Transportation in Supply Flow Networks: The Critical Processtworks
Federal Highway Administration's Freight Discussion Series -- December 2000
William DeWitt, Ph. D.
Teaching Professor
University of Maryland, College Park
Transportation and Supply Flow Networks
- Supply Flow Networks (SFN) Defined and Discussed
- Transportation's Critical Roles in SFN
- Summary
Supply Flow Networks
- Flow -- to move with a continual change of place among the parts
- Supply -- to make available a quantity
- Networks -- an interconnected or interrelated chain, group, or system
Complements of Webster's Third New International Dictionary
Significance of Supply Flow Networks
- Raw Materials sourcing is fixed and limited in scope for most materials; Related weight/bulk shedding semi-processing is similarly limited
- Manufacturing, Assembly and Warehousing are value-added exercises; CAD/CAM and postponement making them more variable in the flow
- As Channels of Distribution change, i.e., wholesalers, jobbers, distributors, retailers, driven by ecommerce, transportation requirements change dramatically
- Consumption is relatively fixed
Freight Transportation Importance
- Major Cost of Logistics -- 40 to 60%
- Integral and Essential Link for Global Supply Chains
- Dynamic Inventory Will Rival Static Inventory
Transportation as a Major Cost Component of Logistics
| Source |
Transportation Costs($ Billions) |
Transportation % of Logistics Costs |
Transportation % of Sales |
Delaney
1998 |
499
(Approx. 6% GNP) |
58 |
|
Davis & Drumm
1997 |
|
45 |
4.08 |
Morreale & Prichard
1996 |
|
43.4 |
3.13 |
Transportation Essential Linkage for International Supply Chains (Sine Qua Non)
- Logistics now viewed as part of supply chains or supply flow networks (CLM 1998)
- Global information and communication systems (Netcentricity) enhance development of international supply flow networks
- Telegraph and Railroads 100-years ago > Web and Multimodal Transportation today
- Supply Flow Networks are spatial and cannot exist without transportations time and place utilities
Increased Sourcing and Market Distance Mean Increased Transportation
- Sourcing around the world
- Marketing internationally
- Customers indifferent to space, sensitive to time
- Global Supply Flow Networks mean increased distance and transportation
- Global means increased reliance on multimodal transportation
Increased Speed of Transportation Systems
- Customers want process speed
- Achieved through:
- Variance Reduction
- Smoother Connections/Handoffs
- Technology Improvements
- RoadRailer
- FastShip
- 747-400F
- 8,000 ++ TEU's
Growing Transportation Complexity/Options and Trade-offs (Customization and Multimodal)
- Optimal Combination of
- Modes
- Equipment
- Information
- Service
- To meet
- Speed
- Complexity
- Precision
- Capacity
- Profitability
Transportation and Urban Congestion
- Linehaul capacity (point to point) is significant issue
- Critical issue is the urban congestive failure
- Population growth
- Changes in Supply Flow Network patterns to residences
In-transit (Dynamic) Inventory Will Rival Storage (Static) Inventory
- Production from mass/push to customized/pull
- Large production lots required large inventories
- Erratic transportation of today/past required safety stocks
- Inventory visible and measured in ERP worlds
- Mass customization makes lot size a unit of "one"
- Inventory is expensive (materials/parts, labor, capital = cash)
- Only want inventory stopped long enough to restage or transfer, not stopped for storage
Increased Information and Communications Systems for Transportation
- Netcentricity
- Information
- Communication
- Operational
- Control -- Capacity and Variance Reduction
- Tracking/Tracing -- Future need?
- Market
- Forecast
- Adjustments to flow/Stochastics
Wrap-up: Transportation and Supply Flow Networks
- Supply Flow Networks Make Transportation the Focus
- Fixed/Limited Sourcing and Consumption
- Ecommerce and channel changes will significantly change transportation requirements
- Transportation and Supply Flow Networks
- Major Cost of Logistics -- 40 to 60%
- Integral and Essential Link for Global Supply Chains
- Dynamic Inventory Will Rival Static Inventory
