Transportation & Supply
Chain Systems
John H. Vande Vate
Spring 2007
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Who am I?
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John H. Vande Vate
Professor and EMIL Executive Director
Office: 222 of the Old ISyE bldg.
Phone: (404) 894-3035
Prefer e-mail: jvandeva@isye.gatech.edu
Office Hours:
– Tuesday, Thursday 2-3:30 (after class) or
– By appointment
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Administrative Details
• Class Home Page:
www.isye.gatech.edu/~jvandeva/Classes/6203/2007/syllabus2007.html
Keep up with information here!
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Recommended Text
• Designing and Managing the Supply Chain:
Concepts, Strategies & Case Studies, Second
Edition, By David Simchi-Levi, Philip Kaminsky
and Edith Simchi-Levi, McGraw-Hill/Irwin;
(October 11, 2002). ISBN: 0072845538
• $106 on Amazon
• Used copies
• Not required
• Each team should have access
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Other Resources
• You may also want to read:
– Contemporary Logistics by Johnson, Wardlow,
Wood and Murphy
– Logistic Systems Analysis by Daganzo
– Business Logistics Management 4th Edition by R.
H. Ballou, Prentice Hall, 1999
– Bramel, J. and D. Simchi-Levi, The Logic of
Logistics: Theory, Algorithms and Applications
for Logistics Management, Springer-Verlag, 1997
– Logistics and Supply Chain Management:
Strategies for Reducing Cost and Improving
Service (2nd Edition) by Martin Christopher
– Modeling the Supply Chain by Jeremy F. Shapiro 5
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Grading
• Exams:
– February 19st
– Final
• Project:
66%
33%
33%
33%
– Groups of 4 to 6
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Objectives
• Knowledge and understanding of the issues
underlying transportation and supply chain
management and
• Mastery of the tools and models to support
intelligent resolution of those issues.
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Projects
• Project: Ideally a real application
– Team of 4 to 6 students
– Distance learning students encouraged to bring
projects from their companies and recruit teams
of on-campus students to work with them
– Every team must have at least 1 on-campus
student
– Several projects already available
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Project Cont’d
• Due February 19
– one member of your team should send me an e-mail
with the subject "6203 Project" providing
• The names and contact information (e-mails and phone
numbers)
• Resumes
• Your team's project preferences (list at least four alternatives)
in order
• Your team's preferences for presentation dates (list all four) in
order of preference
• A presentation and report to your company
• On April 11th, 16th, 18th or 23rd. Present in class
(~ 30 minute presentation)
• Self-contained CD of everything for me
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Project Motivation
• Interviewing for job
• Learning by Doing
• Off-campus students
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Projects
• European Auto manufacturer
• Shipping parts from European suppliers to
average forecasted demand significantly better in
terms of reducing the bullwhip effect.
• Simulation too time consuming and requires too
much data.
• Tool for faster computation of good parameter
values using less detailed information about the
parts.
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Projects
•XYZ: Transportation optimization
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LTL consolidation
Multi-stop TL
Dynamic vendor assignment
Milk runs
Zone skipping
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Other Projects
•Welcome to propose other topics
•Must:
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Have a corporate sponsor
Be of value to the company
Give the team experience
Relate to topics in this course
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Deliverable
• Presentation to your company and to the class
(These may have to be different)
• CD that includes
– Project Description
– Your presentation(s)
– Sufficient description that I can follow your
presentation, understand the data and use the tools
– Data and data definitions
– Any tools (documented)
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Supply Chain Management
• Deterministic View
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Transportation
Inventory
Finance
Location
Mid-Exam: February 19rd
• Managing Variability & Risk
– Revenue Management
– Safety Stock
– Inventory Pooling
• Supply Chain Applications & Projects
• Exam Questions from Variability & Risk and15
Projects
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Transportation
• Modes
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Parcel
Less-than-Truck load
Multi-stop TL
Truck load
Less-than-Car Load (rail)
Car Load (rail)
Block train
Less-than-Container load
Container load
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Trade offs
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Cost
Speed
Access
Reliability
Security
Special Handling
Risk
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Typical Cost Factors
• Parcel (Up to ~150 lbs)
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Zones (origin & destination)
Weight & Cube
Negotiated discount based on volume
Delivery Options
• Location
• Timing: Same day, next day am, next day, 2nd day, ground, …
• UPS: http://wwwapps.ups.com/calTimeCost?loc=en_US
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Why
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Less-Than-Truck Load
(LTL)
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• Origin & Destination
distance?
Typically quoted
• Weight (up to ~20,000 lbs)
as $/CWT
• Class
• Discount based on volume of business
• Special Requirements Why is this
• Old Dominion
important?
• http://www.odfl.com/rateestimate
•/
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NMFC Classes
• Density
– Helps carrier judge demands for capacity
• Value
– Helps carrier judge risk (liability limits
associated with each class)
• Class 50: cheapest, e.g., sand
• Class 500: most expensive, e.g., Ping Pong
Balls
• Maintained by the NMFTA (NMFTA.org)
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Truck Load (TL)
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Up to ~45,000 lbs
Origin
Typically quoted
as $/mile
Destination
Volume of business
Special Services (accessorials)
– Detention, cleaning, …
• Schneider National
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https://webapps.schneiderlogistics.com/pwschneiderrate/schneider_rate_ext_customer
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Rail
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Commodity (Grain, Coal, …)
Origin, Destination
Equipment (Box car, tanker, Tri-level)
Number of cars in block
Cars handle on the order of 70 tons
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Norfolk Southern
http://www.norfolksouthern.com/nscorp/applicati
on?origin=content_home.jsp&event=bea.portal.fr
amework.internal.refresh&pageid=Doing+Busine
ss&contentId=english/nscorp/doing_business/non
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e1/home/agriculture.html
Undiscounted LTL Rates
$12,000
ATL to LB
Class 50
$10,000
$8,000
$6,000
$0.53/CWT
$1.12/CWT
$4,000
$2,000
$0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
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Concave Cost
Cost
Cost per unit
decreasing
So?!
Shipment Size
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Consolidation
• Incentive to consolidate shipments
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Make fewer larger shipments
Reduce frequency (!?)
Hub & Spoke
Share transportation resources
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Issues with Freight Rates
• Issue of how to estimate rates on lanes you
don’t currently use
• Levels of detail
– $/mile as the crow flies
– $/mile on the network
– Rate look up
• Caution: Average cost of shipments can be
smaller than the cost of an average
shipment
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Estimating Rates
Cost
Cost of
Average
shipment
Average
Cost of
shipment
Large
shipments
Small
shipments
Average
shipment
Shipment Size
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Why It Matters?
• Estimating transportation costs to
“customers”
– Typically too many customers
– Aggregate them
• By region
• By state
• By 3-digit zip
– Use some care in estimating the transportation
cost to “aggregated” customers
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Why It Matters?
• Customers may order different quantities at
different times
• Estimating the cost to serve the customer
often look at average shipments
• Careful how you average
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Summary
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Transportation mode basics
Transportation rate basics
Economies of scale promote consolidation
Cautions on “aggregating” transportation
rates
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Next Time
• Inventory and Transportation
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