transportation iii transportation management

Transportation III Transportation Management

Lecture 17ESD.260 Fall 2003

Caplice

MIT Center for Transportation & Logistics - ESD.260

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Transportation Management


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Questions Differ Based on Timeframe


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Approaches Differ Based on Timeframe


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Technologies Differ Based on Timeframe


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Unified Planning & Execution Process


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ObjectiveEstablish primary transportation modes, contract types, routing options to minimize total expected landed cost

Key PointsPhysical network (suppliers, plants, distribution centers) is likely already fixedPlan is run annually with quarterly tweaksTransportation plan limits what you can do in executionApproximate approaches are acceptable, but we have lots of time so why not optimize . . . .

Transportation Planning


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Mode Choice Criteria Feasibility Service StandardsLength of HaulProduct CharacteristicsShipment Characteristics

Trade-offs betweenService vsCostInventory vsTransportation

Additional ChoicesTypes w/in Modes, e.g. Trucking

TruckloadLess-than-TruckloadParcelExpedited versus Standard

Intermodal/ Multi-ModalDual-Mode Strategies

Air & OceanIM & TruckLTL & TLAir & Parcel

Decisions –Mode Choice


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Modal Shares 2001


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Modal Shares 1975 -1999


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Decisions –Contract TypeWhat type of relationship do you need to establish with your carriers?Continuum of relationships from one-off to ownership

Ownership of Assets versus Control of AssetsResponsibility for utilizationOn-going commitment / responsibilitiesShared Risk/Reward –Flexible contracts


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Decisions –Routing OptionsStrategic plan establishes the potential options that can be taken in execution

Network Consolidation Archtypes


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Transportation Routing Options


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Transportation Network Strategies


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Transportation Modeling


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Three Layers of Networks


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Transportation ModelingTransportation Options

Carrollton ISO tanks can move via truck or rail to Charleston or SavannahKingsport ISO tanks can move via truck or rail to either Norfolk or CharlestonEach port has two sailing schedule options to Rotterdam

Transportation ModesEach mode is modeled with:

Variable & fixed costsService and capacity levelsSailing schedules (day of week or fixed day)

Potential Scenarios Run each company separately (Baseline)Run combined operations (leverage volume discount out of Charleston)Introduce new security process at ports –impact of a one day delayRelax delivery windows (measure potential cost reduction)Force a 2 port solution (minimize risk of port closure)Force an all bulk truck solutionExplore option of running a dedicated fleet for line haul or drayageIncrease demand by 20% on certain lanes


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Task: ProcurementMultiple Levels of Procurement

StrategicLooking at entire or large portions of networkDetailed analysis –value focusedEncourages use of sophisticated carrier proposalsConsiders trade-offs between service and cost

Tactical Collecting rates for some lanes from a few carriersMinimal analysis –efficiency focusedNo sophisticated proposals from carriers

ExecutionCollecting spot rates for a specific loadPrivate / public exchangesConsidered component of execution system


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Task: ExecutionMove products from initial origin to final destination is most cost effective manner while meeting service standardsMost shippers use software systems (Transportation Management Systems)TMS works within strategic plan, procured carriers, and real-time information

PLAN: Create Shipments from OrdersEXECUTE: Select and tender to CarriersMONITOR: Visibility of the status of ShipmentsRECONCILE: Audit invoices and pay for Transportation


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How Does a TMS Generate Value?

VisibilityImproved communications efficiency with all trading partnersReduced levels of safety stock inventory.What is the current status of your PO’s/orders/shipments?

AutomationReduces resources, cost, and time to accomplish activitiesAllows user to manage the exceptions Minimizes maverick/rogue behavior and human error

Decision SupportProvides dramatic cost reductions and efficiency gainsMake the ‘business optimal’ decision at every stage of the processAssist logistics professionals in making decisions


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Execution ConsiderationsConsiderations

How do orders drop? Batched vs Continuous?How much time is allowed between drop and must-ship? Weeks? Days? Hours? Minutes? What percentage of orders change after release? How do they change? Quantity? Mix? Destinations? Timing?What is the length of haul? How many orders are “in play” at any time?

Key Decision Support DecisionsCarrier Selection

Routing and RatingRouting Guide ComplianceContinuous Moves

Consolidation & RoutingPostponement of shipments in time Vehicle consolidation (LTL to TL, Parcel to LTL)


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Carrier Selection


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Approaches Must Be Linked


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Note on Rating vs RoutingSeparation of Rating Engine and Routing Guide

Older systems do not make this distinctionCarrier selection (routing guide) hardwired into rating engineLimits the flexibility and potential new carrier options


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Consolidation & RoutingFind lowest cost routing of orders through consolidation in time, on vehicle, or through facilities. Most TMS software contains consolidation or optimization modules


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Multiple Vehicle Scheduling Algorithm


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Optimal Routing Solution


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Heuristic Approach –SavingsClarke-Wright Algorithm


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Heuristic Approach –Cluster & Sweep


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Regardless of ApproachRules of Thumb

Good routes are "rounded", not "star shaped“Good routes don't cross themselves or othersGood sectors are "pie shaped", not "checker board“Good solutions "look like a daisy“

Good Practice TipsAlways use a Preview-Analyze-Review methodologyPeriodically visit the internal logic within the TMSNever discount the salty expert who has been doing this longer than you’ve been aliveIdentify all special conditions (customer A must be delivered to first) and then validate or reject them


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Questions

transportation iii transportation management

Documents

potential options

fixed day potential

potential cost reductionforce

sailing schedule options

port solution

charlestoneach port

risk of port closureforce

savannahkingsport iso