• 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