CHAPTER 6 – DISTRIBUTION AND TRANSPORTATION IN A

SUPPLY CHAIN

Faculty of International Economic Relations

University of Economics and Law

1 Het begint met een idee

CONTENTS

 Distribution
 Transportation

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ROLE OF DISTRIBUTION

Steps to move and store a product from a supplier stage to a

customer stage
 Drives profitability by directly affecting supply chain cost and the
customer value
 Choice of distribution network can achieve supply chain objectives
from low cost to high responsiveness

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FACTORS INFLUENCING DISTRIBUTION NETWORK DESIGN

 Distribution network performance evaluated along two dimensions:

1. Value provided to the customer
2. Cost of meeting customer needs
 Evaluate the impact on customer service and cost for different
distribution network options
 Profitability of the delivery network determined by revenue from
met customer needs and network costs

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FACTORS INFLUENCING DISTRIBUTION NETWORK DESIGN

 Service factors
o Response time
o Product variety
o Product availability
o Customer experience
o Time to market
o Order visibility
o Returnabilty
 Cost factors
o Inventory
o Transportation
o Facilities and handling
o Information

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MANUFACTURER STORAGE WITH DIRECT SHIPPING

Source: Chopra and Meindl (2016)

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MANUFACTURER STORAGE WITH DIRECT SHIPPING AND IN-TRANSIT MERGE

Source: Chopra and Meindl (2016)

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DISTRIBUTOR STORAGE WITH CARRIER DELIVERY

Source: Chopra and Meindl (2016) Vrije Universiteit Amsterdam

DISTRIBUTOR STORAGE WITH LAST-MILE DELIVERY

Source: Chopra and Meindl (2016)

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MANUFACTURER OR DISTRIBUTOR STORAGE WITH CUSTOMER PICKUP

Source: Chopra and Meindl (2016)

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RETAIL STORAGE WITH CUSTOMER PICKUP

Source: Chopra and Meindl (2016)

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ROLE OF TRANSPORATION

The physical movement of materials between points in the supply

chain
 Transport principles:
o Economy of scale
o Economy of distance
 Transportation members:
o Shippers and Consignees
o Carriers and Agents
o Owners and operators of transportation infrastructure
o Transportation policy makers

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RELATIONSHIPS BETWEEN TRANSPORTATION AND LOGISTICS

 Transportation costs and facility locations

 Inventory requirements and transport mode
 Transport mode and packaging
 Type of carrier and material handling equipment
 Shipment consolidation and shipment size
 Customer service goals and type/quality/service of carrier

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TRANSPORT RATE AND TARIFF

 Transport rate
 Tariff
 Minimum charge
 Surcharge
 Commodity
 Freight-All-Kind (FAK)
 Demurrage
 Detention

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MODES OF TRANSPORT

 Air
 Package carrier
 Road
 Rail
 Water
 Pipeline

INTER-MODAL – MULTI-MODAL

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ATTRIBUTES AFFECTING THE CHOICE OF TRANSPORT MODE

 Cost
 Speed
 Reliability
 Capability
 Capacity
 Flexibility
 Value of materials
 Importance
 Security
 Special facilities available
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CONTAINER & ULD

Avg Tare Avg Max Avg Max Avg Max Dimension (LxWxH)
Cont. Type
Weight (tons) Weight (tons) Cargo Volume (cbm) Feet - Meter
45 HC 4.2 28.0 23.8 85.0 45’ x 8’ x 9’6” 13.5 x 2.4 x 2.8
40 HC 3.7 27.0 23.3 75.0 40’ x 8’ x 9’6” 12 x 2.4 x 2.8
40 DC 3.5 27.0 23.5 67.0 40’ x 8’ x 8’6” 12 x 2.4 x 2.5
20 DC 2.4 21.0 18.6 33.0 20’ x 8’ x 8’6” 6 x 2.4 x 2.5

Source: vietnamairlines
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DIRECT SHIPMENT NETWORK TO A SINGLE DESTINATION

Source: Chopra and Meindl (2016)

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DIRECT SHIPPING WITH MILK RUNS

Source: Chopra and Meindl (2016)

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ALL SHIPMENTS VIA INTERMEDIATE CENTER WITH STORAGE/CROSS-
DOCKING

Source: Chopra and Meindl (2016)

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SHIPPING VIA DC USING MILK RUNS

Source: Chopra and Meindl (2016)

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INTRODUCTION TO LINEAR PROGRAMING – EXERCISE 1

A model consists of linear relationships representing decisions, given

an objective and resource constraints

Resource Requirements
Labor Clay Profit
Product (hr./unit) (kg/unit) ($/unit)
Bowl 1 4 40
Mug 2 3 50
40 hrs of labor available per day
120 kgs of clay

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MODEL (EXERCISE 1)

 Decision variables
 Objective function
 Constraints

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EXERCISE 2

A retailer ships smartphones from three warehouses to three stores on a

monthly basis. Each warehouse has an amount of supply per month, and
each store has a fixed demand per month. The retailer wants to know the
number of smartphones to ship from each warehouse to each store in order
to minimize the total cost of transportation.

Warehouse Supply (units)

1 300
To store
2 200
3 200 From warehouse A B C
1 $16 $18 $11
2 $14 $12 $13
Store Demand (units)
3 $13 $15 $17
A 150
B 250
C 200

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EXERCISE 3

A retailer ships smartphones from three warehouses to three stores on a

monthly basis. Each warehouse has a fixed supply per month, and each store
has a fixed demand per month. However, each warehouse does not need to
ship smartphones to all three stores per month. Please find the number of
smartphones to be shipped from warehouses to stores in order to minimize
the total cost of transportation.
Warehouse Supply (units)
1 150
2 175 To store
3 275 From warehouse A B C
1 $6 $8 $10
Store Demand (units)
2 $7 $11 $11
A 200
3 $4 $5 $12
B 100
C 300
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EXERCISE 4 (THE SHORTEST ROUTE PROBLEM)

Source: Chinneck (2000)

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EXERCISE 4 (THE SHORTEST ROUTE PROBLEM)

Source: Chinneck (2000)

Vrije Universiteit Amsterdam

EXERCISE 4 (THE SHORTEST ROUTE PROBLEM)

Source: Chinneck (2000)

Vrije Universiteit Amsterdam

EXERCISE 4 (THE SHORTEST ROUTE PROBLEM)

Source: Chinneck (2000)

Vrije Universiteit Amsterdam

EXERCISE 4 (THE SHORTEST ROUTE PROBLEM)

Source: Chinneck (2000)

Vrije Universiteit Amsterdam

EXERCISE 4 (THE SHORTEST ROUTE PROBLEM)

Source: Chinneck (2000)

Vrije Universiteit Amsterdam

 CHAPTER 6 – DISTRIBUTION AND TRANSPORTATION IN
A SUPPLY CHAIN

THANK YOU!

32 Het begint met een idee