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     Logistics Transportation Systems Design-
                          IE 5333-002

Logistics Transportation Syste...


Logistics and Transportation are the most fertile areas for modeling. In Simulation and optimization we lear...

These savings accrue in terms of time, a tandem driver team can make it coast-to-coast in just three days—as well
as i...

leads to the increase in the number of SKUs which in turn leads to more fragmentation with smaller shipments
moving fa...

    •    If you find it cheaper to send a truckload than send 10,000 lbs
    •    If you ship 10 or more pallets as a ...

              •   Membership (shippers) receives any monies earned in excess of costs

    •    3PLs
              •  ...

J.B. Hunt Transport offers State of the Art tractors and trailers and infinite options for the customer’s transport ne...

    •     Before shipments are sent out all consignees are contacted to coordinate deliveries at no extra charge

every pickup or delivery points where the residential service at pickup or delivery, freeze protection and


   •   A logistics optimization problem starts with defining the network. Figure 1 illustrates a common network with

2.    Trends in supply chain design and management- Hosang Jung, F. Frank
      Chen, Bongju Jeong
3.    Intermodal T...
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Logistics Transportation

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Academic Project: Logistics Transportation Systems Design

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Logistics Transportation

  1. 1. 1 Logistics Transportation Systems Design- IE 5333-002 Logistics Transportation Systems: TL vs. LTL Trucking SHRIRAAM MADANAGOPAL-1000587483 Logistics Transportation Systems Design-IE-5333-002
  2. 2. 2 Abstract Logistics and Transportation are the most fertile areas for modeling. In Simulation and optimization we learnt how the warehousing inside the distribution center happens starting from trucking and packaging delivery areas. We can consider an example which elucidates more on current/future trends and design issues relative to transportation logistics planning. An example which I can relate to the project will be the baggage systems and passenger queuing in the airline industry, and for detailed models of terminals and yards in the railroad industry. In addition, simulators are used for certain specialized applications, such as airspace applications and line-of-road railroad applications. Other non-simulation models based on Optimization, networks and heuristics have dominated many other areas of transportation and logistics, especially large-scale supply chain issues such as logistics network design, vehicle routing, facility location, and scheduling. Logistics Transportation Systems: TL vs. LTL Trucking Truckload versus Less than Truck Load: During the penny-pinching times, it should be a profitable venture for every shipper to consider whether it's more economical to make smaller, more frequent less-than-truckload shipments or to consolidate orders into cheaper, faster truckloads. Taking the example of India Pistons limited, a major piston manufacturing unit for automobiles and Schneider Logistics Inc. of Green Bay. Everything from the commodity's handling characteristics to the location of distribution centers to time-to-market considerations enters into the final decision. Because making that decision can be so complex, many shippers rely on sophisticated software, such as transportation management systems (TMS), for optimization. Such tools can take the guesswork out of the TL vs. LTL in decision making procedures. Instead, we can state, the smart route is to balance technology with the needs of the customer. When we deal with the Domestic Transportation System the following factors are to be considered: • Supply chain success requires transportation • Inventory requirements which are influenced by mode • Packing requirements are dictated by mode • Materials handling equipment and design of the docks which are based on the mode • Maximum consolidation of loads to be achieved with order-management technology which reduces cost • Customer satisfaction PROJECT: Key Objectives to be considered: • To understand and analyze the routing guides • Identify the role of routing guides • Understand the differences between LTL and TL • Understand the use of terminals and transfer points for bulk materials • To relate the trade-offs when using vehicles with self-loading/unloading equipment • To relate the mode of transport to the user’s shipping volume Savings by the Truckload When it comes to cost control, the benefits of combining less-than-truckload shipments into full truckloads seems obvious. Doing so generates cost savings that can range from a low of 5 or 10 percent to a high of 40 to 50 percent, says Gary Whicker, senior vice president of engineering services for truckload carrier J.B. Hunt Transport Services in Lowell, Ark.
  3. 3. 3 These savings accrue in terms of time, a tandem driver team can make it coast-to-coast in just three days—as well as in packaging, handling, administrative costs, and per-unit freight costs. The cost benefits can be so significant, in fact that some companies will even look for opportunities to consolidate their loads with those of other shippers to create a truckload. In Schneider Logistics Inc., found that it could speed deliveries and reduce its customers' costs by commingling their shipments to create truckloads. Schneider takes that approach for General Motors and Ford Motor Company, even though the two are direct competitors. More and more shippers are using decision-support tools like transportation management systems to spot opportunities to combine partial loads into full truckloads. 668929.html A statistical representation of TL Revenue Change which gives us an understanding on Top Public TL Carriers. TMS: A TMS introduces a more flexibility because it allows shippers to continue collecting orders and reconfiguring loads until just prior to departure. A good package, moreover, improves customer-pleasing performance at other points in the supply chain. In this project we consider how TMS systems do more than simply identify transportation efficiencies. For example, transportation optimizer applications, which are commonly included in TMS packages, can help shippers choose the most economical shipping method. This optimizer helps one select or opt the right mode, which helps one build the load. By using this kind of optimizer we spend 40 percent more dollars doing it manually. LTL Growth Trends The opportunities for savings are pushing many shippers toward truckload consolidation; other forces are pulling them in the opposite direction. With a couple of counter traveling trends which some companies are facing which
  4. 4. 4 leads to the increase in the number of SKUs which in turn leads to more fragmentation with smaller shipments moving faster. Looking from one perspective, there is a trend toward the lean manufacturing and minimal inventories which forces shippers to make smaller, more frequent deliveries to customers. So even though better information management provides more opportunities for load consolidation, the increasing number of individual products and the pressure for smaller, faster shipments may override those considerations and mandate using LTL. The re-emergence of regional distribution networks reflects a company's desire to keep inventory close to customers so they can promise delivery in 48 hours or less. There are Companies which distribute their inventory to limited regional operations instead of one national operation, so the drop in length makes it less likely that they'll have enough tonnage to fill a truck. Combine that with more specific customer demands the use of regional LTL is growing rapidly so that some truckload business is moving into regional markets. We shall discuss about various current/future trends and design issues relative to transportation logistics planning all over the United States and International Operations by taking into consideration of various factors as mentioned above in our abstract. We shall also compare the various transportation strategies involved with the certain companies and decipher our results from graphs which will make us understand and learn how efficiently and effectively we can design the transportation systems with TL and LTL. Schneider Logistics Inc. Schneider Logistics, a wholly owned subsidiary of Schneider National, provides supply chain management technology, managed services, engineering services and freight payment. Schneider National Inc., a leading provider of transportation, logistics and related services. Schneider National serves more than 80 percent of the Fortune 500 companies, offering the broadest portfolio of services in the industry. Truck Load: Schneider Logistics Inc. specializes in full truckload shipments. They have a motor carrier database of over 20,000 because of their proprietary transportation management system finding and securing a qualified carrier for customer loads to make it easy. Schneider Logistics Inc. help carriers keep their trucks moving, and simultaneously help their customers obtain the best truck for shipment, at the most cost-effective price. Equipment Options • Dry Van • Flatbed / Step deck • Temperature Control (Heated or Refrigerated) • Specialized & Heavy Haul - RGN, Lowboy, Double Drop LTL (Less than Truckload) Schneider Logistics Inc offers less than truckload services from one pallet to 10,000 lbs via a reliable network of regional and long-haul LTL carriers in the United States, Canada and Mexico. Schneider Logistics Inc help customers sort through the discounts, classes, interlining and billing maze that many times make LTL shipments frustrating and costly. Partial Truckload / Load to Ride When should one consider Truckload Services? • If you ship 3,000 lbs or more using a LTL common carrier • If your freight is light and takes up a lot of space, LTL rates can be high
  5. 5. 5 • If you find it cheaper to send a truckload than send 10,000 lbs • If you ship 10 or more pallets as a truckload Advantages to Partial / Load to Ride vs. LTL • Lower risk of damage with less handling • Lower prices than LTL or Truckload • Transit times are generally fast Schneider has one of the largest sales forces in the industry working to fill your freight hauling capacity. The Freight Place software provides an easy and effective means to identify and locate loads and shipments and negotiate contract terms directly through the customer service representatives. Added feature to the above mentioned factors will be the capacity and receive up to the minute notification about the freight meeting the customer’s needs. This is achieved by the customer’s posting to the company’s available capacity on a daily basis, to help the customers identify freight opportunities suited to the company. Schneider has immediate freight hauling provision for carriers with Vans, Reefers, Flats, Steps, RGN's, and other specialty equipment. These requirement ranges from local freight to long length of haul loads irrespective of one truck or 10,000 trucks. Schneider works with the customers to understand the freight hauling capabilities and coverage regions. Saving on equipment, fuel and services costs with Schneider: Schneider offers small and mid-sized carriers savings on fuel, tires and maintenance usually only recognized by large carriers. Transportation Rates • Rate structure deals with three factors • Relationships between different products • Relationships between shipments of different weights • Relationships between different distances • Three factors are defined numerically and then tied to a rate of cents per hundredweight (cwt) • Negotiated between carrier and shipper • Quoted as percentage discounts from published rates • Four factors determine freight classification • Density • Storability • Ease or difficulty of handling • Liability to damage and theft LTL Shippers • Less-than truckload (LTL) • 150 to 10,000 pounds • When too big to be handled manually, too small to fill a truck • Most large firms are LTL carriers: Yellow Freight, ABF Freight Express • Process includes the local pick-up, original terminal used to load aboard line haul, line haul to terminal near destination, consignee receives • Freight forwarders • Buy space at TL rate and set at somewhat less that LTL rate • Function as transportation departments of small firms • Shipper’s Cooperatives • Similar to air and freight forwarders but are not-for-profit organizations
  6. 6. 6 • Membership (shippers) receives any monies earned in excess of costs • 3PLs • Have equipment—trucks, trailers, terminals • May deal in information only • May operate Internet-based auctions • To find LTL rates usually need: • Origin and destination zip codes • Weight of shipment • Classification of shipment • Supplemental services needed • Discount awarded to shipper by carrier Truckload and Carload Shippers • Shipments of 20,000 to 30,000 pounds • Cost less per pound than LTL shipments • The shipper loads and consignee unloads the trailer • Load goes from shipper to consignee without passing through a terminal • Paperwork, billing, and control costs remain the same • Rate per haul may be negotiable • Largest TL companies • Schneider National Van Carriers • J.B. Hunt Transport • Many firms are smaller, without national presence • Smaller firms may be owner-operators • A dedicated equipment will be carrier owned but assigned to serve only specific type of customers • Private transportation is when the shipper provides and operates its own equipment • Dedicated equipment is carrier-owned but assigned to serve specific customers for indefinite periods • Shippers and consignees using railroad service need sidings on their property J.B. Hunt Transport Services, Inc J.B. Hunt Transport Services, Inc., one of the largest transportation logistics companies in North America, provides reliable transportation services to a diverse group of customers throughout the continental United States, Canada and Mexico. J.B Hunt include transportation of full truckload containerizable freight, which they directly transport utilizing their company-controlled revenue equipment and company drivers or independent contractors • J.B. Hunt Transport Services, Inc extends their service tailored to meet individual customers' requirements and typically involve long-term contracts using • Customized freight movement • Revenue Equipments • Labor and system services Truckload
  7. 7. 7 J.B. Hunt Transport offers State of the Art tractors and trailers and infinite options for the customer’s transport needs. Capitalizing on advanced systems and technologies, they offer engineered transportation solutions that support virtually connects to any transportation network within North America. Their operational experience has allowed creating value for their customers thereby utilizing a wide range of equipment like straight trucks to flatbeds to temperature controlled, which has the equipment and the expertise to provide solutions to match their competitors. Expedited Solutions J.B. Hunt has a special expertise to handle all expedited needs. Working with thousands of team and expedited drivers in their network, J.B. Hunt provides the right capacity where you need it. They also provide their customers with single source monitoring and operations control, giving access to capacity with a single phone call 24*7. Time and Money J.B Hunt work with the concept of “direct proportion” which state that time and money are directly proportional and saving both is very important for their efficient and good business. • Providing Equipment types from cargo van’s to 53-foot air ride trailers in an efficient and cost effective manner • Special Handling and Security enables accommodations • Dedicated capacity provision available by location at lesser rates compared to their competitors • Expedited shipment on a single source contact J.B Hunt distinguishes it’s supremacy from their competitors by providing certain special features at nominal rates for every single customer thereby improving the quality of their business. Their Special services include safety in their shipment 1. Dual Driver Protection 2. Trade Shows 3. Marked and unmarked escort vehicles Less than Truck Load The less than truck load program concatenates in bringing the best quality LTL providers with J.B. Hunt's proven consolidation and distribution expertise. J.B.Hunt experts exhibit a highly customized transportation solution for less than truck load shippers of all sized. They have their system which manages every aspect of the LTL transactions from the time of quotation till their safety delivery. JB Hunt has an excellent LTL System, which operates out of a 100,000+ square foot warehouse which enables them to serve their customer’s specific needs. • Hygienic warehousing capacity • Centralized inventory systems in each location • Local transfer and distribution with an uninterrupted expedited process • Shipments are not handled through break bulk terminals; therefore the claim ratio is far below industry average
  8. 8. 8 • Before shipments are sent out all consignees are contacted to coordinate deliveries at no extra charge levied on the customers • Once every detail is complete the shipment will be safely loaded on a trailer and will remain in place until it reaches the customer India Pistons Ltd A leading manufacturing group involved in the development and production of pistons and allied components for the automotive, farming and energy industries. They transport their pistons to various buyers all over India for the above specified requirements. They have their major clients in the south of India covering Tamil Nadu, Andhra Pradesh, Karnataka and Kerala. Since Time, Money and good Quality of delivering their products at a nominal rate is required to make their business run efficiently, India Pistons Ltd, play a key role in transportation of the their products to each state with safety and expedited delivery. South India Green- Andhra Pradesh, Yellow- Karnataka, Pink- Kerala, Saffron- Tamil Nadu Full Truckload (FTL) Once the trailer is loaded the truck driver returns to the shipper to collect the Bill of landing, Invoice and State transportation paper work. After this step the driver leaves with the trailer containing freight to the consignee and delivers the freight. Full Truckload (FTL) transit times are normally constrained by the driver's availability according to Hours of Service regulations and distance. Advantage of Full truck over Less than Truckload is the freight is never handled en route. In LTL shipment process the freight will be transported on various different trailers where there is a possibility of the products to get damaged in the process of transferring the items to the different trailers. Also the transit times for LTL freight are longer than for FTL. Less than Truckload (LTL) Usually in the LTL shipments range limit is up to 9000kgs. The LTL carriers take the freight from different shippers and conjoin the freight enclosed trailers for a LINEHAUL to deliver to a hub terminal s where the freight will further be sorted for an additional LINEHAUL. The truck drivers start by loading up and head out to make deliveries and then begin their pickups once the trailer gets fully emptied. The pickup drivers have a scheduled roster which they travel several times a week. This way the drivers develop a good rapport with the customers. Most of the LTL freight will be inspected for the safety delivery purpose of goods. The freight is loaded on to an outbound trailer which will carry the goods till the final destination and the inspection check is carried out at all transfer points enabling the goods are handled carefully at all transits. The advantage of LTL over TL will be the shipments getting transported for a fraction of the cost of hiring an entire truck and trailer for an exclusive shipment. Also, a number of accessorial services are available from LTL carriers, which are not typically offered by FTL carriers. These optimal services includes the life gate service at each and
  9. 9. 9 every pickup or delivery points where the residential service at pickup or delivery, freeze protection and acknowledgment before delivery. Integrating TL and LTL The following factors are to be considered when selecting TL Vs LTL  The long-term growth rate forecasts vary, but generally are approximately 5-10% and 0-5% for regional and national LTL carriers, respectively; while the projected growth rate for TL motor carriers is10-15%  Labor costs as a percentage of revenue ranges from 60% for regional LTL carriers, 65% for national, and 40% for TL trucking firms  Labor characteristics of regional LTL carriers find a predominantly non-union, low-turnover labor base. National LTL carriers feature unionized workers with a low turnover. TL carriers are predominantly non-union with extremely high labor turnover, often in excess of 100% annually  LTL carriers move individual shipments through "sorting hubs" or "break-bulk" terminals, where individual shipments are sorted and loaded to final destinations. Of course, TL carriers move directly from shipper's dock pick-up to receiver's delivery docks. These hub-and-spoke systems add costs to the LTL process. Hence, LTL versus TL rates per hundredweight (cwt) are generally higher that TL rates per cwt.  The current escalation of diesel fuel costs is having a direct impact on mode selection by shippers. The volume of TL freight is shifting to rail, where shipping prices are lower and delivery times longer  Commodities transported by LTL and TL differ somewhat in that LTL carriers by their nature move smaller quantities of most of the products shipped.
  10. 10. 10 Pic torial Representation of Full truck load shipment Logistics & 3PL Transportation A third-party logistics provider (3PL) performs logistics services on behalf of another company. There are two primary kinds of 3PL Providers. Types: Type1: Assumes Infinite production on supply and the only concern are to meet the demand at the delivery nodes. Type2: This type of 3PL providers provides the functions of meeting the demands and also considers the safety stock and economic order quantity at the demand node. To achieve this, companies maintain a certain amount of inventory at their warehouse in order to perform on time delivery and achieve good service level. • Logistics optimization problem for the Type 1 3PL can be solved with the Vehicle Routing Problem in order to minimize transportation costs. For the Type 2 3PL Company, logistics optimization is achieved by vehicle routing problem and additionally minimizing the inventory carrying costs at their warehouse. Figure 1: A Common Network
  11. 11. 11 • A logistics optimization problem starts with defining the network. Figure 1 illustrates a common network with one supply depot and various demand nodes. The Vehicle Routing Problem determines the routes for the network. Figure 2: The Vehicle Routing Problem Inventory Optimization for Type 2 3PL Providers • The model minimizes the inventory holding costs ensuring the best feasible solution considering all the constraints. Other Optimization Techniques • Objective is to convert all Less than Truck Loads (LTL) to Full Truck Loads (FTL). The objective function is to minimize transportation costs, inventory holding costs and penalty costs in order to minimize consumption of safety stock and avoid backlogs. The function can be modeled mathematically as below: • Minimize (Transportation Costs) + (Inventory Holding Costs) + (Penalties) • The objective function is subjected to the following parameters: 1. Demand Shortage 2. Safety stock 3. Supply, Net demand 4. Shipment Quantity 5. Transportation Costs(Fixed and Variable), No: of Transports 6. Penalty cost of late/early shipment of safety stock 7. Inventory carry cost • Logistics optimization provides value to the 3PL supply chain. • Allocation of resources makes logistics business turn efficient and saves money. Proper planning and using the right logistics optimization tools yield considerable cost reduction across their logistics & distribution operation and can accomplish better delivery standards. • Transportation is critical to logistics and supply chain effectiveness. These impacts throughout the key factors of logistics effectiveness and the global supply chain. • To meet the dynamic requirements of the supply chain, transportation companies must have a dynamic strategy which must be responsive, both as to service and cost demands of the company’s customers. References: Reference Journals and books from the University of Michigan Ann Arbor: 1. Introduction to Logistics Engineering- G.Don Taylor
  12. 12. 12 2. Trends in supply chain design and management- Hosang Jung, F. Frank Chen, Bongju Jeong 3. Intermodal Transportation education and training- National Research Council (U.S.). Transportation Research Board 4. Transportation Strategy--Key for Logistics Effectiveness-World Wide Shipping--April, 1997- By THOMAS CRAIG President LTD Management 5. Journal of the Transportation Research Forum- Canadian Transportation Research Forum 6. Journal of advanced transportation- Institute for Transportation(Durham, N.C), Advanced Transit Association ( Washington D.C) 7. International Logistics- Douglas C. Long 8. Finance for Transportation and Logistics Managers 9. Strategy Planning in Logistics and Transportation- James Cooper 10. Supply Chain Strategy- Edward Frazelle 11. Transport logistics- Organization for Economic Co-operation and Development 12. Global Logistics and Supply Chain Management- John Mangan, Chandra Lalwani, Tim Butcher 13. 14. India Pistons (Worked there as a Graduate Engineer for 2 Years) 15. JB Hunt transport services Inc- 45789 Port St, Plymouth MI- Ph: (734)-459-2751 16. Schneider National- 15580 US Highway 27 N, Marshall, MI - Phone: (269) 781-9066 Reference Video links 1. ad2qXqWc&feature=PlayList&p=0354ACD6F21B5E19&playnex t=1&playnext_from=PL&index=4 2. 3. v=fNGUnbtRHvA&feature=related 4. 5. v=r0bnGnyFbX0&feature=channel