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How to use the different functionalities of Transport cost data

  • 13 September 2021
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How to use the different functionalities of Transport cost data
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When you open your excel template that you have downloaded from Data Navigator, you will find the “Transport Cost Data” sheet. Here you will be able to define the cost of the different modes of transport, what product can be carried in each of them, from what place it departed (From Location) and where it is headed to (To Location). You often use location groups previously defined in the “Location Relation” sheet, but it is also possible to define the locations individually.

The excel images show an example of how to apply these costs using the template. The columns in yellow are the values that will be used for calculating the total cost in the Network Design Navigator app. These are based on the distance between to specific locations already defined in “Location Data”, this distance is calculated through location IQ, straight line distance calculation or input data, depending on the options you have selected in the Configuration Wizard. The green columns refer to the cost of transport which you need to input depending on your type of transportation cost. As well as this, you must fill in the pink columns with the information specific to each lane of transport you are creating.

It is important to understand the calculations that occur behind the information we input. For all the cases and to keep the solver linear, the app normalizes everything to a per unit measurement which means the calculation will be based on a cost per unit or cost per trip, hence when we talk about number of trips we will have a decimal number of trips. As you can see, to obtain accurate values for the trip cost you must input your average drop size, this is the number of units that can be delivered in that specific mode of transport per trip.

The model can help you define six different types of transportation cost. Each of these are explained in detail below (you can also follow these calculations in the attached spreadsheet). You can also create different combinations of these according to your unique business needs.

 


Fixed cost: This is a cost that does not have any variability with regards to number of units being transported or distance. It is a unique cost that takes place every time this mode of transport is being used. The way of defining it is adding the value of the fixed cost in the “Fixed Cost Per Trip” column.

As you can see from the example one trip is equivalent to delivering 260 units as stated in the “Average Drop Size” and the cost per each will be 500. In this case we are delivering 100,000 units therefore we must calculate the number of trips of 260 units it needs to be able to deliver that amount, the answer is 384.62 trips. When we multiply this number by 500, we arrive to the model cost of 192.308.


Fixed cost with a variable distance cost component: In this case the total cost per trip will be a fixed cost set in the “Fixed Cost Per Trip” column plus a variable distance cost defined in the “Cost Per Distance” column. This means that the total cost will depend on the distance from location to location and the number of trips it requires.

Using the same number of units to be delivered as in the previous example we obtain 384.62 trips. But in this case the cost will be the fixed cost per trip 500, plus the cost per distance 1.5 multiplied by the distance 100. Which means the total cost is 650 per trip, when multiplying this value by the number of trips, the output cost of the model will be 250,000.


Fixed cost with a distance cost component and a minimum cost: To define this type of cost we not only need to fill in the information of the Fixed cost per trip, Cost per distance but also add a value to the “Minimum cost per trip” column. This means that the app will make a logic test where it calculates the cost per trip just like the above example and define if this value is greater or lower than the minimum cost per trip you have set.

In this example we can see both cases, the above one shows how the cost without the minimum cost per trip would be 650 which happens to be lower than the minimum set (700) therefore the model will use 700 as the cost per trip and multiply it by the number of trips. The total cost in this case is 269,231.

On the second case the minimum cost per trip defined is 600 and so the actual cost 650 is greater than this value, which means 650 will be the cost considered by the app when calculating the total cost 250,000.


Cost per unit of measurement: For this type of cost, you must input a value in the “Cost per THU” (THU= Transportation Handling Unit) column.  This means that the cost will be dependent on the quantity of goods that uses that lane of transport. Since we are calculating the cost per trip, we multiply the average drop size by the cost per unit, in this case the cost per trip is 520.

We are using the same number of trips therefore the app will calculate the cost of sending 100,000 units as 520 times 384.62, giving a total cost of 200,000.


Cost per unit of measurement with a distance component: Just like in the fixed cost case, here we will include a portion of the cost based on the distance traveled by the goods, so you must add this value in the “Cost per Distance” column.

The total cost per trip will be the sum of the cost per distance, which is 1.3 times the distance 200 and the cost per unit which is the average drop size 260 times the cost per THU 2. This means that the total cost per trip is 780 and the total cost for the model will be 300,000.


Cost per unit of measurement with a distance component and a minimum cost: When you want to apply this type of cost you must have included values in the “Cost per THU”, “Cost per Distance” and “minimum cost per trip” columns.

The total cost per trip will then be the average drop size times the cost per THU plus the distance times the Cost per Distance.  If this value is lower than the “minimum cost per trip” then the application will choose the minimum cost per trip as your final cost otherwise your total cost will be the mathematical operation shown above.

In this case we show two examples where the minimum cost is higher than the total cost per trip and the second case where the total cost per trip is higher than the minimum cost set per trip.


If you have any further questions about this, please let us know in the comments below.


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