physical distribution 13

8/8/2019 Physical Distribution 13

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Physical Distribution

Chapter 13


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"Wonder rather than doubt is

the root of knowledge."

--Abraham Joshua Heschel


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Physical Distribution The movement of materials from the producers

to the consumers

Two functions

Physical Supply



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Supply ChainS

U

P

PLI

E

R

Manufacturer

Distribution

System

C

U

S

TO

M

E

R

Physical

Supply

Manufacturing

Planning and

Control


Dominant Flow of Products and Services

Dominant Flow of Demand and Design Information


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Two Channels The Transaction Channel

Concerned with the transfer of ownership

Primary function is to negotiate, sell, and contract

The Distribution Channel

Concerned with the transfer or delivery of goods

or services


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FactorsA

ffecting Material Movement The channels of distribution

The types of Markets Served

The Characteristics of the Product

The type of transportation available to move

the product


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Activities in the Physical

Distribution System Transportation

Distribution

Warehousing

Material Handling

Protective Packaging Order Processing and Communication

(30 to 60% of Distribution Costs)

(25 to 30 % of Distribution Costs)


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Physical Elements of Transportation Carriers

Ways

Terminals

Vehicles

Weighing

Connection w/ other carriers and

routes

Routing

Dispatching

Maintenance

Administration

Paperwork

Rail

Road

Air

Water

Pipeline


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Total Cost Concept A company normally ships by rail. Transport by rail costs$200, and the transit time is 10 days. However, the goodscan be moved by air at a cost of $1000 and will take one

day to deliver. The cost of inventory in in transit for aparticular shipment is $100. What are the costs involved intheir decision?

Rail Air

Transportation Cost 200 1000

-In-Transit Inventory-Carrying cost 1000 100

Total 1200 1100


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Three Area of Economic

Regulations

Regulation of Rates

Regulation of routes and service levels

Control of market entry and exit


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Transportation Cost Elements Line Haul Cost

Pick up and Delivery Costs

Terminal Handling Costs

Billing and Collection


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Line Haul Cost Varies with distance not weight

Line Haul Cost varies with cost per mile and

distance moved Costs includes fuel, drivers wages, and depreciation costs, etc

Line Haul Costs = Cost/Mile x Miles Traveled

Line Haul Costs/Cwt Varies with cost per mile, distance moved, and weight

Line Haul Costs/Cwt = Line Haul Cost/Weight (Cwt)


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Line Haul Cost A company ships barbecues fully assembled. The average line-haul

cost per shipment is $12.50 per mile, and the truck carries 100

assembled barbecues. The company decides to ship the barbecues

unassembled and figures they can ship 500 barbecues in a truck.

Calculate the line haul cost per assembled and unassembled. If theaverage trip is 300 miles , calculate the saving per barbecue.

Line haul cost assembled = $12.50 / 100 = $0.125 per barbecue per mile

Line haul cost unassembled = $12.50 / 500 = $0.025 per barbecue per mile

Savings per mile = $0.125- $0.025 = $0.10

Trip Savings = 300 X $ 0.10 = $30.00 per barbecue


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Line-Haul Cost Example

Q: The line-haul cost for a raw material is $1.75 per mile. For a

trip of700 miles and a shipment of500 cwt., what is the cost of

shipping per cwt.?

A: Total line-haul cost = cost per mile x miles= $1.75 x 700 = $1225

Cost per cwt. = Total line-haul cost / cwt.

= $1225 / 500 = $2.45

Q: If the shipment cost is increased to 1000 cwt., what is thesavings?

A: Cost per cwt. = $1225 / 1000 = $1.225

Savings per cwt. = $2.45- $1.225 = $1.23


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Pick up and Delivery Costs

Similar to Line Haul Costs except depend on the

amount of time spent

Carrier will charge for each pick-up and weight


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Terminal Handling Costs Unload, sort, load onto highway trucks

Consolidates shipments into fewer parcels


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Carriers Rate The Value of the item

The density of the item (LTL vs. TL)

The perishability of the item

The packaging of the item


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Warehouse Roles

Terminal Consolidation (LTL to TL)

Product Mixing

Improved Service


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Distribution CentersAn increase will result in:

Increase Truckload shipping costs

Decrease LTL shipment costs

Decrease in Total Transportation costs


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Packaging Functions Identify the product

Contain and protect the product

Contribute to handling efficiency

Levels:

Hold the product

Shipping container

Unit Load

Basic = Pallet 40 x 48 x 4


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Material Handling Increase cube utilization

Reduce handling

Increase service level

Categories

Conveyors

Industrial Truck

Cranes and Hoists


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747200 Series

Aircraft loading


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They can unload this

entire plane in 35

minutes.

physical distribution 13

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