TRANSPORTATION

CHAPTER 14: ISSUES AND CHALLENGES OF

GLOBAL SUPPLY CHAINS

Prepared by: Nguyễn Duy Hồng

Lecturer: Trần Thị Mai Sau
Date: 11 May 2022 Ver: 1.0
LEARNING OBJECTIVES

1. Discuss the growing concern about U.S. transport capacity and the transport infrastructure needed to support global
trade
2. Understand what conditions or factors fostered prosperity during the 1980s and 1990s
3. Appreciate the impact and challenges associated with congestion and the transport infrastructure in the overall economy
4. Understand the challenges and issues related to congestion and infrastructure among the major modes of transportation
in the United States
5. Discuss why sustainability has become a major objective for businesses in general and especially for transportation
6. Appreciate the impact that shipment consolidation and eliminating water from some finished products can have upon
sustainability and supply chain costs
7. Discuss the role and objectives of the SmartWay Transport Program sponsored by the U.S. Environmental Protection
Agency
8. Develop insights into the special challenges that transport companies will face in the 21st century with respect to energy
9. Appreciate the opportunities that transport carriers will have to improve supply chain performance through proactive
collaboration and technology
10. Understand how supply chain visibility can help transport carriers to improve their efficiency and effectiveness

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CHAPTER OUTLINE

NO CONTENTS

1 Introduction

2 Sustainability: The Green Supply Chain

3 Fuel Cost and Consumption

4 Collaboration and Visibility: Art and Science

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1. Introduction

• Transport is an enabler of economic, political, and social development

• In recent decades, consistently low fuel prices and powers of intense
competition push transport rates lower and improve service levels
• Times may be changing. Pressures from:
– Fuel price volatility
– Capacity constraints
– Environmental-related impacts

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1. Introduction

Congestion and Transport Infrastructure

• Congestion in transport network increases supply chain costs

– Uncertainty created by congestion delays requires retailers to

carry additional inventory
– Delays require carriers to purchase and operate additional
transport equipment and utilize additional labor
– Delays on the network also impose additional costs at transport
terminals

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1. Introduction

Highway Congestion and Infrastructure

• High percentage of National Highway System operates under

congested conditions
– Top 10 bottlenecks create 1.5 million annual truck hours of
delay at $30/hr. Cost does not include inventory-related shipper
costs
• Forecasts indicate congestion will worsen
– Funding under existing tax structure not sufficient to even
maintain existing service levels

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1. Introduction

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1. Introduction

Railroad Congestion and Infrastructure

• Surging demand for trailer-on-flatcar (TOFC) and container-on-flatcar

(COFC) services

– Creating congestion on portions of mainline rail network

– Projections indicate congestion will spread to 30% of network by 2035
if capacity not increased
• Principal means for adding capacity –double tracking portions of
mainlines
– Investment expense is a constraint

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1. Introduction

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1. Introduction

Waterway Congestion and Infrastructure

• Aging inland waterways infrastructure cause bottlenecks

– 31% of vessel passages experience delays
• Coastal ports, particularly on West Coast, under congestion pressures due
to:
– Growth of international trade traffic
– Deeper channel draft and dockside requirements due to larger
containership capacities

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1. Introduction
Waterway Congestion and Infrastructure

• Port congestion relief strategies

– Investments to deepen channels
– Investment in technology and equipment by carriers and port
operators. Intended to:
• Speed ship loading and unloading operations
• Relieve landside congestion in terminals and improve access to
port areas
– Longer port operating hours
– Challenge to balance with environmental concerns

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2. Sustainability: The Green Supply Chain

• Can “carbon footprint” and firm costs be reduced simultaneously?

– More firms discover the answer is yes
• What is “carbon footprint?”
– Generally associated with the amount of carbon dioxide (CO2)
emissions
– Some argue for more comprehensive definition encompassing full
life cycle greenhouse gas emissions

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2. Sustainability: The Green Supply Chain

• What is “carbon footprint?”

– the amount of carbon (usually in tonnes) being emitted by an
activity or organization (Global Footprint Network)
– The total amount of greenhouse gases produced to directly and
indirectly support human activities, usually expressed in equivalent
tons of carbon dioxide (CO2).

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2. Sustainability: The Green Supply Chain

• What is “carbon footprint?”

– Your carbon footprint is the sum of all emissions of CO2 (carbon
dioxide), which were induced by your activities in a given time
frame.
– Each of the following activities add 1 kg of CO2 to your personal
carbon footprint:

• Travel by public transportation (train or bus) a distance of 10 to

12 km (6.5 to 7 miles)
• Drive with your car a distance of 6 km or 3.75 miles (assuming
7.3 litres petrol per 100 km or 39 mpg)
• Fly with a plane a distance of 2.2 km or 1.375 miles.
• Operate your computer for 32 hours (60 Watt consumption
• assumed) Production of 5 plastic bags
• Production of 2 plastic bottles

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2. Sustainability: The Green Supply Chain

• What is “carbon footprint?”

– Greenhouse gases can be emitted through transport, land
clearance, and the production and consumption of food, fuels,
manufactured goods, materials, wood, roads, buildings, and
services
– Scholars suggest the most effective way to decrease a carbon
footprint is to either decrease the amount of energy needed for
production or to decrease the dependence on carbon emitting fuels

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2. Sustainability: The Green Supply Chain

• Forces motivating business interest

– Corporate responsibility to society
– Desire to increase or maintain brand reputation
– Competitive pressures
– Internal and external stakeholder pressures or expectations
– Desire to lower fuel costs
– Current and potential regulatory pressures

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2. Sustainability: The Green Supply Chain

• Logistics-related impacts on the green supply chain

– Fuel consumption/efficiency
– Packaging and waste disposal
– Systems interrelationships
• Transport consolidation vs. inventory cost tradeoff
– Transport maxims: “don’t ship air” and “don’t ship
water”
– Consolidation reduces network miles, fuel
consumption
– Consolidation means larger shipment sizes and may
impact supply chain responsiveness

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2. Sustainability: The Green Supply Chain

– Systems interrelationships (cont.)

• Packaging for market appeal vs. transport cost
– Market appeal often drives tendency toward larger packages
– Larger packages contain more air and take up more space in
transport vehicle – result is more transport used to move given
amount of product
• Adding water to product to “enhance” product and market
appeal vs. transport cost
– Adding water to liquid products gives appearance to consumer
of getting more for the money
– Adding water increases transport, warehousing, packaging and
retail costs
– Example: Walmart initiative with liquid detergents

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2. Sustainability: The Green Supply Chain

• Carrier efforts to reduce fuel consumption

– Purchase more fuel efficient equipment
– Use of “clean” fuels and hybrid vehicles
– Working with shippers to:
• Reduce overall network miles
• Increase load consolidation opportunities
– Participation in the EPA’s “Smart Way Transport Partnership”

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2. Sustainability: The Green Supply Chain

• Many opportunities for greener supply chain exist

– Subway restaurants provide one example
– Goal : to become the greenest quick-serve restaurant by
eliminating waste and inefficiency in
• Energy
• Resource utilization
• Waste materials
• Food safety
– Results
• reduced carbon emissions by 120,000 metric tons
• Reduced oil consumption by 277,000 barrels/annually
• Reduced truck miles by 9.3 million miles and shipment by
16,653

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3. Fuel Cost and Consumption

• Wild swings in fuel prices since 2005 creates significant supply chain
cost uncertainty

– Fuel price volatility impacts some modes more than others due to
differences in fuel intensity
• Motor carriers
– Very fuel intensive, approaching annual labor costs as the
largest expense category
– Annual fuel cost rose 70% from 2004-2008
– Fuel surcharges used to pass along higher fuel prices when
possible

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3. Fuel Cost and Consumption

• Air carriers
– Fuel intensive, the most sensitive mode to fuel cost changes
– Fuel is now the largest operating expense item
• Traditionally, fuel was 12%-15% of operating costs
• In 2007, fuel rose to 30% of operating costs, contributing
greatly to some airline bankruptcies
– Surcharges used to recover higher fuel costs
• However, intense competition deters surcharges

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3. Fuel Cost and Consumption

• Water carriers
– Water carriage is relatively fuel efficient
– Nonetheless, fuel price increases do impact operating costs,
particularly for ocean carriers
• Marine bunker fuel prices rose 100% from 2005 to mid-2008
• For some, fuel reached 50%-60% of operating costs
– Fuel surcharges have been imposed but again, competition puts
downward pressure on prices and deters significant surcharges

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3. Fuel Cost and Consumption

• Rail carriers
– Rail is a relatively fuel efficient mode
– Rail has not been impacted to the same degree as other modes by
the rise in fuel prices
– Rail benefits from fuel price increases as some traffic shifts to
intermodal service for long hauls
• Pipeline carriers
– Pipelines are a relatively fuel efficient mode
– Costs not significantly impacted by higher fuel costs

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3. Fuel Cost and Consumption

• Carrier responses
– Fuel surcharges have been the principal response
• Surcharges have become more sophisticated, involving
formulas that closely match fuel price fluctuations
• However, no standard industry practice on surcharge formulas
or policy
– Service capacity and network rationalization
• Reduce linehaul cruise speed
• Focus efforts on shorter traffic lanes
• Cutting or reducing service on unprofitable routes

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3. Fuel Cost and Consumption

– Improve operating efficiency of carriers

• Fleet replacement
– More fuel efficient, lighter weight vehicles
– Alternative fuel vehicles
– Use IT to improve operations through greater visibility of assets
• Track and trace equipment in real time
– Improves security, enables fleet size reduction, increases
responsiveness to exception reports
• Enables more timely and accurate information sharing
between carriers and shippers

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4. Collaboration and Visibility: Art and Science

• The “science” dimension

– Refers to the models and software apps. used to improve supply
chain design and execution.
Examples:
• Network optimization models
• Warehouse Management Systems (WMS)
• Transportation Management Systems (TMS)
• Scheduling models, inventory control models
– Also refers to application of technology such as RFID tags and
GPS systems

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4. Collaboration and Visibility: Art and Science

 The “art” dimension

 Refers to the relationship building within and between
organizations that is necessary for collaborative supply
chain management
 Collaboration fosters leveraging opportunities
 Operations level collaboration initiatives include:
 Coordinating shipping and loading/unloading times at
DCs
 Longer hours of operation at drop yards and DCs
 Faster payments for carriers
 Sharing capacity needs forecasts with carriers

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4. Collaboration and Visibility: Art and Science

– Strategic level collaboration initiatives

• Many are focused on sharing information
– In vendor managed inventory programs, customer data covering
on-hand inventory, SKUs on order, sales and stockouts by SKU,
inventory turns forecasts, and promotional forecasts are shared
with the vendor
– The same info is shared with the logistics service provider
– The info enable the vendor and logistics provider to dramatically
» Reduce DC out-of-stocks and number of expedited orders

» Increase inventory turns

» Smooth the flow of products through the supply chain

» Improve scheduling of pickups/deliveries, reduce empty

miles

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4. Collaboration and Visibility: Art and Science

• Visibility – what does it mean?

– No universal definition
• Initially referred to ability to “see” assets, such as
– Amount of inventory on-hand
– Number and location of equipment
– Visibility application capabilities have expanded
• Status of orders, inventory turns, status of shipments across the supply
chain, alerts on service disruptions
• Information has become more useful for decision making

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4. Collaboration and Visibility: Art and Science

– Dole, Inc. track and trace program is example of enhanced visibility

capability
• Application is fully automated
– Uses RFID, GPS and cell phone technologies
– Coverage starts in harvest fields and runs through cooling center
warehouses, carrier terminals and sorting plants
– Products are tagged as they leave the fields
– Time and quantities are tracked, temperature will be added
• Enables better understanding of how product moves through
the supply chain
• Provides alerts if time and temperature move out of control
• May lead to supply chain design/operation improvement

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THANK FOR YOUR ATTENTION!

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