Module 2

Design Options for a Transportation Network

Direct Shipment Network to Single Destination

The major advantage of a direct shipment is the elimination of intermediate warehouses and its simplicity of operation and
coordination.The shipment decision is completely local, and the decision made for one shipment does not influence others. The
transportation time from supplier to buyer location is short because each shipment goes direct.A direct shipment network to single
destination is justified only if demand at buyer locations is large enough that optimal replenishment lot sizes are close to a truckload
from each supplier to each location. EgHome Depot

Direct Shipping with Milk Runs

A milk run is a route on which a truck either delivers product from a single supplier to multiple retailer or goes from multiple
suppliers to a single buyer location.Milk runs make sense when quantity destined for each location is too small to fill a truck but
multiple locations are close enough to each other such that their combined quantity fills the truck.eg Frito Lay

All shipments via DC

All shipments via intermediate distribution center with storage

 Storing product at an intermediate location is justified if transportation economies require large shipments on the inbound side or
shipments on the outbound side cannot be coordinated.The presence of a DC allows a supply chain to achieve economies of scale for
inbound transportation to a point close to the final destination, because each supplier sends a large shipment to the DC that
contains product for all locations the DC serves. Because DCs serve locations nearby the outbound transportation cost is not very
large.eg W.W.Grainger

All shipments via intermediate transit point with cross docking

Suppliers send their shipments to an intermediate transit point (which could be a DC) where they are cross-docked and sent to buyer
locations without storing them. When a DC cross docks product each inbound truck contains product from suppliers for several buyer
locations whereas each outbound truck contains product for one buyer location from several suppliers. Major benefits are that little
inventory needs to be held and product flows faster in the supply chain. Also saves on handling cost because product does not have to
be moved in and out of storage. Cross docking is appropriate when economies of scale in transportation can be achieved on both the
inbound and outbound sides and both inbound and outbound shipments can be coordinated.eg Walmart,Peapod

Shipping via DC using Milk Runs

Milk runs can be used from a DC if lot sizes to be delivered to each buyer location are small. Milk runs reduce outbound transportation
costs by consolidating small shipments. The use of cross docking with milk runs requires a significant degree of coordination and suitable
routing and scheduling

Tailored Network
Suitable combination of options that reduces the cost and improves the responsiveness of the supply chain.Transportation uses a
combination of crossdocking, milk runs and TL and LTL carriers along with package carriers. Operating a tailored network requires
significant investment in information infrastructure to facilitate the coordination.
 Pros and Cons of Different Transport Networks

Network Structure Pros Cons

Direct Shipping No intermediate High inventory due to
warehouse, simple to large lot size
coordinate
Direct shipping with Lower transportation Increased coordination
milk runs costs for small lots, complexity
lower inventories
All shipments via central Lower inbound Increased inventory cost
DC with inventory transportation cost increased handling at
storage through consolidation DC

Network Structure Pros Cons

All shipments via central Low inventory Increased coordination
DC with crossdock requirement ,Lower complexity
transportation cost
through consolidation
Shipping via DC using Lower outbound Further increase in
milk runs transportation cost for coordination complexity
small lots
Tailored network Transportation choice Highest coordination
best matches needs of complexity
individual product and
store

MODULE 1
1. Sourcing, Procurement and Supply Management-Sourcing, Supply side management, inbound logistics, supplier relationship
management- A set of activities ,functions, and processes concerned with economic procurement and inflow of inputs into the enterprise and
efficient control over flow of funds out of the company.

2.Materials Management-Classic materials management –forecasting, inventory management, stores management, warehousing, stock keeping,
and scheduling till it came to include production planning and production control to evolve into extended materials management. With
subsequent inclusion of order processing in its fold it came to be known as integrated materials management.

3.Logistics and Distribution-Military parlance –covered all functions related to movement and maintenance of armies-logistics function

Realization on the part of businesses that there was an obvious tradeoff between transportation choices and inventory policies led to integration,
and logistics emerged as a cross functional approach that integrates all materials, functions of purchasing ,inventory management ,production
control, inbound logistics and outbound logistics.

Strategic fit

When competitive strategies and supply chain strategies have the same goal there is a strategic fit between the two. Strategic fit refers to the
consistency between the customer priorities that the competitive strategy of the company is designed to satisfy and the supply chain capabilities
that the supply chain strategy aims to build.

Module 2

Bill of lading

Basic legal document issued by a carrier to a shipper in purchasing transport services. Serves as a receipt. It documents names of products,
destination and quantities shipped . It should be signed by the shipper carrier and the receiver. In case of damages during transit, bill of lading is
the basis for claims. The designated individual in the bill of lading is the only bona fide recipient of the consignment.

Strategic fit

When competitive strategies and supply chain strategies have the same goal there is a strategic fit between the two. Strategic fit refers to the
consistency between the customer priorities that the competitive strategy of the company is designed to satisfy and the supply chain capabilities
that the supply chain strategy aims to build.