Current Event Assignments 2

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Key Questions Addressed in Chapter 9

How can we assure on-time delivery at lowest total cost?

What mode(s) of transportation should be selected for delivery?

Which supplier(s) should be selected for delivery?

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Logistics Definition

The management of inventory in motion and at rest

“…that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin to the point of consumption in order to meet customers’ requirements.”

-- Council of Supply Chain Management Professionals (CSCMP)

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Logistics Costs

Three cost categories:

Transportation (the bulk of the costs)

Inventory carrying costs

Administrative costs

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Business logistics costs are declining in U.S. as a percentage of GDP

Reasons for declining logistics costs in U.S.:

Transportation deregulation

Technology advances and e-commerce

Improvements in supply chain processes and practices

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https://www.supplychainquarterly.com/departments/20190617-booming-economy-drives-u-s--business-logistics-costs-up-11-4-percent/

https://www.ttnews.com/articles/us-logistics-costs-rise-114-2018-report-says

r5

Transportation Costs Varies

Transportation costs account the majority of logistics costs,

64 percent of total business logistics costs in 2017

Less than 1% of total

purchase costs if

very-high-value,

low-weight, low-bulk

electronic goods

As much as 40% of total cost of an item if low- value, bulky, and heavy, such as agricultural commodities or construction materials

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Delivery Decision

Components of the delivery decision:

(1) What mode of transportation is most appropriate for a specific order?

(2) What carrier is the best?

(3) Which supplier offers the best value?

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Transportation Industry Segments

Air cargo

Air passenger

Truck/Motor freight

Railroad

Marine

Intermodal

Pipeline

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Modes of Transportation

Five basic modes:

Truck/motor carrier

Rail and intermodal

Pipeline

Air

Marine

Transportation trends:

Integrating modes (intermodality)

Linking modes into supply chain activities

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9

Transportation Carriers

Carriers transport property or people by any means of conveyance (truck, auto, taxi, bus, railway, ship, airplane), almost always for a charge

Once a mode of transportation has been selected, the buyer must decide on a carrier (e.g., railroad) and a specific supplier (e.g., BNSF Railway)

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Truck/Motor Carriers

Three categories:

(1) less-than-truck-load (LTL)

(2) truckload (TL)

(3) small parcel, ground

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Types of Carriers

Common carriers

Offer transportation service to all shippers at published rates, in a nondiscriminatory basis, between designated points.

Under deregulation, common carriers have considerable flexibility in establishing rates and routes.

Contract carriers

For-hire carrier that provides service to a limited number of shippers and operate under specific contractual arrangements that specify rates and services.

Exempt carriers

For-hire carriers, but exempt from regulation of rates and services.

Private carriers

Provides transportation for its company’s own products and the company owns (or leases) all related equipment and facilities.

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Mode and Carrier Selection Criteria

Required delivery time

Reliability and service quality

Available services

Type of item being shipped

Shipment size

Possibility of damage

Carrier financial situation

Handling of claims

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Third-Party Logistics (3PL) Suppliers

Integration of services desirable

transport and logistics

enable through development of supply chain information technology systems

Opportunity for logistics/transport companies to provide more value-added services under deregulation

Large and expanding global industry

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3PL Suppliers

Factors contributing to the expansion of the 3PL industry:

Increased outsourcing and focus on core competencies

Advances in information technology

Opportunities for partnerships focused on reducing supply chain costs

3PL providers can be differentiated on the basis of geographic scope and industry specialization

Potential advantages of using a 3PL

economies of scale

economies of scope

specialized expertise

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Bills of Lading

Straight bill of lading

Used when the goods have been paid for in advance of shipment and requires delivery. It contains the complete contract terms and conditions and are non-negotiable.

Short-form bill of lading

A variation of the straight bill of lading that refers to the contract, but does not include the contract details.

Order bill of lading

A negotiable instrument that can be used when goods are purchased on credit. It must be surrendered to the carrier at the destination before title to the goods can be obtained.

Clean bill of lading

states that the goods were loaded onto a vessel in good condition. It is similar to a carrier’s sign-off.

On board bill of lading

Used to indicate that cargo was loaded onto a named vessel in good condition

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Other Terms

Freight Bill

Freight Claim

Unconcealed Loss or Damage

Concealed Loss or Damage

Expediting

Tracing

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The Selection of the FOB Point Determines Four Things

Who pays the carrier

When legal title to goods being shipped passes to the buyer

Who is responsible for preparing and pursuing claims with the carrier

Who routes the freight

Since deregulation of the transport sector, purchasers

are increasingly taking control of transport arrangements

as a means of controlling costs

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Terms of Sale: Possible FOB Points