© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 1 Module 2 Welcome to & FHDSCM: FIATA HIGHER DIPLOMA in SUPPLY CHAIN MANAGEMENT
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 2 Module 2: International Transport Management Welcome to FDHSCM 2
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 3 Module 2: Objectives • Define the role of International transportation in the supply chain • Understand the role and impact of trade & trade agreements on international transportation • Understand the role of intermediaries in transportation, and the various methods of pricing • Understand and apply trade-offs in international transportation in global supply chains • Differentiate between transportation modes and use simple strategies to choose the optimal transportation mode including intermodal and multi-modal transportation • Discuss the implications of DG and IMDG on transportation • Understand the latest global Security and Safety initiatives
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 4 4 Chapter1: Introduction to Modes of Transport
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 5 Chapter 1: Objectives • Appreciate the role of transportation in the supply chain • Appreciate the impact of transportation on the economy and the environment • Trade-offs in supply chain management • Review the concept of derived demand • Review INCOTERMS 2020 • Appreciate INCOTERMS 2010 & 2020 5
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 6 Chapter 1: Introduction – What is transport? Transport or transportation is the movement of humans, animals and goods from one location to another. In other words, the action of transport is defined as a particular movement of an organism or thing from a point A (a place in space) to a point B. Modes of transport include air, land (rail and road), water, cable, pipeline and space. The field can be divided into infrastructure, vehicles and operations. Transport enables trade between people, which is essential for the development of civilizations 6
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 7 Chapter 1: Introduction –Transportation represents the single most important element in logistical costs, for most firms –Typically about 50 to 60 % of logistics costs are absorbed by transport costs 7
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 8 – Transportation is the physical link connecting the firm to its suppliers and customers – The supply chain is a system of links between nodes where goods are stored – Transportation companies bridge the gaps – FF is the primary intermediary Chapter 1: Introduction 8
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 9 Chapter 1: Transport & the Economy –Transport is not just a movement of people and products through space and time –Transport procurement involves the purchase of a “Bundle of services” –FF often fills variety of role in making this “bundle” happen smoothly –SAAFF – “We call the freight forwarder the “architect of transport” –https://saaff.org.za/ 9
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 10 Transport & the Economy –Economic significance –Environmental significance –Social significance –Political significance –Technological significance 10
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 11 Typical SCM Flow 11
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 12 Drivers of Supply Chains 12
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 13 13
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 14 Introduction 14 Customer service goals Transport strategy Transport decisions Inventory strategy Location strategy
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 15 Transportation improvements lead to: Greater competition in the marketplace Greater economies of scale in production Reduced total costs of goods Accelerating improvement in infrastructure development 15
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 16 Flow of Logistics services in SCM 16
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 17 Creation of Place and Time utility Transportation Time Utility Place Utility Warehouse/ Storage Time in Transit Consistency of Service Place Of Consumption 17
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 18 Impact of transportation on the SC – Production decision • What product(s) to produce ? – Market Area decision • Where the product(s) should be sold ? – Purchasing decision • What to purchase ? 18
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 19 Business Decisions Affected by Transportation –Location decision • Where plants, warehouse, offices, stores or other business facilities should be located ? –Pricing decision • What are the costs ? 19
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 20 3 critical flows of SCM 20
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 21 Factors Affecting Transportation • Degree of intramode or inter-mode competition • Location of markets (distance goods must be transported) • Nature and extent of government regulations • Balance or imbalance of freight traffic in a market • Seasonality • Domestic or international transportation 21
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 22 Transportation and competition 22 - Competition between sellers - Competition between buyers - Competition between carriers / transporters - Competition between FF - Competition between all service providers along the supply chain - All driven by market competition
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 23 Transport Management System Mode of Transport to be used Which carriers for each mode Own or outsource fleet Own or outsource the management expertise Transport System Cost Speed Dependability Task Resources 23 Strategies
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 24 Total Cost Analysis 24
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 25 Trade offs 25
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 26 Total Cost Analysis – Business Logistics Approach – Consider other elements of supply chain costs in customer service, transportation, warehousing, procurement and inventory – Savings in one area may impact the costs in another area 26
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 27 Total Cost Analysis • Total Logistics Cost = • Transport Cost + Warehouse Cost + Stock Holding Cost + • Packaging Cost + Information Processing Cost + • Other Logistics Overheads 27
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 28 Customer Perceived Value Perceived Benefits Customer value = ______________________ Total Cost of Ownership • Perceived benefits include the tangible + intangible • Benefits are essentially perceptual and that they will differ by customer 28
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 29 Demand Elasticity % change in quantity Elasticity = ------------------------------- % change in price 29
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 30 Demand Elasticity – Elasticity of demand refers to the change in demand when there is a change in another factor, such as price or income. If demand for a good or service is static even when the price changes, demand is said to be inelastic – Price elasticity of demand, is the degree to which the effective desire for something changes as its price changes 30
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 31 Demand Elasticity – In general, the demand for freight transportation is inelastic – Transportation costs represents, in the aggregate, less than 4% of a product’s landed cost – Substantial rate reductions would be required for a meaningful increase in demand for the product and consequently a demand for the transportation of the product 31
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 32 Demand Elasticity 32
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 33 Pricing – Cost of Service Pricing • Covers at least actual expense of the service • Typically for low cost goods – Full Cost Pricing • Covers at variable and fixed costs of the service • Allows carrier to continue as an ongoing concern as equipment costs replacement is covered – Value of Service Pricing • Maximizes revenue regardless of costs • Depends on what market will allow 33
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 34 Carrier Characteristics and Selection • Carrier selection logically follows mode selection. Having chosen a mode of transportation, the integrated logistics manager must now decide which carrier or carriers to use. The choice will depend on which carrier best manifests the characteristics of the mode. 34
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 35 Carrier Characteristics and Selection – Many of the same criteria used in mode selection are reused here. Carrier’s selection is generally based on: • Costs/Price • Accessibility • Responsiveness • Claims Record • Reliability 35
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 36 Pricing – Other Pricing Variables • Volume of cargo • Handling requirements • Liability • Market factors • Density and stowability of cargo • Distance 36
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 37 Derived Demand Demand to transport a product to a given location depends on the existence of a demand to consume or use the product at that location. 37
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 38 Derived Demand 38
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 39 Incoterms 2010 / 2020 39 • Please see the Introduction to Incoterms 2020 link on the Talent LMS
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 40 40
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 41 41
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 42 42
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 43 43
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 44 44
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 45 45
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 46 46
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 47 47
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 48 48
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 49 49
© GMLS material is copyrighted and may not be copied, sold or distributed to any other person without the express written permission of GMLS Management. 50 50