Global SCM

490610
Week 9 Transportation
Seiwook Chung

Global SCM (490610-1) 1

 Weekly Plan
Lecture Topic Lecture Goals

• Demand Planning
1
2
Introduction
Basics of SCM
Class, norm and goal setup, walking through syllabus, evaluation
Macro supply chain, end to end process
3 Demand Planning Forecast and forecast accuracy, statistical forecast, bullwhip effect
4 Supply Planning MRP and replenishment, safety stock, reorder point, lead-time
5 Purchase Direct and indirect purchase, EOQ, Kanban, VMI
6 Inventory Planning Inventory planning and control, Inventory metrics,
7 Midterm
3PL Service provider selection, physical counting, Latest technology, H
8 Warehouse azmat
9 Int’l Transportation Ocean and air, industry norms, terms, and knowledge
10 International Trade Incoterms, country of origin, AEO, IATA, customs
11 SAP R3 and APO ERP basics, master data, integration with other tools,
Generic S&OP process and cross-functional communication, leadershi
12 S&OP p for SCM
13 Capacity 1 Discussion of "the goal", bottleneck
14 Capacity 2 Capacity planning
Global SCM (490610-1) 2
15 Final exam
 Supply Chain ②

2nd tier 1st tier

Factory W/H* Distribu Custom
Supplie Supplie Retailer
⑬⑭ ⑧ tor er
r⑤ r⑤

Information (Demand plan③ , Supply plan④)

Information (Orders⑤)

Material (Inventory⑥. Transportation⑨, trade⑩)

Reverse Supply Chain

$$$

SAP/ERP⑪
GlobalS&OP ⑫
SCM (490610-1) 3
* W/H: warehouse
 Week 9
• Recap
• Definitions
• Ocean Transportation
• Air Transportation
• Courier

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Recap

Global SCM (490610-1) 5

Companies Have Warehouses to
Keep Inventory
• Shorten the lead time
• Fulfill un-forecasted demand
• Cover the issues in purchase or production
• Scale economy
• Appreciation in value – Whisky, wine

Global SCM (490610-1) 6

Goals of Warehouse Management
• Accuracy in inventory quantity (physical &
ERP) at SKU, Batch, and serial # (Physical
vs. ERP)
• Keep inventory safely from loss & damage
• Effective GR and GI in speed & accuracy
• Minimize inventory depreciation except by
aging
• Comply the regulation and internal policy
(ISO, AEO, FDA(MFDS), GxP, etc)
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 Warehouse Selection Criteria
• Location, location, location
• Facility – newness, weather, BCP
• Infrastructure around WH
• Transportation availability
• Routing for inbound and outbound
• Cost
• Labor availability

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RFI (Request for Information)
• Acceptance for the contract terms,
conditions for the bid and operation
• Provide the bid scope and requirements
• Company profile exchange (revenue,
global footprint, key customers,
references, etc)
• Other questionnaires to find out bidders’
strengths & weaknesses

Global SCM (490610-1) 9

 RFQ / RFP
(Request for Quote/Proposal)
• Warehouse location & facility
• Detailed rates
• Initial Capex investment plan and financials
• Implementation plan
• Transportation solution
• IT system
• Layout blueprint
• Quality management plans
• BCP

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 WH Ops Bottleneck
• Inbound & outbound
• Storage capacity
• Device (Forklift, PDA) & ERP/WMS
• Pick packing
• Transportation
• Infrastructure
• Mother nature

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Definition

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 Transportation (Transport) is
• Moving someone or something from
point A to point B
• Transportation modes for the freight: air,
ocean, rail, truck, other automotive
vehicle, bicycle and in-person

Global SCM (490610-1) 13

 Silver Courier via Subway
www.silverquick.kr
• Light cargo (4Kg max) via subway
• Eg: dental implants, docs, small spareparts

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Bicycle & Kickboard Courier

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 Carrier
• An entity which operates ship, aircraft, truck, etc
• Eg: Amtrak, JB Hunt, CJ Logistics, Korean Air,
Nippon Express, Maersk

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 Freight Forwarding
• A service to plan and coordinate the cargo mo
ving from point A to point B
• Scope
– Booking with carrier only without taking the posses
sion of the cargo
– Charter the space from carriers & sell to customers
– Add-on services: insurance, customs brokerage, stor
age, special packaging, cross-docking, etc
• Well known freight forwarders: DHL,
Kuehne+Nagel, DB Schenker, Glovis

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 Shipping Container
• Designed for freight transportation
• Ocean, rail, ground
• 40ft is used most (Usually 20 pallets fits
to 1 40 ft container
• SMDT: Intermodal container,

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involving two or more different modes of transportation in conveying goods.
 Container Size
- Dry (GP, General Purpose)
High Cube (HC40), 53, 48, 45, 40, 20ft
General purpose (GP40)

Open top container (OT40)

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 Reefer (RE) Container
• Refrigerated
container
• Temperature &
humidity
• Pricier than dry
• Genset to plug in
• Mostly 40ft

Global SCM (490610-1) 20

 TEU & FEU
(20/40 Foot Equipment Unit)
• TEU is an unit of o
cean cargo capacit
y in terms of numb
er of 20 ft contain
ers.
• 2 TEU = 1 FEU

https://en.wikipedia.org/wiki/Twenty-foot_equivalent_unit
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 Container Chassis
• For drayage (inland transportation,
ground transportation)
• Reverse SCM

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https://dictionary.cambridge.org/
 Truck & Trailer
• Inland (drayage)
• Wingbody truck
• 53-foot trailer:
common in US
• Wingbody truck

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 TMS
(Transportation Management Sys.)
• A software system to define available routin
gs by transportation mode (Ground, ocean,
air, rail, etc) with estimated lead time and c
ost for each option and suggest the best ro
uting including carrier selection for each shi
pment
• Suggestion algorithm is based on order urg
ency, cost, and utilization efficiency.
• Linked to ERP and WMS, and systems of tra
nsportation service providers including cont
racted service rates

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Ocean Transportation

SMDT: Water Transportation, Maritime

transportation

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 Ocean Transportation is
• Moving someone or something via water
(Ocean, canal, river, lake, etc)

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Container Ship (Vessel, barge)
• Ship designed and built to move freight
(cargo)
• Containers stacked on the deck
• Some cargo directly loaded to the lower
deck (cars, oversized, un-containerize-able)

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 Container Loading & Unloading

https://youtu.be/isIcqkYUHws Global SCM (490610-1) 28

 Crane Operations
Inside of the cockpit

https://youtu.be/g4qjmpn7jzY Global SCM (490610-1) 29

 Loading into the Container

https://youtu.be/r_UopsXqrXUGlobal SCM (490610-1) 30

 Empty Ocean Containers

Global SCM (490610-1) 31

https://www.seatrade-maritime.com/containers/container-shortage-chinese-new-year-set-be-turning-point
 Shipper & Consignee
• Shipper (Exporter) – The party responsible fo
r packing and preparing goods & docs inclu
ding all or some responsibility for the export
compliance
• Consignee (importer): The receiver of the go
ods with some or full responsibilities for the
import compliance
• Notify Party: The contact person or contact c
ustoms broker to be notified when the ship
ment arrives at the destination port. Import
declaration is to be filed by the notify party
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 Bill of Lading (B/L)
• A document issued by
a carrier or forwarder
to acknowledge the re
ceipt of cargo for a sh
ipment
• Evidence for the cargo
possession taking
• Notified to the destina
tion customs broker /
consignee
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 VOCC
(Vessel Operating Common Carrier)
• The party which actually operates ships
• Their customers are shippers or NVOCC
• SMDT: Liner, carrier, steamship lines

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 Global Top 10 VOCC
1. P. Moller–Maersk – 4.1m TEU
2. Mediterranean Shipping Company – 3.8m TEU
3. COSCO Shipping Lines – 3.1m TEU
4. CMA CGM Group – 2.7m TEU
5. Hapag-Lloyd – 1.7m TEU
6. Ocean Network Express (ONE) – 1.5m TEU
7. Evergreen Line – 1.2m TEU
8. Orient Overseas Container Line (OOCL)– 733,580 TEU
9. HMM – 728,416 TEU
10. Yang Ming – 616,000 TEU
https://www.ship-technology.com/features/the-ten-biggest-shipping-companies-in-2020
Global SCM (490610-1) 35
 NVOCC
• NVOCC is ‘Non Vessel Owning Common
Carrier’. NVOCC operation comprises of s
ales, stuffing and transport of the contai
ners to gateway ports. The bill of lading i
ssue and overseas distribution is taken c
are by the agents of NVOCC
• Scale economy (price and space)
• Flexibility in schedule

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 2020 Top NVOCC in TEU

ijafri.com Global SCM (490610-1) 37

Mega-Vessel (Mega-ship)

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 Mega-Vessel
• Often called for 10,000+ TEU
• Getting bigger for 20,000 TEU or bigger
• Scale economy
• Infrastructure – Canal, port, bridge

https://www.itf-oecd.org/sites/default/files/docs/15cspa_mega-ships.pdf
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 Changes Originated from Mega-Ships
Bayonne Bridge, Yangshan Port,
New Busan Port, Panama Canal

View on googlemap Global SCM (490610-1) 40

 Intermodal
• Transportation service to use multiple m
odes under one B/L
• Shipper gets one bill
• Ocean+rail, ocean+truck, ocean+air, rail+
truck, etc

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 Slow Steaming
• Operate the vessel speed less than its
maximum speed
• Widely started in 2007 as a counteract of
rate decrease from over supply
• Known as a positive impact from
environment perspective
• Long lead time but rate increased

https://en.wikipedia.org/wiki/Slow_steaming#:~:text=Slow%20steaming%20is%20the%20practice,to%20save%20m
oney%20on%20fuel. Global SCM (490610-1) 42
 Free Time
• Demurrage free time: Time to leave a
unloaded container at the destination
port yard before picking up
• Detention free time: After the pickup,
time to bring the container to the final
destination, unload the container and
then return the empty container to the
pre-agreed place (port or container yard)

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Major Ocean Routes

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 Example Intermodal Routing
From Singapore via LA CA to Columbus NE

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 Ocean Quote
40ft & 20ft dry

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 Tariff
• An official list or table showing the duties o
r customs imposed by a government on im
ports or exports. (dictionary.com)
• Table of charges set and announced by the
transportation service provider
• By service routing, service routing for a
certain time period
• Applicable to any shipper unless a separate
contract is in place
• Base rate, surcharges, other charges
(demurrage, detention, etc)
Global SCM (490610-1) 47
 Surcharges
• Additional charge by carrier or NVOCC on top of
base rate
• Usually charge / container and tied with the
tariff unless fixed rate is indicated in the contract
• Fuel surcharge (BAF, Bunker Adjustment Factor)
• CAF (Currency Adjustment Factor)
• THC (Terminal Handling Charge)
• SEC: Security Charge
• Low sulphur

Global SCM (490610-1) 48

 GRI (General Rate Increase)
• Base rate increase announced by ocean c
arriers by lines.
• Shipper could avoid GRI with GRI free co
ntract terms
• Carrier may lose its customer if GRI is no
t acceptable by the market

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 LCL (Less Than Container Load)
• Delivery service for not large enough for
the full container load but not urgent
enough for air shipment
• Freight forwarder build a full container
by getting LCL cargos from different
shippers
• Cost is usually between FCL and Air
• Hazmat is not allowed

Global SCM (490610-1) 50

Air Freight Forwarding

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 Air Freight Forwarding
• A air freight service to plan and coordinate
the cargo moving from point A to point B
• Scope
– Charter the space from carriers (airlines) & sell
to cutsomers
– Take the possession of the cargo when receivin
g until giving the possession to the consignee
– Issue Bill of Lading

Global SCM (490610-1) 52

Korean Air awaits approval to remove passen
ger plane seats for cargo transportation
“Korean Air, the top flag carrier in South Korea, is i
n the final stage of coordination with governme
nt regulators over the proposed removal of pas
senger plane seats to load cargo. The move is a
imed at improving profitability by increasing car
go transportation as a prolonged coronavirus pa
ndemic showed no signs of an end.”

https://www.ajudaily.com/view/20200827103547913
Global SCM (490610-1) 53
 Passenger & Cargo Aircraft
• Passenger aircraft
– Only lower deck
for freight

• Cargo aircraft
– Both upper *
lower deck for
freight

https://mk.kuehne-nagel.com/ Global SCM (490610-1) 54

Upper (Main) deck & Lower Deck
• Upper deck: only in cargo flight, limited
supply, more expensive
• Lower deck: 160cm height limit

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 Upper deck Loading

• https://youtu.be/OINg49Dz8J0
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 Lower deck loading

• https://youtu.be/N8poP7HmsiU
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 Air Freight Quote
Sample

https://www.sampletemplates.com/ Global SCM (490610-1) 58

 Airway Bill
• Often called by HAWB (House Airway Bill)
• Issued by the forwarder to the shipper
and the consignee when the forwarder
takes the possession of the cargo
• To be submitted in export and import
customs clearance
• Details about the cargo

Global SCM (490610-1) 59

HAWB Sample

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Dimensional (Volumetric) Weight
• Convert volume to weight for commercial
freight price calculation
• Converting factor can be different by the f
orwarder/carrier or country
• Mostly used formula
– (Length(Cm) * Width(Cm) * Height(Cm)} / 6000
– (80cmX60cmX114cm)/6000 =91.2 Kg
•
Global SCM (490610-1) 61
 Chargeable Weight
• For air, typically used greater number
between dimensional weight and actual
weight
• Also applicable for weight base surcharges
• If base rate is USD 2.50 / kilo
– Actual weight: 35 Kg
– Dimensional weight: 91.2 Kg
– Chargeable weight: 91.2 Kg
– Therefore, USD 2.50 * 91.2 Kg = USD 228.00
http://wap.dhl.com/serv/volweight.html
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 Service Level (Rate Class)
• Priority (Express, Premium, Direct)
– Routing: Direct or least transit number.
– Priority in overbooking
– First unloading and customs clearance
– No mix with other cargos or other shippers
• Standard (Regular, Consolidation)
– Price and lead time is between Priority and Deferred
• Deferred
– Most economic routing
– Like mix with other cargos
– Possible delay in unloading
• Level names and definitions vary by carrier / forward
er
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 How to Cut Lead Time
Air Freight
• Booking priority
• Direct flight instead of transit routing
• Pre-customs clearance
• Unloading first
• Pick up at the destination airport and
separate inland transportation instead of
milk run

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 Environtainer
• Air ovides Air freight container with temperat
ure & humidity control
• https://www.envirotainer.com/
• A brand name turned to a common noun
• Higher rate but key in cold chain

Global SCM (490610-1) 65

Courier

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 Courier Service
• Deliver goods or docs usually via air and gro
und door to door
• Consolidation service
• A good fit for small cargo
• Mainly dry cargo (no cold chain, no hazmat)
• DHL Express, UPS Express, Fedex, EMS,
• Own planes and charter from conventional a
irlines
• Complex routing instead of direct booking fr
om point A to point B

Global SCM (490610-1) 67

 Fedex Tracking
Charleston, SC, US to Puerto Montt, Chile

http://all2door.com/how-to-track-a-package/ Global SCM (490610-1) 68

Fedex Netwrok

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 Next on Deck
Lecture Topic Lecture Goals

• Demand Planning
1
2
Introduction
Basics of SCM
Class, norm and goal setup, walking through syllabus, evaluation
Macro supply chain, end to end process
3 Demand Planning Forecast and forecast accuracy, statistical forecast, bullwhip effect
4 Supply Planning MRP and replenishment, safety stock, reorder point, lead-time
5 Purchase Direct and indirect purchase, EOQ, Kanban, VMI, CMI
6 Inventory Planning Inventory planning and control, Inventory metrics,
7 Midterm
3PL Service provider selection, physical counting, Latest technology, H
8 Warehouse azmat
9 Int’l Transportation Ocean and air, industry norms, terms, and knowledge
10 International Trade Incoterms, country of origin, AEO, IATA, customs
11 SAP R3 and APO ERP basics, master data, integration with other tools,
Generic S&OP process and cross-functional communication, leadershi
12 S&OP p for SCM
13 Capacity 1 Discussion of "the goal", bottleneck
14 Capacity 2 Capacity planning
Global SCM (490610-1) 70
15 Final exam
End of Presentation

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 Container Size
Internal v
Length Width Height TEU Notes
olume
20 ft (6. 8 ft (2.4 8 ft 6 in (2. 1,172 cu ft
1[6]
1 m) 4 m) 59 m) (33.2 m3)
40 ft (12. 8 ft (2.4 8 ft 6 in (2. 2,389 cu ft
2[6]
2 m) 4 m) 59 m) (67.6 m3)
48 ft (14. 8 ft (2.4 8 ft 6 in (2. 3,264 cu ft
2.4
6 m) 4 m) 59 m) (92.4 m3)
53 ft (16. 8 ft (2.4 8 ft 6 in (2. 3,604 cu ft
2.65
2 m) 4 m) 59 m) (102.1 m3)
20 ft (6. 8 ft (2.4 9 ft 6 in (2. 1,520 cu ft
1[2] High cube
1 m) 4 m) 90 m) (43 m3)
20 ft (6. 8 ft (2.4 4 ft 3 in (1. 680 cu ft (
1[2] Half-height
1 m) 4 m) 30 m) 19.3 m3)

Global SCM (490610-1) 72