chapter 13 dp&c 13-1 “education in pursuit of supply chain leadership” chapter 13 dp&c...
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Chapter 13dp&c13-1
“Education in Pursuit of Supply Chain Leadership”
Chapter 13
Chapter 13dp&c
Transportation Management
Chapter 13dp&c13-2
Learning Objectives (cont.)
• Defining the transportation management function
• Describing the financial magnitude of transportation
• Reviewing the principles of transportation
• Detailing transportation services and participants
• Discussing the relationship of transportation to other business functions
• Detailing transportation performance characteristics
• Reviewing the legal forms of transportation
• Detailing the characteristics of the five modes of transportation: truck, rail air, water, and pipeline
Chapter 13dp&c13-3
Learning Objectives
• Reviewing the elements of intermodal transportation
• Detailing the role of transportation management
• Discussing the transportation management process
• Reviewing the main issues before todays transportation function: infrastructure, risk management, and transportation management technologies
• Exploring the use of transportation logistics service providers (LSPs)
Chapter 13dp&c13-4
Inventory Management Basics
Chapter 13
Transportation Management
Defining Transportation Management
Chapter 13dp&c13-5
Defining Transportation Management
The function of planning, scheduling, and
controlling activities related to mode, vendor,
and movement of inventories into and out of
an organization
Chapter 13dp&c13-6
Magnitude of Transportation
CSCMP Annual State of Logistics (2014)
Transportation Costs US$ Billions
Motor Carriers• Truck – Intercity 453• Truck - Local 204
Subtotal 657
Other Carriers• Railroads 74• Water (International 27, Domestic 7) 37• Oil Pipelines 13• Air (International 13, Domestic 20) 33• Forwarders 38
Subtotal 195
Shipper Related Costs 10
Chapter 13dp&c13-7
Principles of Transportation
As the volume and weight of the load increases, the unit cost of transportation decreases
Economy of Scale
The transportation cost per unit of weight decreases as the distance from shipping point to delivery point increases
As the speed of the movement of the load increases, the cost of the transportation increases
Economy of Distance
Cost of Velocity
Chapter 13dp&c13-8
Detailed Principles of Transportation
Continuous Flow
Optimize Unit of Cargo
Maximum Vehicle Unit
Match Vehicle to Nature of Transit
Environment
Provide for the uninterrupted flow of goods through the supply chain
Match vehicle size to load weight and volume
Match vehicle transport characteristics and capacities with the nature of the transit environment
Ensure cargo fully optimizes transportation vehicle capacities
Chapter 13dp&c13-9
Standardization
Unit-load Compatibility
Minimization of Deadweight
Maximize Capital,
Equipment, & Personnel
Use standard transport vehicles and materials handling equipment whenever possible
Minimizing vehicle deadweight (the vehicle itself, containers, and materials handling equipment)
Maximize the percentage of time transportation and materials handling equipment and personnel are in use
Materials handling equipment should minimize cargo damage and reduce load shift during transport
Detailed Principles of Transportation (cont.)
Chapter 13dp&c13-10
Transportation Services – Load Transport
Freight Services
Terminal Services
Loading and Unloading
Value-Added Services
Documentation
Transportation Rates
Movement of goods through the channel network
Pickup and delivery of goods from and to channel warehouses
Loading and unloading of product deliveries
Services such as electronic shipment tracking, delivery confirmation, management of transportation charges, and so on
Management of domestic and international documents
Establishment of transportation rates for contracting third-party transport carriers
Chapter 13dp&c13-11
Transportation Services – Product Storage
Transport Mode
Diversion and Reconsignment
In-transit Storage
Shipment loads are temporarily stored in their transportation method
Changing the shipment’s destination while in transit or after it has reached its original destination
Use of long transportation times as storage until product is received
Chapter 13dp&c13-12
Transportation Participants
Consignee (Receiver)Transportation
Consignor(Shipper)
Carriers and Agents
Government
Internet Services
Source: Donald J. Bowersox, David J. Closs, and M. Bixby Cooper, Supply Chain Logistics Management. 3rdedition.New York, McGraw-Hill Irwin, 2010.
Public
Chapter 13dp&c13-13
Relationship of Transportation to Other Business Functions
Strategic Planning
Traffic Management
Warehouse Management
Purchasing
Customer Service
Product Pricing
Inventory Planning
Channel Network Locations
Transportation
Chapter 13dp&c13-14
Transportation Performance Characteristics
CostCompletenessFrequency
Capability Dependability
Speed
Chapter 13dp&c13-15
Inventory Management Basics
Chapter 13
Transportation Management
Types of Transportation
Chapter 13dp&c13-16
Types of Transportation Carriers
CommonProvides transport services to the general public according to a published rate
RegulatedSimilar to a common carrier, but without the requirement to serve all customers
ContractProvide transport services for a negotiated price to selected customers by contractual agreement
ExemptProvides transport services that are not regulated with respect to routes, areas served, and rates
Private Transport that is wholly owned or leased by a firm and is incidental to its main business
Chapter 13dp&c13-17
Transportation Service Agents
Freight Forwarders
Provides the general public with transportation services and provides for the assembly and consolidation of shipments at origin and performs or provides for break bulk and distribution of shipments at the delivery destination
Parcel PostProvides for the rapid shipment of small (weight and volume) goods and are designed for general public use
Shipper’s Associations
Composed of nonprofit shippers' cooperatives whose primary function is freight consolidation
Shippers’ Agents
Composed of transportation brokers who provide ramp-to-ramp transit from railroads and motor vehicles at origin and destination using truckers as needed under a single bill of lading
Chapter 13dp&c13-18
Transportation Service Agents (cont.)
Brokers
A third-party agent who is neither a shipper nor a carrier but rather an intermediary that arranges a match between the shipper’s transportation need and a specific carrier from a pool of carriers they represent
Chapter 13dp&c13-19
Inventory Management Basics
Chapter 13
Transportation Management
Modes of Transportation
Chapter 13dp&c13-20
Modes of Transportation
Transport Modes
Motor
Railroad
Air
Water
Pipeline
Intermodal
Chapter 13dp&c13-21
Transportation Mode Summary
Attribute Motor Rail Air Water Pipeline
Speed/transit time Fast Slow Very Fast Slow Slow
Cost High Low Very High Low Low
Accessibility Very High High Limited Poor Very Poor
Reliability of service Very High High Variable Moderate Very High
Safety Poor Moderate Very High High Very High
Security Poor High Very High Moderate Very High
Bulk transport Moderate Very High Very Poor Very High Poor
Small package delivery High Poor Very High Poor Poor
Intermodal capability Very High Very High High Very High Poor
Chapter 13dp&c13-22
Intermodal Transportation
TOFC – truck trailer on a rail flatcar
Often called the piggyback system, TOFC is a method by which a truck trailer load is transferred in transit from the truck carrier to another transit mode without unloading and reloading product
COFC – container on a rail flatcar
The transfer of containers from one mode of transport to another is a key component of intermodal transportation. A container system is characterized by the storage of products in a box or similar form of container
Chapter 13dp&c13-23
Inventory Management Basics
Chapter 13
Transportation Management
Transportation Management
Functions
Chapter 13dp&c13-24
Transportation Management Functions
Orders
Shipment Selection
Load Planning
Planning
Spot Buy
Execution
Carrier Assignment
Shipment Selection
Prepare Shipping
Documents
Track Exceptions
Dispatch & Monitoring
Order Delivery
Invoice Receipt
Claims
Invoicing and Reporting
Freight Bill Audit
Self Invoicing
Freight Bill Audit
Prepare Shipping
Documents
Chapter 13dp&c13-25
Transportation Operations Principles
Distance
Weight
Density
Stowability
Handling
Liability
Vehicle profitability
Distance products travel from point of origin to the point of delivery
The cost of transport decreases per unit as load weight increases
The cost of transport decreases per unit as load weight and volume increase
The better the volume cube optimizes equipment the cheaper the cost
The easier the loading and unloading the cheaper the cost
Special modes of transport for special shipments increase the cost
Minimizing the cost of vehicle return
Chapter 13dp&c13-26
Transportation Management Process
Modal and Carrier
Selection
Establish Costs, Prices,
and Rates
Costs OK?
Logistics Plan
Shipment Plan
Mode/Carrier OK?
Post-Shipment OK? Documentation, Audit & Claims
Routing and Scheduling
Delivery OK?
Chapter 13dp&c13-27
Transportation Costs
Fixed
Variable
Joint
Common
Cost for components of transportation, such as vehicles, terminals, and rights-of-way that are not subject to shipment volume.
Costs shared by the shipper and carrier to provide a certain transportation service.
Carrier costs incurred on behalf of all or selected shippers, such as terminals and management expenses.
Cost to operate transportation, such as fuel, labor, and maintenance. This cost is significantly impacted by shipment volume.
Chapter 13dp&c13-28
Transportation Costs - Example
0 US$
Cost
Distance, point of origin to destination
Fixed costs
Variable costs
Total costs
Example:• Fixed costs/year = US$8,500,000.00• Variable cost per motor transport trailer = US$350.00• Number of trailers used = 110,000
• Fixed costs/year = US$8,500,000.00• Variable cost per motor transport trailer = US$350.00• Number of trailers used = 110,000
Answer:a. US$8,500,000 + (US$350 x 110,000 trailers) = US$47,000,000b. US$47,000,000 / 110,000 = US$427.27
Chapter 13dp&c13-29
Line haulThe basic cost (distance) to move a trailer, container, railcar, or other vehicle regardless of whether it is full or not
Pickup and delivery
The number of times a shipment must be loaded, handled, and unloaded
Terminal handling
Billing and collecting
After each shipment documentation must be completed and invoices generated
The basic cost (time spent) to load or unload a trailer, container, railcar, or other vehicle regardless of whether it is full or not
Reference: Arnold, J.R. Tony, Stephen N. Chapman, and Lloyd M. Clive. Introduction to Materials Management, 7th ed. Upper Saddle River, NJ: Prentice Hall – Pearson, 2011. p. 291.
Transportation Cost Components
Chapter 13dp&c13-30
Exercise 13.1 Detailed Transportation Cost
a. Warehouse Data
Shipment DataWeight 30,000Miles 2,000# of Terminal Stops 1
Cost DataTrailer 40-ft ValuesCost per mile 3.50$ Pickup & Delivery Costs 125.00$ Fuel 900.00$ Terminal Handling Costs 250.00$ Billing and Collections 0.50%
Chapter 13dp&c13-31
Exercise 13.1 Detailed Transportation Cost
b. Line haul costs
[(Distance miles × line-haul cost) + (terminal stops × terminal
handling costs) + pickup and delivery costs + Fuel costs] × billing
and collections = (2,000 × US$3.50) + (1 × US$250) + US$125 +
US$900 = US$8,275 × 0.5% = US$8,316.38
c. Cost per hundred weight (cwt.)
Total line-haul cost /(Load weight / 100) = US$8,316.38 / (30,000 /
100) = US$27.72
Chapter 13dp&c13-32
Transportation Rates and Pricing
Transportation Rates
A rate is an established charge found in a rate tariff book indicating the payment to a carrier for performing a given transportation service. Rates are established by using the cost as a base to which are applied various factors to attain the final rate.
Transportation Pricing
Charges are based on cost plus a value or level determined by prevailing market forces. Pricing centers on two approaches: the cost incurred by the carrier to provide the service and the value of service provided to the consignor.
Chapter 13dp&c13-33
Types of Transportation Rates
Proportional
Blanket
UniformA single transport rate for all shipments regardless of the origin-destination
Rates based on a published rate structure and the proportion of service cost to ship
Rates that cover a wide area at the origin, destination, or both
TaperingRates based on the principle that as the distance grows rates will increase but at a decreasing rate
Chapter 13dp&c13-34
Terms of Sale – United States
Key Issues
• When does ownership and title pass from seller to buyer?
• Who is responsible for carrier payment?
• Who handles freight claims, seller or buyer?
• Critical for coordination of freight movement
TermsFree on Board (FOB) Terms Goods Owner Selects & Pays Carrier Bears Freight CostFOB OriginFreight Collect Buyer Buyer BuyerFreight Prepaid Buyer Seller SellerFreight Prepaid & Charged Back Buyer Seller Seller
FOB Destination
Freight Collect Seller Buyer BuyerFreight Prepaid Seller Seller SellerFreight Collect & Allowed Seller Buyer Seller
Chapter 13dp&c13-35
Transportation Mode Selection
Accessibility
Capacity
Transit Time
Reliability
Safety
Cost
Ability to reach origin and destination facilities
Match the capacity of the transportation mode to the size and nature of the product being moved
Elapse time to move shipment from origin to the destination
Consistency of the transit time provided by the transportation mode
Arrival of goods at the destination without damage or theft
The rate for moving freight from origin to destination plus fees for additional services
Chapter 13dp&c13-36
Comparison of Modal Capabilities
Mode Strengths Limitations Primary RoleProduct
AttributesExample Products
Truck
• Accessible• Fast & versatile• Customer
service
• Limited capacity
• High cost
Move smaller shipments in local, regional, and national markets
• High value• Finished
goods• Low volume
• Food• Clothing• Electronics• Furniture
Rail
• High capacity• Low cost
• Accessibility• Inconsistent
service• Damage rates
Move large shipments of domestic freight long distances
• Low value• Raw materials• High volume
• Coal/coke• Lumber/
paper• Grain• Chemicals
Air
• Speed• Load
protection• Flexibility
• Accessibility• High cost• Low capacity
Move urgent shipments of freight and smaller shipments of international freight
• High value• Finished
goods• Low volume• Time sensitive
• Computers• Periodicals• Pharma
products• B2C deliveries
Water
• High capacity• Low cost• International
capabilities
• Slow• Accessibility
Move large domestic shipments via rivers, canals and large shipments of international freight
• Low value• Raw materials• Bulk
commodities• Containerized
goods
• Crude oil• Ores/minerals• Farm products• Clothing• Electronics• Toys
Pipeline
• In-transit storage
• Efficiency• Low cost
• Slow• Accessibility
Move large volumes of domestic freight long distances
• Low value• Liquid
commodities• Not time
sensitive
• Crude oil• Petroleum• Gasoline• Natural gas
Chapter 13dp&c13-37
Exercise 13.2 Choosing a Transportation Mode
a. Base data
Modes Rate/per case Delivery/daysRail 1.50$ 12Truck 5.50$ 5Air 10.25$ 2
b. Calculation
Ship Qty 1,500Price/case 50.00$ Margin 15%Case Increase % 5%Margin Increase % 6%
Modes Rate/per case Delivery/days Cases Gross Profit Transportation Cost Net ProfitRail 1.50$ 12 1,500 11,250.00$ 2,250.00$ 9,000.00$ Truck 5.50$ 5 2,025 21,262.50$ 11,137.50$ 10,125.00$ Air 10.25$ 2 2,250 23,625.00$ 23,062.50$ 562.50$
Chapter 13dp&c13-38
Transportation Carrier Selection
Carrier Reduction
Comparing Carrier Alternatives
Continuous Carrier Review
Selection Criteria
Carrier Selection
1
2
3
4
5
Chapter 13dp&c13-39
Factors Affecting Modal Choices
Traffic-Related Shipper-Related Service Related
Length of haulConsignment of weightDimensionsValueValue density (weight and
cube)UrgencyRegularity of shipmentFragilityToxicityPerishabilityPackaging typeSpecial handling
characteristics
Size of firmInvestment prioritiesMarketing strategiesSpatial structure of
production and distribution systems
Availability of rail sidingsStockholder policiesManagement structureSystem of carrier
evaluation
Speed (transit timeReliabilityCostCustomer relationsGeographical coverageAccessibilityAvailability of special
vehicles/equipmentMonitoring of goodsUnitizationAncillary services (bulk
breaking, storage, etc.)Computer capabilities/
compatibilities
Chapter 13dp&c13-40
Exercise 13.3 Transportation Contract Estimatinga. Base data
Base Item DataDemand/units per yr 120,000Cost/US$ 120.00$ Weight/lbs 10Order Size/units 3,000Carrying Cost/US$ 30.00$
b. Carrier data
Transportation Carriers Base Load (cwt) Shipping Cost (US$/cwt) Lead Time/daysABC Motor Transport 200 6.50$ 6NW Rail 100 7.50$ 12Overland Motor 50 9.00$ 4Overland Motor 150 7.50$ 4Overland Motor 250 5.50$ 4
Chicago Motor Carriers 100 9.50$ 3Chicago Motor Carriers 300 6.00$ 3
Chapter 13dp&c13-41
Exercise 13.3 Transportation Contract Estimating (cont.)c. Calculation
Transportation cost = 120,000 × (US$6.50 / 10 lbs. weight) = US$78,000
Cycle inventory = 2,000 (base load) / 2 = 1,000 motors
Safety inventory = (6/2 lead time days) × (120,000/365) = 986
In-transit inventory = 120,000 × (6 days /365 days) = 1,973 motors
Inventory cost = (1,000 + 986 + 1973) × US$30 (carrying cost) = US$118,770
Total cost of contract = US$78,000 + US$118,770 = US$196,770
The traffic planner must now perform the same calculation for the other carriers.
Chapter 13dp&c13-42
Exercise 13.3 Transportation Contract Estimating (cont.)d. Carrier Cost Analysis
Order Size Cost Cycle Inventory Safety Inventory In-Transit Inventory Inventory Cost Total Cost2,000 78,000$ 1,000 986 1,973 118,770.00$ 196,770.00$ 1,000 90,000$ 500 1,973 3,945 192,540.00$ 282,540.00$
500 108,000$ 250 658 1,315 66,690.00$ 174,690.00$ 1,500 90,000$ 750 658 1,315 81,690.00$ 171,690.00$ 2,500 66,000$ 1,250 658 1,315 96,690.00$ 162,690.00$ 1,000 114,000$ 500 493 986 59,370.00$ 173,370.00$ 3,000 72,000$ 1,500 493 986 89,370.00$ 161,370.00$
Chapter 13dp&c13-43
Scheduling and Routing
Load Planning
Consolidation
Shipment Control
Vehicle Routing and Scheduling
Sequencing shipment selection and vehicle loading
Determining the geographic path a vehicle will travel to the delivery destination
Grouping different shipments to exploit full truckload economies of scale
Performing shipment expediting, tracing, advance ship notice (ASN) and hours of service control
Chapter 13dp&c13-44
Documentation and Post-Shipment Processes
Transport Documentation
Claims Management
Payment and Audit
Preparing the necessary documentation to accompany the shipment
Processing damage and loss and overcharge/undercharge shipment claims
Performing carrier invoice payment and freight bill audit
Chapter 13dp&c13-45
Ton-Mile Cost Calculation
The cost to move one ton of goods one mile.
Sample Transportation Budget
Mode Type Planned Mix %Estimated Ton-
Miles (Vol x Mix %)Cost per T/M
Budgeted Transportation
CostTruck (TL) 40.00% 320,000 3.25$ 1,040,000$ Railroad 25.00% 1,500,000 1.10$ 1,650,000$ Truck (LTL) 13.00% 450,000 7.25$ 3,262,500$ Intermodal 17.00% 1,250,000 7.50$ 9,375,000$ Air 5.00% 65,000 15.50$ 1,007,500$
Total 16,335,000$
Transportation Performance Measurement
Chapter 13dp&c13-46
Transportation Performance KPIs
Quality of service. The ratio of how well shipments are meeting customer expectations
Cost of service. The ratio of actual to budgeted costs for shipments
On-time loading. The ratio of times ABC’s vehicles arrived at the scheduled appointment time to pick up loads
Flexibility of service. The ratio of ABC’s ability to meet requests for different modal options and capacities to fit shipment characteristics
On-time delivery. The ratio of shipments delivered by ABC in a timely fashion
Chapter 13dp&c13-47
Transportation Performance KPIs (cont.)
Delivery consistency. Compares the average origin to destination transit time of shipments to the transit time promises made by carriers
Loss and damage claims. The ratio of claims-free deliveries to the total number of deliveries
Freight bill accuracy. The ratio of accurate freight bills submitted by ABC to the total number of freight bills tendered by ABC
Chapter 13dp&c13-48
Transportation Performance Scorecard
Adapted from Coyle, John, et al. Supply Chain Management, 8th ed. Southwestern, 2009, p. 436.
Performance: ABC Transportation ServicesPerformance Criteria Weight Factor Potential Score Performance % Score VarianceQuality of service 10 50 98.50% 50 0Cost of service 10 50 96.70% 40 10Flexibility of service 5 25 90.20% 10 15On-time loading 7 35 93.70% 21 14On-time delivery 9 45 97.30% 36 9Delivery consistency 6 30 94.70% 18 12Loss and damage claims 6 30 96.10% 24 6Freight bill accuracy 8 40 88.20% 8 32
Total Score 207
Performance Scale Points
>98% 595 - 98% 492 - 95% 389 - 92% 285 - 89% 1<85% 0
Chapter 13dp&c13-49
Inventory Management Basics
Chapter 13
Transportation Management
Issues Confronting
Transportation
Chapter 13dp&c13-50
Transportation Infrastructure Issues
Physical Transportation
Systems
Continued deterioration of roads, bridges, and freight movement networks
Impending Driver
Shortages
Spiraling crisis in the number of available qualified truck drivers. Impact of government regulations and other safety issues
Environmental Sustainability
Continued tightening in the use of carbon-based fuels and impact of “green” in social discourse and government action
Chapter 13dp&c13-51
Benefits of Transportation Environmentalism
Corporate citizenship. Actively reducing emissions enables companies to be good corporate citizens by playing an active role to accelerate the transition to low-carbon fuel can improve the company's reputation and support long-term risk management
Shaping of public policy and marketplace choices. As transport companies make the transition to lower cost fuels, they increasingly will have a voice in actively shaping the technologies, institutions, and perspectives that twill define tomorrow's fuel economy
Reduced costs from lower lifecycle fuel prices. Cost savings by using natural gas and electric vehicles.
Readiness to respond to rapid changes in markets and technologies. Companies can pilot technologies that position them to roll out advanced low-cost fuels and vehicles as opportunities arise
Chapter 13dp&c13-52
Transportation Risks
Shipment loss. The possible loss of a shipment through theft, piracy, hijacking, and misplacement constitutes a common risk confronting every shipment
Shipment contamination. The shipment of perishables, consumables, and date-sensitive products risks contamination while in route from origin to destination
Shipment damage. Shipment damage originates in the actions or inactions on the part of load handlers and equipment operators. Causes of damage are poor freight handling, improper transport equipment loading, and in-transit equipment accidents
Delivery delay. Reasons for shipment delay are traffic congestion on rail lines, port facilities, and roadways; climate changes or conditions that impact in-transit flow; and mechanical breakdown of delivery vehicles
Chapter 13dp&c13-53
Transportation Risks (cont.)
Channel disruption. Disruptions are attributed to labor disputes, governmental regulations, catastrophic weather disasters, channel equipment capacity shortages, lack of skilled personnel, and carrier financial problems.
Security breach. Risks arise not only from potentially destructive forces seeking to exploit system flaws and security vulnerabilities, but also from governmental requirements for more extensive freight inspections, documentation, and costly countermeasures
Chapter 13dp&c13-54
Transportation Risk Management Activities
Identification
Measurement
Actionable risks
Realistic solutions
Managers must identify all possible threats and disruptions to the firm’s domestic and international transportation
Selection of risks the organization can change through avoidance, acceptance, transference, and mitigation
Determination if the organization possesses the financial, people, and skill resources to realistically find solutions to the identified risks
Threats are quantified to assess the frequency of a threat and to determine the probability of it occurring
Time-phased implementation
Implementation plan for each risk to be resolved, complete with roles, responsibilities, due dates, and project accountability
Chapter 13dp&c13-55
Transportation Management TechnologiesTransportation Management
System
Yard Management
System
Routing and Scheduling
Supply Chain Even
Management
Driver-Focused Technologies
Software that facilitates the management of transportation services, planning, and performance
System that organizes and directs the traffic of all vehicles in the parking yards located at various industrial buildings, like warehouses, distribution centers and manufacturing plants.
Software for scheduling, routing, dispatching transportation and monitoring route and driver performance
System that is engaged when an event, either planned or unplanned, occurs requiring planner intervention
Technologies such as GPS, electronic logging devices, and telematics to track driver costs, efficiency, and performance
Chapter 13dp&c13-56
TMS Functions
Routing
Shipment Planning
Visibility Tools
Postshipment Analysis
Load Matching
Network Design
Tracking and Settlement
Freight RatingDelivery
Scheduling
Manifesting
Chapter 13dp&c13-57
Inventory Management Basics
Chapter 13
Transportation Management
Transportation Management
LSPs
Chapter 13dp&c13-58
Third Party Logistics (3PL) – Functions
LogisticsFinancial settlement, global trade, logistics consulting, logistics management, reverse logistics
WarehousingAlignment of warehousing with transportation requirements
TransportationFreight movement, intermediary services, freight management, track and trace, leasing of transportation equipment and drivers
Special ServicesDedicated contract carriage, merge in transit, direct delivery, import/export/customs
Networking Technologies
Leased services and equipment for EDI, Web-enablement, and warehouse (WMS) and transportation (TMS) systems management
Chapter 13dp&c13-59
Freight Movement For-hire carriage Contract carriage Expedited service Time-definite service Intermodal service
Intermediary Services Surface forwarding Air forwarding Freight brokerage Intermodal marketing Shippers associations
Freight Management Carrier selection, routing, and
scheduling Contract compliance Performance analysis Freight bill auditing and payment Transportation management systems
Special Services Dedicated contract carriage Drayage Pool distribution Merge in transit Household goods movement
Source: Coyle, John, et al., Transportation., 7th ed. South Western: 2011, p,. 403
Third Party Logistics (3PL) – Transportation
Chapter 13dp&c13-60
LSP Strategies
LSP flexibility. Logistics planners must be careful to draft a contract that provides for flexibility to respond to service changes due to new technologies, channel remapping, new products, new competitors, and other issues
Defined cost of services. Rarely are all permutations of costs and scope of services fully defined contractually. An effective method to cope with these issues is to plan for high, medium, and low costs in the contract.
Realistic expectations. Both parties must work closely together to establish realistic expectations and then structure a program to guide continuous improvement through time
Managing the human side of outsourcing. The introduction of a LSP requires the effective education and concurrence of the people in the organization.
Chapter 13dp&c13-61
LSP Strategies (cont.)
Technology misunderstandings. Often customers and LSPs exaggerate their technical capabilities, as well as downplay what technology expertise is required of each other. Solving this problem requires a realistic statement of competencies to initiate technology improvements that enhance the partnership and drive new benefitsPartnership commitment. It is essential to secure the firm commitment of company management to the LSP arrangement. The executive team must be apprised of its role as leaders and supporters in the ongoing management of the relationship, both from a change management and an expanding collaborative partnership perspective
Retain core competencies. Companies must be vigilant to ensure that critical competencies and processes are not contracted away
Chapter 13dp&c13-62
Chapter 13
End of Session
“Education in Pursuit of Supply Chain Leadership”
Chapter 13dp&c