LOGISTICS AND SUPPLY CHAIN MANAGEMENT PROGRAM

Course:
INTERNATIONAL TRANSPORTATION & LOGISTICS
Preparation for Mid-term Test

Lecturer: Assoc. Prof. Dr. Ho Thi Thu Hoa 1

Contents
1.Chapter 1: Introduction to Transportation and
Logistics in Supply Chain (LP 1)
2.Chapter 2: Costing and Pricing for Transportation (LP
2)
3.Chapter 3: Transportation Modes (LP 3-4-5-6)
4.Chapter 4: Private Transportation and Fleet
Management (LP 7-8)

Assoc. Prof. Dr Ho Thi Thu Hoa 1

 References
1. Coyle, John J., Robert A. Novack, Brian J. Gibson (2016), Transportation A global supply chain perspective,
8th edition. South-Western Cengage, Boston. (Core book)
2. E. Cascetta (2009), Transportations systems analysis: models and applications. Springer
3. Bowersox, Donald J., Closs, David J., Cooper M. Bixby, and Bowersox, John C, Supply Chain Logistics
Management, 4th edition, McGraw-Hill/Irwin, Burr Ridge.
4. Christopher, M. (2011), Logistics & supply chain management, 4th ed, FT Prentice Hall: Harlow
5. Alan Harrison and et. (2014), Logistics management and strategy competing through the supply chain (fifth
edition), Pearson
6. Thorben Seiler (2012), Operative Transportation Planning Solutions in Consumer Goods Supply Chains.
Springer
7. Rodrigue, J-P., Comitos, C., Slack, B. (2013) The Geography of Transport Systems, 3rd ed, Routledge:
Albington
https://www.researchgate.net/publication/318837359_The_Geography_of_Transport_Systems
/link/5a979fca0f7e9ba42974dece/download

Cited from Dr Nguyen Van Hop: Teaching materials for INTERNATIONAL TRANSPORTATION & LOGISTICS

Structure of Mid-term Test

Duration: 90 mins

1. Question 1: (20 points)

2. Question 2: (20 points)
3. Question 3: (30 points)
4. Question 4: (30 points)

Assoc. Prof. Dr Ho Thi Thu Hoa 2

 Chapter 1: Introduction to Transportation and Logistics in Supply Chain-final
Derived Demand for Freight Transportation (dependent demand = secondary demand)
Freight transportation would not be effected by transport carrier actions

Value of Transportation Service

The impact of transportation costs and service on the demand for the product
Landed cost = product cost at source + transportation cost + other costs (ie loading, insurance..).

Landed Cost Example

1 2 3 4 5 6 7
Production Overseas Export International Import Buyer Landed
cost of warehouse tariffs freight duties warehouse costs at
overseas & transport transportation & transport buyer
supplier costs costs costs facility

www.transways.com.au

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 If landed cost ↓  demand of product + transportation
• A manufacturer of bicycle tires located in Kualalumpur (KL) is competing in Binh Duong (BD)
with local producers. Assume that the BD manufacturers have a cost of $4/tire, whereas the KL
manufacturer can produce the same quality tire for $3 because of advantage in raw material
and automation technology.

• If transportation costs per tire from KL to BD < $1  then, the landed cost of KL will have
advantage  there is a demand
• Conversely, if transportation costs/tire from KL > $1  BD consumers will not likely purchase
tires from KL

Binh
Kualalumpur
Duong

The landed cost also determines the extent of the market

200 km
P S
Production = $50/unit Production = $50/unit
Transportation = Transportation =
$0.6/unit/km $0.5/unit/km

• LC(P) = LC(S)
• Production Cost (P)+ transportation Cost (P) = Production Cost (S)+ transportation Cost (S)

• $50+$0.6(x) = $50 + $0.5(200 – x)  x = 90.9km from P

P’s market area will extend 90.9 miles from its plant and S will have a market area that extends about 109 miles
from its facility
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 Chapter 2: Costing and Pricing for Transportation
Market Structure Models

Pure Competition Monopolistic Oligopoly Monopoly

1. Road transport
companies, High Number of sellers Low
freight
forwarders.
Small Size of sellers and buyers Large
2. Samsung, Apple,
LG
Homogeneous Product /service differentiation Heterogeneous
3. Shipping lines,
airlines Low Market entry restriction High
4. Railway
operators, High Demand elasticity Low
electricity

Market Structure Models

Pure Competition Monopolistic Oligopoly Monopoly
(Cạnh tranh (Cạnh tranh độc (Thiểu quyền) (Độc quyền bán)
hoàn hảo) quyền)

Number of Sellers

Number of Buyers

Product /service
differentiation

Market entry
restriction

Example

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 Market Structure Models
Pure Monopolistic Oligopoly Monopoly
Competition (Cạnh tranh độc quyền) (Thiểu quyền) (Độc quyền
(Cạnh tranh bán)
hoàn hảo)
Number of Many Many Few (large size) 1
Sellers no supplier has try to achieve some price advantages by differentiating considerable influence over
any influence their products from other similar products the market price of their
over the market product.
price
Number of Many Many Many (small size) Many
Buyers
Product Homogeneous, Heterogeneous Homogeneous/Heterogene Homogeneous
/service standardised ous (function/promotion)
differentiation
Market entry Low Low High (high investment) High
restriction (regulation)
Example road transport, Iphone, Samsung, Nokia, LG,..) (cold WHS, cold shipping lines, air Railway
freight forwarder transport) transport, project transport operation,
agricultural consumer goods, such as health and beauty aids, fall (OOG) Electricity
products, such as into this category. Suppliers try to differentiate their Auto manufacturers are a
corn, wheat, and product as being, to convince consumers that they good example of an
soybeans are significant by using advertising or other methods oligopoly, because the fixed
that would convince consumers of a product's costs of automobile
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superiority manufacturing are very high

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Cost-of-service Pricing
Two alternative concepts
• Average-cost approach
• Rates are based on average or fully
allocated costs.
• Marginal-cost / Variable-cost approach
• Rates are based on the cost of
producing one more unit of an output.

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 13

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Charging what the traffic will bear.

The elasticity of demand for services sets basis for the

allocation of common costs.

Marginal cost (cost of service) sets the minimum basis or

a floor for price.

Cost of Service as Price Floor – Generic Example

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 Example
• Marginal cost = Depreciation($7) + Interest ($5) +
Fuel($105) + Labor($200) + Maintenance($10) +
Insurance($2)
•  Marginal cost = $329 (Cost of services, direct to
services)
• Fully allocated cost (FAC) = margin cost + administrative
cost ($15) = $329 + $15 = $344
•  FAC = $344 (direct and indirect to services)
• Price = FAC + %FAC (Ex: 15%)
•  Price = $395.6
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Value-of-service Pricing
Pricing according to the value of the product
High prices for the movement of high-valued products, and low prices for
low-valued commodities.

Value of Influence
Influence on demand
Products
on cost elasticity

 More risk involved in moving high-valued  High-valued commodities can bear higher
commodities prices as transportation cost is a small
 More expensive equipment necessary percentage of the final selling.

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 Price discrimination
The seller must be able to separate buyers into
Third-degree Price Discrimination groups or submarkets according to their
different elasticity of demand.
1
A situation in which a seller sets two or
more different market prices for two or
The seller must be able to prevent the transfer
more separate groups of buyers of
essentially the same commodity or
2 of sales between the submarkets.
service.

3 The seller must possess some degree of

monopoly power.
Three necessary conditions

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Differential Pricing

Differential pricing
can be done based on
several methods of
segregating the
buyers into distinct
groups.

By commodity (high/low value)/service

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 Chapter 2: Costing and Pricing for Transportation

Pricing in Transportation Management

Customers Government Channel Members Competition

 Revenue split in interline
 Customers vs. carrier  Economic regulation  Price leader influences
movements
relative power  Antitrust enforcement
 Price change
 Price elasticity interdependency (eg. Sky
 Availability of team, liner conference‐
substitutes BAF, CAF…)

Factors Affecting Carrier Pricing Decisions

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Chapter 3: Modes of Transport

• Select the appropriate mode of transport for a shipment and explain

why select those modes and routes?
• Sea food from Can Tho to Los Angeles?
• Garment from Binh Duong to Budapest?
• How to utilize capacity of truck for two-way transport?
• Advantages and disadvantages of modes of transport
 Demand elastics in transportation (explain and example)
 Pickup and delivery terminal in transportation (explain and
example)
 Container transport
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 Operations Management
Operations DecisionsDecisions
Management

•Transportation Problem
•Capacitated Plant/Facility Location
Model (CPLM)
•Vehicle Routing Problem (VRP)

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Transportation
Transportation Problem
Problem
m n
M inim ize c
i  1 j 1
ij x ij

n
S.t. x
j 1
ij  a i ; i  1, 2, ..., m

x
i 1
ij  b j ; j  1, 2, ..., n

x ij  0; i  1, 2, ..., m ; j  1, 2, ..., n
W here: a i  total amount to be shipped out of source i
b j  t otal amount to be shipped into sink j
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 The capacitated plant location model
The capacitated plant location model

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Vehicle Routing Problem

Clarke- Wright Algorithm

Savings Matrix Method

• Following are the steps of the Savings

Matrix Method:
1. Identify distance matrix
2. Identify savings Matrix
3. Rank savings
4. Assign customers to vehicles
5. Sequence customers within routes

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 ISO 668
20′ container 40′ container 45′ high-cube container
imperial metric imperial metric imperial metric

length 19' 10½" 6.058 m 40′ 0″ 12.192 m 45′ 0″ 13.716 m

external
width 8′ 0″ 2.438 m 8′ 0″ 2.438 m 8′ 0″ 2.438 m
dimensions
height 8′ 6″ 2.591 m 8′ 6″ 2.591 m 9′ 6″ 2.896 m

length 18′ 10 5∕16″ 5.758 m 39′ 5 45∕64″ 12.032 m 44′ 4″ 13.556 m

interior
width 7′ 8 19∕32″ 2.352 m 7′ 8 19∕32″ 2.352 m 7′ 8 19∕32″ 2.352 m
dimensions
height 7′ 9 57∕ ″ 2.385 m 7′ 9 57∕ ″ 2.385 m 8′ 9 15∕ ″ 2.698 m
64 64 16

width 7′ 8 ⅛″ 2.343 m 7′ 8 ⅛″ 2.343 m 7′ 8 ⅛″ 2.343 m

door aperture
height 7′ 5 ¾″ 2.280 m 7′ 5 ¾″ 2.280 m 8′ 5 49∕ ″ 2.585 m
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volume 1,169 ft³ 33.1 m³ 2,385 ft³ 67.5 m³ 3,040 ft³ 86.1 m³

maximum
52,910 lb 24,000 kg 67,200 lb 30,480 kg 67,200 lb 30,480 kg
gross

empty weight (Tare weight) 4,850 lb 2,200 kg 8,380 lb 3,800 kg 10,580 lb 4,800 kg

net load (payload) 48,060 lb 21,800 kg 58,820 lb 26,680 kg 56,620 lb 25,680 kg

Payload = Max. Gross – Tare weightAssoc. Prof. Dr Ho Thi Thu Hoa

Payload: <=17,500 kg for cont. 20' & <=24,000 kg for cont. 40'
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For goods packed in carton

C: cartons/row lcr, wcr, hcr : length, width, height
TC : total cartons of carton

R: rows per width vcr : volume of carton

T : tiers per height Vct : volume of container

Lct, Wct, Hct : length, width, height VU : volume utilization

of container

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 Software: cube
• Mathematical model

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Case study

Measurement of cargo carton:

+ Length: 50 cm; Width: 35 cm; Height: 20 cm; Weight: 15
kg/1 carton
 Required:
1. Calculate the number maximum of cartons can be loaded in a container
40ft/20ft (number of layers not limited);
2. Calculate VU (volume utilization) in two above cases? Which container should
be selected for utilizing VU?
3. Calculate VGM in two above?

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 Key Length Width Height Total cartons

1 Carton dimension 0.5 0.35 0.2

Cont 20ft dimension 5.758 2.352 2.385

Total cartons in cont 20 ft 11.516 6.72 11.925

Round off in cont 20ft 11 6 11
Total cartons in cont 20 ft after rounding
off (1) 726

Total cartons in cont 40 ft

Cont 40ft dimension 12.032 2.352 2.385

Total cartons in cont 40 ft 24.064 6.72 11.925

Round off 23 6 11 Projection
only
Total cartons in cont 40 ft after rounding
off (2) 1518

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Projection
only

2 VU
M cont 20ft (from ISO 668) 33.1 m3
M cont 40ft (from ISO 668) 67.5 m3
M 1 carton (3) 0.035 m3
M (cargo) in cont 20ft (4) = (3) * (1) 25.41 m3
M (cargo) in cont 40ft (5) = (3)* (2) 53.13 m3
VU 20ft (6) = (4)/ M cont 20ft * 100 % 76.76737 %
VU 40ft (7) = (5)/ M cont 40ft * 100 % 78.71111%
3 VGM
Weight of 1 carton (8) 0.015 MT
Tare weight of cont 20ft (9) 2.2MT
Total weight of cargo in cont 20ft (10) = (8) * (1) 10.89MT
VGM of cont 20ft (11) = (9) + (10) 13.09 MT
Tare weight of cont 40ft (12) 3.8 MT
Total weight of cargo in cont 40ft (13) = (8) * (2) 22.77 MT
VGM of cont 40ft (14) = (12) + (13) 26.57MT

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  What is VGM? VGM (Verified Gross Mass) is a provision in
SOLAS that requires all shippers to carry out the determination of
the volume of containers, which takes effect on July 1, 2016.

 SOLAS (the Safety of Life at Sea convention): The Convention

on the Safety of Life at Sea is effective on May 25, 1980.

 Not only in Vietnam, the overloading of goods compared to the

standard of container exploitation and the false declaration of
actual container volume of the owners have been existing, it is the
main cause of many cases. accidents at the Port and for cargo
ships, threatening harbor workers as well as ship sailors ...

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 Methods to calculate VERIFIED GROSS MASS

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WHO IS THE RESPONSIBILITY TO VERIFIED GROSS

MASS?

Responsibility for carrying out and setting up a VGM:

the shipper on the shipping bill of lading (the Ocean
Carrier Bill of Lading)

The shipper is responsible for providing VGM to the

shipping company or at the port in accordance with
SOLAS regulations

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 Chapter 4: Private Transportation and and Fleet Management

Example buy vs rent

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Example buy vs rent

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 Example buying vs renting
Company B have to make around 80 trips/year to move material in Hai Phong to factory in Binh
Duong. The company considers 2 options:
+ Buy new truck: $250.000 with 5 year straight-line depreciation
+ Rent 3PL logistics company: $1980/Trip (Trip = 1610 km)
Renting: increase 3%/year?
Operating cost for buying
Fuel $2 960/year
Depreciation ($250,000/5 year) = $50,000/year
Interest $30 530/year
(10%/year)
Labour $12 000/year
Total cost $95 490/year
Investment Renting 3PL logistics
Purchasing $250,000 Renting $158 400/year

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Buy vs Rent?
• Buying
• TC = FC + OC = FC + n*OC
•
• Renting
• TRC = n* RC
• When TC=TRC => FC + n*OC = n* RC => n = FC/ (RC-OC)

• In which:
• TC: Total cost
• FC: Fixed cost
• OC: Operating cost/year
• TRC: Total renting cost
• RC: Renting cost/year
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 Example buying vs renting

1. After year 5: Depreciation

cost is 0
2. Mathematical model of Total
cost of buying = Total cost of
renting

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Example buying vs renting

• Buying
• Total cost = Fixed cost + Operating cost = Fixed cost + n*Operating cost/year

• Renting
• Total renting cost = n* renting cost/year
• FC + n*OC = n* RC => n = FC/ (RC-OC)

• n = 250,000/(158 400 - 95 490) =250 000/62 910 = 3.97 years (round off 4 years)

• Conclusion: after 4 years, renting cost > buying cost. Consider to invest private
truck/car or continue to rent truck/car

• If renting increase 3%/year => Is there any change for decision?

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 Good luck for Mid-term Test!

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