Business Processes
Sales Order
Management
Aggregate
Planning
Master
Scheduling
Production Activity
Control
Quality
Control
Distribution
Mngt.
© 2001 Victor E. Sower, Ph.D., C.Q.E.
Distribution/Logistics Management
Mode, Carrier, Route Selection
Required delivery date
Cost of transportation
Reliability & service quality
Shipment size
Time in transit
Type of item being shipped
Possibility of damage
Available services
Possibility of damage
Handling of claims
Carrier rating systems
Transportation Modes
•
•
•
•
•
•
•
Parcel post
Private parcel delivery service
Bus service
Air cargo
Rail freight (CL and LCL)
Motor freight (TL and LTL)
Freight forwarder
Transportation Modes
continued
• Coastal, intercoastal, and inland water freight
• Pipeline
Intermodal Transportation
• Piggyback (TOFC)
• Fishyback
Freight Rates
Basic charge determined by class rate
Quantity breaks
Aggregate tender rates
Flat percentage discount
Increased volume-increased discount %
Specific origin & destination points
Through rates
Released rates
Developing a Transportation
Strategy
Value analysis of alternatives
Price analysis
Consolidate freight where possible
Analyze & evaluate carriers
Reassess mode selection
Develop close relationship with selected carriers
Cost analysis/reductions
Third Party Logistics Suppliers
3PL
A company that manages all or part of another
company’s product delivery operations.
APICS Dictionary 11ed., 2005
Dell Computer -- Roadway
Distribution Requirements Planning
DRP
The function of determining the need to replenish
inventory at branch warehouses. A time-phased
order point approach is used where the planned
orders at the branch warehouse are “exploded”
via MRP logic to become gross requirements on
the supplying source.
APICS Dictionary 11ed., 2005
Logistics Terms
Bill of Lading (BOL) – The basic document used in
purchasing transportation services. It serves as
the receipt and documents commodities and
quantities shipped. In case of loss, the BOL is
the basis for damage claims. The BOL specifies
terms and conditions of carrier liability. Title is
transferred with completion of delivery.
Logistics Terms
Continued
FOB buyer’s plant (destination)
FOB seller’s plant (origin)
FOB seller’s plant, freight allowed to buyer’s plant
(freight prepaid)
FOB Origin
or FOB Freight Collect
Title & control of goods passes to buyer when carrier signs
for goods at point of origin.
Buyer pays freight charges
Buyer bears freight charges
Buyer owns goods in transit
Buyer files claims (if any)
FOB Destination
Freight Prepaid
Title of goods remains with seller until goods are delivered.
Seller pays freight charges
Seller bears freight charges
Seller owns goods in transit
Seller files claims (if any)
Incoterms
• EXW Ex works (supplier’s site)
• FCA Free carrier at (Supplier clears goods for
export)
• FAS Free alongside ship (Buyer clears goods
for export)
Incoterms
Continued
• CAF Cost and freight (to port of destination—
supplier clears goods for export)
• CIF Cost, insurance, & freight (Same as CFR,
except supplier is responsible for insurance
during main carriage)
Incoterms
Continued
• DAF Delivered at frontier (country border)
(Supplier clears goods for export)
• DES Delivered ex ship (Goods are available
aboard ship, uncleared for export)
• DDU Delivered duty unpaid (at specified place
of destination)
• DDP Delivered duty paid (at specified place of
destination
The Transportation Model
• Ship items at lowest cost
• Sources have fixed supplies
• Destinations have fixed demand
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
Supp to Ch 9 - 2
The Transportation Model
D
(demand)
D
(demand)
S
(supply)
S
(supply)
D
(demand)
S
(supply)
D
(demand)
Transportation Problem
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
Grain Elevator
Supply
1. Kansas City
2. Omaha
3. Des Moines
150
175
275
600 tons
Mill
Demand
A. Chicago
B. St. Louis
C. Cincinnati
200
100
300
600 tons
Supp to Ch 9 - 3
Shipping Cost Table
Grain
Elevator
Kansas City
Omaha
Des Moines
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
Chicago
A
$6
7
4
Mill
St. Louis
B
$8
11
5
Cincinnati
C
$10
11
12
Supp to Ch 9 - 4
The Transportation Tableau
To
From
Chicago
St. Louis Cincinnati
6
8
10
7
11
11
4
5
12
Kansas City
Omaha
Supply
150
175
275
Des Moines
Demand
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
200
100
300
600
Supp to Ch 9 - 5
Network Of Routes
4
Des Moines (275)
12
5
7
11
Omaha (175)
Cincinnati (300)
11
6
10
Kansas City (150)
8
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
Chicago (200)
St. Louis (100)
Supp to Ch 9 - 6
Solving TransportationProblems
• Manual methods
– Stepping-stone
– Modified distribution (MODI)
• Computer solution
– Excel
– POM for Windows
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
Supp to Ch 9 - 7
Solution For Grain Shipment
Elevator
Kansas City
Omaha
Des Moines
Demand
Shipped
Cost
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
Chicago
25
0
175
200
200
Mill
St. Louis
0
0
100
100
100
Cincinnati
125
175
0
300
300
Supply Shipped
150
150
175
175
275
275
600
4525
Supp to Ch 9 - 8
Unbalanced Problems
Location
A. Charlotte
B. Raleigh
C. Lexington
D. Danville
Capacity(tons)
90
50
80
60
280
Location
Demand (tons)
1. Richmond
120
2. Winston-Salem
100
3. Durham
110
330
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
Supp to Ch 9 - 9
Transportation Initial Tableau
To
From
WinstonRichmond Salem
500
Durham
100
50
90
Charlotte
120
90
40
50
Raleigh
70
50
110
80
Lexington
90
50
70
Danville
Demand
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
Supply
60
120
100
110
Supp to Ch 9 - 11