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24 Cards in this Set

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Chapter 1 (by G. Lafiguera)


What are the roles of transportation in supply chain?



1. Fosters improvement in supply chain integration


- Integration is not achievable without effective transport



2. Help organizations to be more efficient and effective



Why are there demands for Transportation?




1. Regions or areas tend to specialize in economic activities



2. Specialization creates physical gap between markets and areas of production for a given good



3. This gap creates a demand for transport



4. Fundamental economic role of transport is to bridge this supply-demand gap


What are the economics of Transportation?



1. Pervasive elements of daily life


2. Impacts citizens'


- Economic well being


- Safety


- Social interaction


- Quality of physical environment


- Quality of daily life


What is the typical transport measurement units for freight?


Ton Miles

What is the typical transport measurement units for people?



Passenger Miles



Note: Two units may have very different costs of production and very different service requirements

Not Applicable

What are the levels of measurement unit aggregation?

1. Total transport output (freight or passenger)



2. Transport output by mode (mode share)



3. Transport output by carrier (market share)

Transportation demand is price inelastic (insensitive to price change), If?


If % change in quantity < (is less than) % change in price


- Price increase leads to revenue increase


- Price reduction leads to revenue reduction


Transportation demand is price elastic, If?

If % change in qty > (is greater than) % change in price


- Price increase leads to revenue decrease


- Price reduction leads to revenue increase

Is aggregate demand for freight transportation price elastic or inelastic?

Price Inelastic

Is demand for a particular mode or carrier price elastic or inelastic?

Price Elastic


- because often, substitutes are available

Define derived demand for freight transportation.

Demand for transport service to move a product to a given location depends upon the existence of demand to consume or use that product at that location.

What are the components of landed cost?

  1. Cost of Production
  2. Transport cost from production point to market

What cost influences a producer's landed cost advantage/disadvantage vs. competitors?

Transport Costs


- thus determining the market value of the transport service

What determines extent or range of a producer's market area (Lardner's Law)?

Landed Cost


- also determines the value of transport services

What are critical service characteristics and supply chain cost impacts of Freight Demand?

1. Transit time - volume & cost of holding inventory; potential stockout and/or safety stock costs


2. Reliability or consistency of transit time


3. Accessibility - impacts transport cost & time


4. Capability - "special" service requirements


5. Security


What are some of the values of transport services in relation to location of economic activity?

1. Transportation influences location of cities, particularly ports


2. For firms (especially for firms producing or marketing globally), transport influences the location of manufacturing plants and distribution facilities


3. Influences are dynamic: As economic activity locations shift, the pattern of transport demand also shifts and vice versa

Briefly explain the evolution of supply chain concept (three phases).

1960's - Physical Distribution Concept


1980's - Business or Integrated Logistics


1990's - Supply Chain Management Concept



A system approach to analysis and decision-making is common to all three phases

What are the characteristics of Physical Distribution Concept?

1. Focuses on physical distribution costs and tradeoffs


2. Objective was to find lowest total physical distribution system cost


3. Example: transportation mode or carrier selection - involves tradeoffs between transport, inventory, materials handling, and packaging costs

What are the characteristics of Business or Integrated Logistics?

1. Adds analysis of inbound or sourcing side to the outbound physical distribution side.


2. Development facilitated by:


- Economic deregulation of transport in the US


- Rising degree of international or global setting


- Both create additional opportunities for cost savings through integrated management and coordination


3. Notion that logistics contributes to consumer and revenue generation begins to emerge

What are the key underlying principles of Supply Chain Management Concept?

1. Systems analysis and management


2. Three key flows: product, information, and cash


3. Integrated management of extended enterprise


4. Focus on ultimate consumer of end of product

What was directly influenced by transportation?

Product flow


- two way


- Growing importance of reverse logistics systems

Briefly explain Information Flow as a component of Supply Chain Management.

1. Sales trigger replenishment orders flowing upstream


2. Traditionally, replenishment orders used by upstream supply chain members to forecast downstream demand


3. Supply Chain compression via improved two-way information flow reduces uncertainty and cost impact of bull whip effect

Briefly explain Financial or Cash Flow as a component of Supply Chain Management.

1. Payments flowing upstream for goods ordered


2. If order and replenishment cycles shorten (orders and products flow faster) then cash flows faster


3. Faster cash flow reduces working capital requirements for financing operations and processes and contributes to improved profitability


4. High transport service levels contribute to improved customer service and faster cash flow