1. MRI 2315 Warehousing and Distribution

2. 5. Transportation 5.1 Roles of transportation in logistics management.

3. The Role of Transportation in Logistics Transportation is the physical link connecting the firm to its suppliers and customers. In a nodes and links scenario, transportation is the link between fixed facilities (nodes). Transportation also adds value to the product by providing time and place utility for the firm’s goods. As firms engage in global competition, transportation costs are becoming even more significant.

4. The Role of Transportation in Logistics (con’t) In 1999, U.S. firms spent an estimated $554 billion to move freight, or 9.9% of the GNP; this is up from 397 billion, or 6.3% of the GDP in 1993. In 1999, as a percentage of sales, transportation was 3.24%, warehousing 1.84%, customer service 0.48%, administration 0.38%, and carrying cost 1.52%. Outbound transportation was clearly the largest component of total physical distribution costs. Cost trade-offs abound in transportation and are typified by trading lower inventory costs for higher transportation costs.

5. 5. Transportation 5.2 Alternative transport modes.

6. The Transportation – Supply Chain Relationship Firms need to recognize that the lowest cost carrier does not necessarily guarantee that this carrier will result in the lowest landed cost. The total cost of a landed shipment including purchase price, freight, insurance, and other costs up to the port of destination. In some instances, it may also include the customs duties and other taxes levied on the shipment.

7. The Carrier Selection Decision Various modes of transportation should be considered. Choose a carrier or carriers within the selected mode, if there is a choice. Carefully examine the service capabilities of the carrier as services can vary widely between carriers

8. Carrier Selection Determinants Cost / Negotiated rates Transit time and reliability Can be a competitive advantage Lowers customers’ inventory costs Accessibility Capability Consolidating shipments among a few carriers

9. Carrier Selection Determinants (con’t) Security / Safety Financial stability Special equipment Sales rep

10. Carrier Selection Determinants and User Implications

11. Importance Ranking of Carrier Selection Determinants

12. Table 9-1 Modal Distribution of Ton-Miles

13. The Basic Modes of Transportation: Railroads Rail is a long haul, large volume system (high fixed costs; own rights-of-way) Accessibility can be a problem Transit times are spotty, but are generally long Reliability and safety are generally good Premium intermodal services Straight piggyback and containerized freight Double stacks RoadRailer service

14. The Basic Modes of Transportation: Motor Carriers The motor carrier industry is characterized by a large number of small firms. In 1999, there were 505,000 registered motor carriers. Low cost of entry causes these large numbers. Used by almost all logistics systems and account for 82 percent of U.S. freight expenditures. Characterized by low fixed costs and high variable costs. Do not own their rights-of-way.

15. The Basic Modes of Transportation: Motor Carriers (con’t) Limited operating authority regarding service areas, routes, rates and products carried. High accessibility Transit times faster than rail or water. Reliability can be affected greatly by weather. Small vehicle size coincides with lower inventory strategies and quick replenishment (QR). Relatively high cost compared to rail and water; trade-off is faster service.

16. The Basic Modes of Transportation: International Water Carriers General cargo ships Large high capacity cargo holds Engaged on a contract basis Many have self-contained cranes for loading/unloading Bulk carriers Specially designed to haul minerals Can handle multiple cargoes Tankers Specially designed for liquid cargoes Largest vessels afloat, some VLCCs at 500k+ tons

17. VLCC or Very Large Crude Carriers and ULCC or Ultra Large Crude Carriers are the largest operating cargo vessels in the world. With a size in excess of 250,000 Dead Weight Tonnage (DWT), these giant ships are capable of carrying huge amount of crude oil in a single trip. Known as Supertankers, these vessels are primarily used for long- haul crude transportation from the Persian Gulf to countries in Europe, Asia and North America.

18. The Basic Modes of Transportation: International Water Carriers (con’t) Container ships High speeds for ships; increasingly more common and important Larger vessels can handle up to 5,000 containers. RO-RO (Roll on-Roll off) Basically a large ferry that facilitates the loading and unloading process by using drive on/off ramps May also have the capacity to haul containers Other OBO (ore-bulk-oil) multipurpose carriers aka combination carrier Barges (not transoceanic) - a flat-bottomed boat, built mainly for river and canal transport of heavy goods. Some barges are not self-propelled and need to be towed or pushed by towboats.

19. Container Ship

20. RORO

21. Barge towed by a tugboat on the River Thames in London, England, United Kingdom

22. The Basic Modes of Transportation: Pipelines Refers only to the oil pipelines, not natural gas Not suitable for general transportation Accessibility is very low. Cost structure is highly fixed with low variable costs. Own rights-of-way much like the railroads. Major advantage is low rates.

23. The Basic Modes of Transportation: Air Carriers Cost structure is highly variable; do not own rights-of-way. Transit times are fastest of the modes, but rates are highest. Average revenue per ton mile 18 times higher than rail; twice that of motor carriers. Seek goods with a high value to weight ratio. Accessibility is low as is capability. Reliability subject to weather more than other modes.

24. Air Carrier

25. Table 9-2: Performance Rating of Modes Selection DeterminantsRailroadMotor Modes WaterAirPipeline Cost 34251 Transit time 3241--- Reliability 2143--- Capability 12435 Accessibility 2143--- Security 3241---

26. Intermodal Transportation Refers to use of two or more modes of transportation operating on the movement of shipment by publishing a through rate. Logistics managers are looking for the best way to move shipments and these often attempt to take advantage of multiple modes of transportation, each of which has certain useful characteristics. Biggest disadvantage is that carriers are reluctant to participate. Cultural bias towards using only one mode and this makes change more difficult. Certain types have been fairly well developed, such as rail/water, motor/water, rail/motor, and motor/air.

27. Intermodal Transportation (con’t)

28. Intermodal Transportation: Containerization Referred to as Container-on-Flat-Car (COFC); goods are placed in a large box, where they are untouched until they arrive at the consignee’s unloading dock. Reduces theft, damage, multiple handling costs and intermodal transfer time. Changes materials handling from labor intensive to capital intensive and may reduce costs from 10 to 20%. “Land bridge” concept may apply for international shipments where oceans are separated by a large land mass. For example, containers moving from Japan to Europe may dock at Long Beach, CA, transfer the containers to a railroad, and reload the containers onboard another ship in Norfolk, VA., continuing on to a European port.

29. Intermodal Transportation: Piggyback Trailer-on-Flat-Car (TOFC) Over the road trailers ride in special rail cars. Takes advantage of motor flexibility and rail’s long haul economic advantage. Multiple service plans for shippers. Some railroads provide varying levels of service, differentially priced.

30. Intermodal Transportation: RoadRailers Newest concept referred to as a “RoadRailer” Essentially a trailer that has been reinforced to ride on a rail bogey and be coupled together directly without first being placed on a rail flat car Saves weight and locomotive power and thus fuel for the railroad Special lower rates Motor competitive transit times

31. 5. Transportation 5.3 Examine the impact of deregulation on carriers and shippers.

32. Examine The Impacts of Deregulation on Carriers and Shippers Deregulation and Re-Regulation of Transportation by Thomas Gale Moore http://www.cato.org/pubs/pas/pa012.html APEC DEREGULATION REPORT 2000 - MALAYSIA http://www.asianlii.org/apec/other/agrmt/adr2000m299/

33. Examine The Impacts of Deregulation on Carriers and Shippers Deregulation and Re-Regulation of Transportation by Thomas Gale Moore http://www.cato.org/pubs/pas/pa012.html APEC DEREGULATION REPORT 2000 - MALAYSIA http://www.asianlii.org/apec/other/agrmt/adr2000m299/

34. Impact of Deregulations on Carriers and Shippers Benefits for consumers and shippers Free and more competitive market (not monopoly) New pricing (rate fallen or raise) Service Quality improved Speed of delivery Increased productivity

35. Impact of Deregulations on Carriers and Shippers (con’t) New services Product and services differentiation – develop products and services that are suited for customers Traffic Increased Create employment Foster closer working relationship between carriers/shippers and ports

36. Examine The Impacts of Deregulation in Malaysia The Malaysian economy has undergone substantial deregulation since the mid-1980s. The focus and commitment towards growth and industrialisation resulted in policies that favour liberalisation and deregulation in order to nurture a competitive environment. A major privatisation programme was launched in the early 1990s, involving business activities in telecommunications, power generation and supply, ports, airports, highways, posts, telecommunications, railways and sewerage works.

37. Examine The Impacts of Deregulation in Malaysia (con’t) A Privatisation Master Plan was drawn up in 1991 to guide the implementation of this programme. Deregulation was further enhanced through the implementation of the concept of Malaysian Incorporated and smart partnerships to foster greater collaboration between the government and the private sector.

38. Shipping The operations of major federal ports in the country have been privatised. Maritime laws in respect of safety of navigation are being reviewed to harmonise them with relevant international law and practices.

39. Aviation Several measures have been undertaken to deregulate the aviation industry, including the privatisation of the national airline. The management of all airports in the country has also been privatised. To further facilitate and enhance the provision of services in the industry, measures were undertaken to ensure that aviation technical regulations are based on ICAO (International Civil Aviation Organization) standards and procedures.

40. Roads The privatised construction of toll expressways facilitates greater mobility. It also removes road mileage limitations and allows a more flexible modal split with rail and shipping. The new expressways have reduced travel time and perceived costs, namely vehicle operating and time-saving costs, leading to reduced costs and increased profits for business.

41. Rail The Malayan Railways was corporatised in 1992 and this allows the private entity to plan and to promote the railway transport as an effective transport mode. An electric commuter rail service project has been completed and commercial operations started in August 1995. The Railways Act 1991 provides a legal framework for the privatisation of railway operations in the country. As a result, three private companies are providing urban rail transport in the Kuala Lumpur area at this moment in time.

42. Why Deregulations in Malaysia Regulatory agencies tend to protect the interests of the industries they regulate. Regulatory agencies reduce competition at the expense of the public. Regulators perceive their duty as protecting the financial health of the companies they regulate. The easiest way to accomplish this is to reduce competition, thereby increasing rates and creating monopolies. No unlimited resources from government. Regulatory agencies sometimes are not experts to run an profitable organization.

43. 5. Transportation 5.4 Examine the issues of transportation cost and performance measurement.

44. Transportation Cost The expenses involved in moving products or assets to a different place, which are often passed on to consumers. For example, a business would generally incur a transportation cost if it needs to bring its products to retailers in order to have them offered for sale to consumers.

45. Factors affecting Transportation Costs Standards Standards have risen - Society now demands safety, features, environmental protection, access for the disabled, and quality that drive up the cost. Change of scope Projects are scoped wrong - We have investments that don't match actual demands. And this is not just for megaprojects. We have big buses serving few passengers. We have overgrown highways. We have a fear of building too small and having congestion or crowding so we build too big.

46. Factors affecting Transportation Costs Scale economies Others Materials are scarcer (and thus more expensive) Experience and Competence - The US has no experience with high-speed rail, so there is no domestic expertise. Government & legal system (including liability, insurance, etc)

47. Reducing Transportation Costs Fewer Carriers Consolidating Shipments Single Sourcing

48. DESIRED OUT- COMES DEFINITIONDEFINITION CANDIDATE MEASURES/INDICATORS Mobility/ Accessibility Reaching desired destinations with relative ease within a reasonable time, at a reasonable cost with reasonable choices. Travel Time Delay Access to Desired locations Access to the System ReliabilityProviding reasonable and dependable levels of service by mode. Variability of Travel Time Cost-EffectivenessMaximizing the current and future benefits from public and private transportation investments. Benefit / Cost Ratio Outcome Benefit per unit of cost

49. DESIRED OUT- COMES DEFINITIONDEFINITION CANDIDATE MEASURES / INDICATORS SustainabilityPreserving the transportation system while meeting the needs of the present without compromising the ability of future generations to meet their own needs. Transportation costs Environmental Quality Helping to maintain and enhance the quality of the natural and human environment National and State Standards Safety and SecurityMinimizing the risk of death, injury, or property loss. Accident and Crime Rate Customer Satisfaction Providing transportation choices that are safe, convenient, affordable, comfortable, and that meet customer needs. Customer Survey

50. Piggy Back: It is a combination of rail and road. The containers are placed on railway flat-cars and transported by rail from one terminal to another. After reaching the destination terminal, they can be placed on trailers and transported by roads which are also called as TOFC that is Trailer on Flat Car or COFC- Container on Flat Car. The best known and most widely used intermodal system is the trailer on a flatcar (TOFC). Piggyback or trailer – on flatcar is specialized form of containerization in which rail and transport coordinate. In piggyback, the carrier places the carrier trailer on a rail flatcar, which moves the trailer by rail for long distances. And then motor carrier moves the trailer for short distances for pickups and

51. Fishy Back: It is a combination of road and water transport. Fishy back/ train ship/ containership are examples of the oldest mode of the intermodal transport. They utilize waterways, which are one of the least expensive methods for line- haul movement. The fishy back, train ship and container ship concepts load a truck trailer, railcar, or container on to ship for the line- haul move. Such services are provided in coastal waters between Atlantic and Gulf ports, from the great lakes to coastal points and along inland navigable waterways

52. Birdy Back: It is a combination of road and airways and is generally used in International shipments. Local cartage is a vital part of every air movement because air fright must eventually transport from the airport to the final delivery destination. Air- truck movements usually provide service and flexibility comparable to straight motor freight.