Trade-Offs in Transportation Design

All transportation decisions made by shippers in a supply chain network must take into account their impact on inventory costs, facility and processing costs, the cost of coordinating operations, and the level of responsiveness provided to customers. For example, Amazon s use of package carriers to deliver products to customers increases transportation cost but allows Amazon to centralize its facilities and reduce inventory costs. If Amazon wants to reduce its transportation costs, the company must either sacrifice responsiveness to customers or inCTease the number of facilities and resulting inventories to move closer to customers. 

The trade-off between transportation and inventory costs is significant when designing a supply chain network. Two fundamental supply chain decisions involving this trade-off are 

CHOICE OF TRANSPORTATION MODE Selecting a transportation mode is both a planning and 

The impact of using different modes of transportation on inventories, response time, and costs in the supply chain is shown in Table 14-3. Each transportation mode is ranked along various dimensions, with 1 being the best and 6 being the worst. 

Faster modes of transportation are preferred for products with a high value-to-weight ratio (an iPad is a good example of such a product) for which reducing inventories is important, whereas cheaper modes are preferred for products with a small value-to-weight ratio (e.g., furniture imported by IKEA) for which reducing transportation cost is important. The choice of transportation mode should take into account potential lost sales and cycle, safety, and in-transit 

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