Supply Chains and Private Sector Dynamics

3- 2

• Major trends in freight logistics

• Supply chains basics

• Implications for planning

Agenda

3- 3

• Productivity

• Congestion

• Input cost factors

Trends in Trucking

3- 4

Trends in Trucking - and More

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06

$ p

er g

allo

n

Pump Price for Diesel (U.S.)

3- 5

Trends in Rail Freight

• Intermodal growth

• Capacity constraint

• Capacity allocation

3- 6

Trends in Waterborne Freight

• Mega-ships

• All-water routes

• Transloading

• Short-sea

prospects

3- 7

Trends in Pipelines

• Weather risks

• Ethanol

conversion

3- 8

Trends in Air Cargo

• Ground substitution

• Global carriers

3- 9

Trends in Logistics

• Visibility

• Globalization

• Fast Cycle Logistics

Radio Frequency Identification Tag Applications

3- 10

Globalization: Trade Percent of US GDP

3%

6%

9%

12%

15%

18%

21%

1975 1980 1985 1990 1995 2000 2005 2010 2015

Imports Exports

Supply Chain Basics

3- 12

Traditional Logistics

METHOD OF CONTROL SUPPLY CHAIN

MATERIAL OWNERSHIP

TRANSPORT SYSTEM

INFOSYSTEM

MATERIAL FLOW

WHOLESALEWHOLESALE

RETAILRETAIL

INTEGRATEDMANUFACTURER

PUSH TO CUSTOMER

3- 13

Fast Cycle Logistics

KEY: MATERIAL FLOWINFORMATION FLOW

MATERIAL OWNERSHIP

TRANSPORT SYSTEM

INFOSYSTEM

METHOD OF CONTROL

SUPPLY CHAIN

GLOBAL LOCATION

KNOWLEDGE SPECIALISTS

INTEGRATORINTEGRATORINTEGRATOR

PULL FROM

CUSTOMER

STAGING POINTSTAGING POINT

3- 14

Supply Chain Management

• Transforms non-valued added activities into strategic management functions

• “Just-in-time” transit replaces inventory

• Reliability surpasses cost as most important transportation consideration

3- 15

Advanced Manufacturing

• Reliable and timely

• Higher value shipments

• Just-in-time manufacturing

• Multi-modal, truck dominant

3- 16

Natural Resource Manufacturing

• Bulky goods

• Low damage, low cost

• Less emphasis on speed

• Rail and barge dependent

3- 17

Non-Durable Manufacturing

• Heavy or high cube

• Moderate to high value

• Moderate to high speed

• Local ends of long supply chains

• Truck dominant

3- 18

Service Industries

• Accessibility

• Reliability

• Smaller, more frequent trips

• Truck and express package dependent

3- 19

Global Supply Chain: High Tech

SPECIAL PRODUCT & DC

SPECIAL PRODUCT & DC

ASSEMBLY & DC

ASSEMBLY & DC

PARTS DC

PARTS DC

URGENTDC

URGENTDC

BUSINESSBUSINESS

CONSUMERCONSUMER

CONSUMERCONSUMER

BUSINESSBUSINESS

IMPORTAIRHUB

IMPORTAIRHUB

IMPORTSEAPORTIMPORT

SEAPORT

Modal KeyTruckloadIntermodalLess Than Load (LTL)

AirPackage

COMPANY CONTROL

COMPANY OWNERSHIP

3- 20

Global Supply Chain: Retail Office

RETAILOUTLETSRETAIL

OUTLETSLOCAL MARKET DIRECT

WAREHOUSEWAREHOUSE RETAILOUTLETSRETAIL

OUTLETS

WAREHOUSEWAREHOUSE RETAILOUTLETSRETAIL

OUTLETS

REVERSE LOGISTICS

( Multi-stop Loop )

PORTPORT

EXTRA- REGIONALVENDOR

EXTRA- REGIONALVENDOR

REGIONALVENDOR

REGIONALVENDOR

Truck – DrayTruck – LTL/Pkg.

Modal Key

STAGINGSTAGING

WHOLESALEREGIONAL

DC

WHOLESALEREGIONAL

DC

EXTRA-REGIONAL

DC

EXTRA-REGIONAL

DC

TruckloadIntermodal rail

3- 21

Regional Chain: Consumer Beverages

CLUBCLUB

MULTIPLE TRIPS

BULK ORDER DELIVERY1 – 3 Stops per TripTo Clubs & Grocery Stores

SMALL ORDER DELIVERY10 – 30 Stops per TripTo Convenience Stores, HotelsRestaurants, Bars, Offices

GROCERYGROCERY

GROCERYGROCERY

MULTIPLE STOPS MULTISTOPPOCKET

(3 Mile Radius)

STEM ( 5 – 15 Miles)

EXTERNALMARKETS

EXTERNALMARKETS

LOCAL PLANT & DC

LOCAL PLANT & DC

EXTERNALPLANT & DCEXTERNAL

PLANT & DC

Production Flow

Local Receivers

Modal Key

Production & Wholesale Flow

3- 22

High Service Chain: Health Care

REGIONALDC

REGIONALDC1 – 2 HOUR

SERVICE

OVERNIGHTSERVICE

4 – 6 HOURSERVICEHOSPITAL

CENTRALDC

CENTRALDCVENDORVENDOR

VENDORVENDOR

Implications for Planning

3- 24

Planning Considerations

• The Supply Chain = the Business Enterprise

• Business competitiveness depends on transportation performance

• Chains are sensitive to time and disruption

• Chains cross jurisdictions

• Needs vary by chain

3- 25

Freight Planning and Economic Competitiveness

• Travel and vehicle operating costs LOS

• Inventory carrying costs Reliability

• Asset utilization costs Land use

• Access to markets Multi-jurisdictional

planning

3- 26

• Fuse information with technology

• Demand high performance transportation system

• Impacts supply chains and business models

Businesses Compete on Logistics Costs