The product is to be moved from one location to the other and at the end it has to be in hands of the premises of the customer. Rarely production and consumption of an item takes place at the same location. Transportation cost is a significant item in the cost sheets of a supply chain.
Key Players in Transportation Activity
Shippers and Carriers are the two key players in the transportation activity. Shippers require the movement of products from place to place. Carriers provide the transportation service.
Modes of Transport
1. Air
2. Truck
3. Rail
4. Water
5. Pipeline
6. Intermodal or multimodal
7. Package Carriers
Costs of Carrier
1. Vehicle related cost
2. Fixed operating cost
3. Trip related cost
4. Quality related cost
5. Overhead cost
Cost Items Considered by Shippers in Transportation Decisions
1. Transportation cost
2. Inventory cost
3. Facility cost
4. Processing cost
5. Service level cost
Design Options for a Transport Network
A complex supply chain may have number of suppliers supplying a variety of components and sub assemblies to a multiple manufacturing facilities of a final assembler. From these multiple assembly facilities a number of products may be produced and distributed to a large number of retailers. A large number of suppliers and a large number of receiving points create various options for design of transport networks.
1. Direct shipment network
2. Direct shipping with milk runs
3. Shipments via central distribution centre
4. Tailored network
• Tailored Transportation
• Tailored Transportation by Customer Density and Distance
• Tailored Transportation by Size of Customer
• Tailored Transportation by Product Demand and Value
Routing - Scheduling Decisions in Transportation
Savings Matrix method steps
1. Identify the distance matrix: distance between each pair of locations to be visited.
2. Identify the savings matrix: The savings that results from using only one truck to two locations
3. Assign locations to trucks.
4. Sequence customers within routes
Generalized Assignment Method
1. Assign seed points for each route
2. Evaluate insertion cost for each customer
3. Assign customers to routes
4. Sequence customers within routes
