BUCHAREST UNIVERSITY OF ECONOMIC STUDIES
TRANSPORTATION-Managing the flow of the Supply Chain
Members: Andreea Constantin
Cosmin Balazsfi
Group: 1735, D.
Keywords: transportation; supply chain; flow managing;
Contents
Introduction ............................................................................................................................................. 3
What is Logistics ? .............................................................................................................................. 3
What is the supply chain ? .................................................................................................................. 3
What is Transportation ? ..................................................................................................................... 4
Transportation Decision-Making Framework ......................................................................................... 4
Differential effects of transportation in supply chain modelling ............................................................ 7
Critical application of TMS .................................................................................................................... 7
Modal Selection of TMS ......................................................................................................................... 8
Conclusion .............................................................................................................................................. 9
Reference list ........................................................................................................................................ 10
2
Introduction
What is Logistics ?
Every manufacturer in order to be succesful and to grow his business into profit he needs to
move materials, in order to produce, to have what to sell to the curstomers. There are multiple ways of
collecting materials and delivering fnished goods, like retail shops which have regular deliveries from
wholesalers, manufacturer who build factories that collect raw materials and deliver finished goods to
customers. Even your daily routine involves logistics, the fact that you can buy from a store everything
you need, that you can rent a DVD or order clothes online, all of this actions means that someone is
responsible for fulfilling your „wishes and desires” and delivered to you. Logistics is the function that
is responsible for this movement and for the transport and storage of the materials from the suppliers to
the customers.
These products can be cathegorized as goods or services and they can be either
tangible(Samsung, Heineken) or intangible (Orange, Telekom) but on a more detailed analysis they are
a complex package which is not limited only to these attributes but are rather a combination of these 2.
What is the supply chain ?
The supply chain represent the activities and organisations that material move through on their
journey from the first supplier to it’s customers.
For example, due to the fact that every product has its own unique supply chain, for example
for bread its start with the grains growing in a field and ends with you buying the product from the
supermarket. The supply chain for chocolate start with the cocoa beans growing in the field and end
with the table of chocolate being available for sale in the shop. The supply chain has different names in
the literature according to which attributes they emphasise more:
-emphasise on the marketing, logistic channel;
-emphasise on the operations; process;
-emphasise on the value added, value chain;
-emphasise on customers if they are satisfied, demand chain;
3
What is Transportation ?
When we talk about logistics, one of the more important characteristics is the Transportation
part because if this part is not established in detail for every product, from buying from the suppliers
until delivering them to the customers than the whole business would collapse because it relies on this
component a lot. When a company knows exactly how and when to deliver their product and by which
methods, than that company is destined for success, but when the transportation part is not very clear
in the company this can lead to delayed orders, unsatisfied customers and lost of clients and profit.
Challenges to carrying out this role:
•
Supply chain complexity;
•
Competing goals among supply chain partners;
•
Changing customer requirements;
•
Limited information availability;
•
Synchronizing transportation with other supply chain activities;
•
Transportation capacity constraints pose a challenge;
•
Rising transportation rates present another major concern for organizations;
•
The transportation industry is impacted by governmental requirements that affect cost
structures and service capabilities;
•
Regulation is growing in areas where the transportation industry has the potential to impact the
quality of life, the safety of citizens, and the growth of commerce.
Modes of Transportation:
•
Truck;
•
Rail;
•
Air;
•
Water;
•
Pipeline;
•
Intermodal transportation.
Transportation Decision-Making Framework
During this times the transportation and logistics managers face a very different environment
than they did a few years ago, this due to the continuous economical change of the environment and of
the customers expectations, increased globalization and improved technologies bring them not only a
bunch of new opportunities but also a lot of challenges which if they do not know how to overcome and
adapt their needs to it they will remain behind the times and trends.
4
One of the most important challenge is the transportation one, because its important to leverage
this function as critical for the company and make it a critical strategic element in the logistics function.
Managers who do not adapt to these times and they don’t consider transportation a critical function in
the company results in performance shortcomings and missed opportunities.
Transportation services play a central role in seamless supply chain operations, moving inbound
materials from supply sites to manufacturing facilities, repositioning inventory among different plants
and distribution centers, and delivering finished products to customers. Benefits accruing from world
class operations at the points of supply, production, and customer locations are pointless without the
accompaniment of excellent transportation planning and execution. Having inventory positioned and
available for delivery is not enough if it cannot be delivered when and where needed in a cost-efficient
manner, that’s why recently more and more managers in order to meet ever-increasing expectations of
their customers the basic work of transportation is no longer viewed as just a simple delivery job, but
has changed to providing a strategic edge by simultaneously increasingly lower costs and meeting
elevated service requirements.
We can think of the concept of Transportation as a machine, having different gear, each gears
representing the multiple supply chains entities in a channel and each gear it’s dependent on the other
in order to keep the “machine” working properly. The supply chain in this function, in this machine is
only as strong as its weakest component or gear, that’s why we don’t have to look at transportation as
a single and independent value because if its managed independently of other gear in the machine, like
value added supply chain operations than this entire function will fail. Transportation decisions made
in cooperation with related functions alleviate its weaknesses.
When taking the decision of choosing the transportation mode we need to analyse each
possibility and route; air, motor vehicles, railroads, pipelines and intermodal.
5
There are a few steps to take into consideration when choosing the transportation plan:
1. Total Network and Lane Decisions:
-studying the possible network of distribution, supplier, plant, customer locations, the various
movements among them and choosing the best one for your company and focus on long term
planning, which primary mode of transportation is appropriate for each general flow
(interfacility, inbound, outbound) by product or location.
2. Lane Operation Decisions:
-the second level of decision making regards transportation, the first one was for long term
planning, but this one is for daily operational freight transactions such as managers who have
real date about what products are needed at various system nodes and must coordinate product
movements along inbound, outbound and interfacility shipping lanes to meet service
requirements at lowest total costs.
3. Carrier Assignment Decisions:
-this step is about the information that is needed in order to deploy different techniques, goods
and products in order to stay in trend with the market and to be able to offer your customer the
best experience. In order to offer this you need large amounts of data and decisions made upon
product, market service and cost criteria.
4. Service Negotiations:
-this step present the fact that managers are increasingly managing relationships with
transportation service providers and that nowadays managers need to posses a vast knowledge
of strategic and tactical business in order to understand the customer and the transportation firm
and to be able to establish a threshold point to satisfy both parts but to also make profit.
5. Dock Level Decisions:
-this final step involves dock level operations such as loading, planning, routing and scheduling.
6
Differential effects of transportation in supply chain modelling
Transportation management systems are widely used information technologies that
support the effective planning, execution, and analysis of transportation processes. This process
must be included in supply chain strategy development, network design, and total cost
management. Managing the transportation process for maximum supply chain impact requires
considerable knowledge of transportation options, planning, decision making, analytical skills,
and information sharing capabilities.
Businesses seek to increase value through efficient SCM, and one of the easiest ways
to increase value is through increasing volume while reducing waste through the lowering of
operating costs. They have to try to overcome numerous obstacles like global expansion of
supply chains, rising costs, limited capacity, and government regulation in order to synchronize
transportation with other supply chain processes.
Transportation, from the planner’s perspective, is only one of the elements in the supply
chain – representing about 36 percent of total distribution costs; the other 64 percent of cost is
consumed by other elements in the supply chain, which the logistician will take into account
when making decisions about channel relationships. Successful SCM, however, generally
requires good transportation resources, because the transportation system becomes the
warehouse, with orders consolidated in the computer and carriers coordinated for JIT delivery.
Transportation Management Systems
Critical application of TMS include the following:
1. Routing and scheduling
•
proper planning of delivery routes has a major impact on customer
satisfaction, supply chain performance and organizational success
2. Load planning
•
effective preparation of safe and efficient deliveries
3. Load tendering
•
consists of requesting a load tender from a carrier and giving them the
ability to respond by rejection or acceptance.
4. Status tracking
•
helps the supervisors to know exactly when the shipping will arrive in
order to arrange future steps
7
5. Appointment scheduling
•
allows the supervisors to use you load space as best you can without
having drivers waiting.
Certainly, transportation can play a key integrative role in supply chain structures, since
carriers may be in an ideal position to integrate and coordinate flows throughout the supply
chain. This suggests a close consideration of the role that transportation plays in the integrated
SCM scenario.
Modal Selection of TMS
1. Product Safety
•
Safety advantage: Air transportation and motor carriage
•
Safety disadvantage: Rail and water
2. Cost
•
Cost advantage: The cost of transportation service varies greatly between
and within the modes
•
Cost disadvantage: Motor carriage and air transportation
The significant differences between model versions suggests that transportation costs
play a significant role in this particular simulation.
Supply chain information flow strategiesSupply chain management takes a systems
view regarding all processes needed to bring a product to the final customer. This view
recognizes that the value creation process extends beyond the boundaries of the firm, and
8
involves integrated business processes among the entities of the chain, such as suppliers,
manufacturers, and customers. . This requires the supply chain ultimately to be managed as one
complete system and asks for integration practices that strengthen linkages across individual
firm functions as well as throughout the supply chain.
Some of the main benefits of this type of relationship are the increase in the
synchronization of the Supply Chain, the reduction of total costs, improvement of quality and
cycle time, as well as a strong competitive position which exceeds any possible contribution
from traditional relationships. The information flow is the foundation for integration in the
strategic alliance which we can describe by 3 characteristic
1. Level of information sharing
2. Information quality
3. IT supply chain applications
Information sharing is the sharing of knowledge among partners to serve downstream
customers effectively and efficiently. This knowledge includes information on the production
status and the planning process, but also on changes in the business environment and the goals
of the companies
Information quality is measured by the degree to which the information shared
between supply chain partners meets the needs of the different partners.
The use of IT systems in inter-firm integration is supported by transaction cost
economics, which generally posits that IT reduces transaction costs.
Conclusion
Transportation involves the physical movement of goods between origin and
destination points. The transportation system links geographically separated partners and
facilities in a company’s supply. Transportation facilitates the creation of time and place utility
in the supply chain, also has a major economic impact on the financial performance of
businesses.
9
Reference list
1. Huq, F., Stafford, T., Bhutta, M.K. and Kanungo, S., (2009) An examination of the
differential effects of transportation in supply chain optimization modelling, [ejournal]. Available through Emerald Insight (database)
https://www.emerald.com/insight/publication/issn/1741-038X [Accessed 26 March 2020].
2. Vanpoucke, E., Boyer, K.K. and Vereecke, A., (2009) Supply chain information flow
strategies: an empirical taxonomy, [e-journal]. Available through Emerald Insight
(database)
https://www.emerald.com/insight/publication/issn/0144-3577 [Accessed 26 March
2020].
3. Ballou, H.R., (2007) The evolution and future of logistics and supply chain
management, [e-journal]. Available through Emerald Insight (database)
https://www.emerald.com/insight/publication/issn/0955-534X [Accessed 26 March
220]
4. Stank, T.P. and Goldsby, T.J., (2000) A framework for transportation decision making
in an integrated supply chain, [e-journal]. Available through Emerald Insight (database)
http://www.emerald-library.com [Accessed 26 March 2020]
5. Waters, D., (2003) Logistics: An Introduction to Supply Chain Management,
PALGRAVE MACMILLAN
10