Presentation on theme: "Last Time Course logistics Course goals"— Presentation transcript:
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 DistributionVendorsPlantsportswarehousewarehouseDestinationCustomersFactoryTransportation(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 managementOperators, owners, managersSpatial distribution
3 Supply chainsIn 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 goalsMeet service quality goalsSimplify operations
5 Integration of Logistics into Business Operations Operational, or daily decisions are made by comparing transportation and inventory costsStrategic, or long term decisions are made by comparing logistics costs (transportation and inventory) to manufacturing and production costsLengthening of supply chains as transportation cost decreased and new opportunities to reduce manufacturing cost were found
6 Logistics CostsDeregulation since 1970sInitial gains from deregulation (restructuring of networks) dropping off$1000 reduction to each household annually
7 How does REI get goods to market? AsianFactoriesWest CoastPortDistributionCenterDestinationStoreContainer onmarine vesselShort orLong-haultruckDrayagetruckDue to infrastructure government infrastructure investments and decreases inTransportation cost, transportation cost is typically much less significant than theReductions 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? AsianFactoriesWest CoastPortDistributionCenterDestinationStoreContainer onmarine vesselShort orLong-haultruckDrayagetruckIn 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 FlowsNorth American FlowsRegional FlowsLocal Flows
13 US Trading PartnersMillions of dollarsTradeBalanceRankExportsImportsTOTAL-67,111.8(X)99,355.5166,467.3China-20,312.815,854.9326,167.72Japan-6,592.05,161.3411,753.3Canada-5,865.320,409.026,274.4Mexico-5,141.211,878.317,019.6Venezuela-3,419.55767.7254,187.28Nigeria-3,413.06235.3473,648.210Saudi Arabia-3,390.67828.5244,219.1Federal Republic of Germany-2,903.94,061.76,965.6Italy-1,714.891,212.1182,926.913Malaysia-1,700.81,060.4212,761.214Algeria-1,687.61175.5741,763.120Angola-1,413.51293.8681,507.323Ireland-1,381.3739.5282,120.817India-1,228.31,078.42,306.715Korea, South-1,184.82,740.23,924.9France-1,180.4162,145.23,325.7Russia-1,148.4557.6311,706.0Iraq-1,124.7243.5461,368.2Thailand-1,094.719738.6291,833.3
14 Growth in international trade Caused greater reliance on intermodal connections, ports, and air terminals
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 2002Average TEU/vessel 2002Average TEU/vessel 2005Tacoma39483590LA/Long Beach35594103Seattle35384345Oakland34804060Charleston32063323Savannah32053536Virginia Ports30993224New York30843326To date throughput increases at West Coast Ports have been accommodated by increased terminal areaFuture increases may have to be accommodated by other meansIncreased ship size decreases crane productivity (everything else being equal)Larger ship sizes require larger terminal area (less efficient utilization due to peaking)