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Chapter 1:

1. Define transportation logistics.

 The process of obtaining raw materials, producing and distributing final
products from point of origin to point of consumption with the help of
transportation.
 Logistics is a subset and an integral part of supply chain system.

 Difference btw supply chain and logistics:

Supply chain and logistics are related concepts but have distinct differences in their
scope and focus.
Supply Chain: The supply chain encompasses the entire process of delivering products
to customers, from sourcing supplies to production, distribution, and delivery. It involves
the coordination and management of activities between different entities, including
suppliers, manufacturers, distributors, and customers. The supply chain aims to ensure
the efficient flow of goods and information throughout the entire process
Logistics: Logistics, on the other hand, is a subset of the supply chain. It specifically
focuses on the movement, storage, and positioning of goods between different
organizations within the supply chain. Logistics involves planning, implementing, and
controlling the efficient flow of goods, services, and related information from the point
of origin to the point of consumption. It includes activities such as transportation,
warehousing, inventory management, and order fulfillment
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In summary, the supply chain is responsible for the overall sourcing, processing, and
delivery of goods to the end customer, while logistics specifically deals with the
movement and storage of goods between different organizations within the supply
chain
 LOGISTICS GOALS AND STRATEGIES:
 1. Quick respond to change in the market and customer orders

 2. Minimize variances in logistics service

 3. Minimize inventory to reduce expense

 4. Combine product movement by grouping shipments

 5. Uphold high quality and engage in constant enhancement

 6. Support the entire product life cycle and the reverse logistics supply chain

 Logistic functions:
 Transportation: Physically moves goods through the supply chain

 Warehousing: Receiving, storing and shipping the products to and from

production or distribution locations.

 Third & Fourth Party Logistics (3&4 PL): 3PL outsources all or much of a
company’s logistics operations to a specialized company. 4PL acts as a
single interface between the client and multiple logistics service providers.

Reverse logistics: Handles the returns, recycling, reuse or disposal of

materials that travels from the customers to the suppliers.
 Transportation management
 Transportation management is a crucial part of logistics transportation and
deals with the planning, execution, and optimization of the physical
movements of goods.

 In simpler terms, it deals with the management of transportation operations

of all types, including delivery routing, mapping, fuel costing,
warehousing, communications, tracking and managing of
transportation vehicles, traveler and cargo handling, carrier selection,
and accounting to manage and optimize the daily operations of
transportation fleets.
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 Argument about logistical.

 TRANSPORTATION PROCESSES:

1. Route Planning establishes the route the truck will take to make its deliveries. The trade-off is one of
time and expense against commitments to the customer.

2. Load Planning is arranging the shipments within the truck to minimize handling. For example, one
might organize on a first-off last-loaded model.
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3. Truck Servicing assures that the truck is fueled and otherwise properly prepared for the trip.

4. Movement is the physical movement of the truck along the planned route.

5. Delivery puts the product in the buyers hands. This would require, in the case of this LCD television, a
signature (delivery receipt) from the buyer.

* Logistics cost

 The total cost of logistics includes five major components: transportation costs,
handling costs, order processing and information costs, lot quantity costs, and
inventory carrying costs.
 Cost trade-off is a balance between cost and performance, as the lowest cost
transportation routing may not necessarily be the fastest option.
 There are four key elements associated with transportation costs: line haul, pickup
and delivery, handling, and billing and collecting.

Chapter 2 Logistics Transportation Networks

 Transportation network:
- A transportation network is defined as the network of the infrastructure that
includes the network of roads, pipes, aqueducts, and powerlines, or any structure
that permits vehicular movement or flow of the commodity.
- Transportation network analysis is used to determine the flow of vehicles that
involves different modes of transportation
 Classification of Transportation Network
- Direct network : shipment of goods from the point of origin to the point of
destination without transshipment
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- The hub-and-spoke: shipment of goods from the point of origin to the

point of destination through a transshipment point called a hub. The
the network are liner services between
spokes in
regional terminals and the hubs.
 Hub Advantages
1. Hub consolidation reduces cost. Consolidation increases conveyance utilization
2. Provides better level of service with fewer resources
3. The relative distance is lower due to higher degree of circuitry
4. Hub is more economical for smaller shipments
5. Demand pattern is highly distributed due to many destinations from each origin and
many origins from each destination
6. Provides alternate access for freight movement.
 Hub Disadvantages
1. Cost of operating the hub is higher due to facility cost, handling cost that
include unloading, loading and sorting, cost involved due to misrouting,
damage or theft.
2. Impact on service levels
3. Productivity and utilization loss
4. Congestion and delays
5. Route scheduling is more complicated for the network operator.
6. The model is centralized and day-to-day operations may be relatively
inflexible. The hub constitutes a bottleneck in the network
 Performance Criteria
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Direct Shipment

Total no. of shipments = 5

Total handling cost = 5 X $200 = $1000

Total shipment cost = 5 X ($ .75 X 1200) = $4500

Total cost = $1000 + $4500 = $ 5500

Shipment using Hub

Total no. of shipments = 3 + 5 = 8

Total handling cost = 8 X $200 = $ 1600

Total shipment cost = 8 X ($ .75 X 600) = $ 3600

Hub cost = $150

Total cost = $ 3600 + $ 1600 + $150 = $ 5350.

 Transportation Cost Components

1. Line haul: This cost component is based on the distance traveled by the
delivery vehicle and the weight and space occupied by the delivery
product.
2. Pickup and delivery: This cost component is associated with the time
spent to load or unload a transportation vehicle regardless of whether it
is full or not.
3. Terminal handling: This cost component depends on the number of
times a shipment needs to be loaded, handled, and unloaded.
4. Billing and collecting: There is cost associated with the paperwork for
each shipment and generating invoices.
 Transportation Cost Categories
1. fixed cost: Costs incurred irrespective of the
activity level over a viable range of the logistics
operations for a given capacity over a
reasonable period.
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2. variable cost: costs incurred by the actual

movement of traffic and therefore vary with the
level of the goods transported.

 Factors that Influence Transportation Cost

1. Size or volume of shipment
2. Load or flow balance
3. Location and shipment density

Chapter 3: Transportation Infrastructure &

Equipment
 TRANSPORTATION INFRASTRUCTURE
 Transportation infrastructures consist of both physical pathways and
junctions. Roadways, for instance, are often an integral component of a
transportation network.
 Transportation networks can be divided into two primary components:
nodes and links.
 Nodes are the pickup and delivery points, distribution centers, etc., at which
the goods are added, removed, or otherwise handled along the supply chain.
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 Links are the connecting points between nodes. These consist of roadways,
waterways, rivers, etc.
 Transportation Equipment
 Primary equipment is considered planes, trains, trucks, and pipelines that
provide the actual vessel for shipment.
 Secondary equipment is the machines that are used in the
loading/unloading and sorting processes within the transportation system.
 Examples include forklifts, containers, cranes etc.
 Truck load (TL) and Less Than Truck Load (LTL)
 Truck load (TL): The truck contains consignment from only one
company/person. The truck picks up the material at the origin and drops it
off straight at the destination. The consignment is delivered faster less
handling and fewer chances of damage.
 Less Than Truck Load (LTL): The truck carries consignments from
multiple customers. The truck must stop at multiple locations to deliver the
goods which increases the risk of damage to the goods and increases the
transit time.
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 Truck load (TL) and Less Than Truck Load (LTL)

- Rate of truck load is less than rate of less than truck load (RTL<
RLTL)
- to calculate the weight break;
- RTL*WT = RLTL*Wb
- Where, RTL-Rate of truck load
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- WT- Minimum weight of load to rent a truck

- RLTL- Rate of less than truck load
- Wb- Weight break
- If the shipment is less than the calculated weight break LTL is used
otherwise TL is used.
 Example Problem
 Amazon is shipping 17000 lbs. of merchandise; it negotiated with a global
freight forwarder on the following issues.
 RLTL = $0.89 per 100 lbs.
 RTL = $0.62 per 100 lbs.
 Minimum required load to get a TL rate = 22,000 lbs.
 Maximum truck load = 40,000 lbs.
 a. What is the weight break in this scenario?
 b. Which rates will it chose for this shipment?
 c. How much additional money it must pay if it wants to ship an
additional 500 lbs. of merchandise on top of 17000 lbs.?
 d. How much money it will save if it wants to reduce its shipment by 500
lbs. from 17000 lbs.?
 e. What will be the total cost if 45,000 lbs. is being shipped?

->
a. Wb=(0.62*22000)/0.89= 15,325.8 lbs.
Wb= 15,325.8/100 Cwt = 153.26 Cwt
b. Total cost for LTL (17000 lbs. = 170 cwt) = 170*0.89 = $151.3
Total cost for TL (22000 lbs. = 220 cwt) = 220*0.62 = $136.4
TL rate is chosen since it is less expensive than LTL.
c. Total cost for LTL (17500 lbs. = 175 cwt) = 175*0.89 = $155.75
Additional cost for LTL for (17,500 lbs. = 175 cwt) = $155.75-$151.3 = $4.45
There is no additional cost for TL because it can add up to 22000lb and still pay
the same price if going for TL rate.
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d. Total cost for LTL (16500 lbs. = 165 cwt) = 165*0.89 = $146.85
Money saved = $151.3-$146.85 = $4.45
There is no saving if choosing TL because it charges the same up to 22000lb.
e. Since the maximum capacity of the truck is 40,000 lbs., the extra 5,000 lbs. can
be shipped through LTL.
Cost for TL (40000 lbs. = 400 cwt) = 400*0.62 = $248
Cost for LTL (5000 lbs. = 50 cwt) = 50*0.89 = $44.5
Total cost to ship 45,000 lbs. = $248+$4.45 = $292.5

d. Total cost for LTL (16500 lbs. = 165 cwt) = 165*0.89 = $146.85
Money saved = $151.3-$146.85 = $4.45
There is no saving if choosing TL because it charges the same up to 22000lb.
e. Simple: (2 shipments)
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Since the maximum capacity of the truck is 40,000 lbs., the extra 5,000 lbs.
can be shipped through LTL.
Cost for TL (40000 lbs. = 400 cwt) = 400*0.62 = $248
Cost for LTL (5000 lbs. = 50 cwt) = 50*0.89 = $44.5
Total cost to ship 45,000 lbs. = $248+$4.45 = $292.5
Complex: (3 shipments)
Cost for TL (44000 lbs. = 440 cwt) = 220*2*0.62 = $272.8
Cost for LTL (1000 lbs. = 10 cwt) = 10*0.89 = $8.9
Total cost to ship 45,000 lbs. = $248+$4.45 = $281.7

 Rail – Infrastructure
 -Rail is a mode of transport in which rail cars carry goods on land via tracks
 Shipments can be in one rail car or can even be arranged in an entire train
depending on the goods and needs of the shipper
 Railway yards are generally at the intersection of major railway lines (links)
and serve the role of intramodal (rail to rail) interchange of railway cars.
They also serve to facilitate the intermodal (e.g., rail to Ocean) interchange
of shipments.
 Rail- Equipment:
 Intermodal boxcars: These containers can carry many different types of
freight. They can even be double stacked at times.
 Ore cars (hopper cars): Carry ore, dirt, grain and other heavy loose bulk
commodities. These can be both covered and uncovered.
 Triple decker car carriers: These carriers can carry 3 layers of freight, usually
containing automobiles.
 Maritime Infrastructure
 The oldest form of shipment is water shipment.
 Water port provides services like loading, unloading, cross docking,
temporary storage, connectivity, etc. to shippers and carriers.
 The ocean is, of course, the link that ties the nodes together.
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 It is not just a matter of sailing off, but a rather more complicated selection
of routes based on several factors. Some of these factors are predictable;
channel depth, ship beam, surrounding ship traffic, demand from
containerized service.
 Water equipment are basically vessels of various forms. There are three
main types of freight water vessels:
 cargo ships
 container ships
 petroleum tankers
 Air – Infrastructure
 Airport facilitates faster movement of goods. It works as a hub for carrier
companies such as UPS, FedEx.
 The air space traveled follows some specific routes.
 Air travel offers the most flexible routes.

 Air - Equipment
 Passenger planes: This type of planes are used to transport passengers and
air cargo.
 Cargo planes: Cargo planes are used specifically used to transport air
cargo.
 Aviation cargo loader: Cargo loaders are the trucks used in airports to carry
and load the cargo into the aircraft.
 Conveyers: Conveyers makes transporting goods/cargo into the aircraft
and out of the aircraft easy.
 Containerization
 Transportation systems have become dependent on standardized shipping
containers to ensure the timely and efficient transfer of containers
between shipping modes.
 Goods that are shipped in standard metal containers of various sizes
facilitate mechanized handling for each container.
 Mechanized handling allows the timely transfer between modes.
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 There are many sizes of container available, but the most prevalent
container size is the 40-foot box, which can carry on average 22 tons of
cargo with each haul.
 These containers are air-tight, stackable, lockable, and can be outfitted
with refrigeration for perishable loads.
 In the past, pallets were a common management unit in transportation,
but their small size and lack of protective frame made transfer between
modes of shipment labor intensive.
 Significance of Transportation Infrastructure on
Economy
 The quality and quantity of transportation infrastructure and economic
development are directly related
 Development can be seen when there is good transportation infrastructure
and highly connected networks
 Reliable and efficient transportation reduces the economic burden
 Out of the many infrastructure projects, transportation infrastructure
projects generate 5%-20% return on the invested capital annually

CHAPTER 4: Transportation Rules and Regulations

* Creation of Transportation Laws

Common Law – made by the state and federal courts, e.g., common career and
its liabilities
Statutory Law – enacted by congress, e.g., trade embargos
Transportation Rules & Regulations are for
⮚ Vehicle operations

⮚ Vehicle dimensions

⮚ Safety of operators

⮚ Safety of general public.

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Foreign trade zones

A Foreign Trade Zone (FTZ) is a secure area defined by US law as being outside
the jurisdiction of the United States Customs; no duty is paid and certain
state, local, and federal taxes are eliminated on foreign goods or material
brought into the zone, until the goods are “entered” from the zone into US
customs territory. A FTZ is associated with an air or sea port of entry.
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In the United States, the FTZ Board of the US Department of Commerce

regulates FTZs. In other places around the world, such zones are often
called “Free Trade Zones.”
Foreign goods can be shipped directly from an overseas port into a FTZ where
they will be “admitted” into the zone rather than “entered” into US
customs territory.
Once admitted into a FTZ, goods may be held for storage or may be labeled,
repackaged, processed, assembled, or manufactured into a finished
product .

 Freight forwarding.
 Moving merchandise globally and locally can be a problem, particularly if
transportation guidelines are not well understood. That is where a freight
forwarding administration can prove to be useful.
 Cargo sending is the coordination and shipment of merchandise starting
with one goal then onto the next utilizing single or different transporters.
Carriers can incorporate different strategies, including air, marine, rail, or
expressway.
 They are ready to deal with the full scope of administration tasks, from
inland transportation, booking load space, arranging cargo charges,
planning delivery, and fare archives to documenting protection claims.
 Cargo forwarding organizations use their associations with transporters,
including air tankers, trucking organizations, rail vessels, and sea liners, to
arrange the most ideal cost to move their customer’s merchandise
 Some Common Terms
 EXW (… named place) Ex works
 Carriage to be arranged by buyer.
 Risk Transfer from the seller to the buyer when the goods are at the
disposal of the buyer.
 Cost Transfer from the seller to the buyer when the goods are at the
disposal of the buyer.
 FCA (…named place) Free Carrier
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 Carriage to be arranged by buyer or the seller on the buyer’s behalf.

 Risk Transfer from the seller to the buyer when the goods have been
delivered to the carrier at the named place.
 Cost Transfer from the seller to the buyer when the goods have been
delivered to the carrier at the named place.
 What are IncoTerms?
 “Incoterms” is an acronym for international commercial terms.
 “Incoterms” is a trademark of the International Chamber of Commerce,
and is registered in several countries.
 Incoterms are a set of rules to help outline the responsibilities for both the
buyer and seller in order to maintain the sale under good sale contracts.
 Represents a universal understanding of:
o Parties Involved
o Terms of Sale
o Point of Origin
o Destination
o Party Responsible Given a Certain Condition
 E.g. FOB Norfolk, CIF Marseille

More Common Terms:

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FOB (…named port of shipment) Free on Board

Carriage to be arranged by buyer
Risk Transfer from the seller to the buyer when the goods pass the ship’s
rail.
Cost Transfer from the seller to the buyer when the goods pass the ship’s
rail
CIF (… named port of destination) Cost, Insurance, & Freight
Carriage and insurance to be arranged by seller.
Risk Transfer from the seller to the buyer when the goods pass the ship’s
rail.
Cost Transfer at the port of destination, buyer paying such costs as are not
for the sellers account under the carriage contract.

Chapter 5:
 TYPES OF MODALITY
 -Unimodalism
Unimodal transportation refers to the shipment of goods from origin to
destination using only one mode of transportation.
It's often used in road transport due to the limited infrastructure and potential
delays in wide geographical locations. Although nearly impossible to carry
between continents, it creates fewer problems and requires less tracking effort
compared to multimodal transport.
 Multimodalism

This method of freight shipment combines two or more modes of

transportation. Multimodal transportation is more common than unimodal
transportation. This method is most useful for long-distance shipments that cross
multiple state or country borders.
 Intermodal Freight Transportation
 Intermodal transportation is the movement of goods in one and the same
loading unit or road vehicle, which uses successively two or more modes of
transport without handling the goods themselves in changing modes.
 Intermodal service is about combing the modes, networks, infrastructure,
and equipment into an optimally priced integrated service offering, and
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managing that offering in a seamless fashion, such that provides a competitive

advantage to the customer as well as the service provider.

Components of intermodal transportation

 Containers: The driver of all intermodal transportation and specifically
international intermodal transportation has since its invention been the
container. Container boxes are designed to be moved with minimum labor
using common equipment and practices for quick intermodal transfers in
large units between ships, railcars, truck chassis, and barges.
 Carriers: In transportation, carriers are individuals or companies that directly
handle the shipment. The nature of intermodal freight transportation makes
the role of carriers very critical to the entire operation. Carriers provide
services either on the basis of consolidation or customized to the particular
customer. Customized services in many cases are less practical due to
factors like shipping volume and frequency of shipments. Tracking carriers
often employ consolidation as a more attractive option, usually carried out
by less-than-truckload (LTL) shipments.
 Shippers: The shipper is the party that initiates the entire transportation
process. A shipper may also be called the consignor. Shippers in most cases
are the seller of the consignment and thus are directly accountable for
ensuring the goods are delivered to the consignee. This is most commonly
the case in online buying and selling. In some less common cases, the
shipper is also the consignee. Such cases may be seen in intraparty
shipments where, for example, a company is shipping goods to a different
branch. Or when an individual relocating to a different part of the world
ships his or her property to the new location. Shippers select the carriers for
their shipments.
 Difference Between Intermodal and Multimodal
 Intermodal  Multimodal
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transportation Transportation
Intermodal Multimodal
transportation involves a transportation involves
shipper contracting with multiple modes of
multiple carriers to transport, with one
handle each leg of the carrier handling all, and
transportation process. the freight is transported
For example, a large under a single contract or
cargo shipment to bill of lading.
landlocked sites on
different continents may
require a trucking
company to transport it
to a rail yard and then to
a shipping port. The
cargo is transported via
ship, port, rail carrier,
and truck to its
destination location.

 Pros and cons of difference transportation modes:

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 Chapter 6+7 Logistics Transportation Problems

with Linear Programming
Steps for Solving Transportation Problems
Using Simplex Method

 Types of transportation problems:

1. The TP can be balanced or unbalanced.

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2. Balanced TP: When the total amount demanded

3. at all destinations is equal to the total supply
4. available at all sources.
5. Unbalanced TP: When the total demanded at
6. all destinations is not equal to the total supply
7. available at all sources.
 Solving transportation problems
- Steps in solving a transportation problems
+ Define the problem and prepare the
transportation tableau.
+ Obtain an initial feasible
solution

North-west corner method

Least-cost method
Vogel approximation
+ Identify the optimal
solution

This step seeks to make improvements to the initial

feasible until no further reduced cost of
transportation is possible.
+ Demand not equal to supply
(unbalanced problem)

A situation occurring frequently in real-world

problems is the case where total demand is not
equal to total supply.
 The North-West Corner vs Least cost method. Search and provide the
comparation between the twos.
 North-West Corner  Least Cost Method:
Method:
 1. Start from the top-left  1. Identify the cell with the
corner of the transportation lowest transportation cost in
table. the transportation table.
 2. Allocate as much as  2. Allocate as much as
possible from the available possible from the available
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supply to the demand in that supply to the demand in that

cell.
 3. Move to the right and
allocate the remaining supply
to the demand in the next
cell.
 4. If the supply is exhausted,
move to the next row and
repeat the process.
 5. If the demand is satisfied,
move to the next column and
repeat the process.
 6. Continue this process until
all the supply and demand
values are satisfied.
Chapter 8: Logistics customer services.
cell.
 3. If the supply is exhausted,
move to the next row and
repeat the process.
 4. If the demand is satisfied,
move to the next column and
repeat the process.
 5. Continue this process until
all the supply and demand
values are satisfied.

 The term fulfillment process has been described as the entire process of
filling the customer’s order.
 The process includes the receipt of the order, managing the payment, picking
and packing the goods, shipping the package, delivering the package,
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providing customer service for the end-user, and handling the possible return
of the goods.


 Pretransaction elements
 Establish a climate for good customer service.
 This element of services deals with the service level and related activities in
qualitative and quantitative terms.
 Pre-transaction elements provide the roadmap to the operating personnel
regarding the tactical and operational aspects of customer service activities
of the company
 Transaction elements:
 Include everything between a order is received and delivered to the
customer.
 During the transaction phase of customer service, a firm focusses on
retrieving, packing, and delivering the order to the customer in a timely and
cost effective manner
 This phase also includes scheduling of shipment, communication with the
customer, delivery tracking, and delivery confirmation
 Post-transaction elements:
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 This phase represents the array of services needed to support the product in
the field
 to protect consumers from defective products;
 to provide for the return of packages
 to handle claims, complaints, and returns
 Corporate customer service is the sum of all these elements because
customers react to the overall experience.
 Importance of Customer Service Elements
 On-time delivery
 Order fill rate
 Product condition
 Accurate documentation
Order cycle time
 Order Cycle Time is defined as the elapsed time between when a customer order, purchase order,
or service request is placed and when the product or service is received by the customer
 The cycle time of each order must be carefully monitored to properly judge the efficiency within
each cycle
 Total order cycle time includes order transmittal time, order processing and receiving time, stock
acquisition time, and delivery time
 Order processing and receiving time includes the bill of lading preparation, credit clearance, and
order assembly times
 Importance of Logistics Customer Service
 Service Effects on Sales:
 Poor customer service will drive customers away from the brand. Customers always inform
others regarding product quality. A negative reputation could be very hard to erase and tends to
degrade the share value of the company.
 Service Effects on Customer Retention:
 Logistics customer service plays a critical role in maintaining customer patronage and must be
carefully set and consistently provided if customers are to remain loyal to their supplier. On
average it is approximately six times more expensive to develop a new customer than it is to keep
a current customer. Thus, from a financial point of view, resources invested in customer service
activities provide a substantially higher return than resources invested in promotion and other
customer development activities.
 Modeling a Sales-Service Relationship
 Efficiency in customer service can result from the combined impact of improving the elements of
customer service, which has a quantitative effect.
 Business sales are related to customer experience and customer satisfaction. Generally, when
customer service is poor, sales decline.
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 Sales-Service Relationship by the Two-Points Method

 The two-point method involves establishing two points on the diminishing return portion of the
sales-service relationship through straight lines.
 First, set logistics customer service at a high level for a particular product and observe the sales
that can be achieved. Then the level is reduced to a low level and sales are again noted.
 Determining Optimum Service Levels
 The optimum service level is a target service level where net profit is maximum while providing
acceptable customer service. To maximize the net profit, it is imperative to maximize the revenue
while minimizing the cost at that particular service level.
 Identifying the revenue and cost for each service level will provide the logistics professionals
with a starting point to make this critical decision.
 Customer service variability
 Service variability is a characteristic that differentiates services from goods, and it can be defined
as changes in performance from one service encounter to another with the same service provider.
 Variability in any service implies additional risks and uncertainty.
 The larger the uncertainty in a supply chain the larger the costs for safety inventories, time in
transit, or cost of expedited deliveries.
 In the case of customer service, variability is generally considered negative to the overall
customer experience.
 Taguchi’s Loss Function
 A loss function of the form


 L = loss in $
 k = a constant to be determined
 y = value of the service variable
 m = the target value of the service variable
 TC = service penalty cost + service delivery cost
 - service penalty cost = k(y-m)^2
 - service delivery cost = A – B (y-m)


 If m is set to 0, y is the optimal deviation allowed from target

 Example
 Target delivery time for an auto parts supplier is 2 hours. Parts delivered
more than 15 minutes late incur a penalty of $5 off the total bill. Delivery
costs are estimated at $3 but decline at the rate of $0.25 for each minute of
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deviation from target. How much variation should be allowed in the delivery
service ?

 No more than 5.68 minutes should be allowed from the 2-hour delivery
target to minimize cost.
Chapter 9: Transportation Rates and Decision Analysis
Factors affecting transportation rates and costs
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Documentation
Bill of lading: The bill of lading, usually called by its abbreviations BOL, is the
main document used to facilitate the movement of freight.
Freight bill: The freight bill is an invoice rendered by a carrier to a consignee of
freight usually containing a thorough description of the freight, the shipper’s name,
and the point where the shipment was shipped from.
Freight claims: Either due to legal responsibilities as a common carrier or due to
overcharges, freight claims are made against carriers. Claims could be loss
damage/delay claims or Overcharges.
International transport documentation: The most distinguishable feature between
international transportation and domestic is the amount of documentation required
for imports and exports.
This problem was discussed in Chapter 6 as example problem 6.6 from a different perspective. In this
chapter we will look at it from a cost perspective. The problem states that Acme Block Company has
orders for 80 tons of concrete blocks at three suburban locations as follows:
● Northwood—25 tons
● Westwood—45 tons
● Eastwood—10 tons
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Acme has two plants, each of which can produce up to 50 tons per week.
Delivery cost per ton from each plant to each suburban location is as follows:

Northwood Westwood Eastwood

Plant 1 $24 $30 $40
Plant 2 $30 $40 $42

a. Formulate this problem (write the objective function and constraints).

b. Find the lowest cost of shipment for Acme Block Company.
Solution:
a. Formulation is as follows (discussed in Chapter 6):

b. This problem can be solved using any optimization software. The following is the solution from
MS Excel Solver:

Chapter 10
 Transportation routing refers to finding the best way to have goods delivered
from one point to another.
 Transport routing is a numerical streamlining issue with an enormous
number of constraints including vehicle limit, load arrangement, and
conveyance windows.
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 Some method transportation routing:

Freight Consolidation
 Freight consolidation is the services rendered by shipping companies to reduce the overall
shipping cost and increase the shipping security
 It is also known as consolidation service, assembly service, and cargo consolidation
 Due to freight consolidation, companies involved in the supply chain started shipping their
shipments in large quantities.
 Several small shipments are moved to a particular location and are bundled and shipped together.
Routing and scheduling methods
Sweep method:
 The sweep method requires locating all stops on a map.
 extend straight lines from the depot to all stops in all directions
 draw another line for another route
 This method is also simple enough for manual calculation even for large problems
 This two-staged process can result in timing issues en route
Savings method:
 The objective of the savings method is to minimize the total distance traveled by all vehicles and
to indirectly minimize the number of vehicles needed to serve all stop
 It is important to continually generate the most condensed route possible so that truck capacity is
maximized and efficiencies within the firm are created
 The savings method does not guarantee an optimal solution but the approach makes it possible to
find good solutions to complex problems
Shipment consolidation Methods
 Inventory consolidation: This can be achieved by stocking up inventory items as per the observed
demand. This transforms the large and full-size loaded shipments into inventory.
 Vehicle consolidation: This involves merging the pick-up and deliveries of various locations
when the vehicle capacity is lower; thus more than one pick-up and delivery are placed on the
same vehicle for efficient transportation. Vehicle routing and scheduling employ this type of
economy
 Warehouse consolidation: This consolidation is based on the fundamental principle that smaller
shipments are sent through short distances and larger shipments size are routed through longer
distances
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 Temporal consolidation: In this type of consolidation customers’ orders are retained so that larger
shipments can be made at one time instead of delivering smaller shipments several times