The question is related to supply chain Management please read the requirement of the question 800-1000 words Thanks,
SCM 5000 Distribution 1 SCM 5000 Lesson 1 Introduction to Transportation & Distribution Centre Operations SCM 5000 Welcome to Humber’s Supply Chain Post Graduate Program SCM 5000 Introductions Natalie Kotikova, MBA, CCLP Professor Supply Chain Management Formerly Business Manager at Canadian Tire Cell: (416) 684 -8558 Work: [email protected] 3 SCM 5000 If you have not already…  Check BlackBoard “Getting Started”  Review Course Outline Critical Path for key dates  Check student resources available to you – all links in BlackBoard  Stay on track with Learning Materials and assignments  Have fun! – there are no exams in this course… SCM 5000 Get your phones ready – Quiz Time!  Go on Menti.com SCM 5000 Learning Objectives ◼ Describe role of transportation in the supply chain and on the economy ◼ Introduce the different transportation modes ◼ Describe purpose of warehousing and main operations performed ◼ Discuss how transportation and warehousing support the main supply chain strategies SCM 5000 What is a Supply Chain? “The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.” SCM 5000 What is a Supply Chain? “The global network used to deliver products and services from raw materials to end customers through an engineered flow of information , physical distribution , and cash .” SCM 5000 What is supply chain management? “The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging world -wide logistics, synchronizing supply with demand, and measuring performance globally.” Blackstone Jr, John H. (Ed). (2008). APICS Dictionary 12 th Edition . Alexandria, VA: APICS – The Educational Society for Resource Management. SCM 5000 What is supply chain management? “The design , planning , execution , control , and monitoring of supply chain activities with the objective of creating net value , building a competitive infrastructure, leveraging world -wide logistics, synchronizing supply with demand, and measuring performance globally.” Blackstone Jr, John H. (Ed). (2008). APICS Dictionary 12 th Edition . Alexandria, VA: APICS – The Educational Society for Resource Management. SCM 5000 SCM 5000 SCM 5000 SCM 5000 SCM 5000 Transportation in Canada, 2014, Transport Canada © Her Majesty the Queen in Right of Canada, represented by the Minister of Transport, 2015. Freight Transportation Corridors SCM 5000 Key transportation points … Pacific Highway Emerson Sarnia Welland Canal Lacolle St. Lawrence Seaway Detroit / Windsor Fort Erie / Buffalo SCM 5000 What about the modes???? SCM 5000 Modes of Transportation  Rail  Truck  Water  Air  Pipeline  Intermodal SCM 5000 Four Types of Economic Utility … What does Transportation provide? Time Form Possession Place SCM 5000 Transportation accounts for nearly 45% of the typical logistics costs in a company: Source: © 2013 Establish, Inc.; The Establish Davis Logistics Cost and Service Database, August 26, 2013 Survey of companies started in 1974; extensive database. 2013 average logistics costs as a % of sales: 12.48% 44% 22% 23% 6% 4% Transportation Warehousing Inventory Order Entry / Customer Service Administration SCM 5000 The transportation industry is changing …  Covid Impacts  Competition  Globalization – offshore sourcing  Outsourcing to Third Party Logistics (3PL) providers  Mergers  Technology – AI, blockchain, social  eCommerce – Last mile Logistics What about the environment? What might this mean for transportation? SCM 5000 What is Landed Cost? Selecting a partner  What vendor will you choose if… 25  Quote cost: ⚫ From China: $10 ⚫ From US: $15  Quote cost: ⚫ From China: $500 ⚫ From US: $450 SCM 5000 Key terminology:  Landed cost =  Product cost + transportation cost + duties + taxes When sourcing local versus off – shore products, understanding landed cost is critical. What other costs must be considered? SCM 5000 Role of the Distribution Centre (DC) Is Warehouse the same as a Distribution Centre? SCM 5000 Major processes within a Distribution Centre (DC):  Receiving  Put -away  Storage  Picking  Replenishment  Shipping  Cross -docking eliminates put -away and replenishment steps, reduces labour associated with picking . SCM 5000 Supply Chain Strategies Transportation and DC operations must support the company’s competitive strategy:  Customer -centric…..responsive  Product innovation….differentiation  Operationally efficient….cost Each can be used with anticipatory or responsive supply chain models  Anticipatory – forecast driven  Responsive – demand driven SCM 5000 Recap  Canada’s transportation network reflects geography and population density  5 transportation modes + Intermodal  Landed cost important  Distribution Center (DC) processes  Supply Chain strategies support firm’s strategy SCM 5000 Assignments / Next Steps  Discussions: Introduce yourself  Review materials posted in Blackboard in Module 1 – articles and video  Participate in Graded Discussion : How is Supply Chain changing?  Get a textbook for the course and read Chapter 1  Optional: R eview study questions with solutions  Study questions are not for handing in; they are to assist your learning. SCM 5000 Distribution 1 SCM 5000 Lesson 2 Total Cost Concepts Rail Mode SCM 5000 Today  Menti Quiz – Recap lesson 1  Part 1: Transportation role in Supply Chain  Part 2: Rail Mode  Group Work – Google Slides  Costing and Pricing exercises – in Blackboard SCM 5000 Who is going to be a Menti winner today? https://www.mentimeter.com/ SCM 5000 Today’s Learning Objective ◼ Describe where transportation fits in the supply chain ; and the functions it performs. ◼ Discuss the economic drivers that impact transportation costs. ◼ Define transportation participants and service characteristics ◼ Describe the characteristics of the rail mode in North America and when its use is appropriate ◼ Perform simple rail costing exercises SCM 5000 Transportation in the Supply Chain Customer Supplier Supplier Supplier Distribution Center Inbound Customer Customer Outbound Reverse Transfers Consolidation Distribution SCM 5000 Transportation functions  Product / passenger movement  Product storage … yes it happens!  Diversion while in transit: improved systems and visibility make this a viable means to meet customer needs  Creation of value through “time & place” utility SCM 5000 Canada’s transportation networks …  Fundamental to Canada’s economic health  Played a historical role in the development of the country:  Rail  St. Lawrence Seaway  Makes an economic, social, and political impact SCM 5000 Key Stakeholders (Roles) in Transportation  Shipper (supplier, consignor, origin)  Shipment originates here  Customer (consignee, destination)  Shipment ends here  Carriers & Agents  Carrier: transportation organization providing service  Common carriers provide service to general public; private carriers provide service to own organization  Agents: Brokers & Freight Forwarders  3 rd Party Providers (3PLs)  Other stakeholders:  Government  Public SCM 5000 Macro – economic concepts …  Aggregate Demand:  For long range planning and strategic decision making, economists and governments sometimes use Aggregate Demand measured in ton -miles or tonne -kilometres for freight  Aggregate Demand = ∑ shipment weight x distance carried  Price versus Demand:  Overall Aggregate Demand influenced little by price  Broader economic factors (growth, recession) tend to determine the overall demand for transportation services  But choice of mode and carrier is influenced by price (price elastic) and service (same price but better service) SCM 5000 What factors influence transportation economics?  Distance  Weight  Density  Stowability  Handling  Liability  Market  Season + Weather + Geography Here’s two situations: 1) Shipping pallets of canned soup from Toronto to Montreal 2) Shipping hand -made guitars from St. John’s, Newfoundland to Dawson City, Yukon How would these economic drivers impact the costs of these two moves? SCM 5000 Costs in Transportation:  Fixed:  Infrastructure, equipment and assets; e.g., vehicles, tracks, terminal buildings, etc.  Administrative overhead  Semi -variable:  Vehicle maintenance  Licenses and regulatory fees  Variable – costs which vary directly with distance & time:  Fuel  Labour SCM 5000 Each transportation mode has different service characteristics:  Transit time … time from origin to destination  R eliability … consistency of transit time  A ccessibility … ability to serve the origin/destination  C apability … ability to meet the needs of the freight/shipper  S ecurity … loss and damage Let’s discuss the implication of each characteristic on: 1) Inventory levels 2) Transportation costs 3) Customer service SCM 5000 Selecting transportation mode is part of a trade – off decision … But optimizing the supply chain is not a simple task Source: © 2013 Establish, Inc.; The Establish Davis Logistics Cost and Service Database, August 26, 2013 Taken together = Total Cost Supply Chain decisions = trade -offs44% 22% 23% 6% 4% Transportation Warehousing Inventory Order Entry / Customer Service Administration SCM 5000 Let’s consider a Total Cost Analysis  Total Cost = All Supply Chain Costs taken together  Optimizing supply chain = best solution (not the cheapest)  Progressive levels of optimization: “Level 3” requires collaboration across the supply chain. Difficult to achieve: the challenge is how you share the benefits. Level 1 •Within the firm logistics activity – transportation, warehousing, procurement Level 2 •Broader within company – marketing, manufacturing Level 3 •Across the supply chain – including trading partners SCM 5000 An example of total cost optimization Customer Supplier Distribution Center Supplier Customer Customer Transit Time = 6 days ◼ Reduced lead time; lower inventory at DC ◼ Higher inbound transportation cost ◼ Net savings of $200 K Cost reduction Cost increaseType of Otimization Option Trans Inv. Carrying Cost WH Total Logistics Costs Increased Profits from higher Sales Net Cost Base Case Single DC 1000 4600 1000 6600 6600 Intermodal shipments from factory using rail. LT=6 days Level 1 Single DC 1200 4200 1000 6400 6400 Team trucking. LT = 2 days SCM 5000 Network redesign from base case … Customer Supplier RDC Supplier Customer Customer ◼ Higher total costs for logistics ◼ Faster service to market gains increased profits ◼ Incremental savings over previous options RDC Cost reduction Cost increaseType of Otimization Option Trans Inv. Carrying Cost WH Total Logistics Costs Increased Profits from higher Sales Net Cost Base Case Single DC 1000 4600 1000 6600 6600 Intermodal shipments from factory using rail. LT=6 days Level 1 Single DC 1200 4200 1000 6400 6400 Team trucking. LT = 2 days Level 2 2 RDC’s 1100 4500 1200 6800 500 6300 RDCs are closer to customers on average, more safety stock, warehouse handling cost, customers receive orders faster SCM 5000 Further variations on network design The key challenge for logistics managers …choosing the “best” combination of network design & operational process.Type of Otimization Option Trans Inv. Carrying Cost WH Total Logistics Costs Increased Profits from higher Sales Net Cost Base Case Single DC 1000 4600 1000 6600 6600 Intermodal shipments from factory using rail. LT=6 days Level 1 Single DC 1200 4200 1000 6400 6400 Team trucking. LT = 2 days Level 2 2 RDC’s 1100 4500 1200 6800 500 6300 RDCs are closer to customers on average, more safety stock, warehouse handling cost, customers receive orders faster Level 2 3 RDC’s 1000 4800 1500 7300 800 6500 RDCs are closer to customers on average, more safety stock, warehouse handling cost, customers receive orders faster Level 2 Single DC supplied by team trucking, faster customer delivery by using Air Transportation 2000 4200 1000 7200 1000 6200 Less safety stock, gain market share because faster service to customers SCM 5000 Key takeaway: Supply chain management is about trade -offs … ◼ Profit = Revenue – Cost ◼ Cost = ∑ transportation costs + DC costs + inventory costs + customer service costs ◼ Subject to: ◼ ≥ Service Targets ◼ ≥ Profit Targets ◼ = Corporate Strategy ◼ Within your organization ◼ Across the Supply Chain …obviously there are multiple solutions. SCM 5000 Rail Mode Freight train en route near Jasper, Alberta. © Canadian National, www.cn.ca SCM 5000 SCM 5000 Rail is an important mode in Canada…  Rail is the primary mode for bulk transport of Canada’s resources:  Grain, potash, coal, iron ore, forest products  Dominated by two Class 1 carriers with greater than 90% of total rail tonne -kilometers (Source: Transport Canada) :  CN – Canadian National  CP – Canadian Pacific SCM 5000 History Donald A. Smith driving the last spike to complete the Canadian Pacific Railway, Craigellachie , British Columbia, November 1885 Ross, Alexander (Photographer). (1885). Last Spike [Photograph], Retrieved June 4, 2012, from: http://www.collectionscanada.gc.ca/05/0529/052920/05292086_e.html  First railroad – 1830, Liverpool – Manchester  First in Canada – 1836, St. Jean – La Prairie  1871 -1885, Canadian Pacific Railways  1923, Canadian National Railways  Grand Truck  Grand Truck Pacific  Intercolonial  Canadian Northern  National Transcontinental SCM 5000 23 Classes Of Railways  Class I  Revenue greater than $250 million  Class II  Revenue between $40 and $250 million  Class III  Revenue less than $40 million Source: the Institute of Railway Training Canada SCM 5000 Key facts for rail in Canada  Economic contribution:  $1B in annual taxes  Fund, maintain and invest in expanding own infrastructure (unlike other modes)  32,000 jobs (average wage $92,000) + 60,000 jobs in the railway supply sector  Move 75 million passengers and $280 million worth of goods each year  Influencing factors over the past few years:  Overall performance of the Canadian economy  Shifting trade patterns to Pacific Rim resulting in growth of marine intermodal  High diesel cost … more interest in intermodal  Green opportunities  Shift of oil to rail due to pipeline capacity issues  Rail safety concerns Source: A Parliamentarian’s Guide to Canada’s Railways – Jan 2016 SCM 5000 CN Rail Network CN Web Site © Canadian National, www.cn.ca SCM 5000 CP Rail Network CP Web Site  Visit their website … http://www.c pr.ca  Network & facilities  Metrics & KPIs SCM 5000 “CN serves both domestic and overseas customers with its time – sensitive intermodal service at Brampton Intermodal Terminal in Brampton, Ontario.” “CN’s exclusive rail access to major mines and smelters makes it a transportation leader of copper, lead, zinc concentrates, refined metals and aluminum” Images and captions: © Canadian National, www.cn.ca SCM 5000 Rail Infrastructure  Tracks and land  Tunnels, bridges  Terminals  Engines  Cars SCM 5000 Typical Rail Costs:  Fixed Costs 30%:  Tracks, rights -of -way (land), terminals, rolling stock, property taxes, etc.  Semi -variable Costs 20%:  Maintenance of tracks and rights -of -way, etc.  Variable costs 50%:  Labour , fuel  For example CN 2017 results as per annual report:  Labour about 32%  Fuel about 21% SCM 5000 Rail Profitability  Operating Ratio (key measure of profitability) Operating Expenses —————————– x 100 Operating Revenue Expressed as a Percent. Railroads tend to be in the 60 — 75 range. SCM 5000 Rail Issues & Trends  Growth of intermodal and shifting trade patterns (CN investment in Port of Prince Rupert)  Modernization of service (removing old locomotives, Precise Schedule Routing – less switches and smaller yards – improves throughput)  Competition for captive shippers ( accessibility ):  Government regulations offer protection by prescribing rates for movement of goods to an interchange point (CN – CP connection)  These are called interswitching rates (< 160 km) and competitive line rates (> 160 km)  Note: Bill C30, Fair Rail for Grain Farmers Act , increased the old 30 km limit.  Reliability of Service:  Rail Freight Service review conducted by Canadian government; tabled in 2011.  Aimed at improving service where near monopolistic situations exist.  U.S. – Canada Border Security  Limited trackage , track abandonment  Safety and the environment: Lac Megantic disaster! SCM 5000 Rail Best Applications  High weight, low value (at least 30,000 pounds; 13,608 kg)  Long distances (at least 300 miles; 482 km)  Bulk products, commodities  Non -fragile  Containers (intermodal) Rail versus Road … specific situation will dictate the trade – offs between service & cost … remember our Total Cost discussion. SCM 5000 What am I??? DEFINITIONS AND EXAMPLES… SCM 5000 Some Rail Terminology  Ton -mile or tonne -kilometre (metric)  TOFC  COFC  Drayage  Demurrage  Unit train  Transloading  Gateway  Rail classification yard (switching yard) SCM 5000 Various methods are used to price rail movements … ◼ Pricing by Ton – Mile; Tonne – Kilometer ◼ Take care to ensure units are correct: tonne vs. ton; km vs. mile ◼ Pricing by Car Load ◼ Pricing by Unit Train ◼ Pricing by Intermodal Container ◼ The origin – destination (distance), the commodity, and the requirement for any other services will affect the total price. SCM 5000 Mode Comparison Water Rail Truck Air Pipeline Investment + Assets HIGH Operating Costs LOW Rates LOW Transit Time MED Reliability MED Capability HIGH Accessibility MED Security MED LOW – MED – HIGH – HIGHEST SLOWEST – SLOW – MED – FAST – FASTEST SCM 5000 Railcost.xls … pick -up in Blackboard Example 1: Shipper Using the following data, determine the total freight cost. Commodity: 9,000 tons of coal Origin -Destination: Cranbrook , BC – Vancouver (540 miles) Operating cost: 0.016 $ per ton -mile Step 1: Calculate total ton -miles 9,000 tons x 540 miles = 4,860,000 ton -miles Step 2: Calculate total cost 4,860,000 ton -miles x 0.016 = $77,760 SCM 5000 Example 2: Railway Develop the total operating cost for a train moving from Montreal to Detroit based on the 4 cost categories: fuel, labour , maintenance, & ownership Data: Total freight tonnage of 3,705 tons Total trip miles of 571 miles Total fuel usage of 3,520 Imp. gallons Fuel cost of C$2.65 per Imp. gallon Total direct labour hours of 46 hours Average wage rate of C$43.40 per hour (incl benefits) Total maintenance and ownership cost of C$5,750 for entire trip SCM 5000 Example 2: Railway Step 1: Calculate fuel cost 3,520 Imp. Gal x $2.65 per Imp. Gal = $9,328.00 Step 2: Calculate labour cost 46 labour hrs x $43.40 per hour = $1,996.40 Step 3: Calculate total cost $9,328.00 + $1,996.40 + $5,750.00 = $17,074.40 SCM 5000 RECAP : Key Learnings from Today’s Lesson …  Inbound, outbound …don’t overlook reverse & transfers  Aggregate demand used for planning purposes  Total cost analysis & optimization  Modes can be defined by their service characteristics  Rail is significant transport mode in Canada, especially given our commodity based economy  Rail mode best for low value, long distance shipments. SCM 5000 Assignment  Read SCM Textbook: Chapter 3 (Railroads)  In Blackboard pick -up costing and pricing exercises (railcost.xls, railpricing.xls, aggregate demand.xls) SCM 5000 Appendix SCM 5000 Ton versus Tonne  Tonne = 1000 kg (metric)  Ton = 2000 pounds (US & Canada)  In the UK, this may be referred to as a “short ton”.  Ton = 2240 pounds (UK)  May be referred to as a “long ton”.  In any of our exercises, it will be clear indicated:  Tonne = 1000 kg  Ton = 2000 pounds  Note: “ lb ” can be used to denote “pounds” Rail Terminology Instructions 1. Please remember you’re working in a live document that multiple users will be working in. 2. Adjust ONLY the slides assigned to your group 3. Do not apply a ‘theme’ as this will adjust everyone’s slides 4. You may add slides to the presentation if you need more room to explain your term 5. Have fun! Work together, Listen to each other, be respectful and inclusive 🙂 6. Use your textbook and/or internet sources to figure out and define your term Group 1 – TOFC vs COFC TOFC : Trailer on Flatcar ( Piggyback) : Usually used for transporting cars. COFC : Container on Flatcar : Saves more space, More Efficient, less fuel used, more revenue loads in a given train length, less wear and tear on track, etc. Issue with COFC: Height Clearance (E.g North America) Two successive modes (rail, road, water, air) in boxes placed on flatcars Different mechanism is required. Group 2 – Unit Train (Mete-Darshana-Ahmed-Anurag) A unit train, also called a block train or a trainload service, is a train in which all cars carry the same commodity and are shipped from the same origin to the same destination, without being split up or stored en route. – All wagons should carry same commodity – Commodities are shipped from same origin to one destination. – A unit train is generally defined as a train of 100 or more rail cars. – Directly connected to the road and internal waterway transport systems. – Trains move as a single unit and are not re-classified or broken apart until delivered to the final customer. Unit trains includes: ● Frac sand trains ● Grain trains ● Auto trains ● Potash trains ● Lumber trains ● Crude oil trains Group 3 – Switching (SwitchYard) It is a series of tracks in a rail network for storing or loading and unloading rail vehicles and locomotives. Unloading is to be done specified lines. Let’s say, a train full of Oil is moving from Toronto to Vancouver but we need to divide that and send half of it to Prince George. There would be a yard where the unloading happens. Rerouting purpose Group 4 – Drayage Drayage shipping is generally a short run from the rail siding into a warehouse. The term originally meant to transport by a sideless cart or dray. Companies that provide drayage shipping are usually a specialized carrier that has the equipment to move a container from the train to the chassis in order to be trucked to the warehouse. So drayage is very important in logistics. Group 5 – Demurrage ● Definition: “Demurrage” means the charge levied for the detention of any rolling stock after the expiry of free time, if any, allowed for such detention. ● Who pays the demurrage charge: In most of the cases it’s the receiver who pays the demurrage ● Major causes of delays: 1. Delays due to incorrect documentation. 2. Delays due to late receipt of documents. 3. Delays due to loss of documents. 4. Delays due to customs clearance or cargo inspection. ● How to avoid Demurrage 1. Monitor cargo condition and quality. 2. Optimize the logistics and supply chain. 3. Assess the performance of LSPs (Logistics Service Provider) 4. Reduce inventory 5. Better trucking plan SCM 5000 Distribution 1 SCM 5000 Road Transportation Lesson 3 Truck Transportation SCM 5000 Week 2 Recap https://www.mentimeter.com/app SCM 5000 Today’s Learning Objectives • Understand trucking industry structure • Describe the characteristics of the truck mode and reasons for its selection • Discuss trends and issues • Discuss cost drivers • Do sample costing and pricing problems SCM 5000 Trucking Industry is significant to Canada’s economy … • Main mode for manufactured goods – 75% of manufactured goods are transported by truck • Ontario heavily dependent on this mode: high traffic in/out of the US: • Nearly 57% of US -Canada trade via truck mode (more imports!) • 78% of this via Ontario & Quebec border crossings • Revenue: $39.5 5 billion (2018) • 66.5M shipments (2018) • High employment – one of the most common jobs in Canada • 302,000 truck drivers ( 2018 survey) • Driver shortages and cutthroat competition Source: https://www.statista.com/topics/5047/trucking -industry -in -canada/ SCM 5000 SCM 5000 Motor carrier ownership structure • Private fleets: • Small companies for local pick -up and delivery (PUD); • Large corporations which have significant backhaul volumes, e.g. beer companies • For Hire: • Common – Required to offer services to all shippers • Contract – Does not have to serve the general public, may offer specialize equipment SCM 5000 Operational Considerations • Owner Operator • Company Driver SCM 5000 Equipment Types Many! SCM 5000 Equipment Types … Many! • Straight truck – most common urban truck • Tractor Semi -trailer: separate tractor and trailer • Trailer lengths: 28, 40, 45, 48, 53 ft. • Max Gross Vehicle Weights depend on type of vehicle, number of axles, length of unit, time of the year For photos, see: www.freightlinertrucks.com www.manac.ca SCM 5000 Straight Truck SCM 5000 Truck / Power SCM 5000 Dry Van SCM 5000 Truck and Trailer SCM 5000 Flatbed Trailer SCM 5000 Flatbed Loaded SCM 5000 Conestoga Curtain Side SCM 5000 Chassis SCM 5000 Chassis with Container SCM 5000 Equipment Types – LCVs • LCV (Long Combination Vehicle) – e.g. Double Tractor -trailer, Triple Tractor -trailer • Ontario program allows limited use of LCVs up to 40 m … • Controversial. Why? SCM 5000 Innovation: 60 – foot trailer vs 60 – ft intermodal container SCM 5000 Innovation in trucks Volvo Develops Autonomous Vehicle Called Vera An SAE -Level -4 autonomous truck recently completed a coast -to -coast commercial freight run hauling refrigerated freight for Land O’Lakes. The 2,800 -mile, hub -to -hub trip from Tulare, California, to Quakertown, Pennsylvania, was completed in less than three days, hauling a fully -loaded refrigerated trailer of perishable cargo. SCM 5000 SCM 5000 Platooning technology – video in BB SCM 5000 Cost factors which impact the operation of truck fleets: • Fixed (low compared to rail) • Publicly owned, costs recovered by gas taxes, tolls • Terminals (LTL) • Semi -variable • Equipment (lease vs own) • Maintenance • Insurance • Licenses • Variable (>60 % ) • Employee wages and venefits ~25.3% • Payments to owner -operators ~22.1% • Fuel ~15.1% • Tolls Operating Expenses —————————– x 100 Operating Revenue OR = OR ~ .87 to .89 Source: Statistics Canada, 2019 for -hire survey, published April 2021 https://www150.statcan.gc.ca/n1/daily – quotidien/210414/dq210414b -eng. htm SCM 5000 Delivery Methods • TL (Truck Load) • Point -to -point • Mainly line -haul costs only • LTL (Less Than Truckload) • Higher fixed costs; e.g., terminals • Pickup and Delivery (PUD) and line -haul cost components • Specialized – Bulk, Courier/Parcel SCM 5000 TL Rates Transportation Rates: TL • $ per mile/km • In practice, most often quoted per load: $ for 53’ from A to B. • Additional charges for “extra” services, fuel surcharge, etc. LTL Rates – need to review Truck Utilization Concepts: When is a truck considered full? • Weigh -out: • Load to maximum allowable weight • Cube -out: • Load to total available volume without exceeding weight limit; most common • Maximize utilization by mixing heavy and light goods: • Example: floor tiles & carpets SCM 5000 LTL Rates • $ per CWT (hundred weight or 100lbs) by freight class based on shipment weight • Types of commodities affect rates → Freight class • Freight Class is defined by the National Motor Freight Traffic Association (NMFTA) • Depends on Weight, storability, handling & liability also used to classify products. • To obtain a price quote you will need your freight class. • See page 164 – 167 in SCM Text Volume 1 for example. Transportation Rates: LTL E.g. class 50 – Clean Freight – Fits on standard shrink – wrapped 4X4 pallet, very durable – cheapest SCM 5000 Example: LTL Rate Table • Stroh, Michael B. The Class Rating System Retrieved from: http://www.logisticsnetwork.net/articles/Class Rating System.pdf SCM 5000 LTL Pricing characteristics: • The price per cwt decreases as your shipment size increases. Cheaper per pound to ship a 6,000 lb shipment than a 1,000 lb shipment. • Break weight concept : as your shipment size gets closer to the next rate category, it is cheaper to “bump” your shipment up to the minimum of the next category. • Normal pricing assumes a standard density for the shipment: 10 lbs /cubic foot (This may vary by carrier) . For pricing calculations, the higher of actual weight or volume weight applies. This concept is sometimes referred to as chargeable weight or dimension weight. • Calculate pseudo -weight by multiplying cu.ft . by 10 and compare with actual weight. Use the higher of the 2 to calculate freight charge . SCM 5000 Sample Break Weight Calculation Weight (lb) 500 -999 1000 -1999 2000 -4999 >5000 Rate ($/cwt) $21.00 $19.00 $17.50 $16.00 ◼ Break weight calculation: Break Weight (lbs.) = Min Weight For Lower Rate x (the Rate for Higher Weight / the Rate for Lower Weight) ◼ Break Weight = 1000 lb x ($19.00 / $21.00) = 905 lb ◼ Advantageous to rate your shipment at 1000 lb if it is greater than 905 lb ◼ 906 lb/100 x $21.00 = $190.26 > 1000/100 x $19.00 = $190.00 SCM 5000 Both TL and LTL Pricing is influenced by many factors: • Commodity (Freight Class for LTL) • Dimensions • Weight • Distance • Fuel Surcharge • Services provided (loading, stairs, distance to dock) • Wait times (pickup, delivery, border crossing) • Headhaul only, backhaul available • Transit time • Team trucking • LTL over the road • LTL using rail intermodal • Competition SCM 5000 What might be the implication of chargeable weight and weight breaks in “real life”? • Shipment planning: • Order consolidation to achieve increased shipment size • Rate shopping and carrier comparison • Product, packaging and unit load design: • Minimize awkward shape / cube SCM 5000 Comparison with Other Modes • Best for “accessibility” • Fastest for distances of less than 500 miles (800 km) • Lower TL minimum weight requirements than rail, water • Smoother ride (less damage) than rail, water • High reliability • High security • Capability • Limited for weight, size SCM 5000 Mode Comparison Water Rail Truck Air Pipeline Investment + Assets Operating Costs Rates Transit Time Reliability Capability Accessibility Security LOW – MED – HIGH – HIGHEST SLOWEST – SLOW – MED – FAST – FASTEST LOW HIGH MED FAST HIGH HIGHEST HIGHEST MED HIGH LOW LOW MED MED HIGH MED MED SCM 5000 Current issues affecting the Truck mode… 1. Hours of service (HOS) 2. Driver shortage 1. Private fleets are now actively hiring (Walmart has 3 rd largest fleet in NA) and for the first time hiring from driving schools of new/young drivers who would have challenge getting insurance) 3. Operating cost – equipment, licenses, insurance 4. Multiple jurisdictions with different regulations re. weights, lengths 5. Border congestion and Vaccine mandates (est. 15% -20% negative impact in 2022) 6. Cabotage rules SCM 5000 Technology and Trends • Asset utilization • GPS, satellites, cell phones, delivery appointment scheduling • Fuel efficiency • Route optimization, fuel price tracking, truck design • Intelligent transportation systems • Electronic toll collection, border customs clearance • GHG (Green House Gas) reduction initiatives • Speed limiters, high efficiency engines, idling, hybrids (courier delivery trucks) SCM 5000 Select Terminology – GOOGLE slides! • TL • LTL • Linehaul, Backhaul, Deadhead • Hub -and -spoke network • Pickup and delivery (PUD) • CWT • Cabotage • Accessorial Charges SCM 5000 Google Slides – Team Presentations SCM 5000 Costing and Pricing examples … • Chargeable weight.xlsx • Rate questions.xlsx • Truck cost.xlsx DO YOUR HOMEWORK! SCM 5000 RECAP: Key Learnings from Today’s Lesson … • Truck transport plays a very significant role in ensuring the effective movement of trade in Canada, especially for US exports. • Truck transport ranges from local Pickup & Delivery to transcontinental movements, both TL & LTL • Fast, highly reliable and secure…often the best mode up to 500 miles (800 km). • Important to know how truck compares to other modes for 5 key characteristics. SCM 5000 Assignments • Read SCM Textbook Chapter 2 (Motor Carriers) • Self -study: watch Rate Calculations videos in BB and complete practice exercises in Excel – chargeable weight.xls, rate question.xls, truckcost. xls • Participate in the weekly Discussion – 2 % • For more details on the trucking industry visit Statistics Canada website (link to 2019 annual For -Hire Trucking Survey): https://www150.statcan.gc.ca/n1/daily – quotidien/210414/dq210414b -eng.htm SCM 5000 Distribution 1 SCM 5000 Lesson 4 Marine & Intermodal https://www.youtube.com/watch?v=HxXJ8Q2GCs4 How Amazon Beat Supply Chain Chaos With Ships, Containers And Planes SCM 5000 TO DAY • Road Transportation recap – Menti quiz yes! • Water Transportation • Overview, Equipment (ships), Infrastructure (Ports, Locks) • Weight Measure Rate calculation • Break • Intermodal SCM 5000 TO DAY ’ S L E A R N I N G O B J E C T I V E S ▪ Describe the characteristics of the water mode and reasons for its selection ▪ Discuss cost drivers, issues, trends ▪ Do sample costing, pricing problems ▪ Describe intermodal transportation ▪ But let’s start first with a short video. https://www.youtube.com/watch?v=HxXJ8Q2GCs4 Transportation modes in Global Logistics SCM 5000 M A R I N E M O D E I S T H E O L D E S T T R A N S P O RTAT I O N M O D E … … many of our cities and towns began as ports for the shipment of goods … economic activity = public investment in port facilities SCM 5000 M A R I N E M O D E I S T H E O L D E S T T R A N S P O RTAT I O N M O D E … • Ocean going transport: • Coastal and trans -oceanic • Bulk and containerized freight • In -land waterways: • River systems • Lakes • Canals SCM 5000 T H E M A R I N E ( WAT E R ) M O D E R E Q U I R E S S I G N I F I C A N T I N F R A S T RU C T U R E : • Ports • Port facilities often owned/supported by governments as part of “gateway” strategies. • Selection factors: • Distance to shipper/customer • Water depth; weather; ice free year round access • Skilled labour • Loading/unloading facilities, • Intermodal connections (rail, truck) • Canals • St. Lawrence Seaway/ Welland Canal • Panama Canal. Panamax & Post -panamax www.pancanal.com • Suez Canal www.suezcanal.gov.eg SCM 5000 M A N Y D I F F E R E N T T Y P E S O F V E S S E L S TO M E E T S H I P P E R ’ S R E Q U I R E M E N T S ( C A PA B I L I T Y ) : • Ships: • Container: capacity expressed in TEU ( Twenty Foot Equivalent Units) • Bulk carriers: grain carriers up to 120,000 tonnes ~ 1200 railcars! • Tanker: 500,000 tons of liquid ~ 5,000 rail tanker cars! • General cargo: coastal freighters • RoRo : Roll -on/Roll -off • Barges • http://www.worldshipping.org/ SCM 5000 SCM 5000 Source: https:// www.mol.co.jp /iroiro_fune_e /img /product_03.gif SCM 5000 C O N TA I N E R S H I P S I Z E S ▪ Capacity expressed in TEU (40 foot containers common = 2 TEU) ▪ Vessel sizes: ▪ Panamax – up to 965 feet long and 106 ft wide (old width of Panama canal); 3,000 – 5,000 TEU ▪ Post -panamax refers to widths exceeding allowable maximums for Panama canal prior to 2016 when the canal has been widened to accommodate these bigger vessels . (up to 10,000 TEU, stacked 17 rows across 11 high) ▪ Neo -Panamax – 1,200 ft long 160 ft wide (Panama canal locks 1,400 ft long); up to 14,400 TEUs ▪ Megaships – over 10,000 TEU (as of 2022 biggest ship 23,992 TEU) https://customodal.com/blog/ocean -freight -101 -how -sea -freight -works – in -simple -english/ SCM 5000 S H I P S C O N T I N U E TO G E T B I G G E R … ▪ The record on maximum # of TEUs is being broken annually ▪ Today, ship capacities up to 24,000 TEU ▪ In 2022, Evergreen built several vessels with 23,992TEU nominal intake – Ever Ace, Ever Act, Ever Aim, Ever Alp, Ever Arm, Ever Art ▪ Why ships cannot go even bigger? (HINT: infrastructure) https://splash247.com/evergreen -takes -the -biggest -boxship – mantle -away -from -hmm -by -just -28 -teu / SCM 5000 S H I P S C O N T I N U E TO G E T B I G G E R … https://en.wikipedia.org/wiki/List_of_largest_container_ships SCM 5000 Source: https:// linervision.files.wordpress.com /2013/09/ eugen -maersk.jpg SCM 5000 B U L K C A R R I E R – G R E AT L A K E S © Michael Kirk SCM 5000 RO -RO S H I P ( RO L L O N , RO L L O F F ) Image: Sakurai Midori, CC BY -SA 3.0 Creative Commons SCM 5000 B A R G E Coal © Michael Kirk Hopper Barge SCM 5000 The N.W.T. government bought the barges from NTCL in 2016. Northern Transportation Company Limited Route Map B A R G E S A N D S E A L I F T S H I P S A R E U S E D TO S E RV E N O RT H E R N C A N A DA … SCM 5000 B A R G E S A R E U S E D TO S E RV E N O RT H E R N C A N A DA … • The service used to be provided by Northern Transportation Company Limited. • In 2016, the company went bankrupt and sold the barges to the North West Territories Government. SCM 5000 T H E G L O B A L V I E W Panama Canal Suez Canal SCM 5000 V I S I T http://www.pancanal.com/eng/index.html www.suezcanal.gov.eg Live port traffic: https://www.marinetraffic.com/en/ais/home/centerx: – 21.8/centery:42.3/zoom:2 SCM 5000 G L O B A L S H I P P I N G L A N E S © LuxSpace Sarl 2010 Busier lanes – carriers? Rates? Feeder vessels? SCM 5000 G L O B A L S H I P P I N G L A N E S • Pacific Rim to West Coast • Northern Europe to North America • Central North America to N.A. East Coast ports and Europe • Pacific Rim to Europe via Panama Canal • South Asia to Europe, North America via Suez canal • East coast of South America / North America SCM 5000 N O RT H A M E R I C A N K E Y P O RT S … Canada United States of America Mexico Greenland Northwest Passage Seattle, WA Vancouver, BC Long Beach, CA Los Angeles, CA New York Halifax, NS Saint John, NB Prince Rupert, BC Montreal, PQ SCM 5000 M A J O R C A N A D I A N P O RT S • Halifax • Saint John (versus St. John’s ) • Sept -Iles • Quebec City • Montreal • Vancouver • Prince Rupert SCM 5000 Container Terminal Operations Video – watch in Blackboard (posted) SCM 5000 Source: Great Lakes St. Lawrence Seaway Study Final Report Fall 2007 S T. L AW R E N C E S E AWAY : T H E G AT E WAY F RO M T H E AT L A N T I C TO T H E G R E AT L A K E S SCM 5000 Source: http:// www.seagrant.umn.edu /newsletter/2009/09/the_seaway_turns_50.html SCM 5000 https://www.maritime.dot.gov/sites/marad.dot.gov/files/docs/resources/3921/glslsfinalreportfall2007.pdf SCM 5000 S T. L AW R E N C E S E AWAY : T H E G AT E WAY F RO M T H E AT L A N T I C TO T H E G R E AT L A K E S • Extends 3700 km inland • Main cargoes • Grain, coal, aggregates, petroleum products • Welland Canal • 8 locks, occasional bottleneck • Ship size limits • Automatic Identification System (AIS) • Winter shutdown: mid -December to early March from Montreal west to Thunder Bay (2011 season was a record 284 days) • Volume in 2014 highest since 2009 recession: 40 million tonnes of cargo. (27.7 million in 2020) http://www.seaway.ca/en/ SCM 5000 H OW L O C K S WO R K : © http://www.ipassielts.com/ SCM 5000 W elland Canal Lake Erie to Lake Ontario ship sailing through the locks – watch in Blackboard (posted) SCM 5000 C O S T FAC TO R S W H I C H I M PAC T T H E WAT E R MODE: • Ports and canals owned/supported by governments • High fixed costs for infrastructure; low variable costs for labour & fuel. • Many user fees: locks, docks, cargo handling, utilities • Wharfage : function of tonnage, type of cargo: applied each time cargo crosses ship’s side. • Berthage : function of time in port, ship length • Fuel (relatively efficient) • Labour (relatively low: Maersk Majestic 18,000 TEU vessel crewed by 22 people) SCM 5000 PRICING • Function of commodity, distance, weight, volume • Significant ancillary fees at ports • Containerized goods: • Per standard container (20 ft or 40 ft) • Origin to destination • Freight forwarders combine several shipper’s LCL shipments to benefit from CL rates • General cargo…use higher of weight/measure (W/M) • Based on 1 tonne per cubic metre SCM 5000 P R I C I N G E X A M P L E – G E N E R A L C A R G O • For general cargo or LCL volume, use higher of weight/measure (W/M): • Rate Quote = $280 W/M ( Based on 1 tonne per cubic metre) • Cargo with dimension of 2m x 3m x 5m weighing 5 metric tonnes . • What will be price charged? • Weight = 5 tonnes • Measure = 2m x 3m x 5 m = 30 M 3 (cubic meters) x 1 tonne per M 3 = 30 tonne • 30 > 5 • M>W therefore price charged is 30 x $280 =$8400. SCM 5000 S E RV I C E C H A R AC T E R I S T I C S O F T H E WAT E R M O D E : • High capacity: can be up to the equivalent of 5000 railcars! • Fuel efficient • Slow • Poor accessibility • Applicable when no land -based alternative exists. • Good for low value goods: bulk commodities. • Essential for global trade and sourcing from Asia Pacific: containerized shipping • Damage, theft can be an issue; although containerization superior to bulk. SCM 5000 M O D E S C O M P E T E O N M A N Y D I M E N S I O N S … • Sustainability and environmental impact are emerging as potential competitive differentiators • Factors include: • Energy consumption • Green house gas emissions • Accidents and spills • Noise • Consider the St. Lawrence Seaway’s sustainability statements: http://www.greatlakes -seaway.com SCM 5000 TRENDS • Capacity disruption and increased rates due to Covid • Shipping lines getting into Air Freight (Maersk bought German Air Freight Forwarded in 2021, leasing planes – to capitalize on eCom ) • Investment in materials handling equipment & other technology by ports, often to allow larger container ships to call. • St John building cold storage next to port, investing in post Panama cranes • Competition between ports; example: Prince Rupert versus Vancouver versus Seattle. • Information technology: AIS in St. Lawrence Seaway is an example • Larger vessels: In 2020: HMM – 7 sister vessels 24,000 TEU • Panama Canal lock twinning/expansion to accommodate larger container ships….completed 2016 SCM 5000 M O D E C O M PA R I S O N Water Rail Truck Air Pipeline Investment + Assets HIGH HIGH LOW Operating Costs LOW LOW HIGH Rates LOW LOW MED Transit Time SLOW MED FAST Reliability MED MED HIGH Capability MED HIGH HIGHEST Accessibility LOW MED HIGHEST Security MED MED MED LOW – MED – HIGH – HIGHEST SLOWEST – SLOW – MED – FAST – FASTEST SCM 5000 I N T E R M O DA L The combination of two or more modes of transport as part of a single, coordinated shipment Rail + Truck Air + Truck Marine + Rail + Truck SCM 5000 V I D E O S – P O RT S A S I N T E R M O DA L H U B S • Prince Rupert, BC: • Longer version, not HD but good overview: • http://www.youtube.com/watch?v=oRAs9B4EV84 • Shorter version, HD … a summary: • http://www.youtube.com/watch?v=PuxJ470Swbw • Euromax in Rotterdam: • 2.3 million TEU /year capacity • Longer version, not HD … only images: • http://www.youtube.com/watch?v=AP5Rz4TOnrc&nr=1 • A promotional overview of recent initiatives; good insight into intermodal role of a port: • http://www.youtube.com/watch?v=lK -QSe9YZqE SCM 5000 I N T E R M O DA L OV E RV I E W : • Uses 2 or 3 modes; for example, marine + rail + truck for local PUD • Infrastructure includes: • A trans -shipment terminal or yard with gantry cranes, container movers. • Specialized truck and rail chassis; for example, COFC. • Containers: • Closed, open, tank containers • Various temperature, atmospheric conditionings available • Sea Containers (“Sea Cans”): Inside dimensions (inches) and max payloads (kg) 20 ft. standard 232 l x 90 w x 90 h 20,000 40 ft. standard 474 l x 90 w x 90 h 25,000 40 ft. high cube 474 l x 90 w x102 h 25,000 • Other common lengths for road + rail intermodal: 45 ft., 53 ft. SCM 5000 Montreal –Toronto 560 km Winnipeg – Toronto 2210 km Vancouver – Tor. 4410 km COFC Truck COFC Truck COFC Truck Transportation Costs 1218 770 1604 2920 3165 6031 Line Haul 775 770 1120 2920 2585 6031 PUD 443 0 484 0 580 0 Time Value Costs 297 54 748 342 1325 784 Total Logistics Costs 1515 824 2352 3262 4490 6815 Intermodal vs. Truck 84% -28% -34% Cost – effectiveness of Intermodal (COFC) vs. Truck Source: Operating Costs of Trucks in Canada 2005 © Copyright Her Majesty the Queen In Right of Canada As Represented by the Minister of Transport Canada File Number: T8080 -05 -0242 Time Value Costs: Carrying cost of inventory, reflects slower transit times. SCM 5000 C U R R E N T I N T E R M O DA L T R E N D S A N D I S S U E S : • Port congestion • Capacity issues: rail, ports, handling time for drayage • Dwell time concerns: impact on transit time reliability (TRACS) • Container return (repositioning costs) • Tunnel heights (double stacking) • Container security (CSI), advanced notification to U.S. ports. • Transloading 4 40’s to 3 53’s • De -stuffing/stuffing SCM 5000 T E R M I N O L O G Y • TEU • Panamax • LCL • FCL SCM 5000 A S S I G N M E N T • Read SCM Chapter 5 (Water Carriers p. 123 -138) • Do practice exercises in Blackboard: • Water Mode Practice Exercises.pdf • Intermodal Pricing Exercise.pdf • Q1 Hint: key to solution was discussed in today’s lesson. • Q2 Hint: think about concepts from the Demand/Supply Management 1 course. SCM 5000 R E C A P : K E Y L E A R N I N G S F RO M TO DAY ’ S L E S S O N … • Water mode: significant for global freight movements; obviously fuelled by the growth in Asian export activity. • Canals and in -land seaways are important links in the chain. • Priced by container with ancillary fees; general cargo by higher of weight/measure (W/M). • Intermodal … combination of modes to achieve cost and service goals. • Containerization is key to efficiency. • Trend toward bigger and bigger ships. SCM 5000 Distribution 1 SCM 5000 Lesson 5 Air & Pipeline Modes SCM 5000 • First, let’s take a look at some of the largest planes today… • https://www.youtube.com/watch?v= hD4hz8TFSAI While more freight is moved by other modes, air mode is a critical link in the supply chain for specific products and destinations. When combined with truck mode, it is essential to a growing segment of the transport industry: overnight small package courier delivery. SCM 5000 TO DAY ’ S L E A R N I N G O B J E C T I V E S  Describe characteristics of the air mode of transportation  Discuss supply chain strategy dependent on air mode  Describe evolution of courier industry  Describe characteristics of pipeline mode SCM 5000 H I S TO RY O F F L I G H T • Beginning of modern aviation – Dec 17 1903 • The Wright Brothers in North Carolina – f lew their machine 120 feet, 12 seconds https://www.youtube.com/watch?v= VQg6NOxztZ0 SCM 5000 H I S TO RY O F F L I G H T • World War 1 – promising technology, first air mail service (Army) • 1918 – US Postal Service takes over the mail system • 1920s -1930s – Seaports; better aircraft construction methods (aluminum bodies) • World War 2 – military technology; low cost airports to train pilots • 1950s -1960s – Radars, commercial jets, longer runaways, four -engine turbo -propelled aircrafts, short and medium -range aircrafts • 1970s -1980s – large capacity aircrafts (Boeing 747 – 400 passengers, 7,000 km range, 320,000 kg payload); airport innovations; industry deregulation act • 1990s – onward – industry consolidation, code -sharing, turbofan engines (fuel efficient), jumbo jets (Boeing and Airbus – 13,000 km range), GPS and satellite navigation, security issues (Sept 11) • Future ? SCM 5000 Behind the Scenes at American Airlines Air Cargo SCM 5000 SCM 5000 A I R M O D E C O N T R I B U T I O N TO F R E I G H T T R A N S P O RTAT I O N • Air mode carries less than 5% of total freight volume • Cost is high relative to truck and rail • Freight revenues typically constitute less than 15% of total air revenues for non -cargo airlines: passenger revenue dominates. • Best mode for • Light, high value, time -sensitive freight • Long distances, where land alternatives not available • Fragile, non -hazardous goods • High security requirement SCM 5000 T Y P I C A L A I R M O D E I N F R A S T R U C T U R E : • Airports and hub -and -spoke networks • Distribution centers (“cargo terminals”) for cargo • Hangers and maintenance facilities for aircraft • Aircraft • Passenger aircraft with freight in “belly” (up to about 30,000 lbs. freight capacity ~ 13,608 kg) • Freighters…Boeing 747F, conversions (up to 270,000 lbs. payload ~ 122,500 kg) • Loading/unloading equipment • Containers • Unit Load Device (ULD) https://www.aclairshop.com/container_specs. php SCM 5000 A I R C A R G O A N D U L D … • https:// youtu.be/0JBHigPpkr0 • https://youtu.be/OINg49Dz8J0 SCM 5000 A I R M A R K E T P L A C E • Types of carriers: • Passenger airlines with some cargo; e.g., Air Canada • Air operations of courier companies like Fedex • All -cargo airlines like Cargolux www.cargolux.com • Courier companies expanding into general cargo • IATA regulatory body: International Air Transport Association • Trade association of airlines • Working with government and industry to establish regulations and protocols, ranging from HAZMAT to air waybill standards. • Also focused on passenger requirements and services. • Vast website! SCM 5000 A I R C A R G O P R I C I N G F O L L O W S T H E C U B E A N D D E N S I T Y C O N C E P T S D I S C U S S E D I N OT H E R M O D E S : • Operating Costs: • Fixed (about 20%) • Variable (about 80%) • Cargo: generally assumes 6000 cm 3 per kg • Use volume/weight formula and pay the higher of the two (Chargeable Weight) • Use minimum charges and sliding rates for higher weights (top set at 1000+kg) • Similar to truck LTL pricing (but use kg. instead of cwt ) • Note: not all carriers use the same factor; for example, DHL = 5000 cm 3per kg versus Air Canada = 6000 cm 3per kg Air Canada Dimensional Weight Example SCM 5000 P R I C I N G E X A M P L E • For cargo, use volume/weight formula and pay the higher of the two (Chargeable Weight): • Cargo with dimension of 64 cm x 32 cm x 54 cm weighing 15 kg. • Volume = 110,592 cubic centimeters (cc’s or cm 3) • Factor= 6,000 cm 3 per kg • Volume weight = 110,592 cm 3 /6,000 cm 3 per kg = 18.43 kg • Actual Weight = 15 kg • Chargeable Weight = 18.43 kg (higher of the two) • Rate Quote for this commodity = $7.00 per kg • Therefore price charged is 18.43 kg x $7 = $129.02 SCM 5000 A I R M O D E : C U R R E N T I S S U E S A N D T R E N D S • Security concerns: cargo and passenger safety • High fuel costs • Cost Efficiencies – e -tickets, express check -in, $$ for luggage • Increased availability of all -cargo airlines – government trying to protect passenger airlines’ cargo revenue to ensure viability • Clearance delays • Airport congestion • Noise , hours of operation restrictions SCM 5000 F R E E D O M S O F A I R SCM 5000 Source: https:// people.hofstra.edu /geotrans /eng /ch3en/conc3en/ airfreedom.html SCM 5000 C O U R I E R Air + Ground Integrated Solution Courier is an intermodal service SCM 5000 S O RT FAC I L I T Y O P E R AT I O N S • https:// youtu.be /v -Q7Tmw85Xs SCM 5000 C O U R I E R O P E R AT I O N S • Hub and spoke network: same concept as passenger airlines. • Technology has impacted traditional base of rush document business but E -commerce parcel delivery is growing. • Expansion into traditional express and general cargo transportation, e.g. Fedex Ground • In Canada, Purolator has largest market share (owned by Canada Post). SCM 5000 C O U R I E R P R I C I N G A L S O I N C L U D E S A FAC TO R F O R D E N S I T Y TO D E T E R M I N E C H A R G E A B L E W E I G H T : • Factors • Weight • Volume (assumes 6000 cm 3 per kg ) • Distance • Level of service (Overnight by 9, by 10:30, 2 day, weekend delivery) • Most large shippers obtain discounted pricing based on volume commitments. SCM 5000 C O U R I E R S – T R E N D S A N D I S S U E S • Efficient routings • Fuel efficiency for PUD • Reduced GHG emissions • Package identification for automated sortation systems: barcodes, RFID • Postal services expanding into this sector, e.g. Purolator (Canada Post), DHL (Deutsche Post) • Capitalize on e -commerce parcel delivery opportunities SCM 5000 Water Rail Truck Air Pipeline Investment + Assets HIGH HIGH LOW MED Operating Costs LOW LOW HIGH HIGH Rates LOWEST LOW MED HIGHEST Transit Time SLOW MED FAST FASTEST Reliability MED MED HIGH HIGH Capability MED HIGH HIGHEST HIGH Accessibility LOW MED HIGHEST LOW Security MED MED MED HIGH LOW – MED – HIGH – HIGHEST SLOWEST – SLOW – MED – FAST – FASTEST S U M M A RY: M O D E C O M PA R I S O N SCM 5000 P I P E L I N E M O D E A specialized mode for the transport of liquids and gases. SCM 5000 Deep Water Cooling SCM 5000 Source: Enwave Energy Corp. SCM 5000 T R A N S C A N A DA P I P E L I N E • https:// youtu.be /Q3fv4UdQxcQ SCM 5000 T Y P I C A L I N F R A S T R U C T U R E R E Q U I R E D TO S U P P O RT T H E P I P E L I N E M O D E : • Pipelines: • Trunk lines • Gathering lines • One -way only • Pumping stations, compressor stations, and storage tanks • High fixed costs and low variable costs • Usually most cost -efficient mode for large quantities of oil and gas over long distances • Little competition … however, rail has emerged as an alternative due to pipeline capacity shortages. • Pricing: $/barrel (oil) or $/m 3 (gas), point to point or zone to zone. • In Canada, transportation cost is about 10% of production cost of oil; 2 to 3 times production cost of gas. SCM 5000 O I L P I P E L I N E – S Y S T E M Refinery Tank Farm Tank Farm Tank Farm Consumers Tank Farm Gathering Station Oil Field Pipeline Other modes Trunk Line Oil Product Line https://www.google.com/maps/place/Cushing,+OK+74023,+USA/@35.9550996, – 96.7663171,10075m/data=!3m1!1e3!4m5!3m4!1s0x87b169f80014c5c1:0xfe855f1914b195a! 8m2!3d35 .9850639!4d -96.76697 SCM 5000 E N V I RO N M E N TA L C O N C E R N S H AV E M OV E D TO T H E F O R E F RO N T O N N E W P I P E L I N E D E V E L O P M E N T … Consider the Keystone XL Project: • http://keystone -xl.com/ SCM 5000 P I P E L I N E S I N C A N A DA … M A P S • http://www.cepa.com/map / SCM 5000 Water Rail Truck Air Pipeline Investment + Assets HIGH HIGH LOW MED HIGH Operating Costs LOW LOW HIGH HIGH LOW Rates LOWEST LOW MED HIGHEST LOW Transit Time SLOW MED FAST FASTEST SLOWEST Reliability MED MED HIGH HIGH HIGH Capability MED HIGH HIGHEST HIGH LOW Accessibility LOW MED HIGHEST LOW LOW Security MED MED MED HIGH HIGHEST LOW – MED – HIGH – HIGHEST SLOWEST – SLOW – MED – FAST – FASTEST S U M M A RY: M O D E C O M PA R I S O N SCM 5000 P I P E L I N E S E RV I C E C H A R AC T E R I S T I C S • Slow transit times • Liquids….5 km/h • Gas….20 km/h • Highly reliable • Limited accessibility • Very low capability • Liquids, gases, slurries only • Very high security SCM 5000 A S S I G N M E N T S • Pick up Study Questions in Blackboard. • Sample pricing problem in air freight cost.xls SCM 5000 R E C A P : K E Y L E A R N I N G S F RO M TO DAY ’ S L E S S O N … • Air mode: costly but able to meet specific needs of the shipper for speed, distance, and security. • Courier operations offer a high service, integrated air and ground solution for shippers. • Couriers by increasing package/shipment size are competing in with traditional freight providers. • Pipeline is a specialized, infrastructure intense shipment mode for a limited set of commodities. Distribution 1 SCM 5000 Lesson 6 Mode & Carrier Selection Technology & Documentation SCM 5000 Today’s agenda  Check in  Reminders – Quiz 1 and mid term  Socrative.com  https://b.socrative.com/login/student/  Room: KOTIKOVA  Transportation Modes wrap -up SCM 5000 Learning Objectives  Discuss factors used to select a particular transportation mode  Discuss factors used to select carriers  Describe some of the main information technologies used in transportation  Describe documentation used in transportation transactions and purposes served SCM 5000 Which Transportation Mode? Selection is a trade – off …  Service requirements (TRACS):  Transit time  Reliability  Accessibility  Capability  Security  Cost  For a given shipment; versus for all shipment volume.  Regular activity or a rush or expedited shipment. … selection of mode must be linked to the broader supply chain: customer, inventory, DC operations, and transportation. $ Service SCM 5000 Select the most appropriate mode:  6,000,000 barrels of oil from Saudi Arabia to Montreal __________  1,000 barrels of oil from Halifax to Montreal __________  4,000 tons of coal from Edmonton to Winnipeg (~ 600 mile)? ___________  20,000 pounds of coal from Edmonton to Winnipeg (~ 600 mile)? ___________  100,000 tonnes of iron ore from Sept Isles (on the St. Lawrence River) to Hamilton (~ 1,500 km)? ___________  100 tonnes of iron ore from Sept Isles (on the St. Lawrence River) to Hamilton (~ 1,500 km)? ___________  100 pounds of high tech test equipment from Tokyo to Vancouver ________ Marine Marine Rail or Truck Rail Truck Rail Air SCM 5000 Carrier Selection within Mode – criteria:  TRACS : service times, reliability, customer service  Cost: availability of backhauls, wait times, etc.  Sustainability and “green” practices  Minimal handoffs to second carrier  Availability of specialized equipment  Track and trace capability  Financial stability  Willingness to negotiate … these selection criteria would be the basis for a weighted factor analysis. SCM 5000 Process to identify and select a carrier (Procurement)  Recognize specific service needs (delivery method, transit times)  Identify potential suppliers  Negotiate rates / service terms (conduct RFQ)  Purchase the specified transportation services  Establish KPIs  Benchmark and evaluate performance  Develop long -term partnerships!  What are the tasks involved in any purchase ? SCM 5000 What documentation is required for a commercial shipment?  Bill of lading (BOL) (SCM Text Pages 239 – 24 1 )  Receipt for goods tendered to carrier  Description of the goods: number of pieces, general type of goods  Shipping information: ship -to, etc.  Contract between shipper and carrier to make delivery  Also called waybill in rail, air SCM 5000 SCM 5000 Documentation (Cont’d)  Shipping Manifest  Descriptive document for entire shipment in a truck, airplane, railcar, etc.  Encompasses multiple BOLs SCM 5000 Documentation (Cont’d)  Freight Bill  Invoice for transportation service provided  3 rd party auditing services available  Industry is transitioning from paper to electronic data exchange SCM 5000 Documentation (Cont’d)  Proof of Delivery  Signed copy of BOL  Confirms correct number of pieces received in outwardly good condition  Simple example: electronic courier signature SCM 5000 Documentation (Cont’d)  Claim for Shortages/Damages :  In most cases filed by a receiver (consignee)against delivering carrier  If multiple carriers involved – investigate  Standard “insurance” for damaged goods varies by transportation mode and selected incoterms; may be well below product cost.  What is Incoterms and why are they importnat ? SCM 5000 Why are Incoterms Important?  International Commercial Terms of sale – Incoterms – clarify important aspects of the commercial relationship between buyer and seller.  FOB (Free on Board, or Freight on Board) terms are a consideration primarily in Canada and the United States.  Incoterms are related to International Shipments SCM 5000 Incoterms ® Why are Incoterms Important?  Who is going to:  Arrange and pay for shipping  Decide on transportation mode  Load product at origin  Arrange for insurance  Arrange for export / import clearance  Pay duties  Unload product at destination  Where will the delivery take place? 18 Seller Buyer SCM 5000 Incoterms define transfer of responsibilitie s and risk 19 https://oceanair.net/resources/incoterms -2020/ SCM 5000 Transportation Payment Options  Prepaid:  Seller pays freight, bears cost.  Prepaid and charged back:  Seller pays freight, but buyer bears cost.  Collect:  Buyer pays freight, bears cost.  Collect and allowed:  Buyer pays freight, but seller bears cost. SCM 5000 Summary: Mode Comparison Water Rail Truck Air Pipeline Investment + Assets HIGH HIGH LOW MED HIGH Operating Costs LOW LOW HIGH HIGH LOW Rates LOWEST LOW MED HIGHEST LOW Transit Time SLOW MED FAST FASTEST SLOWEST Reliability MED MED HIGH HIGH HIGH Capability MED HIGH HIGHEST HIGH LOW Accessibility LOW MED HIGHEST LOW LOW Security MED MED MED HIGH HIGHEST