Transportation

Dickson K.W. Chiu

PhD, SMIEEE
Text: Ballou - Business Logistics Management, 5/E (Chapter
6,7)

Learning Objectives

To understand some basic domain

knowledge of transportation
To anticipate typical problems involved in
transportation planning and decisions

Dickson Chiu 2006

Transport-2

4a.1 Transport Fundamentals

Business Logistics Management, 5/E
(Chapter 6)

Transport System Defined

Performance

Average transit time

Transit time variability
Loss and damage
Other factors including availability,
capability, frequency of movement, and
various less tangible services

Cost

Line haul
Terminal/local
Accessorial or special charges
Dickson Chiu 2006

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Transport Choices

Primary intercity carriers

Air
Truck
Rail
Water
Pipe

Small shipment carriers

Agents

Coordinated services

Piggyback
Birdyback
Fishyback

UPS
Federal Express
Postal services
Bus Package Express
Freight forwarders
Shipper associations

Others

Autos
Bicycles
Taxis
Human
Electronic !!

Dickson Chiu 2006

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Importance of Modes by Products

Hauled

Air - very high-valued, time sensitive

products
Truck - moderately high-valued, time
sensitive products. Many finished and semifinished goods
Rail - low-valued products including many
raw materials
Water - very low-valued products moved
domestically, high -valued if moved
internationally
Pipe - generally limited to petroleum
products and natural gas
Dickson Chiu 2006

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Importance of Modes by Volume

Moved
Transportation
mode
Railroads
Trucks
Inland waterways
Oil pipelines
Air
Total

Percent of
total volume
36.5%
24.9
16.3
22.0
0.3
100.0

Dickson Chiu 2006

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Performance vs Cost

Air generally fast over

long distances and a fair
degree of relative
variability
Water is very slow and
moderately reliable
Pipe is very slow but
reliable
Truck is moderately fast
and reliable
Rail is slower and less
reliable than truck

Mode
Rail
Truck
Water
Pipeline
Air

Dickson Chiu 2006

/ton-mile
2.28
26.19
0.74
1.46
61.20

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Rate Types

Line haul rates

Class

Specific rates for given shipment sizes for specific

products moving between designated points

Special service charges

Contract rates
Drayage (local delivery)

Commodity and contract rates

Freight classification of items

Rate tables of tariffs

Extra charges
Stop-off privilege example

Private carrier costing

Dickson Chiu 2006

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Rate Profiles by Distance

Dickson Chiu 2006

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Rate Profiles by Volume

Should always check to

see if shipment can be
declared at the next
higher weight break for
a lower rate and lower
total charges

Dickson Chiu 2006

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4a.1 Transport Decisions

Business Logistics Management, 5/E
(Chapter 7)

12

Typical Transport Decisions

Mode/Service selection
Private fleet planning

Carrier routing
Routing from multiple points
Routing from coincident origin-destination
points
Vehicle routing and scheduling

Freight consolidation

Dickson Chiu 2006

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Mode/Service Selection

The Problem

Define the available choices

Balance performance effects on inventory
against the cost of transport

Methods for selection

Indirectly through network configuration

Directly through channel simulation
Directly through a spreadsheet approach

Dickson Chiu 2006

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Carrier Routing

Determine the best path betweenorigin and

destination points over a network of routes
Shortest route method is efficient forfinding the
minimal cost route (cf. taught in algorithm course)
The procedure can be paraphrased as:

Find the closest unsolved node to a solved node

Calculate the cost to the unsolved node by adding the
accumulated cost to the solved node to the cost from the
solved node to the unsolved node.
Select the unsolved node with the minimum time as the
new solved node. Identify the link.
When the destination node is solved, the computations
stop. The solution is found by backtracking through the
connections made.

Dickson Chiu 2006

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Mapquest Solution

Mapquest at www.mapquest.com
CR (2004) Prentice Hall, Inc.

Dickson Chiu 2006

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Routing from Multiple Points

This problem is solved by the traditional transportation
method of linear programming

4a
Supplier A
Supply 400

Plant 1
Requirements = 600

6
5
5

Supplier B
Supply 700

Plant 2
Requirements = 500
9
5
8

Supplier C
Supply 500

Plant 3
Requirements = 300

.
The transportation rate in $ per ton for an optimal routing between
supplier A and plant 1

Dickson Chiu 2006

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Routing with a Coincident

Origin/Destination Point

Typical of many single truck routing problems from a single depot.

Mathematically, a complex problem to solve efficiently.
However, good routes can be found by forming a route pattern
where the paths do not cross - a "tear drop" pattern

D
Depot
(a) Poor routing-paths cross

D
Depot
(b) Good routing-no paths cross

Dickson Chiu 2006

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Single Route Developed by

ROUTESEQ in LOGWARE
Y coordinates

Y coordinates

8
7

8
4

5
42

12

3
4
5
X coordinates

42

17

(a) Location of beverage accounts

and distribution center (D) with
grid overlay

CR (2004) Prentice Hall, Inc.

15

20
18

8
12

17

1
7

19

18

11 14

13 16
10

2
7

6
20 5

1
01
0

15
8

7
19

10

13 16

01
8 0

11 14

3
4
5 6
X coordinates
(b) Suggested routing pattern

Dickson Chiu 2006

7-14

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Multi-Vehicle Routing and

Scheduling

A problem similar to the single-vehicle

routing problem except that a number of
restrictions are placed on the problem.
Chief among these are:

A mixture of vehicles with different capacities

Time windows on the stops
Pickups combined with deliveries
Total travel time for a vehicle

Heuristic solution (see textbook)

Sweep Method
Savings Method

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One Example Methodology Warehouse

Funeral home

Determine typical weekly demand and pickups

Divide territories of equal size to minimize number of trucks
Route design within territories
CR (2004) Prentice Hall, Inc.

Dickson Chiu 2006

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Freight Consolidation

Combine small shipments into larger ones

A problem of balancing cost savings against
customer service reductions
An important area for cost reduction in many
firms
Based on the rate-shipment size relationship for
for-hire carriers
Cheaper, but what about the service effects of
holding early orders for a longer time to
accumulate larger shipment sizes?

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4a.3 Summary

23

Summary

Much domain knowledge required

Scheduling and planning involves cross-disciplinary
knowledge

artificial intelligence, algorithms, optimization

Note the data / information requirements and how IT

helps to collect / integrate the data for calculations and
decision making
Note many elementary methods are just static planning
beforehand more advanced dynamic handling
required to handle exceptions and violation of
assumptions (e.g., traffic jam / accident, order
cancellation)
Note the quality of service implication, especially
service delay
Dickson Chiu 2006
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