Value density
Value density = rupee value of the product / its weight
Choosing a transport mode. High value density favours air; low value density favours rail or water.
- rupee value
- Unit cost or price of the item
- weight
- Shipping weight of the item
Inventory created by a transport mode
In-transit (pipeline) stock = demand per period x transit periods
Cycle stock = shipment size / 2
Total inventory = in-transit + cycle
Comparing two modes. A slower mode with bigger lots creates inventory on both counts.
- transit periods
- Transport plus customs time, in the same period as demand
- shipment size
- Lot size the mode imposes
Cost of a transport mode per period
Cost = total inventory x carrying cost per unit per period
+ demand per period x freight per unit
Carrying per unit per week = annual % x unit cost / 52
The mode comparison itself. Convert the annual carrying rate to the period the demand is quoted in.
- annual %
- Inventory carrying cost as a fraction of item cost, e.g. 0.20
- freight per unit
- Quoted rate for that mode
RATER classification rule
Perceived < Minimum -> Negative
Minimum <= Perceived <= Desired -> Satisfactory
Perceived > Desired -> Positive
Scoring a service against the three baselines. Positive can also mean over-resourced.
- Minimum
- Lowest adequate service level
- Desired
- The highest level, what the customer hopes to receive
- Perceived
- The customer's perception of current service