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Making the Right Transportation Modal Decision

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tech4people
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Supply Network Guru
Re: Good linear optimization problem
tech4people   4/5/2013 11:55:03 AM
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Taimoor,

Yeah.

I think in the case of Domestic Airlines the Hub-Spoke model just did'nt cut it anymore(anywhere in the World).

For International Flights though some Major Global Carriers[Emirates, Qantas, Singapore,Etihad,Qatar,Thai,BA,JAL] are basing their Entire Strategy around Hub-Spoke Model where they offer Ticket prices much lower than Direct Carriers.

That works in some cases particularly since most of Africa,South Asia, Southern/Eastern Europe do not have Quality Airlines with A Good Range of Destinations  today.

Regards

Ashish.

tech4people
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Supply Network Guru
Re: Opportunity Cost
tech4people   4/5/2013 11:45:33 AM
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Himangshu,

Keeping the inventories low and demand high is the key for profit.

 

Such a Brilliant and Simple Statement;Yet it holds the Key to All of the Major Issues which afflict Supply Chains today.

Excellent Statement!!!


TaimoorZ
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Supply Network Guru
Re: Opportunity Cost
TaimoorZ   4/5/2013 11:34:34 AM
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"Getting the inventory at right time and right amount is most crucial. Keeping the inventories low and demand high is the key for profit."

@Himanshugupta: Just to add to it, "at the right place" is becoming equally important as companies move towards decentralized warehouses where your suppliers deliver directly to your local warehouse or even directly to your customers and you don't have to move the inventory around yourself. With the help of better forecasting and planning, companies are able to make this happen.


TaimoorZ
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Supply Network Guru
Re: Good linear optimization problem
TaimoorZ   4/5/2013 11:32:34 AM
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"Atleast in the case of Air-Cargo its Okay (and relatively easy)to Shift the Traffic elsewhere (to a less populated/Less Developed region) without much Hassles;but with Passenger Traffic lot more Variables are involved"

@Ashish: Exactly. And Southwest was perhaps the first airline to realize that people are not like Cargo. They don't want to travel through the hub and spoke model and would rather move from point to point. The airline was able to achieve this at the same time keeping the prices lower than those airlines operating on the H&S model.


Himanshugupta
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Supply Network Guru
Re: Opportunity Cost
Himanshugupta   3/31/2013 10:16:45 AM
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Transportation is a big part of both supply chain and overall cost of the product. Getting the inventory at right time and right amount is most crucial. Keeping the inventories low and demand high is the key for profit.

tech4people
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Supply Network Guru
Re: Good linear optimization problem
tech4people   3/31/2013 9:00:51 AM
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Rich,

There are times when I don't know whether you are Serious or Joking.

This is one of those times.

Let me just say this much-Linear Optimization works in some Situations not all.

tech4people
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Supply Network Guru
Re: Good linear optimization problem
tech4people   3/31/2013 7:49:47 AM
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Taimoor,

Yes that's true.


You need scale for the Hub and Spoke model to work most effectively.

But then,if you track Infrastructure Spending closely;you would also have noticed that Its very expensive to Start,Run and Maintain Large-scale Infrastructure Projects (like Airports and Seaports);if there is no Scale.

Best example today is Spain(and in the near future-China).

So many independent regions there tried to build their Own Airports without first figuring out which Airline is going to fly there and for what?

A lot of complementary Skills and resources are required(in addition to scale) to make sure such Large-Scale Infrastructure Projects make money and pay for themselves over time.

Atleast in the case of Air-Cargo its Okay (and relatively easy)to Shift the Traffic elsewhere (to a less populated/Less Developed region) without much Hassles;but with Passenger Traffic lot more Variables are involved.

Regards

Ashish.

TaimoorZ
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Supply Network Guru
Re: Good linear optimization problem
TaimoorZ   3/31/2013 2:50:14 AM
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"When it comes to Cargo Transportation you need a Hub and Spoke Model [Where the Spokes are usually Railways and Roadways] to make things more efficent."

@tech4people: I am a big fan of the hub and spoke model too and many companies have utilized it to achieve operational efficiencies. However, it an only work when you have a large number of destinations scattered across the country. If the volume is not there, it would make more sense to do direct transactions between points rather than hub and spoke model.


TaimoorZ
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Supply Network Guru
Opportunity Cost
TaimoorZ   3/31/2013 2:36:00 AM
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Apart from all the direct inventory related costs such as transportation and freight costs, there's also an opportunity cost associated with making the inventory arrive quicker than it's needed. If the inventory arrives earlier than you need it, normally you need to pay for it earlier as well. Hence, the opportunity cost here is the alternate way the business could have used those funds in something more profitable rather than paying off the supplier.

HM
User Rank
Stock Keeper
Re: Good linear optimization problem
HM   3/31/2013 12:07:16 AM
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Very nice article

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