On the morning of September 11th, 2001, the United States and the Western world entered into a new era ‐ one in which large scale terrorist acts are to be expected. The impacts of the new era will challenge supply chain managers to adjust relations with suppliers and customers, contend with transportation difficulties and amend inventory management strategies. This paper looks at the twin corporate challenges of (i) preparing to deal with the aftermath of terrorist attacks and (ii) operating under heightened security. The first challenge involves setting certain operational redundancies. The second means less reliable lead times and less certain demand scenarios. In addition, the paper looks at how companies should organize to meet those challenges efficiently and suggests a new public‐private partnership. While the paper is focused on the US, it has worldwide implications.
Please scroll down for article-it is on subsequent pages With 12,500 members from nearly 90 countries, INFORMS is the largest international association of operations research (O.R.) and analytics professionals and students. INFORMS provides unique networking and learning opportunities for individual professionals, and organizations of all types and sizes, to better understand and use O.R. and analytics tools and methods to transform strategic visions and achieve better outcomes. For more information on INFORMS, its publications, membership, or meetings visit http://www.informs.org
Most shippers use annual auctions to procure transportation services, leading to annual contracts. By using combinatorial auctions they can reduce their operating costs while protecting carriers from winning lanes that do not fit their networks, thereby improving carriers' operations as well. Combinatorial auctions account for carriers' economies of scope, which many consider more important than economies of scale in transportation operations. Any transportation procurement procedure, however, must account for level of service and other nonprice variables, which are as important as price in determining which carrier should serve what lane. These considerations can be incorporated into the combinatorial auction framework easily and holistically. After several years of using this approach, leading shippers have adopted it, and several software providers offer the requisite software.
Common carriage comprises over one-third of the $600 Billion annual trucking market in the United States (see American Trucking Association 2002). Since the deregulation of interstate trucking in 1980 and the intrastate movements in 1994, the predominate form of commercial relationship between shippers and common carriers has changed from a transactional to a contractual basis. These contracts typically hold for one to two years and sometimes longer. Shippers select which carriers to do business with on each lane (origin-destination pair) utilizing a competitive request-forproposal (RFP) process, which is, in fact, an auction. This paper takes a look at this RFP procurement process for transportation services. While bidding processes have been used to procure many products and services, transportation presents added complexities in terms of strong interdependencies (later referred to as economies of scope), large numbers of unique items, and inaccurate information. Truckload, ocean, air-cargo and most other transportation modes share these complex characteristics -especially interdependent costs. For the sake of brevity, this paper focuses on truckload (TL) transportation but the model can be, and has been, applied to other modes as well.The primary research question addressed in the extended research is: How should shippers procure TL motor carrier transportation services? This paper presents one approach that is both grounded in theory and appears to have worked well in practice.The generic transportation procurement process can be divided into three steps:• Bid Preparation -where the shipper determines what is to be bid out, what carriers to invite, how to present or package the business to be bid, and what opportunities exist for different types of shipper-carrier relationships. 1
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