Transportation strategy in manufacturing company

2. TRANSPORTATION STRATEGY
Dr. Timotius Febry. S.T., M.T

3. OUTLINE
• Key modes of
transportation and
major issues
• Transportation cost
• Transportation system
design
• Tradeoffs in
transportation design
• Routing and
scheduling

4. Importance of Transportation
• Contribution of GDP
• Accessibility to markets
• Greater competition
• More distant markets can be served
• Economies of scale
• Wider market-> greater production volume
• Production point need not be close market
• Lower prices
• Increased competition among supplier
• Lower production and transportation cost
• E-commerce: managing (global) transportation cost is crucial

5. FACTOR AFFECTING TRANSPORTATION
DECISIONS
CARRIER
(party that performs the move)
• Invesment decisions
• Operationg policies
• Cost considerations
• Capacity utilization
• Responsiveness/ service level
offered
SHIPPER
(party requiring movement of goods)
• Supply chain design
• Transportation mode choice
• Assignment of shipment to
transportation mode
• Cost considerations
• Responsivness/ delivery
guarantees

6. Transportation Modes
Air transportation
Rail transportation
Pipeline transportation
Water transportation
Truck transportation
FTL VS LTL

7. Air Transportations
• Expensive
• High security
• Size of shipment constrained
• Key Issues
• Location
• Location of fleet bases
• Schedule optimization
• Fleet assignment
• Crew scheduling
• Yield management

8. Truckload (TL)
• Average capacity = 42,000-50,000 lb.
• Smaller dispatch lots (compared with rail)
• Low fixed cost
• Carries do not own maintains roads
• Door-to-door convebience
• Good speed and frequency
• Cannot carry large loads
• Major Issues
• Utilization
• Consistent service

9. Less Than Truckload
• Higher fixed cost (terminal) and low variabel costs
• Major Issues
• Location of consolidations facilities
• Utilization
• Order assignment/ loading
• Vehicle routing
• Customer service

10. Rail
• Long haul (avg 720 miles)
• Slow mover
• Large load: Average load = 80 tons
• Consolidation, stop-off, re-reoute
• High fixed cost, low variabel cost
• Key Issues
• Scheduling to minimize delays / improvement service
• Yard operations
• Variability of delivery times

11. Pipeline
• Limited capabilities: crude oil, water
• Slow
• High capacity
• Reliable, low risk of distruption and damage
• 24-hour service
• High fixed cost
• Pipes, pumping equipment
• Own or lease right – of ways
• Varible cost
• Pump operation
• Depend on throughput and pipe diameter
• Loss through seepage

12. Water
• Heavy, bulk commodities
• Slow
• Affect by weather
• Fixed cost
• Mainly transport equipment
• Waterways and harbours publicly owned
• Terminal cost
• Variabel cost (low)
• No charge for use of waterwas

13. Other key players in the Transportations Supply Chain
Freight forwarders
• Provide service to small shipper by consolidating shipments to get lower rates
• Purchase transportation service from carries
Shipper’s agents
• Consolidate shipment for “piggyback” transport
• Purchase service “in bulk” and re-sell to indivicual shippers
Freight brokers
• Arrange door-to-door service, dealing with all modes of transport in between
Shippers Associations
• Common industry or geographical area
• Common negotitation line to get better rates

14. Transportation cost
Cost
allocation
difficult
Fixed cost
Variable
cost
Road/ railways acquisition and
maintenance, terminal facilities,
transport equipment, carrier
administration
Fuel, labour, equipment
maintenance, handling, pickup and
delivery
By shipment ? Weight? Volume?
Issurance value? Delivery
guarantees?

15. •Determined by
density, ease of
handling, risk of
damage,
substitutability
•Standarized rate
form class rate tarif
•Uniform rate
•Proportional rate
•Minimum charge
•Less than vehicle
load rate
•Special rate for high
volume shipment
Volume-
ralted
Distance
related
Demand
related
rate
Class
rates

16. Incentive
rate
• For large
shipment
Cube rates
• For light and
bulky goods
Import/
Export rate
Deferred
rate
• Use to fill
available
space (esp. in
air or water
mode)
Released
value rates
• Limited
liability for
carrier
Ocean
freight rates
• By weight or
space basis
• Set by “carrier
conference”
Other Transportation Rates

17. Special Service Charges
• Change destinantion or chage consignee
• Use carries as warehouse
Diversion and Re-consignment
• Cost lower than two separates rates
• Partial loading/ unloading
Transit or stop – off privileges
• Refigerator/ heating/ ventilation
• Additional bracing
Protection
• Carrier transfer shipment and pays 2nd carrier
Interlining
• Pickup/ deliver, rail switching
• Demurage penalty
Terminal service

18. Documentation
• Bill of loading
• Legal contract between shipper and carrier for freight movement with reasonable
dispatch and free of damage
• Certification of classification and tariffs of good received
• Contract of carriage
• Freight bill
• Invoice of carrier charges
• Prepaid by shipper or collected from consignee
• Freight claims
• Loss, damage and delay claims
• Carries liable for full value
• Overcharge / misclassification amendments

19. Transport service selection considerations
• Price
• Line haul, terminal handling, delivery
• Door to door
• Average transit time
• Transit time variability
• Increases for multi-moda or consolidated shipments
• Loss and damage
Cost, speed and dependability
considered most important

20. Profile
- Ph.D in Operation Research and
Management
- Lecturer International Business
Management Ciputra University
(INA)
- Owner Rumah Manajemen
Consultant
Perum Green Eleven B1-08
Jalan Raya Bangil, Kenep, Pasuruan Jawa Timur
67154-Indonesia
+62 811 337 3131
Rumah Manajemen Consultant