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Concept 1 Transportation and Commercial Geography.

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Presentation on theme: "Concept 1 Transportation and Commercial Geography."— Presentation transcript:

1 Concept 1 Transportation and Commercial Geography

2 Commercial and Transport Geography Commercial Geography Transactions Movements Transport Geography

3 Commercialization of Transportation Introduction (isolation / proprietary) Expansion and interconnection Standardization and integration Integrated demand Market Size Market Potential Number of providers

4 Concept 2 Transport Costs and Transport Networks

5 Components of Transport Cost AB Friction of Space Transaction Costs Shipment

6 Distance Costs Distance Costs Distance Costs Distance Costs Transshipment Costs Different Friction of Space Functions Fixed Costs Zone Change

7 FOB and CIF Transport Costs } Production Costs Distance Costs Freight-on-Board Cost-Insurance-Freight

8 Zonal Freight Rates Distance Costs I II III IV Flat zonal rate Real transport cost D1 D2

9 Network Structures Centralized DecentralizedDistributed

10 Transport Structures Hub / Interface Feeder Warehousing Financial / Insurance Retail / Wholesale Distribution Node Link Flow Corridor

11 Centrifugal and Centripetal Networks Centrifugal Centripetal

12 Transport Hub Point-to-Point Hub-and-Spoke Hub

13 Impacts of Integration Processes on Networks and Flows Network Flows Before Integration After Integration International border

14 Transport Rates and Network Structure Low Average High

15 Concept 3 The Spatial Dimension of Transportation Networks

16 Topology of a Network Node Link Unidirectional link Bi-directional link Entry and exit Exit Entry

17 Types of Network Topology Mesh Hub-and-Spoke Linear Tree

18 For each node to be linked to another node Even number of nodesOdd number of nodes For all the nodes to be linked together For each node to be linked to all other nodes Number of possible combinations Network Geometry and Number of Links

19 Topology and Network Connectivity Average Path Length Network Length Minimum Network Fully Connected Network Geographic Barrier A B or C D A B C D

20 A Typology of Transportation Networks - I Number of arcs and nodes arcs = 6 nodes = 7 Orientation and extent N-E S-E 500 km2 625 km2 Abstraction level Concrete Abstract Relative position

21 A Typology of Transportation Networks - II Distance, road type and control of the vehicle Max= 100 km/hr Max= 60 km/hr highway Secondary road 125 km 90 km Mode Road Maritime Volume and direction 3500 t/hr 8000 t/hr Type of traffic Continuous Divided

22 A Typology of Transportation Networks - III Type of correspondence Hierarchical Non- hierarchical Pattern Random Uniform Linear Change (dynamics) t t + 1 Load and capacity 65% 95% 800 t/hr 1500 t/hr

23 Mode of Territorial Occupation by Transport Networks Clearly defined Vaguely defined Without definition Road Rail Air corridor Maritime corridor Cellular coverage Overlap “No service”

24 ABC D EF Network Strategies to Service a Set of Locations

25 Absolute and Relative Distance in a Network 10 km 30 minutes

26 Concept 4 Transportation Supply and Demand

27 Transport Supply and Demand ij A ij ij Expressed Demand T ij Potential Demand Modal Supply Intermodal Supply

28 Major Supply Variables for Transportation Modes Road Rail Air Maritime Lanes Width Speed limit Parking Speed Passengers Tonnage Atmospheric Conditions Tracks Grade Yards Transshipment Speed Passengers Tonnage Corridors Speed Passengers Tonnage Runways Dockways Canals Locks Docks Transshipment Speed Tonnage Routes Terminals Vehicles

29 Impacts of Modal Competition and Intermodal Capacity on Transport Supply Traffic Assignment Mode A Mode B C Capacity C(A) Terminal ATerminal B C(B) T(AB) = C(B) T(A) T(B) C = T(A) + T(B) 1 2 Modal Competition Intermodal Capacity

30 Classic Transport Demand / Supply Function Traffic Cost Demand Supply T1 C1 D S1 S2 C2 T2 Equilibrium

31 Transport Elasticity by Activity Traffic Cost 100% 0% Emergency Commuting Major Purchase Special Event Social Activities Recreation

32 T>A T

33 33 Basic Transport and Logistics Course

34 34 Definition Materials Management: –The grouping of functions that support the complete cycle of material flow, from the purchase of and internal control of production material, to the planning and control of work-in-progress (Chase et al, 1998)

35 35 Definition (cont’d) Physical Distribution management –…the efficient movement of finished product from the end of the production line to the consumer, and in some cases includes the movement of raw materials from the source of supply to the beginning of the production line. These activities include freight transportation, warehousing, material handling, protective packaging, inventory control, plant and warehouse site selection, order processing, marketing forecasting and customer service. (National Council of Physical Distribution Management)

36 36 Definition (cont’d) Logistics Management: –The process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of (customer) orders (Christopher, 2008)

37 37 Definition (cont’d) Supply chain management –A supply chain is a network of connected and interdependent organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users (Aitken, 1998) –SCM is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole (Christopher, 2008)

38 38 A schematic relationship among material managements, physical distribution and logistics

39 39 Development of logistics & sc management First phase: Late 19 th century to the early 1960s –Secondary importance to sales and marketing, production –Little strategic impact outside of daily operations –Logistics functions were decentralized and split among marketing, manufacturing or finance

40 40 Development of logistics & sc management (cont’d) Second phase: 1970s –Becoming aware of the operational and cost deficiencies of the decentralized system –Centralizing logistics functions into a single management system –Constructing logistical activities to achieve optimal total cost for the whole system (TDC)

41 2015/5/741 Development of logistics & sc management (cont’d) Third phase: 1980s –A concerted attempt by companies to move away from a passive approach (cost oriented) to another where logistics was conceived as providing internal enterprise strategic advantage (customer oriented) –More functions were being integrated to explore a continuous source of unassailable strategic competency

42 42 Development of logistics & sc management (cont’d) Fourth phase: SCM comes into play 1990s –From being a source of internal competitive advantage to a source of external advantage –To accelerate the cycle time of inventory and information along the chain –To optimize the linkages between internal functions and supply partners

43 43 Development of logistics & sc management (cont’d) Fourth phase: SCM comes into play 1990s –To consecutively network the competencies of intersecting supply channels of focused around: the creation of shared marketplace and competitive visions Co-evolutionary alliances providing breakthrough in products and services

44 44 Elements of logistics Storage, warehousing and materials handling –Number, locations, size, layout and operations Transport –Functions, modes, types of delivery, load planning and route scheduling Inventory –Functions, what, when and how much to order / reorder and stock Information technology and control –Systems, procedure Others –Order processing, procurement, maintenance, contracting

45 45 Warehousing Functions –Storage Temporary Permanent:seasonal production, erratic demand, conditioning, speculation, bulk purchase et al, strategic reserve –Movement Receiving, transfer, picking, shipping, cross dock, merge-in-transit

46 46 Warehousing (cont’d) Warehouse layout –For what: quality control, quarantine, pallet and trolley storage and repair, returned goods, waste disposal, battery charging, maintenance, fuel supply, services, offices. Amenities, security and special data link / communications lines Spare for expansion, plant area

47 47 Warehousing (cont’d) Warehouse layout –Principles to follow for layout design: Load unitization Use of space: 40% (25% to have, 15% to maintain) Movement minimization: 42% of manpower in picking activity Control Safety, security and environment Total cost minimization

48 48 Warehousing (cont’d) Warehouse layout Types of layout: –“U” flow: goods in and out at the same end of warehouse –Through flow: goods in at one end and goods out at the other end –Adjacent flow: goods in at one side and goods out at the adjacent side

49 49 Warehousing (cont’d)

50 50 Warehousing (cont’d) Picking method –Order picking: one order or a small number of orders is picked on each picking circuit –Batch picking or summary picking: quantity of orders is summarized and picked simultaneously during 1 picking circuit –Zone picking: each order is split in different picking zone and subsequent collation may be required

51 51 Warehousing (cont’d) What is the role a warehouse / DC in e-commerce? Let’s look at this new era.

52 52 What ’ s the new era? Globalization: –Why: Economically: lower cost of production, large market Politically: WTO, OECD, NAFTA, MERCOSUR, ASEAN Technologically: Transport, IT, communication –Impact on logistics Greater distance Conflicting infrastructure Different standards and regulations Cultures and (trusting) relationships over the chain

53 53 What ’ s the new era? Technology –IT –Communications: 2.4Ghz, bluetooth –Use of defense technology –GPS/Local Positioning System

54 54 What ’ s the new era? Some hard-earned lessons: –Botched orders –High stock out rates –Late deliveries Causes: –No integrated end-to end solution –Handoffs between all the different functions

55 55 What ’ s the new era? Customer demand –Ever-changing less brand loyalty and shorter product life-cycle –Volatile demandforecasting almost impossible End result: agile logistics structure to put the end-customer in your focus

56 56 Requirements on logistics Quality and cost effectiveness (lean) are taken for granted Ever-shortening lead time And ever-increasing customer service level are the norm A direct channel which requires a short cycle time, no min. order size constraint, customized products Meaning much more orders w/ fewer lines in smaller qty.

57 57 Impact of e-commerce on logistics –50% web-retailers losing on every package shipped (0.65 mil packages/day in 1999, expected to reach 4.6 mils packages in 2003 by Forrester Research) –Higher picking costs: many picks before of more smaller orders (trad. 43% of distribution cost is for picking) –More frequent deliveries: short & shorter lead time –Decentralize CentralizeDecentralize amazon.com (DCs in US & UK), webvan (1 DC to cover 40 sq.m), Sameday.com (9 centres to cover 40% of US population in same day & 80% next day) –Cash on deliverydelivery men to take on the role of cashier (m-POS) –Customer service representation –3PL, 4PL

58 58 Warehouse (cont’d) Therefore, roles of a warehouse can be: –An assortment centre –A light manufacturing plant –A point to do merge-in-transit –A transit point for reverse logistics –A configuration centre –Other value adding services such as labelling, pre-retailing etc

59 Third-party logistics 59 Carrier / Logistics Service Provider Supply chainCustomer

60 What is third-party logistics? Definition 1: –»... involves outsourcing logistics activities that have traditionally been performed within an organization. The functions performed by the third- party can encompass the entire logistics process or, more commonly, selected activities within that process« (Lieb & Randall, 1996). 60

61 What is third-party logistics? Definition 2: –»Activities carried out by a logistics service provider on behalf of a shipper and consisting of at least management and execution of transportation and warehousing (if warehousing is part of the process)« (Berglund et al., 1999). 61

62 What is third-party logistics? Definition 3: –»A long-term formal or informal relationship between a shipper and a logistics provider to render all or a considerable number of logistics activities for the shipper. The shipper and the logistics provider see themselves as long-term partners in these arrangements. Although these alliances may start with a narrow range of activities, there is a potential for a much broader set of value-added services, including simple fabrication, assemblies, repackaging, and supply chain integration« (Bagchi & Virum, 1998a, b). 62

63 Relationships between shippers and logistics service providers 63 Market transactions Degree of integration Degree of asset specificity Outsourcing of transport & warehouse Third-party logistics (3PL) Fourth-party logistics (4PL)

64 Typology of third-party logistics providers Three waves of entrants into the third-party logistics market –traditional market-based solutions –asset-based logistics providers –network logistics providers –skill-based logistics providers (information-based) 64

65 Typology of third-party logistics providers 65 Physical services Management services Asset-based logistics providers -Warehousing -Inventory management -Postponed manufacturing Information-based logistics providers -Management consultancy -Information services -Financial services -SCM -IT Solutions Traditional transport and forwarding companies -Transport -Warehousing -Customs clearance Network logistics providers -Express shipments -Track and Trace -Electronic proof-of- delivery -JIT deliveries

66 What is being outsourced? 66

67 Forces behind third-party logistics Supply chain activities become more complex, expensive and capital intensive 67 Benefits of outsourcing –Conversion of fixed costs to variable costs –Economics of scale and scope –A leaner organization –Faster access to new markets and distribution channels –Reconfiguration of European logistics systems

68 Forces behind third-party logistics Some empirical evidence of why firms do it: 68

69 Forces behind third-party logistics Some empirical evidence of what firms have achieved: 69

70 Developing a third-party logistics partnership Outsourcing decisions are both difficult and stressful 70 Stages of developing a 3PL relationship –establishing objectives and selection criteria –evaluating and selecting a third-party logistics provider –making a contract between the partners implementing the partnership –making continuous improvements –renegotiating

71 Obstacles in logistics outsourcing Turning over an internal logistics function to an external third- party provider involves risk. –Potential risk of loss of control over the flow of products and materials 71 –3PL might go out of business or be taken over by another company with inferior services or geographic coverage –Interorganizational cooperation itself presents inherent difficulties in the compatibility of corporate cultures, data systems and the level of employee knowledge and skills

72 Obstacles in logistics outsourcing Some empirical evidence for areas that need to be improved: 72

73 Operations Management a Sustainable perspective

74 Operations Managers Globalizati on Social responsibil ity Technology Knowledge managemen t Environment al responsibility Five challenges for operations managers

75 Operations strategies have an ethical dimension Product/service design - customer safety, recyclability of materials, energy consumption. Network design - employment implications and environmental impact of location. Layout of facilities - staff safety, disabled customer access. Process technology - staff safety, waste and product disposal, noise pollution, fumes and emissions. Job design - workplace stress, unsocial working hours. Capacity planning and control - employment policies. Inventory planning and control - price manipulation.

76 Management Systems EMAS, Environmental Management and Audit SchemeEMASEnvironmental Management and Audit Scheme ISO 14000

77 Life cycle analysis Full explanation link

78 Life Cycle Analysis (LCA) Method for investigating the impact of a product and its associate processes throughout its life cycle and disposal An Environmental and Financial assessment of viability Portfolio analysis Competitive analysis

79 INFORMATION RESOURCE MANGEMENT INFORMATION AS AN INPUT TO MANAGEMENT DECISIONS TECHNOOGY OFFERS AN INFRASTRUCTURE THAT CREATES NEW WAYS OF DOING BUSINESS CHANGES IN THE WAY GOODS ARE PURCHASED, THE REP TRAVELLING THE ROAD, HOME SHOPPING, MANAGEMENT OF THE HOME, ENERGY ETC.(DISCUSS)

80 INFORMATION RESOURCE MANAGEMENT DESIGN AND SPECIFICATION WHAT INFORMATION WHAT INFORMATION IS ACCESABLE WHAT CAN BE EFFECTIVELY USED

81 INFORMATION RESOURCE MANAGEMENT THREE KEY MANAGERIAL ACTIVITIES – STRATEGIC PLANNING( GOALS, STRATEGIES AND POLICIES) – MANAGEMENT CONTROL (IMPLEMENTATION OF STRATEGIES) – OPERATIONAL CONTROL (EFFICIENT AND EFFECTIVE PERFORMANCE OF INDIVIDUAL TASKS)

82 INFORMATION RESOURCE MANAGEMENT PLANNING SYSTEMS – SALES(PROFITS/EARNINGS) FORCASTING, OPERATING PLANS, CAPACITY PLANNING, NEW LEGISLATION SCENARIOS CONTROL SYSTEMS – EMISSIONS AND ENERGY ANALYSIS, BUDGETRY CONTROL, MANAGEMENT ACCOUNTING, INVENTORY MANAGEMENT OPERATIONAL SYSTEMS – ORDER-ENTRY PROCESSING, TRACKING WASTE DOCUMENTATION, TRANSPORT SCHEDULING.

83 INFORMATION RESOURCE MANAGEMENT SOURCES OF INFORMATION – INTERNAL EMISSIONS ENERGY WASTE RECYCLING LEGISLATIVE COMPLIANCE RESEARCH AND DEVELOPMENT PRODUCTS EXPERTISE SKILL SYSTEMS

84 INFORMATION RESOURCE MANAGEMENT SOURCES OF INFORMATION – EXTERNAL LEGISLATION GLOBAL AGREEMENTS MARKET DEVELOPMENTS COMPETITIVE ACTIVITY SCIENCE AND TECHNOLOGY PRESSURE GROUP ACTIVITY


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