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Chapter 8
Transport in Supply Chains
Learning objectives
1. Understand the cost structures and operating characteristics of the different transport modes, and the relationships between freight rates and consignment weight, dimensions and distance to be travelled 2. 3. Highlight key terms used in transport Identify the range of issues to be considered in planning transport infrastructure
Learning objectives
4. Discuss the roles of distribution centers and highlight the concept of factory gate pricing 5. Explain the application of a technique known as the transportation model 6. Identify some of the many issues (including the effect of supply chain strategies) that can impact the efficiency of transport services
Figure 8.2 Relationship between rate per kilo and consignment weight
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Table 8.1 A Summary of costs and relative operating characteristics of the different transport modes Mode Air Relative Costs and Operating Characteristics by Mode Fixed cost is on the lower side but variable cost, including fuel, maintenance, security requirements, etc., is high. The main advantage of air is speed; it is however limited in uplift capacity, similarly other modes of transport are required to take freight to and from airports, thus air cannot directly link individual consignors and consignees
Table 8.1 A Summary of costs and relative operating characteristics of the different transport modes Mode Road Relative Costs and Operating Characteristics by Mode Fixed cost is low as the physical transport infrastructure, such as motorways, is in place through public funding; variable cost is medium in terms of rising fuel costs, maintenance and increasing use of road and congestion charges. In terms of operating characteristics, road as a mode of transport scores favourably on speed, availability, dependability, and frequency, but not so good on capability due to limited capacity on weight and volume. Uniquely among transport modes, it can allow direct access to consignor and consignee sites.
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Table 8.1 A Summary of costs and relative operating characteristics of the different transport modes Mode Water Relative Costs and Operating Characteristics by Mode Fixed cost is on the medium side, including vessels, handling equipment and terminals. Variable cost is low due to the economies of scale that can be enjoyed from carrying large volumes of freight, this is the main advantage of the water mode, together with its capability to uplift large volumes of freight. Like air, it cannot offer direct consignor to consignee connectivity, and vessels are sometimes limited in terms of what ports they can use. It is also quite a slow mode.
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Table 8.1 A Summary of costs and relative operating characteristics of the different transport modes Mode Rail Relative Costs and Operating Characteristics by Mode Fixed cost is high and the variable cost is relatively low. Fixed cost is high due to expensive equipment requirements, such as locomotives, wagons, tracks and facilities, such as freight terminals. On relative operating characteristics, rail is considered good on speed, dependability, and especially capability to move larger quantities of freight.
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Table 8.1 A Summary of costs and relative operating characteristics of the different transport modes
Mode Pipeline Relative Costs and Operating Characteristics by Mode Fixed cost is high due to rights-of-way, construction and installation, but the variable cost is relatively low and generally just encompasses routine maintenance and ongoing inspection/security. On operational characteristics, the dependability is excellent but this mode can only be used in very limited situations.
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Figure 8.3 Modal split for freight transport in the EU 25 in 2005 (% tonne kilometres)
2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/Mangan 14
2- Intermodal transport
Where freight moves within a loading unit (known as an ITU Intermodal Transport Unit), this unit may move upon a number of different transport modes But the freight remains within the unit at all times Various types of ITUs:
Standard sized containers (typically 20 and 40 feet in length) Igloo containers used in air freight
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2- Intermodal transport
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2- Intermodal transport
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AmbientTemp
As is FGP design
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c x
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Transportation Problem(1)
The Alpha Limited Manufacturers W.M TEXT pp143
Transportation Problem(1)
The Alpha Limited Manufacturers Transportation Cost
Don caster Newcastle
Birmingham 25 /ton
Manchester 15 Glasgow 40
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20 30
Transportation Problem(1)
The Alpha Limited Manufacturers W.M Transportation Tableau
DC(1) Don caster
P(1) Birmingham P(2) Manchester P(3) Glasgow DC-Demand ? ? ? 400
DC(2) Newcastle
? ? ? 250
Plant Capacity
300 200 150
Computer solution
Excel POM/QM for Windows
Transportation Problem(1)
The Alpha Limited Manufacturers Optimization Using Solver
DC(1) Don caster
P(1) Birmingham P(2) Manchester P(3) Glasgow DC-Demand Total Cost 300 *25 100 *15 ---- *40 400 9,000
DC(2) Newcastle
---*35 100 *20 150*30 250 6,500
Plant Capacity
300 200 150
15,500
Transportation Problem(2)
SUPPLY/DEMAND MODEL From GRAIN FARMER SUPPLY 150 175 275 600 tons To MILL DEMAND 200 100 300 600 tons
COST MODEL FROM GRAIN FARMER Kansas City Omaha Des Moines Chicago A $6 7 4
Example 7.1
Supply (tons)
Des Moines (275) $4 Omaha (175) $7
Demand (tons)
Chicago (200) $12 $11 Cincinnati (300) $6 $8 $5 $10 St. Louis (100)
$11
Kansas City (150)
Transportation Problem(2)
GRAIN/MILLS DISTRIBUTION Optimization Using Solver
Mill(1) Chicago
P(1) Kansas P(2) Omaha P(3) DM MillsDemand Total Cost 0 25 175 200 $4,525
Mill(2) St.Louis
0 0 100 100
6- Transportation Efficiency
Seeking Efficient Asset utilization Streamlining Shipments Container Load
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