Discuss key drivers that may be used to tailor transportation?

Answer 1

Tailored transportation is the term for use of different transportation networks and modes based on customer and product characteristics. Tailoring transportation allows firms to achieve cost and responsiveness targets that are appropriate for the supply chain. The key drivers are density and distance, customer size, and product demand and value. These drivers can be viewed as guide for ownership of

Transportation options based on customer density and distance are summarized in the table and present cost and responsiveness tradeoffs for the supply chain.

Short distance

Medium distance

Long distance

High density

Private fleet with milk runs

Cross-dock with milk runs

Cross-dock with milk runs

Medium density

Third-party milk runs

LTL carrier

LTL or package carrier

Low density

Third-party milk runs or LTL carrier

LTL or package carrier

Package carrier

Customer size and location dictate whether a supplier should use a TL or LTL carrier or milk runs. Very large customers can be supplied using a TL carrier, whereas smaller customers can use LTL carriers or milk runs. The authors discuss a customer-partitioning procedure for combining smaller customers' shipments with larger customers in order to achieve responsiveness and cost targets.

Product demand and value determine whether aggregation strategies will benefit the supply chain. The best combinations are shown in the table:

Product Type

High Value

Low Value

High demand

Disaggregate cycle inventory but aggregate safety inventory. Use an inexpensive mode of transportation for replenishing cycle inventory and a fast mode when replenishing safety inventory.

Disaggregate all inventories and use inexpensive mode of transportation for replenishment.

Low demand

Aggregate all inventories. If needed, use fast mode of transportation for filling customer orders.

Aggregate only safety inventory. Use inexpensive mode of transportation for replenishing cycle inventory.