Center for Logistics, Trade and Transportation Intermodal Transportation Curriculum for Secondary Education – Pilot Study Students’ Project Discussions WORKSHOP October 22 & 23, Trent Lott Center, University of Southern Mississippi Prepared By: Dr. Tulio Sulbaran, Dr. Mohammad Rahman, Dr. MD Sarder, & Dr. Chad Miller Center for Logistics, Trade, and Transportation (CLTT) - The University of Southern Mississippi Under the Supervision of: Dr. Lemond Irvin & Mr. Brad Skelton

Center for Logistics, Trade and Transportation Learning Outcomes At the completion of this module students should be able to: – Understand the objectives and needs of these hands on projects – Identify the problems and formulate the problems associated with the project (s) – Identify the constraints, resources, and mechanisms to solve the project problem (s) – Deduce the appropriate assumptions, apply right solution processes, derive and interpret results – Produce acceptable project deliverables Big Idea: Instigate students’ interests and promote critical thinking thru hands on project. Provide guidance for maximized learning. Lecture Duration: Embed with appropriate modules.

Center for Logistics, Trade and Transportation Project 1: Decision Regarding Hub Use  Company “A” is a retail distributor who operates its business from Hattiesburg, MS. Most of its customers are in Mississippi and most of the time they orders LTL of products. This company has limited trucks for delivery but has synergetic partnership with several hubs in the state. It ships all customer orders from its Hattiesburg warehousing facility.  Company “A” received a total of 5 orders today from its customers who are located in Natchez, Vicksburg, Greenwood, Greenville, and Starkville. All these orders are due by tomorrow. This company can either directly ship those orders from its warehouse to individual customers or can use a hub facility in Jackson for a fee and deliver from there. Should company “A” use the hub facility or directly ship from its warehouse?  Following information is provided by the company; Total demand for 5 customers = 2TL delivery and none of the order requires a TL delivery Average distance between origin & destination = 500 miles Average distance from origin to hub or hub to destination = 250 miles Cost for transportation = $200 handling + 1 $/mile Cost for using hub = $100/day

Center for Logistics, Trade and Transportation Project 1: Problem Dissection  Identify the Problem to be solved: Should company “A” use the hub facility or directly ship from its warehouse?  Formulate the Problem: Calculate the value of each option depending on the performance factors. For example: if cost is the issue, calculate the total cost of shipments for all available options.  Identify constraints, resources, and mechanisms: What is given/available and what is the limiting factor that dictates the solution?  This company has limited trucks for delivery  It received a total of 5 orders Total demand for 5 customers = 2TL delivery and none of the order requires a TL delivery Average distance between origin & destination = 200 miles Average distance from origin to hub or hub to destination = 100 miles Cost for transportation = $50handling + 1 $/mile Cost for using hub = $100/day

Center for Logistics, Trade and Transportation Project 1: Problem Dissection  Deduce the assumptions:  Consolidated delivery is not an option  Each delivery route is unique and can not be shared  Company has at least 5 trucks and 5 drivers  Solutions:  Comprehend the problem (may visualize the case)  Identify available alternatives  Calculate results based on performance factor(s)  Interpret results

Center for Logistics, Trade and Transportation  Problem Comprehension

Center for Logistics, Trade and Transportation Project 1: Performance Criteria  Number of trucks  Number of trips  Shipment cost  Frequency of service  Customer satisfaction  Example Case Pick the option that has the least cost of shipment

Center for Logistics, Trade and Transportation Project 1: Calculations  Example Case: Direct Shipment Total no. of shipments = 5 Total handling cost = 5 X $50 = $250 Total shipment cost = 5 X ($1 X 200) = $1000 Total cost = $250 + $1000 = $1250 Level/frequency of customer service?  Example Case: Via Hub Shipment Total no. of shipments = = 7 Total handling cost = 7 X $50 = $350 Total shipment cost = 7 X ($1 X 100) = $700 Hub cost = $100 Total cost = $350 + $700 + $100 = $1150 Level/frequency of customer service?

Center for Logistics, Trade and Transportation Project 1: Interpretation  Based on the assumptions and current requirements, calculation shows that Company “A” should use the hub system to deliver its orders to its customers. In this case the company will be able to save $100 over the direct shipments.  Any changes in assumptions or requirements may alter the savings and may lead to different decision.

Center for Logistics, Trade and Transportation Project 1: Critical Thinking  What if the Company “A” has only 4 truck drivers available for that day?  What if the hub cost goes up to $200 per day?  What if a customer want to expedite the delivery?  What if a customer orders a TL of delivery?

Center for Logistics, Trade and Transportation Project 2: Modal Selection  Selection of freight transport services is a twofold process, which covers modal choice and carrier choice. Modal choice could be either a specific mode or intermodal transportation. The shipper chooses a particular mode and also chooses between similar services within the chosen route-mode.  As mentioned earlier that modal selection is not like a cherry picking process, it ensures the efficient movement of goods while considering the performance factors.  Performance factors may include the following;  Transportation cost  Transit time  Reliability and competency  Flexibility and Customization  Emissions  Energy consumptions, etc.

Center for Logistics, Trade and Transportation Project 2: Modal Selection Criteria  There is a relationship between transport costs, distance and modal choice that has for long been observed. It enables to understand why road transport is usually used for short distances (from 500 to 750 km), railway transport for average distances and maritime transport for long distances (about 750 km). Distance, Modal Choice and Transport Cost D1 = KM D2 = Near 1500 KM Source: Photo: Dr. Jean-Paul Rodrigue

Center for Logistics, Trade and Transportation  The concept of economies of scale applies particularly well to container shipping.  It is thus not surprising that maritime shipping companies have introduced larger and larger containerships, particularly over long distance routes. Average Cost per TEU by Containership Capacity and By Route, 1997 Source: Cullinane, K. and M. Khanna Project 2: Modal Selection Criteria

Center for Logistics, Trade and Transportation  While maritime container shipping companies have been pressing for larger ships, transshipment and inland distribution systems have tried to cope with increased quantities of containers.  The growth in capacity comes with increasing problems to cope with large amounts of containers to be transshipped over short periods of time as shipping companies want to reduce their port time as much as possible. Economies and Diseconomies of Scale in Container Shipping Source: Photo: Dr. Jean-Paul Rodrigue Project 2: Modal Selection Criteria

Center for Logistics, Trade and Transportation Project 2: Shipping Shoes from China How should I ship my shoes from Shenzhen, China to Kansas City, USA?  Shoes are manufactured, labeled, and packed at Shenzhen plant  ~4.5M shoes shipped per year from this plant  6,000 to 6,500 shoes shipped per container (~ FEUs / year)  Value of pair of shoes ~$35

Center for Logistics, Trade and Transportation Project 2: Problem Comprehension 40 shipping lines visit these ports each w/ many options Examples:  APL - APX-Atlantic Pacific Express Service  Origins: Hong Kong -> Kaohsiung, Pusan, Kobe, Tokyo  Stops: Miami (25 days), Savannah (27), Charleston (28), New York (30)  Origins: Yantian -> Hong Kong, Pusan Stops: Port of Los Angeles(16.5 days)  CSCL - American Asia South loop

Center for Logistics, Trade and Transportation Project 2: Problem Comprehension Inland Origin 3 Port Options  Shekou (30k) Truck  Yantian (20k) Rail Truck  Hong Kong (32k) Rail Truck Barge In Hong Kong 9 container terminals

Center for Logistics, Trade and Transportation Project 2: Problem Comprehension Inland Transportation within US

Center for Logistics, Trade and Transportation Project 2: Problem Analysis  Maher Terminal  Express Rail II NS RR Double stack thru: Harrisburg, Pittsburgh, Cleveland, Ft. Wayne, to Kansas City  CSX RR (5-10 days) Double stack thru: Philadelphia, Baltimore, Washington, Pittsburgh, Stark, Indianapolis, to Kansas City  Truckload ( days) NJ Turnpike to I-78W, I- 81S, I-76/70 to Kansas City Port of New York / New Jersey

Center for Logistics, Trade and Transportation Intermodal transport that utilizes trucking is the most expensive shipping option Intermodal shipping that utilizes rail transportation uses the lowest energy and produces the least CO2 emissions The all-water route via the Panama Canal is the least expensive option Source: Morrison, 2012 Project 2: Problem Analysis

Center for Logistics, Trade and Transportation Project 2: Problem Analysis (cont’d..) Source: Morrison, 2012 “Given a choice, many shippers today are leaning toward a delivery service that costs less and is more reliable, even if the delivery time were slightly longer" (Spivak, 2011)

Center for Logistics, Trade and Transportation Project 2: Decision Making Transportation Decision  So how do I ship shoes from Shenzhen to Kansas City?  Let students do the research to find the details  Calculate total point to point cost  Calculate total transit time  Calculate emissions and energy consumptions  Identify the reliability, dependability, and other performance parameters of modes and shipping companies  Compare the values and select the best

Center for Logistics, Trade and Transportation Project 3: Intermodal Choice  Consider a product to be transported from a location A to a location B.  The distance between A and B is (y) mile.  Mode options and associated distances are given below: 1.Truck (mile) × Cost = Total 1 2.Rail (mile) × Cost + Truck (mile) × Cost = Total 2 3.Truck (mile) × Cost + Rail (mile) × Cost + Truck(y mile) × Cost = Total 3 4.Truck (mile) × Cost + Water (mile) × Cost + Truck(y mile) × Cost = Total 4

Center for Logistics, Trade and Transportation Project 3:  A Manufacturer (M) ships goods to a Distribution Center (D) located in a different city.  There are three modes of transportation options available.  Loading/unloading, or container transaction from one mode to another mode is $10/container.  Inventory carrying (lead time) (including insurance) cost is 1% of total goods value.  Assume cargo transportation is estimated 20 containers.  Average container value is approx. $10,000 Intermodal Options: A manufacturer has three options available to deliver its product to a distribution center. Option 1: Road-Rail-Road Option 2: Road only Option 3: Road-Water-Road

Center for Logistics, Trade and Transportation Option 1: Intermodal Choice Road-Rail-Road  Distance travelled:  From factory to Intermodal-1 is 60 miles,  From Intermodal-1 (R 1 ) to Intermoda-2 is 420 miles,  From Intermodal-2 (R 2 ) to Distributor is 40 miles,  Base cost by rail is $30/Container MR1R1 R2R2 D Costs$/ton Up to 100 mile90 Up to 200 mile85 Up to 500 mile70  Transportation costs by road per ton ModeSign Road Rail Water

Center for Logistics, Trade and Transportation Option 2: Intermodal Choice By Road (direct)  Distance travelled:  From Manufacturing factory (M) to Distribution (D) center is 400 miles Costs$/ton Up to 100 mile90 Up to 200 mile85 Up to 500 mile70  Transportation costs by road per ton M D ModeSign Road Rail Water

Center for Logistics, Trade and Transportation Option 3: Intermodal Choice Road-Water-Road  Distance travelled:  From factory to Port-1 (P 1 ) is 70 miles,  From Port-2 (P 2 ) to Distributor is 50 miles,  From Port-1 to Port-2 is 500 miles,  Base cost by water is $20/Container MP1P1 P2P2 D ModeSign Road Rail Water  Transportation costs per ton Costs$/ton Up to 100 mile90 Up to 200 mile85 Up to 500 mile75

Center for Logistics, Trade and Transportation Solution to Project %/day/ton(road) 1.00%/day/ton(Rail) 1.20%/day/ton(water) Carrying + Insurance cost Up to milesRoad ($)Rail ($)Water ($)ContainersHandling ($)Value/container 100$90$30$2020$10$ $85Cost ($) per container 500$75 TransportationLoading /Carrying (miles)transaction(days) RoadRailWater Option Option Option TransportationLoading /Carrying Total (miles)transactionInventory RoadRailPort (days) Option 1$9,000$12600 $800$8,000$30,400 Option 2$30,000--$400$6,000$36,400 Option 3$10,200 $10,000$800$16,800$37, × × 7 ×1.2%= 16,800

Center for Logistics, Trade and Transportation Questions? Thanks