SCO 3048 Transportation and Logistics Final Questions and Answers

SCO 3048 Transportation and Logistics Final Questions and Answers Are Millennium's more or less brand conscious? Research shows they are less brand conscious and geared more towards value. A product characteristic that directly influences transport cost The products density. NOT the products market share or technical complexity. Larson's Definition of Logistics Moving things from here to there and storing them along the way. 6 Successful Supply Chain Strategies Market Saturation Driven: High profit margins through strong brands, ei: Louis Vuitton. Operationally Agile: React nimbly to consumer trends along lines of product category or geographic region, ei: Jenni-o creating a longer shelf-life. Freshness Oriented: goal is to earn a premium by providing the consumer with freshest product compared to competitors. Consumer Customizer: mass customization to hold strong relationships with end-consumers through direct sales. Logistics Optimizer: balance SC efficiency and effectiveness. Trade Focused: "low price, best value", ei: Walmart. Logistics Activities/Decisions at each Functionality Level: Strategic Planning (Top of Pyramid) Strategic Planning: strategic alliance formation, development and refinement of capabilities and opportunities, and focused/profit-based customer service analysis. Middle level of Pyramid: Decision Analysis Vehicle routing and scheduling, inventory levels and management, network/facility location and integration, vertical integration vs. third party/outsourcing Middle bottom level of pyramid functionality : management control Financial measurements such as cost and asset management, customer service measurement, productivity measurement, quality measurement. Lowest level of pyramid functionality : Transaction system functionality order management, inventory assignment, order selection, shipping, pricing and invoicing, and customer inquiry. More opportunities exists for improvements at _______ levels of functionality higher ISPs Integrated Service Providers: provide outsourcing, transportation, warehouses, value-added services, 3PL and 4PLs. Forces driving SC strategies IT, Integrative mgmt, responsiveness, financial sophistication, globalization, CONSUMER EXPECTATIONS, AND COMPETITION. Primary driver: competition What is Postponement? meeting customer demand quickly while minimizing inventory. Three types of postponement manufacturing, geographic, and combined. Manufacturing Postponement Or form postponement. No customization until final commitment and customer specifications received. Manufacturing one order at a time. Modular construction. Build a scale economy of "ready to customize" basic units. Geographic Postponement logistics postponement. Build/stock full inventory at one or few locations. Deployment of inventory is postponed until customer orders received. Manufacturing economies of scale, responsive to customers. Used for critical, high cost products (engines). Combine Postponement basic parts central and customization at the destination distributor. Ex: cars installing sound systems, GPS, etc once new car is at dealer. 4 D's of Global Logistics Distance: longer than domestic business. Documentation: more complex than for domestic Diversity: in work practices and local operating environments. Demand: cultural variations. Logistics Textbook Definition design/administration of systems to control movement and geographical positioning of raw materials, WIP, and finished goods, at LOWEST TOTAL COST. Logistics costs trends Total logistics costs are increasing but they are decreasing in percentage of GDP terms. Goal of Logistics Management To satisfy (OR DELIGHT) customer expectations for delivery of products/services while minimizing total cost. 3 areas of service benefits Availability: having inventory consistently to meet requirements. Operational Performance: time required to deliver orders. Service Reliability: quality of logistics. Accurate measurement of availability and performance over time. Traditional vs. Total cost logistics model Traditional objectives is to minimize each separate component cost, where total cost is to minimize the sum of all the parts, allowing for some high component part costs. Major functions of work in Logistics -Order Processing: demand planning, demand mgmt, demand control. The transmission of customer reqs. to the supply chain. -Inventory: directly linked to the facility network and desired level of customer service. -Transportation -Warehousing, Materials handling, and packaging. -Integration through network of facilities. The #, size, and relationship of facilities used to perform operations. What is the role and purpose of inventory, why have it? seeks to achieve customer service with minimum inventory commitment. Inventory strategy is based on a combination of: - Core customer segmentation - Product profitability - Transportation integration - Time-based performance - Competitive performance Logistics Integration requires achieving 6 objectives simultaneously: Responsiveness, variance reduction, inventory reduction or optimization, shipment consolidation, quality, and life cycle support. Procurement is now a ____ activity of the firm. Strategic Goods and services account for __ cents of every Flagstone sales dollar. 80 What are the 5 key issues that procurement focuses on? -Ensuring continuous supply - minimizing inventory investment - quality improvement of supply - supplier development (relationships, selection, continuous improvement) - lowest total cost of ownership No company has ever ____ their way to greatness saved Pareto Principle 80/20 rule. 20% of items account for large percentage of dollars spent. Why have or hold inventory? What's the purpose? Economies of Scale create purchasing, transportation, and manufacturing advantages. Balancing supply and demand. Buffering against UNCERTAINTY in SUPPLY AND DEMAND What are the sources of organizational risk? Market risk (demand risk), supply risk, and financial risk. What are the functions of inventory? geographical specialization (across different locations), decoupling (run processes for max economic lot sizes in single facility), supply/demand balancing (time between inventory availability and consumption) , buffering uncertainty. What are the 4 common measures of service level? Performance cycle (time between release of purchase order to buyer to receipt of shipment), case fill rate (% of cases ordered that are shipped as requested), line fill rate (% of order items filled completely), order fill (% of customer orders filled completely) Average Inventory= 1/2 order quantity+ SS+ In transit stock What are the components of inventory carrying cost: cost of capital, taxes (of inventory held in warehouses), insurance (based on risk or loss over time), obsolescence, and storage costs (facility expense). Basic Reorder Formula? Reorder= Average daily demand in units X average performance cycle length in days. What does EOQ balance? ordering costs and carrying costs. Assumes demand and prices are fixed. Demand uncertainty can be managed using ________. Safety Stock Independent Vs Dependent Demand Independent demand: driven by replenishment. Dependent demand: driven by a requirements system. ABC Approach typically the small number of items represents 80% of sales. Least Total Cost Calculator See Moodle. Product Movement in terms of transportation consists of two elements: Restrictive: in transit inventory is captive/inaccessible during transportation. Flexible: inventory can be diverted during shipment to a new destination. Transportation is more than __% of the cost of logistics 60 Two fundamental Transport Principles: - Economy of Scale: cost per unit goes DOWN as size of shipment goes UP. - Economy of distance: cost per unit goes DOWN while distance goes UP. Also called the tapering principle. - Max size of load and distance while meeting service expectations. Transport Participants (3 primary, 6 total) - SHIPPER - CONSIGNEE (RECEIVER) - CARRIER & AGENTS - Government - Internet - Public 5 Primary modes of transportation rail highway water pipeline air Domestic Shipments by mode and volume: truck: 70% of volume rail: 13% Water: 6% pipeline: 10% Domestic Shipments by mode and REVENUE: Trucks: 83% of revenue Truck mode has expanded rapidly since end of WWII, why? 1M miles of highway in the US, more efficient than rail for small shipments or shorter distances, many companies have their own truck fleets, +/- of pipelines: high fixed (construction) cots, lowest variable costs. Not flexible, limited to liquids and gases. Operates 24/7, no emissions, no empty container or empty vehicle return. Which transportation mode has the highest fixed cost? Pipeline Which transportation mode has the lowest fixed cost? Truck and air. Arguably truck before air. Highest variable cost? Air (fuel, labor and maintenance) Lowest Variable cost? Pipeline Operating characteristics/classifications of transportation modes Speed (time from origin to destination), availability (ability to service any locations), dependability (variance from expected delivery schedule), capability (ability to handle load size), and frequency (quantity of scheduled movements a mode can handle). Mode rankings in terms of characteristics/classifications: Best in speed: air Best in availability: truck Best in dependability: pipeline Best in capability: water Best in frequency: pipeline Lowest rank: truck with 10 pts. What is a piggyback? Intermodal transport that integrates rail and motor. Landbridge? moves containers in a combination of sea and rail transport. Oldest form of intermodal transport? Containerships Transportation seeks ____ cost and _____ service. Low; high. Economic Drivers that influence rates: distance, weight, density, storability, handling, liability, market ____ is a the first major influence on cost. Distance. Tapering Principle: Rate of cost goes DOWN as distance goes UP. ____is the second major influence on cost. Weight. Cost per pound _____ as weight increases. decreases. Density is a combination of ____ and ____. Weight and volume. Cube out rather than weigh out. Fixed costs need to be paid even when: the company isn't operating. Carrier pricing strategies for setting rates: -cost of service - value of service -combination pricing strategy -net-rate pricing strategy Cost of service carrier pricing strategy: whatever it costs the railroad to provide the service plus a percent profit margin. Use for low value goods in a highly competitive market. Value of service pricing strategy: value as perceived by shipper rather than carrier. Higher margins than cost of service because high value goods with no competition use this. Carrier Pricing Combination strategy: a value between cost of service minimum and value of service maximum. Used in highly volatile markets and changing competitive situations. Three factors determine the base rate: How much are you shipping (TL or LTL)? What are you shipping? and Where are you shipping it/how far? FOB Origin seller states the price at point of origin, and agrees to load the carrier, but takes no further responsibility. Buyer picks carrier and mode, pays transportation and assumes risk. FOB Destination seller arranges for transportation and adds charges to sales invoice. Title doesn't transfer to buyer until delivery is made. FOB: When does title transfer? See moodle document. Complexity of logistics systems in North America: open geography challenge, extensive transportation options, limited cross-border documentation needed. Complexity of logistics systems in Europe: compact geography challenge, numerous political and cultural/regulatory and language situations, and congested transportation infrastructure. Complexity of logistics Pacific Rim Challenges: Island based geography, relatively poor infrastructure, extensive water and air shipments to travel far distances. Global Logistics face: Increased Uncertainty decreased control increased variability decreased visibility 5 major differences between domestic and international operations: - performance cycle structure - transportation - operational considerations - information systems integration - alliances Performance Cycle: longer for international operations, measured in weeks/months. Requires inventory to be in transit for longer periods, so longer asset commitment. Global Sourcing increasing among low-cost countries, why? - RATIONALE driven by the need to remain competitive, with the low-wage rates reducing manufacturing costs, increasing firm's exposure to process technologies, and establishing local presence in international countries. Two Main reasons for performance metrics: To control and Improve. Others to direct and monitor. What are the four different perspectives of the balanced score card? Financial, customer, internal operations, and innovation & learning. Functional Perspective of logistics measures includes: cost customer service quality productivity asset management ____ is the most direct reflection of logistics performance. cost. Customer service/availability measures: -item fill rate -line fill rate -value fill rate -order fill rate Inventory Turnover cogs during time period/avg inventory cost during time period