Transport Techniques & Management - Report Example

Transport Techniques & Management Transport Techniques & Management North West Method The North West Corner Rule isa technique that used for computing a fundamental feasible solution of a transportation problem. In this method, the primary variables are selected from the top left a corner or the North-West corner. The North West corner method is also referred to as a procedure that is followed in the transportation model where one is required to start the process from the upper left - hand of the cell of the table and systematically allocated individuals units to their respective shipping routes. The North West method is considered a much useful method as it allocate as much as possible resources to the cell that is located in the left-hand corner (Elsharawy, Gomah, & Samy, 2009 p .356). Various compensations are associated with the use of this method. One of the most important reasons why this method is used is its simplicity and reliability. A recent study indicated that the North West Method is one of the simplest approaches to computing a fundamental feasible solution of a transportation problem (Imam, Elsharawy, Gomah, & Samy, 2009 p .358). In determining a solution in a transportation table, the user selects the North West cells of the transportation table and then allocate as many units as possible, which are equal to the minimum between the demand requirement and the available supply. The user is then required to adjust the demand and supply numbers in the respective columns and rows allocation. If there is exhaustion of the supply of the first row, then the user is required to move down to the cells that are in the first column and the second row. In a situation where the demand is equal to the cell supply then, the allocation that follows is made in the cell, either in the next column or in the next row. Researchers argued that this procedure is one of the simplest and most reliable putting in mind the complexities that are associated with the computational of feasible solutions for a transportation problem. The North West method is easy to interpret, compute and understand. Ultimately, the procedure followed to compute the solution of this process is considerably comprehensive and for this reason, it is used for transportation to satisfy various compulsions where cost is not the primary criteria. Additionally, the method is utilized in a situation where costs are relatively insignificant. Regardless of the various benefits that are associated with the method, the method faces various limitations. Some the researchers argue that the method does not take into consideration the cost that is involved in shipping. Consequently, the initial solution that is acquired by the North West Method necessitates iteration before the optimal solution is obtained (Imam, Elsharawy, Gomah, & Samy, 2009 p .356). Additionally, the method has been criticized for entirely ignoring the unbalanced problem. In other words, the method assumes that demand is not equal to supply .This assumption makes it very challenging to get accurate results which can be used in making amicable decisions. Nevertheless, this method can be solved by an introduction of dummy destination or dummy sources to minimize cost. Matrix Minimum Method A matrix method is a method of calculating feasible solutions of transport problems whereby the underlying variables are chosen according to the entity cost of transportation. The matrix minimum method is very useful because it condenses the computation as well as the time required to determine the optimal solution. For instance, to get a solution using this method one is required to identify the box that is having the minimum unit cost. If the minimum cost is not precise, one is at liberty to select any cell. After the selection is done, one is required to select the value of the corresponding XiJ, which is subject to the requirements constraints and the capacity. The user is also required to repeat these steps until all the constraints are satisfied (Korukoğlu & Ballı, 2014). The matrix minimum method is widely used because of its ability to compress computations. In a situation where the user wants to have all the computation in a single pane, the user may opt to use the matrix method. Additionally, it is relatively easy to identify computational errors using this method since every part of the computation is clearly identified from an easy to interpret computation. Vogel’s Approximation Method Vogel’s Approximation Method is a heuristic method that is used to solve transportation problems. Compared to other methods, VAM provides an efficient running solution. Vogel’s Approximation Method is considered one of the most efficient algorithms used in finding the basic feasible solution. One advantage of this method is that an extremely good solution can be obtained with comparatively less effort. In fact, Vogel’s Approximation Method yields a close to optimum or optimum starting solution for transport problems that are considered small sized. In understanding the limitations of this method, it is imperative to understand the basis of this method. Vogel’s Approximation Method is based on the context of regret or the penalty cost. A penalty cost is considered as the difference between the largest cell cost and the next largest cell cost in a column or a row. This method allocates values as much as possible to the cells with the minimum costs both in the column and in the row with the largest penalty cost. A recent study conducted by the Association for the scientific research indicated that Vogel’s Approximation Method obtains efficient initial solutions compared to other methods. Ultimately, the method uses the total opportunity cost as well as alternative allocation costs. Additionally, a simulation experiment conducted by the some researchers indicated that Vogel’s Approximation Method is extremely efficient for getting solutions for a small sized transportation problem (Korukoğlu & Ballı, 2014).. Nevertheless, Vogel’s Approximation Method has various limitations that constrict the algorithm from achieving its solution. In this approach, Penalties are settled on by the difference of the two minimum costs of each column and each row. The highest penalty shows that between the two minimum costs, one is too high, and one is the lowest. If the maximum penalty cost emerges in two or more columns or rows, the Vogels Approximation Method will select any of them, or it will select the top row. Additionally, it is not always true that the largest penalty will ensure the lowest cost. This reason is brought about by a variation of the two pairs of numbers can tend to be equal, but the lowest number will exist in the second pair. Therefore, it can be concluded that if the lower pair fails to emerge in the top-most position or rather the extreme left position then, there will be no selection in the next iteration. Therefore, the total transport cost may not be adequately minimized (Das, et al., 2014). A simulation experiment conducted by the Association of scientific research indicated that unlike other methods, Vogels Approximation Method is insufficient for large sized transport problems. For this reason, many users opt to use Improved Vogels Approximation Method (IVAM) when they want to obtain reliable initial elucidation for large-scale transportation problems. The main reason why this Vogels Approximation Method is not used in large-scale transportation problems is its high number of iterations, high number of CPU times and more importantly, its computational difficulty, which hinders optimal solution (Korukoğlu & Ballı, 2014). What other factors need to be considered and what are the alternatives to these methods? Transportation plays a critical role in our managerial decision-making and more importantly, in our economy. Rather than covering the entire context of transportation technique and management, this paper will discuss the various factors that require to be considered and the alternatives of these methods. In understanding the factors considered in establishing a good transportation model, it is important to understand what transportation problem. Transportation problems involve the physical transition of goods and services from various origins of supplies to multiple destinations where the goods and services have been demanded. Ultimately, transportation problem involves transition within the given constrictions of demand and supply in such a way that there is a reduction in the total transportation cost. A transportation problem is also considered a special type of (LP) linear programming, which may be solved using the various methods of transportation. in particular, simplex method. Nevertheless, even small transportation problems often engross large number of linear constraints and variables and for this reason; a direct appliance of a simple method may be too expensive even for computers. Fundamentally, the structure of a transportation problem is mathematical. This allows the problem to be solved by an efficient method that is recognized as a transportation method (Soh, 2010, p. 343). In determining a transportation model, various factors must be considered. These factors include cost factor, the demand and supply of the product or services, levels of services and more importantly, the geographical location. Regardless of the fact that transportation methods are the best in solving the transportation problem there are various alternatives, which can be used to solve the transportation problem. The most commonly used alternative is collaboration. Companies as well as individuals are joining hands to purchase goods in order to receive quantity discount. This method has significantly reduced minimized the cost which could have been otherwise minimized through transportation methods (Soh, 2010, p. 333). Explain the differences between 3PLs, 4PLs and lead logistics providers providing examples of each. Third-party logistics (3PL) Third-party logistics (3PL) is an organization that offers services to its clients of outsourced logistics services for part or on full supply-chain management function. 3Pl providers usually specialize in integrated transportation and warehousing services that can be measured and customized according to the customer’s requirements. These services are customized in accordance with the market conditions, such as delivery and demand service requirements for their materials and products. In some instances, transportation services are beyond logistics as they include value-added services linked with procurement and production of goods Third-party logistics targets a particular line in supply chain management, such as transportation, warehousing or provision of raw materials. 3Pl has numerous advantages such as being cost saving, low capital commitment, being flexible, and they focus mainly on their core business. 3Pl providers include courier, freight forwarders companies and other companies offering and integrating transportation and subcontracted logistics services (Leahy, Murphy, & Poist, 1995). There are four categories of third-party logistics providers; the first category of the third-party logistics providers is standard third-party logistics. This is the standard form of a third-party logistics provider. This 3PL perform activities such as packing and picking, distribution and warehousing that is the fundamental function of logistics. The second category of third-party logistics providers is service developer. This form of 3PL provider offers to their customers with value- added services such as tracing and tracking, specific packaging, cross-docking or providing special security system. A robust information technology and concentration of economies of scales enables the 3PL provider to offer these types of services. Another category of third-party logistics providers is customer adapter that is provided at the customer request, and fundamentally, it controls the overall logistic activities of the company. Customer developer is another category of third-party logistics providers, it is the highest level that 3PL provider can achieve with respect to its activities and processes (Sheikh & Rana, 2012, p. 45) Outsourcing may engage a subset of an operation’s logistics, leaving some operation steps or products intact since internal logistics can do better than the external provider can. Another significant point about 3Pl is its customer orientation. The logistics provider must fit the requirements and structures of the company. The fit is more crucial than the pure cost savings. Customer orientation is a way of adaptability to changing customer reliability, needs and the flexibility of 3PL provider. 3PL providers are likely to shed clients’ efficiency willfully by using their assets to maximize their effectiveness. Additionally, third-party logistics providers are usually bureaucratic, and they often have long decision-making process because of the significant-sized company. One of the main limitation facing 3PL providers is loss of customer control this is due to delays that are associate with long decision-making process. (Siddiqui, 2005, p. 34). Forth –party logistics (4PL) Most firms’ experts believe that 4PL concentrates on the logistics process of the customer, mainly from the way they deal with operations internally through logistics suppliers they use to their client service. Forth-party logistics providers are obligated to offer the best supply solutions. 4PL can be described as an integrator that combines the resources, technology and capabilities of its organization and other firms to build, design and run complete supply chain management. Forth-party logistics process assembles technology and processes to manage and design customized supply chain. The supply chain solutions address all or part of the customers’ needs and requirements. 4PL is a BPO (Business Process Outsourcing) provider that offers re-engineered approach and value to the client’s needs. 4PL is neutral and manages the supply chain and logistics process, regardless of the carriers, warehouses or forwarders are utilized. A neutral forth party logistic does not have constraints, as expensive assets do not hold them back. This flexibility allows the 4PL to get the best solution to reach their clients. Forth-party logistics have independent service providers who deal with the company supply chain operations. Neutrality allows 4PL to offer optimized services and costs to a supply chain (Chen, Lin, & Huang, 2006). The advantages of 4PL include reduced supply chain cost, boost productivity, optimize structures and processes, increase service level and helps in gaining more supply chain visibility. The 4PL idea has greatly used the path of globe-trekking ventures exploring cheap and more reliable outsourced manufacturing locations. A 4PL can act as a major contractor as well as a management fee (Bottani & Rizzi, 2006). Lead logistics providers A lead logistics provider is the most transparent among 3PL and 4PL. Leads logistics provider is as the name suggests as it takes the lead in offering some functions while providing a single central control point. An LLP acts as the customer’s chief supply chain management benefactor, describing processes and managing the integration and provision of logistics services through its company and those of the subcontractors. LLP takes the full responsibility of organizing for transport from the producer to their clients. The existing lead logistics providers include the rail companies, shipping companies, road haulage based or airfreight. Lead Logistics offers numerous services such as inventory management, supply chain consultation, warehousing, and supply chain design among others (Anderson, Devinney, & Keating, 2010, p. 102). What are the advantages of and barriers to collaboration? Provide examples of successful freight transport collaboration For years, upcoming shippers have accepted the unpredictable schedules that are sometimes associated with the LTL (Less –Than Truckload) carriers. This method is changing as low volume shippers are influencing the matchmaking capacities of the 3PL (Third Party Logistics) to combine freight from various companies that are shipping to the same region. This simple collaboration strategy can be 25 to 35 percent less in terms of cost compared to the usage of LTL for a similar move. Most transportation companies are collaborating in freight transportation to ensure that transportation cost is minimized as much as possible. By reducing their transportation cost, they are assured of higher profit margins without compromising their relationship with their customers (Peeta & Hernandez, 2002, p. 25). Collaboration is the process of working together in achieving a common goal that may tend to be more challenging in individual efforts. In a successful collaboration, parties with identical interest bring together a coordinated effort with significantly benefit the parties concerned. Normally, collaboration involves, having an agreement on a common goal, devising a plan to realize the goal and more importantly, assigning responsibility to each collaborator. In a supply chain, the degree of collaboration ranges from sharing information between the different levels of the chain of supply to various strategic alliances between competitors. The currents supply management trend such as the need for customer responsiveness, outsourcing, globalization as well as increased competition has left companies with no choice than to collaborate. Various benefits associated with collaborating including reduced costs, improved service levels, and asset utilization, decreased lead-time, improved customer, supplier and even competitor’s relationship. Having a wider perspective of the supply chain enable companies to make efficient and informed decisions on various strategic issues (Puttmann, 2006, p. 112). Depending on the collaboration level and business function, there is a variation on the level of benefit received by each company. In the supply chain, collaboration can be categorized into two levels; vertical and horizontal. In horizontal level collaboration, companies with identical characteristics competitors collaborate to achieve even greater benefits. An example of is a group purchasing organization. In this type of competition, competitors work together to purchase products for them to receive a volume discount from conventional suppliers (Elmaghraby, 2005). Conversely, collaboration across various levels of the chain of supply is known as vertical collaboration. The greater part of this level involves coordination of operations as well as information sharing between buyers and sellers. There is vast literature relating to supply chain agreements between the purchaser and the seller. The structuring of this agreement is meant to achieve coordination is supply chain and more importantly, to improve the general performance of the chain of supply. An inventory resupply managed by a vendor can be given as a well – analyzed example of a vertical collaboration. This collaboration is mainly advantageous to the companies in terms reducing inventory-related costs (Campbel, Clarke, Kleywegt, & Savelsberg, 1998). Regardless of the level of collaboration, it is very beneficial to have collaboration especially in freight transportation. An article published in the in the Talking logistics.com showed how Dal-Tile Corporation and Transplace benefited from a collaborative transportation project. Together with their members from Werner Ladder Whirlpool, the participants have significantly benefited from this collaboration. Some of these benefits include easy management of end customer experience, keeping their truckload freight moving, access to legal advice among others (Talking Logistics, 2013) Nevertheless, the collaboration also poses abundant challenges that increase depending on the level of collaboration. These challenges are brought about by the fact that, regardless of the fact that there is collaboration between participants, every participant is steered by their self-interests. Therefore, every proposed method to manage collaboration functions is required to yield individually and collectively (Albert, 2013). At the utmost level, developing a triumphant collaboration involves identification and exploitation of synergies between individual participant and allocating resulting benefits between the collaborators. In a transport and a distribution setting, identification and exploitation of synergies involves solving multifaceted optimization problems and therefore, may be challenging in it (Crainic, Ricciardi, & Storchi, 2004, p. 122). Trust is another critical issue in collaborative relationships. Lack of confidence among the participants poses a significant barrier to collaborative relation. Trust is even more important in horizontal collaboration where competing individuals are required to collaborate with each other. Due to trust problem, there is a potential risk of having information asymmetries among the various agents in the chain of supply including information of how to share information between agencies. Normally, sharing of information benefit the collaborators and the collaboration, in general, nevertheless, this is not always the case due to trust issues (Caplice & Sheffi, 2003, p. 115). Researchers argue that various risks are associated with freight collaborative activities besides trust. Collaboration poses a significant risk to the continuity and the organization of the project. Ultimately, two types of risks can be recognized in the category. There is a risk that is associated with the logistic organization meant for operational decisions that are individually made. There is also a significant risk involved in LSC strategic and tactile actions where obstacle and other misunderstanding have been seen as potential risks. It is also, worth noting that the project reorganization can only be considered when the project is stable and operative (Lambert, Emmelhainz, & Gardner, 1996, p. 14). Collaborative activities are also faced with considerable risks relating to processes, current practices, and policies. The usage and the development of new logistic solutions require an important in the manner by which people act and think in making the process operative. In ensuring that the collaborative relationship is operative, there is a need for continuous social analysis during the conception as well as during the development phase. This social analysis is critical to the success and stability of every innovation solution carried out (Feliu & Salanova, 2012, p. 179). Collaboration is vulnerable to dependence risk. For instance, if the information system of the collaborative relationship is based on several technologies, there is a need to consider the risk that is related to dysfunction of these technologies. In a situation where there is a dysfunction in the technological tool supporting the collaborative partnership, the collaborative system can be less effective. References Albert, M., 2013. Collaborative Freight Strategies Offer Lower-Cost Alternative to LTL. [Online] Available at: http://www.inboundlogistics.com/cms/article/collaborative-freight- strategies-offer-lower-cost-alternative-to-ltl/ [Accessed 10 June 2015]. 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Talking logstics , 2013. Transportation Collaboration: Optimizing Freight Costs by Sharing Capacity. [Online] Available at: http://talkinglogistics.com/2013/01/14/transportation-collaboration-optimizing- freight-costs-by-sharing-capacity/ [Accessed 10 June 2015]. Read More