Transportation

Dickson K.W. Chiu

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

1
 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)

3
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 Transport-4

 Transport Choices
Primary intercity carriers Small shipment carriers
Air UPS
Truck Federal Express
Rail Postal services
Water Bus Package Express
Pipe Agents
Freight forwarders
Coordinated services Shipper associations
Piggyback Others
Birdyback Autos
Fishyback Bicycles
Taxis
Human
Electronic !!

Dickson Chiu 2006 Transport-5

Importance of Modes by Products
Hauled
Air - very high-valued, time sensitive
products
Truck - moderately high-valued, time
sensitive products. Many finished and semi-
finished 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 Transport-6

 Importance of Modes by Volume
Moved

Transportation Percent of
mode total volume
Railroads 36.5%
Trucks 24.9
Inland waterways 16.3
Oil pipelines 22.0
Air 0.3
Total 100.0

Dickson Chiu 2006 Transport-7

 Performance vs Cost
Air generally fast over
long distances and a fair
degree of relative
variability Mode /ton-mile
Rail 2.28
Water is very slow and
Truck 26.19
moderately reliable
Water 0.74
Pipe is very slow but Pipeline 1.46
reliable Air 61.20
Truck is moderately fast
and reliable
Rail is slower and less
reliable than truck

Dickson Chiu 2006 Transport-8

Rate Types
Line haul rates
Class
Freight classification of items
Rate tables of tariffs
Contract rates
Drayage (local delivery)
Commodity and contract rates
Specific rates for given shipment sizes for specific
products moving between designated points
Special service charges
Extra charges
Stop-off privilege example
Private carrier costing

Dickson Chiu 2006 Transport-9

Rate Profiles by Distance

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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 Transport-11

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 Transport-13

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 Transport-14

 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 Transport-15
 Mapquest Solution

Mapquest at www.mapquest.com
CR (2004) Prentice Hall, Inc.
Dickson Chiu 2006 Transport-16
 Routing from Multiple Points
This problem is solved by the traditional transportation
method of linear programming

4a

Supplier A
7 Plant 1
Supply 400
6 Requirements = 600

5
5

Supplier B 5 Plant 2
Supply 700 Requirements = 500
9
5

8
Plant 3
Supplier C
Requirements = 300
Supply 500
a .
The transportation rate in $ per ton for an optimal routing between supplier A and plant 1
Dickson Chiu 2006 Transport-17
 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 D
Depot Depot
(a) Poor routing-- (b) Good routing--
paths cross no paths cross

Dickson Chiu 2006 Transport-18

 Single Route Developed by
ROUTESEQ in LOGWARE
Y coordinates Y coordinates
8 8
7 4 9 13 16 7 4 9 13 16

6 10 19 6 10 19

5 6 15 20 5 6 15 20

42 8 18 42 8 18
3 5 D 12 17 3 5 D 12 17
2 3 2 3
1 7 11 14 1 7 11 14

01 01
0 1 2 3 4 5 6 7 8 0 1 2 3 4 5 6 7 8
X coordinates X coordinates
(a) Location of beverage accounts (b) Suggested routing pattern
and distribution center (D) with
grid overlay 7-14
CR (2004) Prentice Hall, Inc. Dickson Chiu 2006 Transport-19
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

Dickson Chiu 2006 Transport-20

 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 Transport-21
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?

Dickson Chiu 2006 Transport-22

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
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