Introduction Transportation is necessary to: Move purchased goods from suppliers to buyers Move finished goods to the customer. Products have little value to the customer until they are moved to the customer’s point of consumption. Transportation is what creates the efficient flow of goods between supply chain partners.

Impact of Transportation on Supply Chain Management Time utility- products are delivered at the right time. Place utility- products are delivered to the desired location. Transportation & storage, getting through customs, delivering to foreign locations Firms are often use outside agents or third-party transportation services to work in foreign locations. Poor transportation management can bring a supply chain to its knees!!

Importance of Transportation Transportation contributes to the overall economic activity and provides opportunity for growth under competitive conditions. The more efficient the transportation the lower the transaction costs for the companies operating in the economy It supports greater reach and availability for the products in the market place The wider the product distribution and reach greater the role for transportation and more the number of opportunities for companies to exploit the economies of scale Transportation is a significant cost influencer and has more than 25% of the share in the total logistics costs. This can influence the price of the end products.  The transportation activity should not be considered in isolation, but in conjunction with the other supply chain activities and it is more than physical delivery. There is a need to deploy and support the transportation planning process with IT tools and techniques.

Factors Influencing Transporter’s Decisions Vehicle related costs: These are the costs towards the purchase or lease of a vehicle. These costs are considered fixed for the short term and taking into account whether the vehicle is operating or not and for the medium or long term these costs are considered as variable. For strategic and long term purpose the vehicle related costs depend on the number of vehicles owned. Fixed operating expenses: These are the costs associated with maintaining transportation assets like insurance, taxes, labour etc; If the vehicle operators are paid irrespective of the trips made then they would fall within this category. Operations related expenses: This is the cost incurred towards labour, fuel, which are independent of the quantity transported. These depend on the duration of the trip and independent of the quantity carried. Quantity related costs: Under this category are the costs in loading, unloading and handling. A small portion of the fuel cost also depends on the quantity carried. Overhead costs: These costs are incurred for planning, coordination, scheduling and any investment in IT tools and applications.

The two fundamental economic principles for transportation decisions are – economy of scale and economy of distance.

Participants in Transportation Public Government Agents/Brokers/Tr ansporters Shipper Consignee/Receiver Internet

Factors Influencing Shipper’s Decisions Transportation Cost: This is calculated as the total cost paid to the transporters for inbound and outbound transportation. Inventory cost: These costs are towards holding inventory in various stages of the supply chain. For transportation decisions these are considered as fixed for short term transportation and variable when considering the design of the total distribution network. Facility cost: These are the costs for maintaining the various facilities –factories, warehouses etc; and these are considered as fixed for making transportation decisions. Processing cost: These are the costs associated with loading, unloading and handling of goods. These are considered as variable costs for transportation decisions. For some transportation modes like through container, these can be quite significant.

Fundamentals of Transportation The Objective of Transportation- Satisfying customers while minimizing costs & making a profit contribution. Legal Forms of Transportation- Transportation service companies are classified legally as either common, contract, exempt, or private carriers. Common carriers- offer transportation services to all shippers at published rates between designated locations without discrimination. Contract carriers- not bound to serve the general public. Contract carriers serve specific customers under contractual agreements. Exempt carriers- exempt from regulation of services & rates & if they transport certain exempt products like produce, livestock, coal, or newspapers. Private carrier- not subject to economic regulation & typically transports goods for the company owning the carrier.

Fundamentals of Transportation- Cont. The Modes of Transportation Motor Carriers (trucks)- most flexible mode of transportation & account for over 80 % of U.S. freight. Trucks compete w/rail & air for short-to medium hauls. Weather is primary disadvantage. Less-than-truckload (LTL) carriers or truck-load (TL) carriers. LTL carriers move small shipments & fees are higher. General freight carriers carry the majority of goods shipped & include common carriers. Specialized carriers transport liquid petroleum, household goods, building materials, & other specialized items.

Modes of Transportation Roadways Railways Airways Pipelines Ropeways Intermodal Regular freight Package carrier Waterways Domestic water transport Foreign water transport Coastal Inland

Rail High fixed cost in equipment, terminals, tracks, wagons etc and low variable cost Road Low fixed cost and medium variable cost (fuel, maintenance etc) Water Medium fixed cost (ships and equipment) and low variable cost Pipeline Highest fixed cost (construction, pumping equipment) and lowest variable cost Air Low fixed cost (aircraft, cargo handling) and high variable cost ( fuel labour, maintenance)

Transportation Mode Selection   Match the shipment characteristic with the appropriate mode of transportation. There should be documented proof of performance for a transportation mode. Evaluate on the basis of cost Developing selection criteria is the final step and the modes should be evaluated on the basis of these.

Operating characteristics Rail Truck Water Pipeline Air Speed 3 2 4 5 1 Availability Dependability Capability Frequency