BY:

Kavya Sood 112051

Abhishek Gupta 112003Amarendra Kumar 112011Arun Samadhiya 112024Arpit Saraf 112023

It encompasses all activities involved in thetransformation of goods from the raw material stage to thefinal stage, when the goods and services reach the endcustomer.

SUPPLIER CUSTOMER

Supplier Manufacturer Distributor Retailer Customers

Supply chain mainly includes:

Material flow

Information flow

Financial flow

Supply chain management is mainly facilitated by:

Processes

Structure

Technology

High logistics cost.

Poor condition of roads.

Poor state of logistics infrastructure.

Complex taxation structures.

Complex distribution setups.

Mumbai Dabbawallas:

• Deliver the home made food to middle class officers usingan effective coding system, less reliability on technologyand following a six-sigma approach.

Amul:

• An effective supply chain started for milk supply( aperishable product) by creation of village co-operatives &district unions which would take it to company processingplant .Further it is marketed to the customers.

Consumer Expectations -Power lies with the consumer

Competition

Government Regulations – Trade barriers

Environment Issues – Waste minimization

Technology

Transportation refers to the movement of product from onelocation to another as it makes its way from beginning of asupply chain to the customer. It is a significant link betweenvarious stages of in the supply chain. Transportation relateddecisions significantly affect the cost as well asresponsiveness of the supply chain. For e.g. Fastertransportation allows greater responsiveness but lowerefficiency.

The key transportation decisions made by a firm are :

Selection of transportation strategy- making plans to make the product reach to geographically dispersed markets in a cost effective way.

Choice of transportation mode – Selecting feasible mode of transport.

The major drivers of transportation decisions are :

Transportation cost structure

Impact of product and Demand characteristics on system cost:

Value Density

Demand Characteristics

Transportation cost is function of distance and the quantity of goods shipped.

With increasing distance the rate of increase of costs will go down, as the utilization of vehicle is higher. This is known as economies of distance in transportation.

Therefore truck operators always prefer full truck load (FTL) .

In case of low capacity utilization different orders can be compiled but this can increase transaction costs.

A higher load will allow the transport operator to use a bigger vehicle, which results in reduction of costs per ton of shipment

Value Density- It captures the ratio of rupee value of the product to itsweight. It shows the importance of transportation cost in the overallproduct cost.

For products with higher value density company can use faster andexpensive mode of transport, as transportation cost is relatively smallfraction of product cost.

For a low density product company has to use a slower mode of transportmode of transport because a small increase in transportation – relatedcost can affect the profitability of the product in a significant way.

For a few bulky products transportation cost is captured by physicalvolume. For e.g. cycles and water tank.

It captures the volume of demand for the product and nature ofuncertainty associated with the product demand.

Higher the volumes of demand, bigger is the batch sizes to be transferredfrom plant to market.

Higher demand uncertainty affects the amount of safety stock carried bya firm.

For longer lead times and slower mode of transport, firms end up withhigh amount of safety stocks for products with high demand uncertainty.

For high uncertainty products company has to use faster mode oftransport and use slower mode of transport for products that have stabledemand

The supply chain typically uses a combination of the followingfive modes of transportation:

1 . R A I L

2 . R O A D

3 . W A T E R

4 . A I R

5 . P I P E L I N E

Ideal mode of transportation for:

I. Low value density products

II. Products not sensitive to time

Suffers from long and unreliable lead time.

In India, the share of railways in freight has been gradually declining over the last 30 years.

Trucks are dominant mode of transport in India.

More expensive than rail but it offers the advantage of door to door shipment and shorter delivery time.

Truck freight rates in India are among the lowest in the world.

Cheapest mode of transport.

Slowest mode of transport.

Considerable delays at ports.

Used extensively for international cargo.

Fairly fast but expensive.

Effective option only for time sensitive and high value density goods.

Goods specific- used for bulk transportation of predicable volumes of specialized products like petroleum products and natural gas.

Performance of 4 major modes of transport can be compared according to the given figure:

Plant 1

Plant 2

Plant 3

Market 1

Market 2

Market 3

In this method the good is directly transported fromproducing company to the on market selling company(involves 9 trips).

Work well if each product line has high volume and lessdemand uncertainty.

To get economy of scale in transport, each trip involvesFTL shipment, resulting in high cycle stock at thewarehouses.

Cheapest networking mode for transporting goods.

Example: polymer industries.

Plant 1

Plant 2

Plant 3

Market 1

Market 2

Market 3

It is a method followed for distribution on the basis ofdemand. It involves only 3 trips.

Generally done for perishable product i.e. that havegenerally less shelf life and cannot be stored for long time.

Initially run with FTL then further run on HTL.

The method involves highest transportation cost.

Example:

Transportation of loose milk by mother dairy.

Plant 1

Plant 2

Plant 3

Market 1

Market 2

Market 3

Distribution

Centre

The mode of shipping in which the good is directly transported to the distribution centre and then further good are transported to the market. It involves 6 trips.

The firm is able to aggregate its stock at a particular depots. Similarly for the depot, instead of dealing with the three supplier

one has to deal with 1 supplier. Transportation cost is in-between Direct shipping and Milk run

model. Example:Mobile phone transported by Nokia from Delhi to Chennai.

Cross docking involves coordinating the six trips in such a way that goods unloaded from incoming vehicles at the DC are straightaway loaded on to the trucks that originate from DC.

Firm need not to have inventory stock at the warehouses.

This is possible only if a firm is working in an environment of predictable volume. And lower uncertainty in transit time.

• DIRECT SHIPPING

• MILK RUN FROM EACH PLANT

• DISTRIBUTION NETWORKING DESIGN

0

20

40

60

80

100

120

0 50 100 150 200 250

X-Values

Y-ValuesB

C

X

Y

Z

A

O

DISTANCE (Km)

company (X,Y) Coordinate Trip Distance(Km)

A (0,100) AX, BY, CZ 200

B (0,50) AZ,CX 223.6

C (0,0) AY,BX,BZ,CY 206.15

X (200,100) XY,YZ 50

Y (200,50) AO,CO,OX,OZ 111.8

Z (200,0) BO,OY 100

O (100,50)

To calculate the annual shipping cost we need to calculate total distance travelled:

Distance travelled per cycle=(2XA+2AY+2AZ)x3

=(200x2+206.15x2+223.6x2)x3

=3778.5 Km

Travel cost per cycle= 3778.5x5

=Rs 18,892.5/-

Frequency of transport= 1,and holding cost=0

So, TAT cost=Rs18,892.5/-

Annual inventory carrying cost= Rs3,000/-

Annual total cost =Rs21,892.5/-

To calculate the annual shipping cost we need to calculate total distance travelled:

Distance travelled per cycle=(AX+XY+YZ+AZ)x3

=(200+100+223.6)x3

=1570.8 Km

Frequency of transport= 3 and holding cost=0

Travel cost per cycle=1570.8x3x5

TAT cost =23,562/-

Annual Inventory carrying cost=1,000/-

Total cost= 24,562/-

To calculate the annual shipping cost we need to calculate total distance travelled:

Distance travelled per cycle =(AO+OX+AX)x3

=1,270.8 Km

Frequency of transport=3 and holding cost=Rs 2,000

Travel cost per cycle=(1270.8x3x5)+2000

TAT cost =Rs 21,062/-

Annual Inventory carrying cost=Rs 1,000/-

Total cost=Rs 22,062/-