TRANSPORTATION PL201 FUNDAMENTAL OF LOGISTICS MANAGEMENT

INTRODUCTION Transportation is moving and transferring units, personnel, equipment, and supplies to support the concept of operations. Transportation involves the physical movement of goods between origin and destination points. The transportation system links geographically separated partners and facilities in a company’s supply. Transportation facilitates the creation of time and place utility in the supply chain. Transportation also has a major economic impact on the financial performance of businesses.

RELATIONSHIP BETWEEN TRANSPORTATION AND LOGISTICS IN SUPPLY CHAIN MANAGEMENT Transportation is a key activity in logistics because it moves product through the various stages of production and ultimately to consumers. Transportation is usually the largest single cost expenditure in most logistics operations.

Role of Transportation in Supply Chain Management Transportation provides the critical links between these organizations, permitting goods to flow between their facilities. Transportation service availability is critical to demand fulfillment in the supply chain. Transportation efficiency promotes the competitiveness of a supply chain

TRANSPORT PRINCIPLES Economy of scale Economy of distance The cost per unit of weight decreases as the size of a shipment increases. Economy of distance Decreased transportation cost per unit of weight as distance increases.

TRANSPORT FUNCTIONALITY Product Movement Whether in the form of materials, components, WIP or finished goods, the basic value provided by transportation is to move inventory to specified destinations. The primary transportation value proposition is product movement throughout the supply chain. The performance of transportation is vital to procurement, manufacturing and customer accommodation. Product Storage A less visible aspect of transportation is the performance of product storage. While a product is in a transportation vehicle, it is being stored. Transport vehicles can also be used for product storage at shipment origin or destination but they are comparatively expensive storage facilities.

RECOGNIZE PARTICIPANTS DECISIONS Public Government Shipper Carrier and agents Consignee (Receiver) Internet

MODES OF TRANSPORT Air Sea In-land Land Pipelines

KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4 Railroads Intermodal Transportation Piggy-Back or Trailer on Flatcar (TOFC) Containers 16-9

KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4 Motor Carriers Air Carriers and Express Companies Freight Forwarders/ Express Companies 16-10

KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4 Pipelines Water 16-11

Rail A long hauler and slow mover for raw materials (coal, lumber, chemicals) and low-valued products (food, paper & wood products) In US, typical length of haul 720 miles with average train speed of 22 miles/hour and average distance travelled of 64 miles/day Slow speed is due to long overhead time in loading/unloading, moving within terminal, rail car assembly

Truck A transportation service for semi-finished and finished products and for small shipment In US, the average length of haul is 646 miles for less-than-truckload (LT) and 274 miles for truckload (TL) Provide high frequency door-to-door service without extra loading/unloading Restrictions on shipment’s weight, length and width

Air Provide quick transportation service over long distance Good dependability and availability under normal operating conditions Delivery time variability is low in absolute magnitude, but the variability, when compared with average delivery time, is ranked as one of least reliable modes Has a distinct advantage in terms of loss and damage In US, average length of freight is 1300 miles

Water Confine to inland waterway system and costal areas Large carrying capacity, super container vessels can carry up to 7200 TEU (i.e.180000 tons) Loss and damage is low Substantial packaging is needed to protect goods against rough handling during loading-unloading operation

Pipeline Offer very limited range of service and capabilities The most economically transportation service for crude oil, natural gas, and refined petroleum product Product movement speed is slow, about 3-4 miles/hr, but effective speed can be high because of 7-24 operations Most dependable in terms of transit time Loss and damage is low

FIGURE 16-5 Advantages and disadvantages of five modes of transportation 16-17

SUPPLIER TRANSPORTATION SERVICES Single modes Specialized carrier Intermodal operators Harmony Harmonious fit with nature and perhaps as well with the environment (unity with nature, protection of the environment, world of beauty). Mastery Values give priority to the dominance of the surroundings through self-affirmation (ambition, success, risk). It is related with affective individualism through sharing the desire for activity and stimulation and presupposing the legitimacy of changing the status quo.

Single modes The most basic carrier type is a single-mode operator that offers service utilizing only one transport mode. This degree of focus allows a carrier to become highly specialized, competent, and efficient. However, the approach creates significant difficulties for intermodal transport because it requires negotiation and a transaction with each individual carrier. Airlines are an example of a single-mode carrier for both freight and passenger service since they only offer service from airport to airport. The shipper or passenger is responsible for movement to and from the airport. A series of single-mode operations require more management effort and, thus, increase cost

Specialized carrier Over the past several decades a serious problem existed in small-shipment transportation. It was diffietilt for a common carrier to provide a reasonably' priced small-shipment service because of significant overhead cost associated with terminal and line-haul service. This overhead forced motor carriers to assign a minimum charge for handling any shipment.

Intermodal operators Intermodal operators use multiple modes of transportation to take advantage of inherent economies of each arid thus provide integrated service at the lowest total cost.

Summary Most commercial transactions, transportation decisions are influenced by shipper, carriers, government, public and internet. Transportation system contains 5 modes of operation: rail, motor, water, pipeline and air Transportation services offered by suppliers are single modes, specialized carriers and intermodal operators.

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