1 1 Transportation & Supply Chain Systems John H. Vande Vate Spring 2008.

Presentation on theme: "1 1 Transportation & Supply Chain Systems John H. Vande Vate Spring 2008."— Presentation transcript:

1 1 1 Transportation & Supply Chain Systems John H. Vande Vate Spring 2008

2 2 2 Who am I? John H. Vande Vate Professor and EMIL Executive Director Office: 222 of the Old ISyE bldg. Phone: (404) 894-3035 Prefer e-mail: jvandeva@isye.gatech.edu Office Hours: –Tuesday, Thursday 2-3:30 (after class) or –By appointment

3 3 3 Administrative Details Class Home Page: On T-square http://t-square.gatech.edu/portal Keep up with information here! TA: Huizhu “Crystal” Wang hwang8@gatech.edu

4 4 4 Recommended Texts (Not Required) Chopra, Sunil, and Meindl, Peter, Supply Chain Management: Strategy, Planning and Operations, Prentice-Hall, 2001. Good on Inventory models. Designing and Managing the Supply Chain: Concepts, Strategies & Case Studies, Second Edition, By David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, McGraw-Hill/Irwin; (October 11, 2002). ISBN: 0072845538. Source for case studies Both weak on Transportation!

5 5 5 Other Resources You may also want to read: –Contemporary Logistics by Johnson, Wardlow, Wood and Murphy –Logistic Systems Analysis by Daganzo –Business Logistics Management 4th Edition by R. H. Ballou, Prentice Hall, 1999 –Bramel, J. and D. Simchi-Levi, The Logic of Logistics: Theory, Algorithms and Applications for Logistics Management, Springer-Verlag, 1997 –Logistics and Supply Chain Management: Strategies for Reducing Cost and Improving Service (2nd Edition) by Martin Christopher –Modeling the Supply Chain by Jeremy F. Shapiro

6 6 6 Grading Exams: 66% –February 21 st 33% –Final 33% Project: 33% –Groups of 4 to 6

7 7 7 Objectives Knowledge and understanding of the issues underlying transportation and supply chain management and Mastery of the tools and models to support intelligent resolution of those issues.

8 8 8 Projects Project: Ideally a real application –Team of 4 to 6 students –Distance learning students encouraged to bring projects from their companies and recruit teams of on-campus students to work with them –Every team must have at least 1 on-campus student –Several projects already available –Encourage teams to include off-campus students

9 9 9 Project Cont’d Due January 31st –one member of your team should send me an e-mail with the subject "6203 Project" providing The names and contact information (e-mails and phone numbers) Resumes Your team's project preferences (list at least four alternatives) in order Your team's preferences for presentation dates (list all four) in order of preference A presentation and report to your company On April 8 th, 10 th, 15 th, 17 th. Present in class (~ 30 minute presentation) Self-contained ORGANIZED! CD of everything for me (and for your sponsor)

10 10 Project Motivation Interviewing for job Learning by doing Share lessons with the class Off-campus students

11 11 Projects BMW Predict the variance between system stock and physical stock for major parts and use this information to schedule physical counts. The goal is to simultaneously reduce the effort involved in maintaining accurate inventory levels (e.g., the physical counts) and to avoid expedited shipments

12 12 BMW Project Estimates of: Data availability: medium Technical requirements: high Computational requirements: medium Initiative and Creativity requirements: medium to high Potential for impact: medium

13 13 Projects Intel – Low Cost PC Supply Chain –Planning and forecasting –Production and distribution –Two aspects: Characteristics: how Structure: what & where Educational Objective: Comprehensive overview of differences between high value and high volume supply chains that dives beneath superficial aspects in key areas of planning and distribution.

14 14 Intel Project Estimates of: Data availability: low Technical requirements: low Computational requirements: low Initiative and Creativity requirements: very high Potential for impact: medium to high

15 15 Projects ABC Pharma Co. – CRO Sourcing opportunity –Quantify uncertainty in requirements –“Optimize” sourcing of CRO capacity to balance Lower price available from contracts Reduced commitment from “spot” Educational Objective: In-depth investigation of matching supply and demand in the face of forecast uncertainty.

16 16 ABC Pharma Project Estimates of: Data availability: high Technical requirements: medium to high Computational requirements: high Initiative and Creativity requirements: medium Potential for impact: medium

17 17 Projects FMCG Co. – Fleet Composition –Quantify uncertainty in requirements –“Optimize” balance between Lower cost available from owned fleet Flexibility from outsourced fleet Educational Objective: In-depth investigation of matching supply and demand in the face of forecast uncertainty.

18 18 Coca Cola (FMCG) Project Estimates of: Data availability: high Technical requirements: high Computational requirements: medium Initiative and Creativity requirements: medium Potential for impact: high

19 19 Projects CARE – Emergency Preparedness –Improve disaster forecasting –Translate forecasts into expected requirements –Develop appropriate sourcing plans –Develop appropriate distribution and response plans Educational Objective: In-depth supply chain study in emergency response setting.

20 20 CARE Project Estimates of: Data availability: low Technical requirements: low Computational requirements: low Initiative and Creativity requirements: high Potential for impact: high

21 21 Projects GE Energy – Transportation Planning –Two components: User interface to interact with supply and demand data for wind turbines Optimization engine to automate assignments Educational Objective: Implementing transportation management tools for a changing world.

22 22 GE Energy Project Estimates of: Data availability: high Technical requirements: medium to high Computational requirements: medium Initiative and Creativity requirements: medium to high Potential for impact: high

23 23 Projects Dell Malaysia – Order Cycle Time Reduction –Reduce order-to-delivery variability –Determine whether it is possible to achieve sufficient lead-time consistency to offer a service commitment Educational Objective: Interactions among manufacturing, transportation and customer service.

24 24 Dell Malaysia Project Estimates of: Data availability: mixed Technical requirements: medium Computational requirements: medium Initiative and Creativity requirements: high Potential for impact: medium

25 25 XYZ Project Analyze the company’s LTL and TL shipments to identify opportunities for: –Consolidation points –Multi-stop routes –Dynamic assignment to consolidation points –Impacts on cycle time and inventory

26 26 XYZ Project Estimates of: Data availability: high Technical requirements: medium Computational requirements: high Initiative and Creativity requirements: medium Potential for impact: medium

27 27 Other Projects Welcome to propose other topics Must: –Have a corporate sponsor –Be of value to the company –Give the team experience –Relate to topics in this course

28 28 Deliverable Presentation to your company and to the class (These may have to be different) CD that includes –Project Description –Your presentation(s) –Sufficient description that I can follow your presentation, understand the data and use the tools –Data and data definitions –Any tools (documented)

29 29 Supply Chain Management Deterministic View –Finance –Transportation –Inventory –Consolidation –Location –Mid-Exam: February 21st Managing Variability & Risk –Forecasting –Matching supply & demand Sourcing Manufacturing Distribution –Revenue Management –Inventory Management Supply Chain Applications & Projects Exam Questions will also come from Projects! Exam: 8 – 10:50 am May 1 st (Period 10)

30 30 Transportation Modes –… –Parcel –Less-than-Truck load (LTL) –Multi-stop Truck load –Truck load (TL) –Less-than-Container load (LCL) –Container load –Less-than-Car Load (rail) –Car Load (rail) –Block train –…

31 31 Trade offs Cost Speed Access Reliability Security Special Handling Risk …

32 32 Typical Cost Factors Parcel (Up to ~150 lbs) –Zones (origin & destination) –Weight & Cube –Negotiated discount based on volume –Delivery Options Location Timing: Same day, next day am, next day, 2 nd day, ground, … UPS: http://wwwapps.ups.com/calTimeCost?loc=en_US http://wwwapps.ups.com/calTimeCost?loc=en_US

33 33 Less-Than-Truck Load (LTL) Origin & Destination Weight (up to ~20,000 lbs) Class Discount based on volume of business Special Requirements Old Dominion http://www.odfl.com/rateestimate Why not just distance? Why is this important? / Typically quoted as $/CWT

34 34 NMFC Classes Density –Helps carrier judge demands for capacity Value –Helps carrier judge risk (liability limits associated with each class) Class 50: cheapest, e.g., sand Class 500: most expensive, e.g., Ping Pong Balls Maintained by the NMFTA (NMFTA.org) Part of the contract negotiation!

35 35 Truck Load (TL) Up to ~45,000 lbs Origin Destination Volume of business Special Services (accessorials) –Detention, cleaning, … Schneider National https://webapps.schneiderlogistics.com/pwschneiderrate/schneider_rate_ext_customer Typically quoted as $/mile

36 36 Rail Commodity (Grain, Coal, …) Origin, Destination Equipment (Box car, tanker, Tri-level) Number of cars in block Cars handle on the order of 70 tons … Norfolk Southern http://www.norfolksouthern.com/nscportal/ nscorp/Customers/Industrial%20Products/ Agriculture/http://www.norfolksouthern.com/nscportal/ nscorp/Customers/Industrial%20Products/ Agriculture/

37 37 Undiscounted LTL Rates ATL to LB Class 50 $1.12/CWT $0.53/CWT

38 38 Concave Cost Shipment Size Cost Cost per unit decreasing So?!

39 39 Consolidation Incentive to consolidate shipments –Make fewer larger shipments –Reduce frequency (!?) –Hub & Spoke –Share transportation resources –…

40 40 Issues with Freight Rates Issue of how to estimate rates on lanes you don’t currently use Levels of detail –$/mile as the crow flies –$/mile on the network –Rate look up Caution: Average cost of shipments can be smaller than the cost of an average shipment

41 41 Estimating Rates Small shipments Shipment Size Cost Large shipments Cost of Average shipment Average Cost of shipment

42 42 Why It Matters? Estimating transportation costs to “customers” –Typically too many customers –Aggregate them By region By state By 3-digit zip –Use some care in estimating the transportation cost to “aggregated” customers

43 43 Why It Matters? Customers may order different quantities at different times Estimating the cost to serve the customer often look at average shipments Careful how you average

44 44 Summary Transportation mode basics Transportation rate basics Economies of scale promote consolidation Cautions on “aggregating” transportation rates

45 45 Next Time James R. Kellso, P.E. Manager of Supply Network Research & Supply Chain Master Intel James R. Kellso, P.E., has more than 35 years of experience in industrial engineering, consulting and logistics/supply chain management. He has extensive experience in a variety of manufacturing and distribution operations from his 16 years in consulting and 19 years at Intel. During this time, Kellso has managed all aspects of world-wide logistics, including systems development and deployment, network construction, transportation management, engineering and business process development; and construction and start-up of new integrated facilities world-wide. Kellso currently is heavily involved in the strategies and supply chain aspects of the growth in new businesses and supply chain optimization for Intel.