1. Last Time Course logistics Course goals
What is Transportation Logistics and why is it important?
Different approaches to Transportation Logistics

2. Supply Chain of an Individual Firm
Distribution
Vendors
Plants
ports
warehouse
warehouse
Destination
Customers
Factory
Transportation
(e.g. local delivery truck)
Transportation
(e.g. long haul truck)
Transportation
(rail, marine, road)
Transportation
(e.g. LTL truck)
Information flow
(security, internal management, and control)
Conflict between consumer oriented and inventory management
Operators, owners, managers
Spatial distribution

3. Supply chains
In a pull chain finished products are manufactured when requested.
In a push chain production and distribution are based on forecasts.
This has integrated inventory management into business planning

4. Transportation Goals Reduce cost (5-10% of sales)
Meet reliability goals
Meet service quality goals
Simplify operations

5. Integration of Logistics into Business Operations
Operational, or daily decisions are made by comparing transportation and inventory costs
Strategic, or long term decisions are made by comparing logistics costs (transportation and inventory) to manufacturing and production costs
Lengthening of supply chains as transportation cost decreased and new opportunities to reduce manufacturing cost were found

6. Logistics Costs
Deregulation since 1970s
Initial gains from deregulation (restructuring of networks) dropping off
$1000 reduction to each household annually

7. How does REI get goods to market?
Asian
Factories
West Coast
Port
Distribution
Center
Destination
Store
Container on
marine vessel
Short or
Long-haul
truck
Drayage
truck
Due to infrastructure government infrastructure investments and decreases in
Transportation cost, transportation cost is typically much less significant than the
Reductions in manufacturing. Inventory management has been the area of attention.

8. In-transit inventory or pipeline inventory: inventory that is in the process of movement from point of receipt or production and between points of storage and distribution.
Inventory-at-rest: inventory that is NOT in the process of movement from point of receipt or production and between points of storage and distribution, rather it is stationary, typically at a production facility, warehouse, distribution center, or consumption facility.

9. How does REI get goods to market?
Asian
Factories
West Coast
Port
Distribution
Center
Destination
Store
Container on
marine vessel
Short or
Long-haul
truck
Drayage
truck
In transit inventory

10. Cycle Inventory: the average amount of inventory used to satisfy demand between receipt of supplier shipments. The size of the cycle inventory is a result of the production or purchase of material in large lots. Companies produce or purchase in large lots to exploit economies of scale in the production, transportation, or purchasing process. With the increase in lot size, however, also comes an increase in carrying costs. The basic trade-off supply managers face is the cost of holding larger lots of inventory (when cycle inventory is high) versus the cost of ordering product frequently (when cycle inventory is low). Some of this inventory may be in-transit, while some may be inventory-at-rest.
Safety inventory: inventory held in case demand exceeds expectation; it is held to counter uncertainty. If they have too much safety inventory, goods go unsold and may have to be discounted. If the company has ordered too little safety inventory, however, the company will lose sales and the margin those sales would have brought. Therefore, choosing safety inventory involves making a trade-off between the costs of having too much inventory and the costs of losing sales due to not having enough inventory. Generally this inventory is inventory-at-rest, so that it is immediately available.

11. Infrastructure Consequences
Global Flows
North American Flows
Regional Flows
Local Flows

12. Global Trade Regions

13. US Trading Partners
Millions of dollars
Trade
Balance
Rank
Exports
Imports
TOTAL
-67,111.8
(X)
99,355.5
166,467.3
China
-20,312.8 1
5,854.9 3
26,167.7 2
Japan
-6,592.0
5,161.3 4
11,753.3
Canada
-5,865.3
20,409.0
26,274.4
Mexico
-5,141.2
11,878.3
17,019.6
Venezuela
-3,419.5 5
767.7 25
4,187.2 8
Nigeria
-3,413.0 6
235.3 47
3,648.2 10
Saudi Arabia
-3,390.6 7
828.5 24
4,219.1
Federal Republic of Germany
-2,903.9
4,061.7
6,965.6
Italy
-1,714.8 9
1,212.1 18
2,926.9 13
Malaysia
-1,700.8
1,060.4 21
2,761.2 14
Algeria
-1,687.6 11
75.5 74
1,763.1 20
Angola
-1,413.5 12
93.8 68
1,507.3 23
Ireland
-1,381.3
739.5 28
2,120.8 17
India
-1,228.3
1,078.4
2,306.7 15
Korea, South
-1,184.8
2,740.2
3,924.9
France
-1,180.4 16
2,145.2
3,325.7
Russia
-1,148.4
557.6 31
1,706.0
Iraq
-1,124.7
243.5 46
1,368.2
Thailand
-1,094.7 19
738.6 29
1,833.3

14. Growth in international trade
Caused greater reliance on intermodal connections, ports, and air terminals

15. Growth not from neighbors

16. Services:
Travel Passenger Fares Other Transportation Royalties and License Fees Other Private Services Direct Defense Expenditures U.S. Government Misc. Services

17. The West Coast?
Trade Statistics (see additional pdf)

18. US Port Throughput (TEU)
Terminal throughput has gone up and is expected to continue to increase
How has this increase in throughput been accommodated so far?

19. Major Gateways
Importance of east-west corridors

20. West Coast Terminal Area has increased

21. Primarily at California ports

22. Throughput density (TEUs/acre) variation across west coast ports

23. Similarly with berth length

24. Berth length (TEUs/ft) utilization at west coast ports
This is due

25. Increasing vessel size
Ports with largest average vessel size and at least 500 vessel calls per year in 2002
Average TEU/vessel 2002
Average TEU/vessel 2005
Tacoma
3948
3590
LA/Long Beach
3559
4103
Seattle
3538
4345
Oakland
3480
4060
Charleston
3206
3323
Savannah
3205
3536
Virginia Ports
3099
3224
New York
3084
3326
To date throughput increases at West Coast Ports have been accommodated by increased terminal area
Future increases may have to be accommodated by other means
Increased ship size decreases crane productivity (everything else being equal)
Larger ship sizes require larger terminal area (less efficient utilization due to peaking)

26. Shifting warehousing patterns