On line

MATERIALS MANAGEMENT AND PHYSICAL DISTRIBUTION

Lesson 5 _ Chapter 7
- Transport within Logistics

Koh Swee Suan ( Mdm Koh )

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Course Overview_ DSCM_ MMPD FT _July 2020
SN Date Time Focus on … Description Textbook

The Enterprise, its Logistics Supply

1 8th July 12noon Chap 1
Chain
MM and PD at
2 15th July 12noon International Trade Logistics Chap 6
External/Global level
The Role of Logistics Services
3 17th July 12noon Chap 5
Providers in Supply Networks
4 22nd Jul 12noon MOCK TEST_ ASSESSMENT L1 TO 3. ASSIGNMENT

5 24th Jul 12noon Support of Transport Transport within Logistics Chap 7

and Distribution Chap 8
6 29th Jul 3.30pm Warehouse in Supply Storage and distribution
Chain Network
7 5th Aug 3.30pm Building External Relationships Chap 9
8 7th Aug 12noon Tutorial

9 19th Aug 3.30pm Procurement Chap 12

MM and PD at
26 Aug 3.30pm Internal Organization
Technology and Communications as
10 th
Enablers Chap 14
level
11 28th Aug 12noon Improving Logistics Chap 15
12 2nd Sep 3.30pm Managing Logistics operation Chap 16
13 ,14 4th Sep 8.30 am Revision and submission of Assignment by the 5 th Sept 2020
EXAMINATION_

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My Expectation
During the Lesson time…
Hand phone on silent
Be Punctual for class
Stay Focus and Be Present

 When working on Project…

 Collaborate as a Team
 Enjoy the Journey
 Aim to Excel

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Chapter 7

Transport within Logistics

7-4
 Excessive Free Trade Free Trade
Agreement Zone
Deteriorate Inventory
Control Global, Regional
Damage
Incoterm,
Pilferage Monitoring HS Code
Competition
Mitigate Risk
Planning
Business Protection
Network

Material Management Physical Distribution

I n f o r m a t i o n T e c h n o l o gy

Raw materials Organization Tangible Logistics

Product Service Provider
Supplier
components Transport Move
Manufacturer
Products Policy, Strategy, Traceable
Storage
Best Cost Goal, Target, Asset
Procedures,
People Ownership
Competitive Warehouse
Transferable
Pricing
Implement
Best Practices Is Valuable XRX
1-5
MMPD Overview
MMPD stands for Material Management Physical Distribution

MMPD at Internal
Organization
MMPD at External
Organization 1. Procurement
MMPD at Global
2. Technology and
level Support of Transport Communications
and Distribution as Enablers
1. What is an Warehouse in Supply 3.Improving
Enterprise and its Chain Network Logistics
Logistics Supply 1. Transport within 4. Managing
Chain? Logistics Logistics operation
2. International 2. Storage and
Trade Logistics distribution
3. The Role of 3. Building External
Logistics Services Relationships
Providers in
Supply Networks

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Takeaways from Lesson 5
Learning Outcomes
After this lesson, you should be able to:
• Consider the advantages and limitations of different types
of transport
• Understand the role of transport in supply chains
• Scope the extent of transport economics
• Understand the range of variables when pricing transport
• Recognise the approaches to selection of carriers and
measuring performance.

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PPTs t/a A Framework for Supply Chains by Oakden and XRX
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Leonaite © 2012 McGraw-Hill Education (Asia)
Supply Chain Network from Upstream to Down stream ...

Intramodal transport
Intermodal transport

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Sources of Risk (Not within Orgn Control)
 Shipment at Sea Challenge
Sources of Risk (Within Orgn Control)
1. Over commit to Customer
2. Inadequate Resources (Knowledge, People, Skills ,Equipment etc)
3. Silo organization
4. Inadequate communication network
5. Low staff morale
6. Grapevine network
7. Maverick buying
8. Cartel set up
9. Monopoly
10. Overestimate Supplier’s strength
11. Etc…
 Transport along the Supply Chain

Transformation
of Product

Primary Industries Secondary Industries Tertiary Industries _

_ Agriculture _ Process Assembler/Finish Product

Market

Modes of
Transport

Home
Delivery

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Modes of Transport

• Criteria that affect the choice of transport include:

Nature of goods (fragility or perishability)
Flexibility of routing
Urgency (service-level agreement requirements, such as a just in time (JIT)
operation or threat of idling production)
Transit time
Reliability
Costs.

• Considerations are based on the balance between value adding

and cost adding through a retail supply chain.

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Transport and Adding Value

Source: Supply-Linq Pty. Ltd.

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Modes of Transport
Intermodal transport
• Intermodal freight handling is a solution to the challenge of
transferring goods between modes of transport.

• Involves the use of containers to transport goods and

transferring them between multiple modes of transport without
handling the physical goods when changing modes.

• Containers of 20 ft (6.1 m) and 40 ft (12.2 m) length are the

standard in ocean freight.
• Common term for a 20-ft container is TEU (twenty-foot
equivalent unit) and FEU for a 40-ft equivalent unit.

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Modes of Transport
Intermodal transport
Variations on the standard container are:
• refrigerated intermodal containers used for perishables
• specialised 30-ft (9.1 m) containers for the plastics industry
• pallecons (a metal pallet-like base with a container built on top of it) for
chemicals
• ‘tanktainers’, consisting of a tank for liquids fitted inside a standard
container frame
• air freight containers, which are shaped to optimise the space utilisation
inside the fuselage of an aircraft
• a range of non-stackable open box containers
• specialised containers used in Europe.

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The Role of Transport in Supply Chains
- Transport Planning
- Transport Management
- Network Optimization

PPTs t/a A Framework for Supply Chains by Oakden and

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Leonaite © 2012 McGraw-Hill Education (Asia)
The Role of Transport in Supply Chains
1. Transport planning
• Key concerns of the newer approaches to transport planning are:
the design of supply networks and the specific routing and scheduling
within them

managing demand loads and the effective use of assets

environmental considerations

safety considerations play an important part (chain of responsibility

legislation)

incorporated within the chain of responsibility approach is managing

fatigue at work.
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A Supply Chain with Transport Links

Figure 7.2
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The Role of Transport in Supply Chains
2. Transport management
• Inherent risk associated with transport is non-delivery at
each stage of the goods movement to the final end user.

• Two key causes of non-delivery risk:

1. Shipment delay – this may be caused by infrastructure
disruption, operational error in scheduling, change to
the route or industrial action.
2. Shipment destruction – this may be a result of
involvement in an accident, sabotage, exposure to
weather or an adverse substance.

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The Role of Transport in Supply Chains
3. Network optimisation
• … is the science of maximising operational efficiency, given the
geographical constraints of the network within which a business
operates.
• Key challenges:
Quality of historical data
Assumptions relating to future demand requirements.

• The network efficiencies are affected by:

how well the movements can be planned and how well the
vehicles/vessels/containers can be used
technology solutions to assist network design, such as transport
management systems (TMS)
route planning for distribution.

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Plane explosion due to lithium batteries

https://www.youtube.com/
watch?v=1Sp-zjRm3Q8

shipping issues

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Transport Economics
- What are the drivers?
- Efficiency Theory
- Cost Groups
- Transport Pricing

PPTs t/a A Framework for Supply Chains by Oakden and

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Leonaite © 2012 McGraw-Hill Education (Asia)
Transport Economics

• …Is the discipline of allocating resources within the

transport sector and maximising the commercial and
operational efficiency of a transport operation.

• …Has a dependent and derived demand – it is created

in response to the demands by customers or
consumers for products to be transported.

• It operates within constraints, such as peak demands

and flow speeds limitations of specific modes.

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Transport Economics_ Key Drivers

Five key drivers in transport economics:

1. Density of product
2. Stow ability / stack ability:
a) vertical strength of the packaging (a function of
packaging quality and pallet configuration)
b) weight of the products to be stacked
c) possible movement during transport and nature
of the products
3. Handling
4. Liability
5. Market

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Transport Economics _ Efficiency Theory
• ‘Rule of efficiency’ – term used to denote efficiencies gained in
transport operations through:
minimising handling at points of transfer between modes
consolidating and break-bulk activities at freight terminals
maximising capacity of the transport vehicle
avoiding travelling empty whenever possible.
• ‘Economy of distance’ – decreasing cost per unit as the distance
increases.

Scale and
Scope Criteria

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 Transport Economics _ Cost Groups
• Business costs in general, and transport costs in particular, are divided
into four categories:
1. Variable costs – sometimes referred to as direct or marginal
costs, are inherent in operating a transport service (labour and fuel).
2. Fixed or indirect costs – unaffected by the operational variable
such as shipment volume.
3. Joint costs – created as a consequence of operational decisions
that need to be recovered.
4. Common costs or overheads – typically administrative costs,
such as company management and office facilities, are incurred on
behalf of all parts of the business.

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Transport Economics _ Transport pricing

• The decision about which approach to use concerning

transport pricing, or the pricing of transport services,
will be conditioned by business factors, such as:

the cost and value component of the commodities

to be transferred

operating conditions

economics of the customer’s industry.

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Transport Economics _ Transport pricing
• Criteria under which pricing is established are:
1.Route related e.g. interstate/intrastate, export/import
2.Distance related e.g. distance to travel, group multiple
deliveries
3.Volume related e.g. Full truck load or less than truck load,
volume discount
4.Miscellaneous e.g. container use, commodity prices, fuel
and other surcharges

• Four basic pricing approaches used by carriers:

1.Cost of service
2.Value of service
3.Fully allocated pricing
4.Risk-based contribution margin.

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Carrier Selection and Performance

PPTs t/a A Framework for Supply Chains by Oakden and

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Leonaite © 2012 McGraw-Hill Education (Asia)
Carrier Selection
• Carrier selection is a specific procurement decision made after
the mode of transport has been selected.
• Decision is based on a range of criteria:
the carrier’s capability
geographical presence
commercial competitive position
equipment availability.

• Operational factors affecting carrier selection can be grouped

into
• 1. cost
• 2. service
• 3. flexibility-related categories.

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Carrier Selection

1. Cost category factors:

What is the end-to-end total cost of working with
this carrier?

How willing is the carrier to develop a pricing

arrangement that aligns with the potential client’s
business model?

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Carrier Selection

2. Service category concerns:

Operations service (performance and low
damage/loss incidence).

Customer service (accuracy of billing, claim

investigation and processing, ability to ‘track
and trace’ the goods, performance
reporting).

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Carrier Selection

3. Flexibility-related categories addresses

the carrier’s responsiveness to:
changes in requirements
equipment availability
scheduling flexibility.

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Carrier Performance
Measuring transport performance
• Analysis of transport performance plays a crucial role in
managing the transport task.
• Good-quality data about customer requirements and
performance levels achieved by the carrier is essential… it
includes despatch and delivery dates (and in some instances
times) and damage or loss information from the receiver.

• Data is consolidated to form the transport metrics and includes:

order turnaround time
on-time delivery
loss or damage rates
inventory accuracy

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Reflections

1. What are the 5 key drivers in transport economics?

2. Describe the four cost groups that can affect the profitability in a
transport business.
3. In the Efficiency Theory of Transport Economics, list are the 4
practices in the “Rule of Efficiency”
4. Name 4 Transport performance measurements.
5. Discuss the criteria/factors that affect the choice of transport.
6. Describe the causes for non-delivery during transportation.

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