TRANSPORTATION

(ROUTING , SCHEDULING
& PRICING)
Dr.Sunil Giri
 Role of Transportation
 Transportation choice is closely related to
inventory decision, customer service levels and
finally cost.
 40-60% of logistics cost
 3.5 to 8% of sales
 Transport Mode Selection
 Company SCM strategy
 Market Structure
 Product Characteristic
 Customer Characteristic
 Environmental Issue
 Modes
 Air
 Road

 Rail

 Water

 Pipelines

Combinations
Intermodel
 Transportation Performance
Parameters
Selection Rail Road(truck) Water Air Pipelines
Determinant

Cost 3 4 2 5 1

Transit 3 2 4 1 --
Time
Reliability 2 1 4 3 --

Capability 1 2 4 3 5

Accessibilit 2 1 4 3 --
y
Security 3 2 4 1 --
 Cost
Operating cost Rs/Ton Fuel efficiency Ton KM/
KM Litre

Rail 1.18 85

water 0.75 105

Road 1.51 24
 Use of various modes in
domestic geography
Mode India China US

Road 57 22 37

Rail 36 47 48

Air 1 1 1

Waterways 6 30 14
 Water
 OceanShipping
 Costal Shipping
 Inland shipping
 Inland waterways India
 National waterways 6 No. ( 106 total identified)

NW1 Prayag to Haldia 1620 Ganga

NW2 Dhubhri to Sadiya 891 Bhramputra

NW3 Kollam to Kottam Canal Various

NW4 Kakinada to Pondicherry 1095 Canal &
Godavari
NW5 Talchar to Dharma Mahanadi
Geonkhali to Charbita Brahmani
Mangalagadi to Paradip East Cost Canal
NW6 Lakhipur to Bhanga Barak River
 Design Options
Structure Pros Cons
Direct Shipping Simple to co-ordinate High Inventory
Direct Shipping with Lower transportation Increased co-ordination
Milk Run cost for small lots complexity
All shipment via central Lower inbound cost Increased handling and
Dc without inventory through consolidation inventory cost at DC
storage
All shipment via Dc with Very low inventory Increased co-ordination
cross dock lower transportation cost complexity
through consolidation
Shipping Via DC using Lower outbound High co-ordination
Milk Run transportation cost for complexity
small lots
 Transport Network
 A transport network consists of nodes linked
by arcs or branches. Associated with each arcs
is a flow of some type.
( Cities represents nodes and highways
represents arcs and traffic represents flow)
 Principles of routing and
Scheduling
 Load trucks with stop volumes that are in the closest proximity to
each other
 Stops on different days should be arranged to produce tight
cluster
 The sequence of stops on a truck should form a tear drop pattern.
 The most efficient routs are built using the largest vehicles
available.
 Pickups should be mixed with delivery routes
 A spot that is greatly moved from a route is a good candidate for
an alternate means of delivery.
 Narrow stop time window restrictions should be avoided.
 Problem
Site X Y Order Size Lb
A 220 800 3000
B 240 720 31500
C 470 790 16500
D 670 860 6000
E 540 730 4500
F 630 680 6750
G 420 570 3750

H 370 490 6000

I 130 500 7500
J 180 270 9000
K 480 360 5250
L 480 210 18000
M 660 250 3000
N 760 390 6750
O 810 640 11250
Capacity of Truck 40000Lb No. of Trucks 5
 The trucks are to be scheduled in such way that all
orders for the week are to be shipped at one time
beginning not earlier then 7 AM. Capacities of truck
should not exceed. Deliveries are to be made between
7AM to 6 P M. Drivers are to take one hour break after
12 noon and night break after 7PM.The average driving
speed is 50 miles per hour and the time for unloading
at a stop is 30 minutes. The road distance are estimated
as 21 % higher than straight line. Driver and truck cost
is Rs.1.50 per mile . X 460 Y 720
 Pricing of Transportation
Volume Related Minimum Charge

Any Quantity

LTL

TL

Distance Related Uniform Rate

Proportional Rates

Tapering Rates

Blanket Rates
 Cont…….
Demand Related Rates
Line Haul Rates By Product
By Class Rates
Special Service Charges
Diversion or Reconsignment
Transit Privileges
Interlining
Terminal Services
Switching Services
Demurrages
Detention
 Problem 1
 Suppose 15000 Kg of Aprons used as
advertising material is to be shipped by truck
from A to B. The Class rate is found to be
Rs.33.08 per Kg for a shipment between
10000Kg to 20000Kg and Rs. 24.11 per Kg for
greater than 20000Kg.The carrier offers a 60 %
discount, calculate the net charges.
 Differential Pricing
A Transporter purchased six trucks with a total
capacity of 6000 cubic feet , to use for transport
from A to B .The monthly charges including all
expenses is Rs.1500 per truck.The market
research had indicated that the demand curve
for trucking capacity is D= 10000-2000p
 A transporter has identified two customer
segments for its services, One willing to book the
transport quite in advance and the other willing to
pay higher charges for less than one week notice.
D1=5000-20p
D2=5000-40 p
The cost of transportation is Rs.10 per Unit.
What price the transporter should charge
Compute the price when the transporter wants to
charge same price.
 Freight Consolidation
 A supplier ships goods from S to 3 cities . The
supplier can ship every day, every other day or
every third day. There is a penalty of Rs.0.20
/cwt for every day delayed.
 Requirement
Weight/day
R 80 Cwt
C 100 cwt
K 70 cwt
 Transportation Rates
LTL < 25 0cwt TL > 250cwt
1.20 1 R
1.05 0.80 C
2.00 1.20 K