# Presentation: 177378

## Transportation in Supply Flow Networks:The Critical ProcessFederal Highway Administration’s Freight Discussion Series – December 2000

- William DeWitt, Ph. D.
- Teaching Professor
- University of Maryland, College Park

**Notes:**
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## Transportation and Supply Flow Networks

- Supply Flow Networks (SFN) Defined and Discussed
- Transportation’s Critical Roles in SFN
- Summary

## Supply Flow Networks

- Flow – to move with a continual change of place among the parts
- Supply – to make available a quantity
- Networks – an interconnected or interrelated chain, group, or system
*Complements of Webster’s Third New International Dictionary*

## Slide 4

## Significance of Supply Flow Networks

- Raw Materials sourcing is fixed and limited in scope for most materials; Related weight/bulk shedding semi-processing is similarly limited
- Manufacturing, Assembly and Warehousing are value-added exercises; CAD/CAM and postponement making them more variable in the flow
- As Channels of Distribution change, i.e., wholesalers, jobbers, distributors, retailers, driven by ecommerce, transportation requirements change dramatically
- Consumption is relatively fixed

## Freight Transportation Importance

- Major Cost of Logistics – 40 to 60%
- Integral and Essential Link for Global Supply Chains
- Dynamic Inventory Will Rival Static Inventory

## Transportation as a Major Cost Component of Logistics

| Source | Transportation Costs($ Billions) | Transportation % of Logistics Costs | Transportation % of Sales |
| --- | --- | --- | --- |
| Delaney
1998 | 499
(Approx. 6% GNP) | 58 |  |
| Davis & Drumm 1997 |  | 45 | 4.08 |
| Morreale & Prichard
1996 |  | 43.4 | 3.13 |

## Transportation Essential Linkage for International Supply Chains (Sine Qua Non) 

- Logistics now viewed as part of supply chains or supply flow networks (CLM 1998)
- Global information and communication systems (Netcentricity) enhance development of international supply flow networks
- Telegraph and Railroads 100-years ago > Web and Multimodal Transportation today
- Supply Flow Networks are spatial and cannot exist without transportations time and place utilities

## Increased Sourcing and Market Distance Mean Increased Transportation 

- Sourcing around the world
- Marketing internationally
- Customers indifferent to space, sensitive to time
- Global Supply Flow Networks mean increased distance and transportation
- Global means increased reliance on multimodal transportation

## Increased Speed of Transportation Systems

**Customers want process speed**
_**Achieved through:**_
**Variance Reduction**
**Smoother Connections/Handoffs**
**Technology Improvements**
**RoadRailer**
**FastShip**
**747-400F**
**8,000 ++ TEU's**

## Growing Transportation Complexity/Options and Trade-offs (Customization and Multimodal)

- Optimal Combination of
- Modes
- Equipment
- Information
- Service
- To meet
- Speed
- Complexity
- Precision
- Capacity
- Profitability

## Transportation and Urban Congestion

- Linehaul capacity (point to point) is significant issue
- Critical issue is the urban congestive failure
- Population growth
- Changes in Supply Flow Network patterns to residences

## In-transit (Dynamic) Inventory Will Rival Storage (Static) Inventory 

- Production from mass/push to customized/pull
- Large production lots required large inventories
- Erratic transportation of today/past required safety stocks
- Inventory visible and measured in ERP worlds
- Mass customization makes lot size a unit of “one”
- Inventory is expensive (materials/parts, labor, capital = cash)
- Only want inventory stopped long enough to restage or transfer, not stopped for storage

## Increased Information and Communications Systems for Transportation 

- Netcentricity
- Information
- Communication
- Operational
- Control – Capacity and Variance Reduction
- Tracking/Tracing – Future need?
- Market
- Forecast
- Adjustments to flow/Stochastics

## Wrap-up: Transportation and Supply Flow Networks 

- Supply Flow Networks Make Transportation the Focus
- Fixed/Limited Sourcing and Consumption
- Ecommerce and channel changes will significantly change transportation requirements
- Transportation and Supply Flow Networks
- Major Cost of Logistics – 40 to 60%
- Integral and Essential Link for Global Supply Chains
- Dynamic Inventory Will Rival Static Inventory