

7-28

Freight Consolidation

Combine small shipments into larger ones

A problem of balancing cost savings against customer service reductions

An important area for cost reduction in many firms

Based on the rate-shipment size relationship for for-hire carriers


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Freight Consolidation Analysis


Suppose we have the following orders for the next three days.

Consider shipping these orders each day or consolidating them into one shipment. Suppose that we know the transport rates.

Note: Rates from an interstate tariff

From: Ft Worth Day 1 Day 2 Day 3 To: Topeka 5,000 lb. 25,000 lb. 18,000 lb. Kansas City 7,000 12,000 21,000 Wichita 42,000 38,000 61,000

Freight Consolidation Analysis (Cont’d) Day 1 Day 2

Rate x volume = cost Rate x volume = cost

Topeka 3.42 x 50 = $171.00 1.14 x 250 = $285.00

Kansas City 3.60 x 70 = 252.00 1.44 x 120 = 172.80

Wichita 0.68 x 420 = 285.60 0.68 x 400a = 272.00

Total $708.60 Total $729.80a Ship 380 cwt., as if full truckload of 400 cwt.

Day 3 Totals

Rate x volume = cost

Topeka 1.36 x 180 = $244.80 $700.80

Kansas City 1.20 x 210 = 252.00 676.80

Wichita 0.68 x 610 = 414.80 972.40

Total $911.60 $2,350.00

Separate shipments

CR (2004) Prentice Hall, Inc. 7-30

Freight Consolidation Analysis (Cont’d)

a 480 = 50 + 250 + 180

Computing transport cost for one combined, three-day shipment

Cheaper, but what aboutthe service effects of holdingearly orders for a longer timeto accumulate larger shipmentsizes?

Consolidated shipment

Day 3 Rate x volume = cost

Topeka 0.82 x 480a = $393.60

Kansas City 0.86 x 400 = 344.00

Wichita 0.68 x 1410 = 958.80

Total $1,696.40

CR (2004) Prentice Hall, Inc. 7-31

7-1 transport decisions cr (2004) prentice hall, inc. chapter 7 if you are planning for one year,...

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