Transport Decisions

If you are planning for one year, grow rice. If you

are planning for 20 years, grow trees. If you are
planning for centuries, grow men.
A Chinese proverb

Chapter 7
CR (2004) Prentice Hall, Inc.

7-1

CONTROLLING

Transport Strategy
Transport fundamentals
Transport decisions

ORGANIZING

Inventory Strategy
Forecasting
Inventory decisions
Purchasing and supply
Customer
scheduling decisions
service goals
Storage fundamentals
The product
Storage decisions
Logistics service
Ord. proc. & info. sys.

PLANNING

Transport Decisions
in Transport Strategy

Location Strategy
Location decisions
The network planning process

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7-2

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
Just a few of the many
problems in transportation
CR (2004) Prentice Hall, Inc.

7-3

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 as follows:
Cost types
Transportation
In-transit inventory
Source inventory
Destination inventory
CR (2004) Prentice Hall, Inc.

Alternatives
Air Truck Rail

7-4

Mode/Service Selection (Contd)

Example Finished goods are to be shipped from a
plant inventory to a warehouse inventory some
distance away. The expected volume to be
shipped in a year is 1,200,000 lb. The product is
worth $25 per lb. and the plant and carrying costs
are 30% per year.
Other data are:
Transport
choice
Rail
Truck
Air
CR (2004) Prentice Hall, Inc.

Rate,
$/lb.
0.11
0.20
0.88

Transit
time,
days
25
13
1

Shipment
size, lb.
100,000
40,000
16,000

7-5

Cost
type

Transport Selection Analysis

Computation

Rail

Truck

TransRD
portation

.11(1,200,000)
= $132,000

In-transit ICDT
inventory 365

[.30(25)
[.30(25)
[.30(25)
1,200,000(25)]/365 1,200,000(13)]/365 1,200,000(1)]/365
= $616,438
= $320,548
= $24,658

ICQ
Plant
inventory 2

[.30(25)
100,000]/2
= $375,000

[.30(25)
40,000]/2
= $150,000

[.30(25)
16,000]/2
= $60,000

IC'Q
Whse
inventory
2

[.30(25.11)
100,000]/2
= $376,650

[.30(25.20)
40,000]/2
= $151,200

[.30(25.88)
16,000]/2
= $62,112

$1,500,088

$ 861,748

$1,706,770

Include transport rate

Totals
CR (2004) Prentice Hall, Inc.

.20(1,200,000)
= $240,000

Air

Improved service

.88(1,200,000)
= $1,056,000

7-6

Carrier Routing

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7-7

Carrier Routing (Contd)

Origin
Amarillo
A

90 minutes
138

84

66
C

84

120
90

132
126

60

348

Can be a
weighted index of
time and distance

126

156

132

48

48
D
Note: All link times are in minutes

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Oklahoma
City
I

150

J
Destination
Fort Worth

7-8

1
2
3

Its Closest
Connected
Unsolved
Node
B
C
C
D
E
F
D
F
I
D
D
I
H
D
D
H
J
D
D
G
G
J
J
J

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Total Cost
Involved
90
138
90+66=156
348
90+84=174
138+90=228
348
138+90=228
174+84=258
348
138+156=294
174+84=258
228+60=288
348
138+156=294
228+60= 288
258+126=384
348
138+156=294
288+132=360
288+48=336
258+126=384
288+126=414
258+126=384

nth
Nearest
Node
B
C

Its
Minimu
m Cost
90
138

Its Last
Connection a
AB *
AC

174

BE *

228

CF

258

EI*

288

FH

294

CD

384

IJ*

Shortest Route Method

Step

Solved
Nodes
Directly
Connected
to Unsolved
Nodes
A
A
B
A
B
C
A
C
E
A
C
E
F
A
C
F
I
A
C
F
H
I
H
I

7-9

MAPQUEST SOLUTION

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

7-10

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

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7-11

TRANLP problem setup

Solution

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7-12

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

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D
Depot
(b) Good routing-no paths cross

7-13

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

7-14

Multi-Vehicle Routing and

Scheduling

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7-15

Practical Guidelines for Good

Routing and Scheduling
1. Load trucks with stop volumes that are in
closest proximity to each other

Stops

D
Depot
(a) Weak clustering
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D
Depot
(b) Better clustering

7-16

Guidelines (Contd)
2. Stops on different days should be arranged to
produce tight clusters
F
F

T
F
F
Stop

F
T

T
F

T
F

F
T
F

T
T

F
D
Depot
(a) Weak clustering-routes cross

CR (2004) Prentice Hall, Inc.

May need to
coordinate with
sales to achieve
clusters

D
Depot
(b) Better clustering

7-17

Guidelines (Contd)
3. Build routes beginning with the farthest stop from
the depot
4. The stop sequence on a route should form a
teardrop pattern (without time windows)
5. The most efficient routes are built using the largest
vehicles available first
6. Pickups should be mixed into delivery routes
rather than assigned to the end of the routes
7. A stop that is greatly removed from a route cluster
is a good candidate for an alternate means of
delivery
8. Narrow stop time window restrictions should be
avoided (relaxed)

7-18

Application of Guidelines to
Casket Distribution

Warehouse
Funeral home
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Typical weekly demand

and pickups

7-19

Application of Guidelines to
Casket Distribution (Contd)
Territories of
equal size
to minimize
number of trucks

Warehouse
Funeral home
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Division of sales territories into

days of the week
7-20

Application of Guidelines to
Casket Distribution (Contd)

Warehouse
Funeral home
CR (2004) Prentice Hall, Inc.

Route design within territories

7-21

Sweep Method for VRP

Example A trucking company has
10,000-unit vans for merchandise
pickup to be consolidated into larger
loads for moving over long distances. A
days pickups are shown in the figure
below. How should the routes be
designed for minimal total travel
distance?

CR (2004) Prentice Hall, Inc.

7-22

Stop Volume and Location

Geographical
region

Pickup
points

1,000
4,000

2,000

3,000
2,000
3,000

2,000

1,000

3,000

Depot
2,000

2,000

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2,000

7-23

Sweep Method Solution

Sweep direction
is arbitrary
Route #3
8,000 units

Route #1
1,000
10,000 units
4,000

2,000

3,000
2,000
3,000

2,000

3,000

Depot

1,000

2,000
2,000

2,000
Route #2
9,000 units

CR (2004) Prentice Hall, Inc.

7-24

The Savings Method for VRP

Stop
dA,0

d0,A

A
d0,B

0
Depot

dB,0

d0,A
B

dA,B

0
Depot

dB,0

Stop
(a) Initial routing
(b) Combining two stops on a route
Route distance = d 0,A +dA,0 +d0,B + dB,0
Route distance = d 0,A +dA,B +dB,0

CR (2004) Prentice Hall, Inc.

Savings is better than Sweep

methodhas lower average error

7-25

Savings Method Observation

The points that offer the greatest
savings when combined on the
same route are those that are
farthest from the depot and that are
closest to each other.
This is a good principle
for constructing multiple-stop
routes
CR (2004) Prentice Hall, Inc.

7-26

Route Sequencing in VRP

AM
8
Truck #1
Truck #2
Truck #3

9
10
Route #1

PM
11

Route #9

12
1
Route #10

Route #8
Route #2

Route #7
Route #3

Truck #5

CR (2004) Prentice Hall, Inc.

4
5
Route #6

Route #4

Route #5

Truck #4

Minimize number of trucks

by maximizing number of routes
handled by a single truck

7-27

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

CR (2004) Prentice Hall, Inc.

7-28

Freight Consolidation Analysis

Suppose we have the following orders for the
next three days.
From:
Ft Worth
Day 1
To: Topeka
5,000 lb.
Kansas City 7,000
Wichita
42,000

Day 2
25,000 lb.
12,000
38,000

Day 3
18,000 lb.
21,000
61,000

Consider shipping these orders each day or

consolidating them into one shipment. Suppose that
we know the transport rates.
Note: Rates from an interstate tariff
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7-29

Freight Consolidation Analysis (Contd)

Separate shipments

Day 1
Rate x volume = cost

Day 2
Rate x volume = cost

Topeka
Kansas City
Wichita

3.42 x 50 = $171.00
3.60 x 70 = 252.00
0.68 x 420 = 285.60

1.14 x 250 = $285.00

1.44 x 120 = 172.80
a
0.68 x 400 = 272.00

Total
a

$708.60

Total

$729.80

Ship 380 cwt., as if full truckload of 400 cwt.

Topeka
Kansas City
Wichita

Day 3
Rate x volume = cost

Totals

1.36 x 180 = $244.80

1.20 x 210 = 252.00
0.68 x 610 = 414.80

$700.80
676.80
972.40

Total
CR (2004) Prentice Hall, Inc.

$911.60

$2,350.00
7-30

Freight Consolidation Analysis (Contd)

Consolidated shipment

Computing transport cost for one combined, three-day

shipment
Day 3
Rate x volume = cost

Topeka
Kansas City
Wichita

0.82 x 480 = $393.60

0.86 x 400 = 344.00
0.68 x 1410 = 958.80
Total

$1,696.40

480 = 50 + 250 + 180

Cheaper, but what about
the service effects of holding
early orders for a longer time
to accumulate larger shipment
sizes?

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7-31