Transportation

Definition
Transportation refers to the movement of goods from one
location to another as it makes its way from the beginning
of a supply chain to the customers hand

Shipper - The party that requires the movement of the product

between two points in supply chain

Carrier The party that moves or transports the product.

Transportation
Factors affecting Carrier Decisions
1. Vehicle related cost
2. Fixed operating cost
3. Trip related cost
4. Quantity related cost
5. Over head cost
Factors affecting Shippers decision
1. Transportation cost
2. Inventory cost
3. Facility cost
4. Processing cost
5. Service level cost

Key Components of Transportation

The key components of Transportation
decisions are:
1. Mode of Transportation Speed, Cost, Size and Flexibility

2. Route and network selection Direct shipment, Milk run, Central

DC, Tailored Transportation
3. In-house or Outsource Purchase versus Leased versus Vendors
vehicle
4. Trade off - Responsiveness versus Efficiency Cost versus Speed

Modes of Transportation &

their performance Characteristics
Air
Very Fast mode
Very expensive mode
Rate are generally fixed and on per kg. basis
What material is send ?
High Value items, time sensitive emergency items or
high value, light weight, high tech items

Modes of Transportation &

their performance Characteristics
Road
Types of Road Vehicles
Trucks
Tempo
Container truck
Mini Tempos
3 Wheelers
Open v/s Closed
TL (Truck Load) / LTL (Less than Load)
Ambient v/s Reefer/Chiller vehicles
Ambient v/s Reefer/Chiller Container

Modes of Transportation &

their performance Characteristics
Rail
It is ideal to carry heavy and large shipments over a long distances
It is most economical mode, but transportation time is very large.
One cannot send items which are time sensitive, small and short distant

Major Drawback - Dependent on road transportation to complete

Delivery
Many Large scale companies have rail track till their assembly line
(Cement Co.s)

Modes of Transportation &

their performance Characteristics
Water
Ideal suited to carry very large loads at low cost
It is slowest of all the modes. Significant delay happens at
ports and customs
It is the cheapest mode of transport for the global shipping.

Modes of Transportation &

their performance Characteristics
Package Carrier
They are the Transportation companies like Fed Ex, UPS,
Blue Dart, Speed Post
They use air, road and rail to transport, time sensitive small packages

They offer is rapid and reliable delivery

They give added service to the shippers like - track order status

Modes of Transportation &

their performance Characteristics
Inter modal
It uses more than one mode of transport to move a shipment
to its destination.
Most common is Road-rail-road, Road-air-road, Road-ship-road
and combination of 3 ie- Road, Rail and Water.

Pipeline
It is primarily used for the transport of Crude petroleum and Natural gas
It features - initial one time, very large, investment for the pipes

Electronic Transportation
Newest mode,
Electronically transports, Music, Pictures etc. through internet

Modes of Transportation &

their performance Characteristics
Rail

Road

Package

Air

Water

Lot Size

In- Transit Inventory

Transportation Cost

Transportation Time

1 being lowest / small and 5 being highest / huge

Transportation Network
Suppliers

Retail Stores

Direct Shipping Network

Transportation Network
Suppliers

Retail Stores

Direct Shipping with Milk Runs of Retail Stores

Transportation Network
Suppliers

Retail Stores

Direct Shipping with Milk Runs of Retail Stores

Transportation Network
Suppliers

Retail Stores

DC

Direct Shipping via Central DC

Transportation Network
Retail Stores

Suppliers

DC

Milk Runs from DC

Pros & Cons of different Networks

Network Structure

Pros

Cons

Direct Shipping

No intermediate warehouse
Simple to coordinate

High inventories(due to large lot)

Significant receiving expenses

Direct shipping with

Milk runs

Lower Trans. cost for small lots Increased coordination

Lower Inventories
complexity

All shipments via DC Lower Inbound Trans cost

With inv. storage
thro consolidation

Increased inventory cost

Increased handling at DC

All shipments via DC Very low inventory

With cross docking
requirement Lower Trans
cost thro consolidation

Increased coordination
complexity

Route selection in Transportation

Factors to be considered while deciding stores route
Octroi naka passing
Octroi Held up time
Store opening/closing time
Parking regulations
Lean hours
Staff availability
Merchandise mix
Delivery window
Load size
Delivery Route length in km

Route selection in Transportation

1
2
Retail Stores

3
5
4

DC

10

8
6

Route selection in Transportation

1
2
Retail Stores

3
5
4

DC

Route selection methods

10

Distance Matrix method

Saving Matrix method
General assignment method
Sequencing customers within route

8
6

MIS in SCM

DC Efficiency
Throughput
Labor Productivity
Storage Density
Fill rate DC, Vendor, line
Warehouse utilization
GRN completed on same day
On time delivery
Vehicle Turn around time
Average store delivery cost

Tailored Transportation

Sells over 3,00,000 MRO products

Adhesives, Sealants and Tape
Cleaning
Electrical
Electronics, Appliances, and Batteries
Fleet and Vehicle Maintenance
Furniture and Furnishings
Hardware
Hydraulics
Lighting
Lubrication
Material Handling
Office Equipment
Outdoor Equipment

Painting
Plumbing
Pneumatics
Power Tools
Power Transmission
Pumps
Raw Materials
Reference and Learning Supplies
Safety
Security
Test Instruments
Welding

C
u
s
t
o
m
e
r

Y axis
3
4
1

2
5
DC (0,0)

6
7

X axis

8
9

1
0

1
1

Distance Matrix method

X- coordination

Warehouse
Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Customer 6
Customer 7
Customer 8
Customer 9
Customer 10
Customer 11

Y- coordination

0
0
6
7
9
15
20
17
7
1
15
20

0
12
5
15
12
3
0
-2
-4
-6
-6
-7

Order size
(Units)
48
36
43
92
57
16
56
30
57
47
91

Distance Matrix
Distance Dist(A,B) with A with coordinates (xA ,yA) B with coordinates (xB ,yB)
Dist (A,B) =

(xA - xB)

+ (yA - yB)

Saving Matrix method

DC
Cust 1
Cust 2
Cust 3
Cust 4
Cust 5
Cust 6
Cust 7
Cust 8
Cust 9
Cust 10
Cust 11

DC

0
12
8
17
15
15
20
17
8
6
16
21

0
9
8
9
17
23
22
17
18
23
28

0
10
8
9
15
13
9
12
14
18

0
4
14
20
20
19
22
22
26

0
11
16
16
16
20
19
22

10

0
6
0
5
4
11 14
17 20
9
8
11 7

0
10
16
4
6

0
6
8
13

0
14
19

0
5

11

The trip --- DC to Customer x to DC

The saving S (x, y) is the distance saved if the trips DC to Customer x to DC

and DC to Customer y to DC are combined to a single trip as
DC to Customer x to Customer y to DC
S (x, y) = Dist(DC, x) + Dist(DC, y) - Dist(x,y)
eg. S (1,2) = 12 + 8 9 = 11

Cust 1
Cust 2
Cust 3
Cust 4
Cust 5
Cust 6
Cust 7
Cust 8
Cust 9
Cust 10
Cust 11

0
11
21
18
10
9
7
3
0
5
5

0
15
15
14
13
12
7
2
10
11

0
28 0
18 19
17 19
14 16
6
7
1
1
11 12
12 14

0
29 0
27 33 0
12 14 15 0
4
6
7 8 0
22 28 29 16 8
25 34 32 16 8

10

0
32

The highest saving is 34 with route 6 and route 11

Total load is 16 + 91 = 107
Max. load can be carried upto 200 units

11

General assignment
method

3
4
1

2
5
6
7
8
9

This method is used when load is a constraint

The highest saving is 34 with route 6 and route 11
Total load is 16 + 91 = 107
Max. load can be carried upto 200 units

1
0

1
1

General assignment
method

3
4
1

2
5
6
7
8
9

1
0

1
1

The highest saving is 34 with route 6 and route 11

Total load is 16 + 91 = 107
Max. load can be carried upto 200 units
Now we can add route 7 which is 56 units, total is 163
Next saving is 32 of route 10 But we cannot add route 10 because it exceeds 200 units

Sequencing customers
within route

3
4

2
5
6
7
8
9

This method is more useful when load is not the constraint

1
0

1
1

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