D08440020120154039Topic 4 Transportation Systems - D0844 Supply Chain Logistics

ISYE6048 Supply Chain Logistics
Topic :
Transportation Systems
Transportation Systems
Chapter 5
Materials are taken from Prof. Marc Goetschalckx Course Note with some modification
Agenda
• Introduction
– Importance of Transportation
– Terminology
– Performance Measures
– Transportation Units & Structures
• Transportation Modes and Infrastructure
• Transportation Documents and Contracts
Supply Chain Modeling: Logistics, Spring 2013 ©KGA. All Rights Reserved
Source: Infrastructure Development Strategy in Indonesia by
Ministry of National Development Planning (BAPPENAS), Jan 2011)
Importance of Transportation
• Creates a more “efficient” market

– Greater competition
– Economies of scale
– Reduced prices
• Two major trends

– Smaller, faster, more frequent,
more on time shipments
– Capacity constraints, larger
carriers
Transportation Terms
• Shipper
• Carrier Established price and
no discrimination
– Common carrier
– Contract carrier
– Private carrier
Transport its own good Selective and will be more responsive

Transportation Performance
Measures
Measures:
Tradeoffs with:
– Accessibility
– Capacity
- inventory for shipper
– Cost
– Speed or transit time
– Dependability
• Transit time variability
• Loss and damages
- flow volume for carrier
Direct shipping cost tradeoff
Cheap line haul
Transportation Costs
• Fixed (independent of intensity)

– Terminal facilities, administration, roadways and tracks
• Variable (dependent on intensity)
– Labor, fuel, maintenance, and handling
– Based on distance and volume
• Average costs are expressed in costs per ton-mile
• Many freight transportation costs are very asymmetric and
usually caused by a large one-directional flow
• Subject to economies of scale
Cost Economies of Scale
QUANTITY DISCOUNT
• Incremental discount: piecewise linear concave cost curve
• Full discount: discontinuities cost curve
Transit Time
• The elapsed time between the moment the goods are
picked up at the door or dock of the supplier until the
moment the goods are delivered to the dock or door of the
designee
• Transit time variability

– Maintain safety inventory to buffer
– Higher inventory levels mean tied up capital, need
larger warehouses, and increase the risk of product
obsolescence
Transportation Units
• Common unit: cwt. (hundredweight)
– English: long hundredweight (112 lbs.)
– American: short hundredweight (100 lbs. or 45.36 kg)
• Ton is commonly used to measure the cargo capacity
– Freight ton: 40 ft3 or 1.13 m3
– Deadweight ton (dwt.) is used to indicate cargo capacity of
ships in long tons (2240 lbs.)
– Metric ton (1000 kg)
• Ton can be used to express the weight of the transported freight (20
cwt.)
– English: long ton (2240 lbs. or 1016 kg)
– American: short ton (2000 lbs. or 907.2 kg)
Transportation Service Structures
Point-to-point
• Direct origin to
destination
• More transportation
“legs,” reduced transit
time and travel distance
for the goods, lower
frequency, higher
transportation costs
Hub-and-spoke
• Local consolidation hub,
shipped by hub long-haul
freight carrier to destination
hub, deliver from
deconsolidation hub to final
destination
• Fewer “legs,” longer transit,
higher frequency,
congestion, reduced
transportation costs
• Commonly used in LTL
trucking, containers, airlines
• Hybrid network
– Origin and destination points with the highest pairwise traffic
volume are served point-to-point transportation while the traffic
on the legs with lower volume are routed over the hub-and-
spoke network
• Opportunistic routing (tramp trade)
Transportation
– According Service
to load requests, no fixed itinerary Structures
or schedule
– Spot market, using exchanges
– Full truck load (FTL), ocean-going ships
– Example, cab in metropolitan area
PIPELINE RAIL ROAD
Transportation Modes &
Infrastructure
INLAND WATER OCEAN AIR
SPACE
Pipeline Systems
• Pipe sections, pumps, valves

• High volume
• Larger diameters are more efficient
• Slow transportation speed (4 mph) yet continuous movement (24/7)
• High initial cost (fixed cost), very low operational cost (power
consumed in the pumping station)
• Liquids, gasses, or slurries (suspended solids)
• Dependable, few interruption, and low time variance but it is an
Pipeline
extremely Systems
concentrated infrastructure thus a single natural or man-
made calamity may block all the freight transportation (earthquakes,
sabotage, government-ordered shutdowns)
• Pipelines inside the facilities are usually suspended from the ceiling
while for long distance are laid underground
• Crude and refined petroleum products, natural gas, coal slurry
• Privately owned
Railway Systems
MAIN CAPITAL INVESTMENT
Highly efficient but

capital intensive
Locomotive: rail vehicle with single function to push or pull

the un-powered vehicles (cars or wagons)
Switching yard
Gauge: distance between tracks
COFC (container-on-flat-car):
train cars carry intermodal
Railway Systems containers
Double stacked containers
TOFC (trailer-on-flat-car) or piggyback:

train cars carry truck trailers
Railway Systems
• A unit train may consist of 70 – 100 cars, 80 – 100 tons/car
• The largest unit trains on earth: 300 freight cars, propelled by six
locomotives and stretch up to 3 km long (Economist, 2009)
• Competes mostly directly with trucking but less expensive, slower

and lower performance
• Common carriers
• Bulk and lower value products, automotive delivery
• Long hauls
Railway Systems
• High-speed rail transportation systems to serve

mostly passenger traffic between major metropolitan
areas up to 400 miles apart
• The estimated costs to upgrade existing railroad
tracks to operate at 90, 110, 125, and 150 mph are
$300,000, $550,000, $3,000,000, and $5,000,000
per mile, respectively (FRA, 2003)
Railway Systems
• Maglev
– Use magnetic levitation thus it does not need wheels but float on
a magnetic force field
– Construction cost $100 million per mile
– Shanghai airport, Yamanashi
http://www.youtube.com/watch?feature=player_embedded&v=VVuOnbrIEKU
Load carrying capacity:
Roadway
• Light truck: Systems
same size with passenger car and used by individuals or
commercial enterprises (e.g. pickup trucks)
• Medium truck: used for city delivery
• Heavy trucks: consists of tractor and trailer and used in inter-city
transportation
Roadway Systems
Over-the-road vehicles can be capacitated because of their:

• Weight (“weighted-out”)
• Volume (“cubed-out”)
• Time (time windows)
• Increase the volume or weight reduces shipping costs at the expense of

damaging the road surface and increasing maintenance cost (based on
weight per axle)
• Most flexible
– Door-to-door
– Small quantities
– On demand schedule
Roadway Systems
• Centers (transit, consolidation) and rolling stock (tractors and

trailers)
• Semi-finished and finished products
• High speed
• Mixed mode (piggyback, fishyback)
• Private fleet, common carrier, contract carrier
• Labor intensive (high turnover)
• Water-based transportation
• Barges Inland Water
are the vessels Waysfreight on inland water ways
transporting
• Tug or towboat
Inland Water Ways
• Efficient to transport large volumes of bulk commodities over

long distances, however, their accessibility is limited and can
be weather controlled
• Slower and less expensive than rail (8 mph)
• Vessels carry trucks are roll-on, roll-off (RORO) if the tractor
remains connected to the trailer or “fishyback” if only the
trailers are transported
• Water-based transportation
Ocean
• Crude oil Going
and petroleum products, bulk and ore or intermodal
containers
• Port yards, ships, and containers
• Bulk, oil, and intermodal container, some automotive
• Low speed (25 mph)
• Large capacity
Rank Port Country TEUs (K)
1 Singapore Singapore 23,192

Ocean Going 2 Hong Kong China 22,427
3 Shanghai China 18,084
4 Shenzhen China 16,197
Largest Seaport Container Ports 5 Busan South Korea 11,843
in 2005 6 Kaohsiung Taiwan 9,471
7 Rotterdam Netherlands 9,287
8 Hamburg Germany 8,088
9 Dubai United Arab Emirates 7.619
10 Los Angeles United States 7,485
11 Long Beach United States 6,710
12 Antwerp Belgium 6,482
13 Qingdao China 6,307
14 Port Klang Malaysia 5,544
15 Ningbo China 5,208
16 Tianjin China 4,801
17 New York United States 4,785
18 Guangzhou China 4,685
19 Tanjung Pelepas Indonesia 4,177
TEU: Twenty-Foot Equivalent Unit
20 Laem Chabang Thailand 3,834
Intermodal Transportation Systems
• Freight in containers transportation by multiple transportation modes

w/o handling of the freight inside the containers
• Full container (8 x 8 x 40) and half container (8 x 8 x 20)
• Efficient space utilization
• Improves security and reduces handling, damage and loss, and

transit time
• Drawback is the need to use standardized handling and storage and

empty container management
• 80% of international piece goods and growing
Intermodal Transportation Systems
• Extensive computer support is needed

• Feasibility and efficiency of the schedule rules are tested by a large
simulation model
Airport yards, airplanes
Air
• Urgent and high value items

• Relatively high cost
• Very fast transportation speed (600 mph), limited access
• High variability (weather dependent)
• Private fleet, contract, and common carrier
• Strong growth since 1940s, explosive growth after 1980
• Jumbo jets are commonly used for international air cargo
Air
BOEING 747
Jumbo jets are commonly used for international air cargo

AIRBUS A380
Air
• Military Airlift Transport C5 loading a tank
• Military airlift transport: retrieving another plane
Largest Air Cargo Airport
Ra Airport Country Code Ra Airport Country Code

nk nk
1 Memphis USA MEM 16 London UK LHR
2 Hong Kong China HKG 17 Shanghai China PUG
3 Tokyo, Narita Japan NRT 18 Bangkok Thailand BKK
4 Anchorage USA ANC 19 Dubai UAE DXB
5 Inchon South Korea ICN 20 Indianapolis USA IND
6 Los Angeles USA LAX 21 Newark USA EWR
7 Frankfurt Germany FRA 22 Atlanta USA ATL
8 New York USA JFK 23 Osaka Japan KIX
9 Singapore Singapore SIN 24 Tokyo , Haneda Japan HND
10 Miami USA MIA 25 Dallas/Ft. Worth USA DFW
11 Louisville USA SDF

12 Chicago USA ORD
13 Taipei Taiwan TPE
14 Paris Paris CDG
15 Amsterdam Netherlands AMS
Space
Space shuttles can carry 22 tons into orbit

(≈ one truck)
Mode Rough equivalency Remark
Standard over-the-road 25 metric tons for packaged goods
tractor-trailer truck Capacities Comparison 35 metric tons for bulk and liquid goods
Pipeline 2,000 tanker trucks
Space shuttle 1 truck 22 tons
Large cargo airplanes 6 trucks 150 tons of freight
Bulk railroad car 300 trucks 100 tons/car and up to 100 cars
Piggyback 100 trucks
Double stacked 200 trucks 200 containers
intermodal containers
Barge 1,800 trucks 1,500 tons/barge
Container ship 4,500 trucks 17 wide, 15 high, 19 long
ULCC (ultra large crude 16,000 trucks 550,000 deadweight tons of crude
carrier) petroleum
• Bill of Landing (BOL)
– Contract and Transportation
receipt Documents
– Identifying the goods,
ownership (shipper), carrier
(receipt), destination
(designee)
• Freight bill
Transportation
– Same info plus charges and incotermsDocuments
– Owners copy (invoice), carriers copy (delivery proof), consignee
copy
• Duties and tariffs and incoterms
– FOB (free on International Transportation
board): exclusive freight
• No duty on freight
• Shippers pay
• USA
International Transportation
– CIF (cost, insurance & freight): inclusive freight
• Duty on freight
• Most countries
International
– Duty-free zone Transportation
and Free-trade zone (developing countries,
duties or taxes have to be paid when the goods leave the FTZ
and are imported into the country)
Incoterms 2000 (ICC)
International Commercial TERMS Label Name

EXW Ex Works (at location)
DDP represents maximum obligation
FCA Free Carrier (at location)
for the seller while EXW represent
the minimum obligation for the seller FAS Free Alongside Ship (at port)
FOB Free on Board (at port)
CFR Cost and Freight (at location)
CIF Cost, Insurance, and Freight (at port)
CPT Carriage Paid To (location)
CIP Carriage and Insurance Paid To (at location)
DAF Delivered At Frontier (location)
DES Delivered Ex Ship (at port)
DEQ Delivered Ex Quay (at port)
DDU Delivered Duty Unpaid (at location)
DDP Delivered Duty Paid (at location)

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ISYE6048 Supply Chain Logistics

• Creates a more “efficient” market

• Two major trends

Transport its own good Selective and will be more responsive

- flow volume for carrier

Cheap line haul

• Fixed (independent of intensity)

• Transit time variability

INLAND WATER OCEAN AIR

• Pipe sections, pumps, valves

• Crude and refined petroleum products, natural gas, coal slurry

Highly efficient but

Locomotive: rail vehicle with single function to push or pull

Gauge: distance between tracks

Double stacked containers

TOFC (trailer-on-flat-car) or piggyback:

• A unit train may consist of 70 – 100 cars, 80 – 100 tons/car

• Competes mostly directly with trucking but less expensive, slower

• Bulk and lower value products, automotive delivery

• High-speed rail transportation systems to serve

Over-the-road vehicles can be capacitated because of their:

• Increase the volume or weight reduces shipping costs at the expense of

• Centers (transit, consolidation) and rolling stock (tractors and

• Efficient to transport large volumes of bulk commodities over

1 Singapore Singapore 23,192

• Freight in containers transportation by multiple transportation modes

• Full container (8 x 8 x 40) and half container (8 x 8 x 20)

• Efficient space utilization

• Improves security and reduces handling, damage and loss, and

• Drawback is the need to use standardized handling and storage and

• 80% of international piece goods and growing

• Extensive computer support is needed

• Urgent and high value items

Jumbo jets are commonly used for international air cargo

• Military Airlift Transport C5 loading a tank

• Military airlift transport: retrieving another plane

Ra Airport Country Code Ra Airport Country Code

1 Memphis USA MEM 16 London UK LHR

2 Hong Kong China HKG 17 Shanghai China PUG

3 Tokyo, Narita Japan NRT 18 Bangkok Thailand BKK

4 Anchorage USA ANC 19 Dubai UAE DXB

5 Inchon South Korea ICN 20 Indianapolis USA IND

6 Los Angeles USA LAX 21 Newark USA EWR

7 Frankfurt Germany FRA 22 Atlanta USA ATL

8 New York USA JFK 23 Osaka Japan KIX

9 Singapore Singapore SIN 24 Tokyo , Haneda Japan HND

10 Miami USA MIA 25 Dallas/Ft. Worth USA DFW

11 Louisville USA SDF

Space shuttles can carry 22 tons into orbit

International Commercial TERMS Label Name

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