Trade-Off between Transportation Cost and Customer Responsiveness

In UB India, the transportation cost is closely linked to the degree of responsiveness the supply chain aims to provide. The graph below shows the relationship between the two factors. The transportation cost efficiency is plotted against x-axis while customer responsiveness is plotted against y-axis.

Improved customer responsiveness at the expense of cost efficiency

Improved efficiency and responsivenes s

CUSTOMER RESPONSIVENESS

HIGH

UB INDIA

Lower efficiency and responsivenes s

LOW

Improved cost efficiency at the expense of customer responsiveness.

LOW TRANSPORTATION COST EFFICIENCY

HIGH

United Biscuits India is currently operating near the optimal performance level and is striving to shift their frontier through innovative techniques and gain sustainable competitive advantage.

While moving away from the frontier, many companies may manage to improve only cost efficiency at the expense of customer responsiveness or vice versa.

CUSTOMER RESPONSIVENESS

HIGH

Improved customer responsiveness at the expense of cost efficiency

Improved efficiency and responsivenes s TARGET

UB INDIA

Lower efficiency and responsivenes s

LOW

Improved cost efficiency at the expense of customer responsiveness.

LOW TRANSPORTATION COST EFFICIENCY

HIGH

United Biscuits India is just a two and a half years old company and is continuously trying to shift their frontier by implementing various techniques. Some of these techniques are: Temporal aggregation Cross Docking Milk Run System Exploring more transportation networks Better routing and scheduling in transportation Innovative process, etc.

Temporal aggregation UB India currently follows the process of temporal aggregation, a process of combining orders across time. The orders are taken only from Monday to Wednesday, while the dispatch is primarily done on Fridays. This technique decreases the UB Indias customer responsiveness due to the shipment delay. The customer response time increases as the orders are taken and dispatched on the particular days of the week. However, this technique of temporal aggregation helps to decrease the transportation costs due to 2 reasons: Economies of scale that result from larger shipments. Reduction of variability in the shipment sizes.

In general, a limited amount of temporal aggregation is very effective in reducing transportation cost in a supply chain. In choosing response time, however, firms must trade off the decrease in transportation cost upon temporal aggregation with the loss of revenue because of poorer responsiveness.

Cross Docking Cross docking is the practice in which the warehouse is used only for inventory coordination rather than inventory storage. The goods that are received at the warehouse will be dispatched from the warehouse directly to the buyers. In United Biscuits India, the process of cross docking is implemented occasionally. It mainly depends upon the order received and the goods loaded on the vehicles. Some of the advantages of cross Docking at the UB Indias mother warehouse are: Increased Customer Responsiveness Less Inventory Carrying cost Low Inventory Handling costs Low warehouse costs Low wastages

Although there are few challenges ahead for the UB team to implement the cross docking system more frequently. Some of them are: Forecasting accuracy should be very high The goods must reach the warehouse on time Transportation Infrastructure should be robust Good IT Infrastructure

United Biscuits India is currently practicing this approach whenever the deliveries are time sensitive and there are several small drop-offs in proximity.

Milk Run System Milk Run is a process in which the same vehicle is used for multiple collections/ multiple distributions. The main advantage of using the milk run system is higher utilization of the vehicles and the resulting reduction of transport costs. UB frequently practices this system and make direct store deliveries using a single vehicle.

SUPPLIER

BUYERS LOCATION

Rajender Nagar

Karol Bagh

Warehouse at Saket, NewDelhi

MILK RUN

Kisan Ganj

Old Delhi

Kashmiri Gate

UB implements the milk run system in these 2 situations: If very frequent small deliveries are needed on a regular basis A set of suppliers or a set of retailers is in geographic proximity.

The use of milk run has significantly reduced transportation costs, allowed appropriate responsiveness.

United Biscuits India has implemented a PDP, permanent dispatch plan, using milk run systems. It is a geographical plan that is used for distribution and billing purposes.

Role of IT in Transportation System The use of software to determine transportation routes has been the most common IT application in transportation. This software takes the location of customers, shipment size, desired delivery times, information on the transportation infrastructure, and the capacity of vehicles as input. After feeding these inputs in the software, the output is received in form of routings and a packing list for each vehicle that minimize costs while meeting delivery constraints. UB India is currently implementing such software on a trial basis. The only purpose of using such software is to prepare a packing list for each vehicle which helps to improve fleet utilization.

VEHICLE 709 LPT 407 TATA ACE CHAMPION

MAX. VOLUME CAPACITY (cube ft.) 380 815 270 110 45 Table 1

Table 1 indicates the types of trucks with their maximum capacity (by volume) used by UB India.

VEHICLE 709 LPT 407 TATA ACE CHAMPION Table 2

MAX. WEIGHT ALLOWED (metric tons) 4.26 7.75 2.52 0.62 0.585

Table 2 indicates the types of trucks with their maximum capacity (by weight) used by UB India.

S. NO.
1 2 3 4 5 6 7 8 9 10 11 12 13

Material Material Description Code

10127 10033 10037 10520 10204 10514 10801 10306 10605 10117 10702 10804 10703 McVitie's Digestive (96 Pac x 74 gms.) McVitie's Cookie Butter Family Pack 20% Extra Trial Offer (30 Pac X 166 gms.) McVitie's Cookie Cashew (96 Pac X 68 gms.) McVitie's Marie (96 Pac x 54 gms.) (Rs. 6/- MRP) McVitie's Cream Chocolate (96 Pac x 63 gms.) (Ben 10) McVitie's Marie (60 Pac x 54 gms.) (Free) McVitie's HobNob (72 Pac X 120 gms.) McVitie's Cookie Cashew Family Pack with Free Marie 54g (60 Pac X 136 gms.) McVitie's Festivities Pack (16 Pac X 470 gms.) McVitie's Digestive (30 Pac X 230 gms.) (Rs. 35/- Pack) McVitie's Cream Orange (72 Pac x 58 gms.) McVitie's HobNob (120 Pac X 37 gms.) McVitie's Cream Orange (48 Pac x 116 gms.)

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

10120 10608 10121 10705 10517 10518 10124 10519 10126 10405 10112 10901 10130 6000094 10406 10612 10123 10611 6000079 10512 10613 10310 10521 10610 10119 10308 10407 10902

McVitie's Digestive Celebrity Pack (12 Pac X 690 gms.) (Rs. 90/- Pack) McVitie's Variety Pack (16 Pac X 531 gms.) McVitie's Digestive (48 Pac x 164 gms.) (Rs. 17/- Pack) McVitie's Cream Orange Buddy Box (48 Pac x 116 gms.) McVitie's Marie (60 Pac x 140 gms.) McVitie's Marie (96 Pac x 90 gms.) McVitie's Digestive (24 Pac X 328 gms.) (3+1 82 gms. Free) McVitie's Marie (24 Pac x 324 gms.) McVitie's Digestive (24 Pac x 115 gms.) (with Free Bowl) McVitie's Cookie Butter 10% Extra (96 Pac X 75 gms.) (Rs. 12/- MRP) McVitie's Digestive (30 Pac X 230 gms.) (Rs. 35/- Pack) Fruit Bake McVitie's Digestive (72 Pac x 115 gms.) (With Glass Bowls) Glass Bowl (Free with Digestive 115 gm) McVitie's Cookie Butter (48 Pac X 150 gms.) McVitie's Cookies Combi Pack (24 Pac X 272 gms.) (3 Butter 68 gm + Free Cashew 68 gm) McVitie's Digestive (72 Pac x 115 gms.) (with Free Bowl) McVitie's Digestive Combi Pack (24 Pac X 336 gms.) (3 Digestive 82 gm + Free Marie 90 gm) Plastic Packaging Container McVitie's Marie (96 Pac x 54 gms.) (Free) McVitie's Digestive Combi Pack (24 Pac X 312 gms.) (3 Digestive 74 gm + Free Marie 90 gm) McVitie's Cookie Cashew Family Pack with Free Digestive 74g (30 Pac X 224 gms.) McVitie's Marie (12 Pac x 648 gms.) (1+1 324 gms.) McVitie's Variety Pack (16 Pac X 470 gms.) McVitie's Digestive (30 pac X 230 gms.) CSD McVitie's Cookie Cashew (96 Pac X 68 gms.) CSD Cookie Butter (45 Pac X150 Gms.) (With Free Plastic Container) Fruit Bake 16.6 (Sample)

Table 3 Table 3 lists down the description of the finished goods of UB India with their respective codes.

Desired delivery items

Vehicle Capacity

Packing List for each vehicle

INPUTS

OUTPUT