1. CHAPTER 9
Decision Strategies in Transportation
2. Areas in the Supply Chain Affected by TransportationSource: Adapted from The Emergence of Third Party Logistics, White Paper no. 4 (Atlanta, GA: PricewaterhouseCoopers, 1998), p. 5.
3. Mode/Carrier SelectionProblem recognition
Search process
Choice process
Postchoice evaluation
4. Cost Factors Often Considered in Mode Carrier SelectionFreight costs
Inventory carrying costs
inventory in pipeline
cycle stock at the receiving location
required safety stock at the receiving location
Investment cost required to produce the inventory to fill the pipeline
a
5. Service Factors Often Considered in Mode Carrier SelectionPerceived quality of customer service
Shipment tracking and tracing capabilities
Billing/invoicing accuracy
Electronic data interchange (EDI) capabilities
Potential to develop mutually beneficial long-term partnership
Cargo capacity limitations
Ability to provide service that does not damage goods in transit
Customs clearance capabilities for international shipments
Impact on the shipper’s negotiating position/leverage on other shipping activities9-4 b
6. 10 Steps in Evaluating Private Carriage Option1. Define the problem.
2. Develop transport objectives.
3. Collect pertinent information
4. Determine present cost.
5. Analyze present operations.9-5 a
7. 10 Steps in Evaluating Private Carriage Option (cont.)6. Develop alternatives.
7. Determine private fleet costs.
8. Consider indirect factors.
9. Summarize alternatives.
10. Make the decision.9-5 b
8. Financial Considerations in the Decision to Private CarriageCapital RequirementsAnnual Cash InflowsCost of buying or leasing fleet
Cost of maintenance facilities
Cost of terminal facilitiesSavings over using public carriers
Reduction in lost sales
Reduction in inventory carrying costs due to more efficient routing Total9-6 a
9. Financial Considerations in the Decision to Private Carriage (cont.)Annual Cash OutflowsFuel
Labor - drivers
Labor - maintenance and terminal
Insurance - trucks
- drivers
-maintenance and terminal facilities
License fees
Parts supply
Utilities
Supervision
Administrative- billing, telephone, accounting
TotalAnnual cash inflows - Annual cash outflows9-6 b
10. Steps in Logistics Alliance FormationObjectives and
selection criteriaIdentify qualified
vendorsNeeds determination
and request for bidsEvaluate bidders
and selectIntegrate logistics
providers with
own systemsImplement and
manage the
relationshipMeasure performance
and analyze deviationsRedefine goals and
objectivesKnow your needs and wants
Define criteriaPhase 1 Need awarenessPhase 2 Planning and managementPhase 3 EvaluationKnow the marketplaceCooperate in management and controlCooperate in critical reviewLogistics IS
Train partnersRevisit needs and provider capabilityIdentify partnersArticulate needs and wantsDOACTCHECKPLANContinuous Improvement ProcessLogistics Alliance Phases7-7