Transportation

in supply
chain

Presented by- Rekha MBA

CONTENT
 Introduction

 Role of transport

 Factors affecting

 Modes of transport

 Transport infrastructure and policies

 Design options for a transportation network

 Case study

 Trade off
2
 Tailored

 Making transportation decisions

Logistic And Transportation

The Council of Supply Chain Management

Professionals (CSCMP) defines logistics as the process
of planning, implementing, and controlling
procedures for the efficient and effective
transportation and storage of goods including
services, and related information from the point of
origin to the point of consumption for the purpose of
conforming to customer requirements.
Transportation means of conveyance or travel
(of goods and services) from one
place to another .
It’s plays a vital role in logis
tic.
3
 General information of
transportation
• According to bureau of Transportation Statisticis
(BTS)has 3 Sectors .

HOUSING HEALTHCARE FOOD

- It Contributes a larger share to the gross domestic

product (GDP) than Transportation. due to the
transportation most of the people got the employment
4
.
Role of transportation
• Transportation is the physical link connecting the firm to its
suppliers and customers.
• In a nodes and links scenario, transportation is the link
between fixed facilities (nodes).
• Transportation is an important supply chain driver because
products are really not produced and consumrd at same
location.
• Transportation also adds value to the product by providing
time and place utility for the firm’s goods.
• As firms engage in global competition, transportation costs
are becoming even more significant.
• Outbound transportation was clearly the largest
component of
total physical distribution costs. 5
• Cost trade-offs abound in transportation and are typified by
trading lower inventory costs for higher transportation costs.
 FACTORS AFFECTING
TRANSPORTATION DECISIONS

• Shipper (party that requires • Carrier (party that moves

CARRIER
SHIPPER

the movement of the or transports the product)

product between two points • Vehicle-related cost
in the SC) • Fixed operating cost
• Transportation cost • Trip-related cost
• Inventory cost • For example: DHL, FedEx
• Facility cost etc.
Modes of Transportation

 Truck

 Air

 Rail

 Water

 Pipeline
6
 Intermodal
 Truck
• The trucking industry consist of two major segments-
1) Truck load (TL)
2) Or less than truck load (LTL)
It is more expensive than rail but offers advantage of door to
door shipping and decrease the delivery time. It also has the
advantage if requiring no transfer between picking and
delivery.
It requires lower fixed cost . And owning a few trucks is
sufficient to enter in the bussiness.it is charcterized by
shipments of 10,000 pounds or more than 50,000 carriers offer
T L sevice in U S . The challenge in the T L bussiness is that
most market have an imbalance of inbound and outbound
flows.
For eg- newyork has a significantly higher in flow of material
then out flow. 7
Trucking

Advantages-
 Lower costs
 good Accessibility
 Small, frequent shipmen ts
Good speed.
Disadvantages-
 costly
 Capacity
 Range
8
 AIR
• Major air lines in U S that carry both passengers and cargo
include American southwest ,United and delta. have three
cost components-
1) A fixed cost of infrastructure and equipment
2) cost of labour and fuel that is independent of the
passengers or cargo on flight but is fixed for the flight.
3) A variable cost that depends upon the passengers or
cargo
Main carried.
objective of airline is to incurred the cost when the flight
takes off.
Key issues- the air carrier face include identifying the location
and number of hubs, asinging planes to route, seeting up
maintenance shedule for planes, scheduling crews,and
managing prices and availability of different prices. 9
 AIR

Advantages
• Premium transportation mode
• Speed delivery can be done
• High Range of products can transport
• Perishable products
•Urgent deliveries.
Disadvantages
 Price
 Non-direct points
 Add-on charges

11
 R AIL

• Rail carriers incur a high fixed cost in term of tracks,

locomotives, cars, and yards.
• The price structure and heavy load capability make
rail an ideal mode for carrying large, heavy , or
high density products over long distances.
• In rails fuel cost is calculated by the distances
travelled and the number of goods transported.
• Major operational issues at railroad are vehicle and
staff scheduling, track and terminal delays, and it
is poor on-time performance
• .for eg- coal is major part of each railroad
shipments.
12
 R AIL

Advantages
 Lowest overall cost per unit weight
 Consistent time schedule
 Recommended with most commodity types
 can be used in any type of Weather
Large volume if sample can be transported
Disadvantages
 Inflexibility
 Potential damage of goods
Ineffective with small shipmen t,
Short distance,time-sensitive. 12
 Rail Types of Freight Services
 Bulk Unit Train
 Moves very high volumes of a single commodity
 Coal, grain, minerals and waste
 One way (shipper to receiver)
 Mixed Carload
 Moves a diverse range of commodities.
 Chemicals, food products, forest products, metals, auto
parts, waste and scrap.
 One way (shipper to receiver)
 Intermodal (container, trailer and automobile)
 Moves truck trailers
 Almost anything that can be pack in a truck or container
like: finished consumer goods, refrigerated foods, tools and
parts for manufacturing and raw materials.
 Two way 13
 WATE R

• A cargo ship, also known as freighter, is one that carries

cargo, goods and materials from one port to another.
• Major ocean carriers include Maersk, evergreen group,
American President Lines, and Hanjin shipping Co. Water
transport , by its nature, is limited to certian areas.
• Water transport is ideally suited for carrying large loads at
low cost. within the U S , water transport is used primarily
for the movement of large bulk commodity shipments and is
the cheapest mode of carrying the loads. It is slowest of all
the mode.
• In global trade, water transport is the dominant mode of
transport can be used for shipping of all types of material.

15
 WATE R

Advantages
• Large volumes
•Long distances
Disadvantages
• Slower than
all the modes
• Limited access

16
Types of Cargo Ships

1) Bulk Carriers
• These ships are designed to transport
unpackaged bulk cargo such as cement, ore,
grains and coal.

• 40% of the world’s

• merchant fleets.

17
2) Lake Freighters (Lakers)
• Lakers are bulk carriers that transport goods
through the Great Lakes.
• The number of Lakers in operation has been reduced
due to the Saint Lawrence Seaway, that allows access
of ocean-going vessels to the Great Lakes.

18
3) Container Ships
• These cargo ships carry intermodal containers that
can be carried by land. Containers vary from 20 to
40 feet in length.

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Unloading Container Ships

• Port cargo cranes are used to unload containers from

cargo vessels

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PIPELINE

• It is used usually for transport of pertroleum, refined

oil, natural gas.
• Significant initated fixed cost is incurred in setting up
the pipeline and realted infrastructure that does not
vary significantly with the daimeter of pipeline.
• Pipeline operations are typically optimized at about
80-90percent of pipeline capacity.
• Given the nature of the cost it is the best suited mode
when realtively stable and large flows are required.
• Pipeline pricing usually consist of two components-
1) A fixed component related to shipper ‘s peak
usage 20
2) charge realting to the actual quantity transported.
 PIPELINE

Advantages-
• Transport of
homogeneous materials
• Lower transportation
costs than other modes
• Unable to transport a
variety of materials
• Disadvantages-
• Leakage of pipes
may
occur
• Wastage of material 21
• Maintanance is
require.
IN TE R M O D AL

• In this type more than one mode type of transport is used

for shipment of product to its destination.
• Most coomon mode is truck and rail.
• Intermodal traffic has grown considerably with the
increased use of containers for shipping and the rise
of global trade
• Containers are easy to transport from one mode to another ,
and there use fcailities intermodal transportation.
• Containers can be used .
• Key issues- it involves the exchange of information
between different modes because these transfers are often
involve considreable delays, hurting delivery time
perfrormance. 22
• More popular due to globalization.
• delivery time is less and cost is low.
AD VAN TAG E S AN D
DISADVANTAGES

24
 Transport Infrastructure and

Policies
• Roads, seaports, airports , rail, and canals are some of the major
infrastructural elements that exist along nodes and link of a
transportation network . In all countries the government has either taken
full responsibilty or played a vital role in development of transportation
and the resulting growth of trade . The role of railroad and canals in
the economic development of the U S is well documented. More recently
the impact of improved road,air,and port infrastructure on the
development in china is very visible.

25
 Impact of average and marginal cost on
vehicle flow

Price of trip

Marginal cost of time+operation

B
P1 A
Average cost of
P0
time + operation

Demand curve

Q1 Q0 25

Vehicle flow rate

DESIGN OPTIONS FOR A
TRANSPORTATION
Ntransportation
• A well designed E TWOnetwork RK allows
a supply
chain to achieve the desired degree of
responsiveness at a low cost.
• Three basic questions need to be considered while
dwsigning the transportation network between two
1)stages of atransportation
Should supply chain. be direct or through an
intermediate site?
2) Should the intermediate site stock product or only
serve as a cross-docking location?
3) Should each delivery route supply a
single destination or multiple 26
destinations ?
 Factors Influencing
Distribution Network
Design
• At the highest level, performance of a distribution
network should be evaluated along two dimensions:
• 1. Customer needs that are met

• 2. Cost of meeting customer needs

• The customer needs that are met influence the

company's revenues, which along with cost decide the
• profitability of the delivery network.

28
• While customer service consists of many components, we will focus on
those measures that are
• influenced by the structure of the distribution network. These include:
 • Response time Response time is the time between when a
customer places an order and receives delivery-
 • Product variety- Product variety is the number of different products /
configurations that a customer desires from the distribution network.
 • Product availability -Availability is the probability of having a product
in stock when a customer order arrives-
 • Customer experience -Customer experience includes the ease with
which the customer can place and receive their order
 • Order visibility - Order visibility is the ability of the customer to
track their order from placement to delivery-
 • Returnability - Returnability is the ease with which a customer
can return unsatisfactory merchandise and the ability of the network
to handle such returns.

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 Direct shipment network to single
destination

29
In this all shipments come directly from each supplier to each buyer location,
in this the routing and cost of each shipment is specified
Direct shipping with milk runs
from multiple buyers to multiple
suppliers location

A milk run is a route on which a truck either delivers product from single supplier to
multiple retailers or goes from multiple suppliers to a single buyer location .in this a
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supplier delivers directly to the multiple buyers location on a truck or a truck picks up
deliveries destined for the same buyer location from many suppliers. By this the
manager has to decide the routing of each milk run.
Shipping via D C using milk runs

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This is used if lot of size to be delivered to each buyer location are small it reduced
outbound transportation cost cost by consolidating small shipments.
pros and cons of different
transportation network

33
Tailored network

Here the transportation is used in the combination of the cross-docking ,milkruns,

TL and LTL carriers along with package carriers.
34
Mumbai dabbawalas
case study

35
(Nutan Mumbai Tiffin Box Suppliers Association)

History : Started in 1880

Charitable trust : Registered in 1956
Avg. Literacy Rate : 8th Grade Schooling
Total area coverage : 60 Kms
Employee Strength : 5000
Number of Tiffin's : 2,00,000 Tiffin
Boxes
i.e 4,00,000 transactions every day.
Time taken : 3 hrs

36
Structure

• Three tier structure:

• Executive committee
• Mukadams
• Dabbawalas
• Role of Groups (a profit centre with 8 mukadams)
• Culture similarity of the staff
• Distinct local entity of dabbawalas
• Known for reliability and work ethic
• Helped by commuters

37
APPROAC H

DISCIPLINE :
• No Alcohol Drinking during business hours
• Wearing White Cap during business hours
•Carry Identity Cards
WOMEN:
• Mrs. Bhikhubai of
Borivali(East)
•Mrs. Anandibai of Andheri(East)
LATEST MARKETING STRATEGY: 37
Marketing message in the “dabba”
Case Study : TBSA
Tiffin Box Suppliers Association

Executive Committee
How do they do it…? (5 members)

• Organizational
structure Teams of 20-25 headed by a
group leader
• Operations

• War against Time (10.30 –

1.00) Individual Dabbawalla
workload = 30 tiffins
• The Code
38
ORGANISATIONAL STRUCTURE

The service is uninterrupted even on the days of extreme weather, such as

Mumbai's characteristic monsoons. The local dabbawalas at the receiving and
the sending ends are known to the customers personally, so that there is no
question of lack of trust. Also, they are well accustomed to the local areas they
cater to, which allows them to access any destination with ease. Occasionally, 39
people communicate between home and work by putting messages inside the
boxes. However, this was usually before the accessibility of
telecommunications
 PRESIDENT

VICE PRESIDENT

13 MEMBERS
GENERAL SECRETARY

TREASURER

DIRECTORS(19)

MUKADAM
40
MEMBERS(5000)
 PRESIDENT & GENERAL SECRETARY
NUTAN MUMBAI TIFFIN BOX SUPPLIERS ASSOCIATION

42
F I N A N C I A L DATA O F A G R O U P

1st group –
Rs Total earnings -20 People
Maintenance cost
125000
Tiffin luggage basket pass – Rs 180 per person.
Rs 35000
Maintenance of cycles – Rs 300 – 2 cycles per month.
Maintenance of wooden boxes – Rs 100 per person .
T.C , police robbery of Tiffin Rs 500 yearly.
Organizational fee Rs 15 per head.
Puja held per station Rs 50 per head.
43
Awards and Felicitation
 Shri.Varkari Prabhodhan Mahasmati Dindi (palkhi) sohala – 4th march
– 2001.
 Invitation from CII for conference held in Bangalore.
 Documentaries made by BBC ,UTV, MTV, and ZEE TV
Dabbawalla services are popular with the Indian IT developer
community in Silicon Valley, California, USA
 In literature
One of the two protagonists in Salman Rushdie's controversial novel The
Satanic
Verses, Gibreel Farishta, was born as Ismail
Najmuddin to a dabbawallah. In the novel, Farishta joins his father, delivering
lunches all over Bombay (Mumbai) at the age of 10, until he is taken off the
streets and becomes a movie star.
Dabbawalas feature as an alibi in the Inspector Ghote novel Dead on Time. 44
S ome Achievements

• World record in best time management.

• Name in “ G U I N E S S B O O K of World Records”.

• Registered with Ripley's “ believe it or not”.

45
L OG IS TIC S

Logistics is happening 24 hrs a day,7 days a

week and 52 weeks a year.
Logistical competency is achieved by
coordinating the following:
 Network Design
 Information
 Transportation
 Inventory
 Warehousing

46
• Coding
VLP : Vile Parle
(Suburb in Mumbai)

9E12 : Code
for Dabbawallas at
Destination

E : Express Towers
(Bldg. Name)

12 : Floor No.

E : Code

for
Dabbawalla
s at
Residential 46
MR. RAGHUNATH MEDGE

47
• 10:34-11:20 am

• This time period is actually the journey

time. The dabbawalas load the wooden
crates filled with tiffins onto the luggage or
goods compartment in the train. Generally,
they choose to occupy the last compartment
of the train.
49
• 11:20 – 12:30 pm

• At this stage, the unloading takes place at the

destination station
• Re-arrangement of tiffins takes place as per
the destination area and destination building

50
• In particular areas with high density of customers, a special
crate is dedicated to the area. This crate carries 150 tiffins
and is driven by 3-4 dabbawalas!

51
• 1:15 – 2:00
pm
• Here on begins the collection process where
the dabbawalas have to pick up the tiffins
from the offices where they had delivered
almost an hour ago.

52
RETURN JOURNEY:

• 2:00 – 2:30 pm
• The group members meet for the segregation as
per the destination suburb.

53
• 2:48 – 3:30
pm
• The return journey by train where the group
finally meets up after the day’s routine of
dispatching and collecting from various
destination offices

• Usually, since it is more of a pleasant journey

compared to the earlier part of the day, the
dabbawalas lighten up the moment with
merry making, joking around and singing.

54
• 3:30 – 4:00
pm
• This is the stage where the final sorting
and dispatch takes place. The group meets
up at origin station and they finally sort
out the tiffins as per the origin area

55
 THE ROYAL VISIT:
Recently, the dabbawala’s had royal company at Churchgate
station. The Prince of Wales himself had visited them when he
came down to Mumbai.

• He took keen interest in their way of functioning, expressed

surprise at their efficiency and was struck with awe when he
was told that they didn’t employ any technology.

• The prince was presented a small memento, accompanied

with
a garland, a Gandhi topi and a trophy by the dabbawalas.

56
RICHARD BRANSON CHAIRMAN VIRGIN ATLANTIC
AIRWAYS MUMBAI

• Sir Richard Branson, Chairman, Virgin Atlantic

Airways, meeting the Mumbai's famed
'Dabbawalas' at their nodal point, the Churchgate
Railway Station in South Mumbai, on April 1,
2005. 56
Order through S M S

Although the service remains essentially low-tech, with the barefoot

delivery boys as the prime movers, the dabbawalas have started to
embrace technology, and now allow booking for delivery through SM S. A
web site, mydabbawala.com, has also been added to allow for on-line
booking, in order to keep up with the times. An on-line poll on the web site
ensures that customer feedback is given pride of place.

The success of the system depends on teamwork and time management

that would be the envy of a modern manager. Such is the dedication and
commitment of the barely literate and barefoot delivery boys (there are
only a few delivery women) who form links in the extensive delivery chain,
that there is no system of documentation at all. A simple colour coding
system doubles as an ID system for the destination and recipient. There
are no elaborate layers of management either — just three layers.

Each dabbawala is also required to contribute a minimum capital in

kind, in the shape of two bicycles, a wooden crate for the tiffins, white
cotton kurta-pyjamas, and the white trademark Gandhi topi (cap). The
return on capital is ensured by monthly division of the earnings of each 57
unit. -
Sales@MyDabbawala.Com
TRADE-OFFS IN TRANSPORTATION DESIGN
• Transportation and inventory cost trade-off
• Choice of transportation mode
• Inventory aggregation
• Transportation cost and responsiveness trade-off

2/16/2015
CHOICE OF TRANSPORTATION MODE
• Selecting a transportation mode is both a planning and an
operational decision.
• Decisions made by managers (shippers) must balance
transportation and inventory cost.
• A mode with higher transportation costs can be
justified if
it results in significantly lower inventories

2/16/2015
 INVENTORY AGGREGATION: INVENTORY VS.
TRANSPORTATION COST
• As a result of physical aggregation
• Inventory costs decrease
• Inbound transportation cost decreases
• Outbound transportation cost increases
• Inventory aggregation decreases supply chain costs if the
product has a high value to weight ratio, high demand
uncertainty, or customer orders are large
• Inventory aggregation may increase supply chain costs if the
product has a low value to weight ratio, low demand
uncertainty, or customer orders are small

2/16/2015
TRADE-OFFS BETWEEN TRANSPORTATION
COST AND CUSTOMER RESPONSIVENESS

• Temporal aggregation is the process of combining orders

across time
• Temporal aggregation reduces transportation cost because
it results in larger shipments and reduces variation in
shipment sizes
• However, temporal aggregation reduces customer
responsiveness

2/16/2015
TAILORED TRANSPORTATION
• The use of different transportation networks and modes
based on customer and product characteristics
• Factors affecting tailoring:
• Customer distance and density
• Customer size
• Transportation cost based on total route distance
• Delivery cost based on number of deliveries
• Product demand and value

The above factors allows supply chain to achieve

appropriate responsiveness and low cost.

2/16/2015
 PROS AND CONS OF DIFFERENT TRANSPORTATION
NETWORKS
Network Structure
Direct shipping
Direct shipping with milk runs
All shipments via central DC
with inventory storage
All shipments via central DC
with cross-dock
Shipping via DC using milk
runs
Tailored network
Pros
No intermediate warehouse.
Simple to coordinate
Lower transportation cost for
small lots,
Lower inventories
Lower inbound transportation
cost through consolidation
Lower inventory requirement.
Lower transportation cost
through consolidation
Lower outbound
transportation cost for small
lots
Transportation choice best
matches needs of individual
product and store
Cons
High inventories due to large
lot sizes.
Significant receiving
expense.
Increased coordination
complexity
Increased inventory cost.
Increased handling cot at DC.
Increased coordination
complexity
Further increase in
coordination complexity
Highest coordination
complexity
2/16/20 1 5 29
2/16/2015
 ROLE OF IT IN TRANSPORTATION
• The complexity of transportation decisions demands to use
of IT systems
• IT software can assist in:
• Identification of optimal routes by minimizing costs
subject to delivery constraints
• Optimal fleet utilization
• GPS applications

2/16/2015
 RISK MANAGEMENT IN TRANSPORTATION

• Three main risks to be considered in transportation are:

• Risk that the shipment is delayed
• Risk of disruptions
• Risk of hazardous material
• Risk mitigation strategies:
• Decrease the probability of disruptions
• Alternative routings
• In case of hazardous materials the use of modified
containers, low-risk transportation models, modification
of physical and chemical properties can prove to be
effective

2/16/2015
MAKING TRANSPORTATION DECISIONS IN
PRACTICE
• Align transportation strategy with competitive strategy
• Consider both in-house and outsourced transportation
• Design a transportation network that can handle
e-commerce
• Use technology to improve transportation
performance
• Design flexibility into the transportation
network

2/16/2015
ASSIGNMENT…
• What is the role of transportation in a supply chain?
• What are the strengths and weaknesses of different transport modes?
• What are the different network design options and what are
their strengths and weaknesses?
• What are the trade-offs in transportation network design?

2/16/2015
 14-20

Making Transportation Decisions in

Practice
• Align transportation strategy
with competitive strategy

• Consider both in-house and

outsourced
transportation

• Design a transportation network that can

handle e-commerce

• Use technology to improve transportation

performance

• Design flexibility into the transportation

network
Challenges
• Demographic trends
• Economic circumstances
• Connectivity of existing networks
• Environmental issues
• Existing transport infrastructure capacity
• Environmental issues
• Travel patterns and trip rates
• Air quality and noise pollution
• Socio-economic profile