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Logistics and Transportation

Dr. Gopal Kumar
gopal.kumar@imsgzb.com

IMS Ghaziabad

September 2016

Dr. Gopal Kumar

Logistics and Transportation

September 2016

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Logistics
India’s logistics industry is worth $300 billion
Indian logistics market is estimated to grow at a
CAGR of 12.17% by 2020
(Logistics Market in India 2015-2020, Novonous)
The e-commerce market in India will be worth $220
billion by 2025.
(Bank of America Merrill Lynch, 2015)
The e-commerce is not just sales and GMV numbers
For customers, speed of delivery is as important as
quality of product
The key is
Dr. Gopal Kumar

Logistics and Transportation

September 2016

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Logistics development in e-commerce

Customer
responsiveness
and satisfaction

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Logistics development in e-commerce
Indian logistics market is highly unorganized and so
resources are under-utilized
Snapdeal has been building strategic technology solutions that are leveraged by its
third-party logistics partners to improve tracking of shipments.
(Ashish Chitravanshi, Vice President, Operations, Snapdeal)
Fast, reliable and resourceful internet connectivity across devices will help us use
technology better for vehicle tracking.
(Amazon)
Logistics solutions provider Loginext–which caters to Paytm, Myntra and Amazon
among others–even provides ‘heat maps’ for giving information on those areas
where maximum delays are happening.
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Gopalji: Milk Run for Milk Dr. Gopal Kumar Logistics and Transportation September 2016 5/47 .

Gopal Kumar Logistics and Transportation September 2016 6/47 .Gopalji: Milk Run for Milk Supply chain Dr.

Logistics Gopalji Milk from Farmers to Consumers Dr. Gopal Kumar Logistics and Transportation September 2016 7/47 .

Gopal Kumar Logistics and Transportation September 2016 8/47 .Logistics Cold chain( flow line) Dr.

Gopal Kumar Logistics and Transportation September 2016 9/47 .Logistics Dr.

Gopal Kumar Logistics and Transportation September 2016 10/47 .Logistics Dr.

Gopal Kumar C U S T O M E R S Quantity Time Place Logistics Sourcing Marketing Operations Logistics and Transportation September 2016 11/47 .Logistics function S U P P L I E R S Dr.

Evolution of logistics 1960s Physical distribution Dr. Gopal Kumar 1970s 1980s Material management Logistics and Transportation 1990s Logistics and SCM September 2016 12/47 .

Gopal Kumar Logistics and Transportation September 2016 13/47 .Logistics and transportation in SC Logistics Manufacturer Wholesaler Retailers Transportation Dr.

Gopal Kumar Logistics and Transportation September 2016 14/47 .Logistics For making efficient and effective logistics Order processing and tracking Inventory management Transportation Warehousing Material handling Packaging Dr.

Gopal Kumar Logistics and Transportation September 2016 15/47 .Transportation Costs Product related factors o o o o Density Stowability Ease or difficulty of handling Liability Market related factors o o o o o Degree of intramode and intermode competition Location of markets Government regulation of transport carriers Freight traffic into and out of a market Seasonality of product movements Transportation cost Dr.

Transportation decisions Mode/service selection Trade-off between transportation costs and customer responsiveness Shipment consolidation Vehicle routing Single origin and destination points Multiple origin and destination points Routing with coincident origin/destination Dr. Gopal Kumar Logistics and Transportation September 2016 16/47 .

First Flight.Modes of Transport Trucks TL LTL Rail Air Package Carriers Water Pipeline Dr. FedEx. DHL. UPS Logistics and Transportation September 2016 17/47 . Gopal Kumar India Post. BlueDart.

Truckload (TL) Average haul: 500 miles or less Flexible and versatile Low fixed and variable costs Major issues Consistent service Utilization Backhaul Dr. Gopal Kumar Logistics and Transportation September 2016 18/47 .

Gopal Kumar Logistics and Transportation September 2016 19/47 .Less Than Truckload (LTL) Average haul: Less than TL Higher fixed costs (terminals) and low variable costs Major Issues – Location of consolidation facilities – Utilization – Vehicle routing – Customer service Dr.

Gopal Kumar Logistics and Transportation September 2016 20/47 .Rail Lacks flexibility and versatility of TL Low cost Major Issues – Scheduling to minimize delays / improve service – Off track delays (at pick up and delivery end) – Yard operations – Variability of delivery times Dr.

Air Premium service Fast and timely service High cost Dr. Gopal Kumar Logistics and Transportation September 2016 21/47 .

Gopal Kumar Logistics and Transportation September 2016 22/47 .Containerization The expense of purchasing and disposing of singleuse packaging created interest in reusable containers The use of reusable packages resulted in substantial savings Owner companies who rent containers to manufacturers or distributors achieve success Dr.

Intermodal Using more than one mode of transportation Example: Rail-truck. truck-rail-water It increased with increase in global trade Key issue: Exchange of information to facilitate efficient transfer between different modes Dr. Gopal Kumar Logistics and Transportation September 2016 23/47 .

Transportation mode selection Important costs Transportation cost Transportation rate × demand In-transit inventory holding cost ??????? ???? (ℎ) × Cost per unit (C) × Demand (D) × Transportation time in days (T) 365 Plant inventory Warehouse inventory Mode with high transportation cost can be justified if they reduce inventories significantly. Dr. Gopal Kumar Logistics and Transportation September 2016 24/47 .

Transportation network design Dr. Gopal Kumar Logistics and Transportation September 2016 25/47 .

Gopal Kumar Logistics and Transportation September 2016 26/47 .The BIS corporation Dr.

Gopal Kumar Logistics and Transportation September 2016 27/47 .The BIS corporation Dr.

The BIS corporation Required data & info Desired performance Dr. Gopal Kumar Logistics and Transportation September 2016 28/47 .

The BIS corporation Dr. Gopal Kumar Logistics and Transportation September 2016 29/47 .

Gopal Kumar Managers decision:  How much quantity to ship  Which mode of transportation to use Logistics and Transportation September 2016 30/47 .Direct shipment network Transportation Network Suppliers Buyer locations Short transportation time Good coordination For large demand of size close to a TL Dr.

Gopal Kumar Transportation Network Buyer locations Logistics and Transportation September 2016 31/47 .Direct shipping with milk runs Suppliers Dr.

Gopal Kumar Managers decision:  Routing of each milk run Logistics and Transportation September 2016 32/47 .Direct shipping with milk runs Transportation Network Buyer locations Suppliers  Short transportation cost/time  Better utilization of truck Dr.

Gopal Kumar Logistics and Transportation September 2016 33/47 .All shipment via central DC Transportation Network Buyer locations Suppliers Inbound Outbound DC Inventory & transfer location Wal-Mart  Saves cost when supplier and buyer are separated far away  Economies of scale  Little inventory Dr.

Shipping via DC using milk runs Transportation Network Buyer locations Suppliers Inbound Outbound DC Inventory & transfer location Wal-Mart  Lower outbound TC  Needs coordination Dr. Gopal Kumar Managers decision:  Routing of each milk run Logistics and Transportation September 2016 34/47 .

Tailored network Transportation Network Buyer locations Suppliers Inbound Outbound DC Inventory & transfer location Dr. Gopal Kumar Logistics and Transportation September 2016 35/47 .

Trade-offs in transportation Transportation Network Transportation and inventory cost trade-off o Facility installation o Transportation mode (both planning and operational decision) Transportation cost and customer responsiveness trade-off Dr. Gopal Kumar Logistics and Transportation September 2016 36/47 .

Gopal Kumar Reducing inventory Reducing TC Logistics and Transportation Factors to be considered for TM choice Cycle. safety. TC September 2016 37/47 . in-transit inventory cost. 6 = highest Item characteristics Transporta Important tion mode High value-toweight ratio Faster Small value-toweight ratio Cheaper Dr.Transportation and inventory cost trade-off Trade-off in transportation Transportation mode and SC performance Size Lot inventory Safety inventory In-transit cost Transportat ion time Rail 5 5 5 2 TL 4 4 4 3 LTL 3 3 3 4 Package 1 1 1 6 Air 2 2 2 5 Water 6 6 6 1 1 = Lowest.

Dr. Gopal Kumar Logistics and Transportation September 2016 38/47 . it incurs high transportation cost because it will have small outbound shipment.Transportation cost and customer responsiveness Trade-off in transportation If firms achieve high responsiveness by delivering within a day. it compromises responsiveness. A limited amount of temporal aggregation may be good for both transportation cost and responsiveness . If firms delays delivery to take advantage of economies of scale through items aggregation.

Transportation cost and customer responsiveness Trade-off in transportation Dr. Gopal Kumar Logistics and Transportation September 2016 39/47 .

Gopal Kumar 450.00 Logistics and Transportation September 2016 40/47 .16 Dr.Transportation cost and customer responsiveness Trade-off in transportation 572.

Factors affecting tailoring – Customer distance and density – Customer size – Product demand and value Dr. Gopal Kumar Logistics and Transportation Allows appropriate responsiveness and low cost September 2016 41/47 . firms choose transportation mode and service level.Tailored transportation Trade-off in transportation  Firms do not use single strategy to serve all customers  Firms try to serve different customers through various products with varying level of service (responsiveness)  Based on customers type and characteristics of product.

Gopal Kumar Logistics and Transportation September 2016 42/47 .Risk in transportation Delayed shipment Shipment does not reach its destination Risk of hazardous material Theft Dr.

Manufacturer/distributor storage with customer pickup 6. Distributor storage with last mile delivery 5. Gopal Kumar Logistics and Transportation September 2016 43/47 . Will product flow through an intermediate location? Six options: 1. Will product be delivered to the customer location or picked up from a preordained site? 2.Transportation System Design Manager has to make two key decisions: 1. Retail storage with customer pickup Dr. Manufacturer storage with direct shipping and in-transit merge 3. Distributor storage with package carrier delivery 4. Manufacturer storage with direct shipping 2.

: eBags. slow-moving with unpredictable demand Dr. Gopal Kumar Logistics and Transportation September 2016 44/47 .com Customer Very good for high-value. Nordstrom.Manufacturer storage with direct shipping Distn network Drop-shipping Manufacturer High product availability Lower inventory Retailer Ex.

slow-moving with unpredictable demand Dr.: Dell. Sony Customer Very good for high-value.Manufacturer storage with direct shipping and in-transit merge Distn network Manufacturer High product availability Lower inventory Advantages of aggregation Higher information cost Retailer In-transit merge Ex. Gopal Kumar Logistics and Transportation September 2016 45/47 .

Sony Customer Very good for high-value. slow-moving with unpredictable demand Dr.: Dell. Gopal Kumar Logistics and Transportation September 2016 46/47 .Distributor storage with package carrier delivery Distn network Manufacturer Higher inventory Low TC Faster response Advantages of aggregation Warehouse storage by distributor/retailer Ex.

Thanks! Dr.. Gopal Kumar Logistics and Transportation September 2016 47/47 .