Logistics transportation

Transportation : The Backbone of Logistics
Freight
Management
Rate Negotiation
Claim
Administration
Transport Mode
& Mix Decision
Route Planning
Shipment
Scheduling
Carrier
Evaluation &
Selection
Documentation

• “The process of moving an item from point A to point B.”
• “Safe, efficient, reliable, and sustainable movement of
persons and goods over time and space”.
• Transportation in Logistics: The operation of transportation
determines the efficiency of moving products. The progress
in techniques and management principles improves the
moving load, delivery speed, service quality, operation
costs, the usage of facilities and energy saving.
Transportation takes a crucial part in the Logistics
Operation. Therefore, transportation is the base of
efficiency and economy in business logistics and expands
other functions of logistics system
Transportation-Meaning and Definition

Transportation: An overview
• Transportation is the most visible logistic operation
(approx 40-50 % of total Logistics cost)
• A good indicator to measure the Economic, Social &
Commercial progress of a country.
• Modes of Transportation can be categorized as
Roadways, Railways, Waterways, Airways, Pipelines &
Ropeways.
• It facilitates production by moving the various means
of production.
• Serves to link the facilities of the firm which are
geographically distributed.
• It directly and indirectly accelerate employment.

Roadways
• Benefits/ Advantages:
– Door-to-door service
– Flexibility
– Reliability
– Can reach remote locations
– Speed
• Challenges:
• Multi point octroi
• Multi point police checks
• Unauthorized local levy
• Poor conditions of road
• Mostly unorganized

Roadways
• National Highways=96,260 (approx. as of 2015)
• State highway= 1,80,000 (approx)
• Operating cost of truck=Rs. 25-30 per KM
(approx)

RAILWAYS
• Good for Larger loads, long distance transportation.
• Transport all types of goods-mostly the bulk items like Coal,
Iron ore, Cement, Fertilizers, Petroleum, Heavy Machineries,
Raw materials, Finished products, live cattle etc.
• High fixed cost due to infrastructure of railway tracks etc
• Variable cost reduces as compared to other modes
• Slow speed due to consolidation of wagons
• Monopoly Carrier
• Route / service limitations can be over come by multimodal
transportation.

Railways
• No of stations= (around) 7,112
• Rail Network= (around) 115,000 KM(Track),
65,808 KM (Route)
• Broad gauge (1,676 mm (5 ft 6 in)) lines= 105,000 Km
• Meter Gauge (1,000 mm (3 ft 3 3⁄8 in))
• Standard Gauge (1,435 mm (4 ft 8 1⁄2 in))
• Narrow Gauge (762 mm (2 ft 6 in))
• No of Wagons=2,39,281 (approx.)

MODES OF TRANSPORTATION : AIRWAYS
• Fastest and less hazardous.
• Fixed cost is little low than other
• High variable cost due to fuel, maintenance, labour
USED FOR
 lightweight, high value and highly perishable items.
 urgent delivery
 critical maintenance
 passenger, cargo etc
Disadvantage
Overall HIGH COST
WEATHER DISTURBANCE
Limited routs

Seaways
 Used mostly for International trade.
 Types-Tankers, Dry bulk carriers, Container ships and
Special vessels
 India has around 55 shipping companies with 510
ships
 Major items are- crude oil and other petroleum
products, Iron ores, Coal, Food grains etc
MODES OF TRANSPORTATION

MODES OF TRANSPORTATION : Pipeline
Utilized for fluids, sewages, gas, chemicals etc
Privately owned or hired
Advantage-
• Available all the time
• Lower variable or operating cost
• Large quantities in a single continuous shipment
• Protection provided by pipeline
Disadvantage-
• Limited to routes
• Limited with respect to commodities
• Highest investment cost or fixed cost

MODES OF TRANSPORTATION
MULTIMODAL OR INTERMODAL:
• COMBINING OF 2 OR MORE MODES OF TRANSPORTATION
• SERVICES LINKING 2 NODAL LOCATIONS
• REASONS: LIMITED ACCESSIBILITY OF RAIL, WATER, PIPELINE & AIR MODES
• Eg. COMBINATION OF RAIL & ROAD MAY PROVIDE THE LONG DISTANCE
ECONOMY OF RAIL & HIGH ACCESSIBILITY OF ROAD TOGATHER
• Eg. RAIL-WATER COMBINATION COULD YIELD THE SPEED & LOWER COST
• DISADVANTAGE : TRANSFER OF CARGO FROM ONE MODE TO ANOTHER
BUT COULD BE SOLVED BY USE OF CONTAINERS

Cost Structure For Each Module:
Mode Fixed Costs Variable Costs
Rail High- Equipments, Terminals , Tracks ,etc Low
Road Low-Highway provided by government Medium-Fuel , Maintenance,
etc
Water Medium-Ships and Equipment Low-As capacity is huge
Pipeline Highest-Right of the way , construction,
Equipment for control station and
Pumping capacity
Lowest-Insignificant labour
costs
Air Low-Aircraft and cargo handling systems High- Fuel, labour,
Maintenance

Principles of Transportation
Principles of
Transportation
Economy of
Scale
Economy of
Distance

PRINCIPLES OF TRANSPORATION
1. Cost of transportation decrease with increasing loads &
increasing distance of transportation
Eg. 10 kg shipment cost will be less per kg. than 5 kg. shipment,
because cost incurred in executing an order does not vary much
with the size of the order with most cost components like order
preparation, invoicing & collecting the shipment remaining
fixed irrespective of shipment size.
Also transportation vehicles having larger holding capacity
cost less than those with smaller

2) PRINCIPLES OF TRANSPORTATION DISTANCE
• Unit cost of transportation decreases with increasing
distance in transportation
• Same load transported in one step across 1000 km cost less
than transporting load in two steps of 500 km each across
the same 1000 km because of double loading & unloading
charges.
• The two principles state that transportation management
decisions should aim to maximise size of load & distance of
shipment in order to obtain cost benefits, taking care of
customers requirements & satisfaction.

TRANSPORTATION TERMS
• Consignment (GOODS SHIPPED)
• Transportation mode (Form)
• Container (large box)
• Rights-of-way (legally permitted routes)
• Consignor (sender of goods shipment, seller)
• Consignee (receiver of goods shipment, buyer)
• Carrier (services of transporting goods)
• Public carrier (services to general public at non discriminatory pricing)
• Private carrier (services to own organisation)

TRANSPORTATION TERMS
• FRIGHT FORWARDERS (CONSOLIDATE SMALL SHIPMENTS INTO LARGE
ONES– FORWARD TO COMMON DESTINATION)
• BILL OF LADING ( DOCUMENT REPRESENTING CONTRACT BETWEEN
BUYER & SELLER, GIVES DETAILS TO SHIPER,RECEIPT OF GOODS &
CONFERS RESPONSIBILITY TO CARRIER FOR TRANSRORTATION BY LEGAL
TRANSFER OF OWNRSHIP)
• FREIGHT BILL (INVOICE OF THE CARRIER, MAY BE PREPAID OR ON TIME OF
DELIVERY)

• Multimodal transport (also known as
combined transport) is the transportation of
goods under a single contract, but performed
with at least two different means
of transport; the carrier is liable (in a legal
sense) for the entire carriage, even though it
is performed by several different modes of
transport (by rail, sea and road, for example)
Multimodal Transport

SPECIFIC COMBINATION
Piggy Back :
Piggyback transportation refers to
the transportation of goods where
one transportation unit is carried on
the back of something else.
Trailer-on-Flatcar (TOFC)
“Piggybacking” :
The goods are packed in trailers and
hauled by tractors to the railway
station. At the station, the trailers are
moved onto railway flat cars and the
transport tractors, which stay behind,
be then disconnected. At destination,
tractors again haul the trailers to the
warehouses of the consignee.

• COFC (Container-On-Flatcar): This type of
piggybacking facilitates multiple containers to be transported
on a flat cars.

• Roadrailers: (For bi-modal transportation)
– These are specially designed trailers which can run on
road as well as on rails.

SPECIFIC COMBINATION
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, concepts load a truck trailer,
railcar, or container on to ship for transportation.
Birdy Back:
It is a combination of road and airways and is generally
used in International shipments Air- truck movements
usually provide service and flexibility comparable to
straight motor freight.

Intermodal (conti..)
Land Bridge (TranShip):
A variant of this intermodal option is the “LAND BRIDGE”
concept, which moves containers by a combination of
sea and rail. The land bridge concept is based on the
benefit of ocean and rail combination that utilize a single
tariff, which is lower than the total cost of the separate
rates. The-goods can be transported by water
transferring the shipment to surface transport and again
finish destination will be placed on a rail car and
transported to Chennai from where it will again be
loaded on a vessel for transferring to say port Blaire.

ROLL-ON ROLL-OFF (RO-RO)
RORO means Roll-on/roll-off, where loaded trucks are
directly carried by railway wagons to their destination.
Ships also act as a ferry for loaded trucks. The trucks Drives
onto the ship, the ship sails to the destination Port, and
the trucks drives off the ship to deliver the goods.

TRANSPORTATION MANAGEMENT DECISIONS
It has two stage process
1) Mode of transportation selection:-
Based on factors affecting desired performance , the total logistics
performance & cost incurred in it.
Speed of transportation affects lead time of inventory, availability to firm,
inventory carrying cost, stock out cost
2) The carrier …whether Common (Public) , Contract, exempt or Private:-
• Reliability or consistency of lead time affects inventory carrying cost &
stock out cost
• Safety
• Capability – ability to transport different products
• Flexibility – door to door delivery
• Capacity – amount that can be carried in one trip
• Frequency

Relative Opening Characteristics by Transportation Modes:
Operating
Characteristics
Rail Truck Water Pipeline Air Remarks
Speed 3 2 4 5 1 Air is the fastest
Availability 2 1 4 5 3 Road is the best since they
can drive from origin to
destination
Dependability 3 2 4 1 5 Pipeline ranks best-As the
service is continuous and
there is no stoppage due
to traffic or congestion
Capability 2 3 1 5 4 Sea is the best-Can handle
all types and size of cargo
Frequency 4 2 5 1 3 Pipeline is ranked best-As
the movement is
continuous
Composite Score 14 10 18 17 16 Lowest rank is the Best-

LEGAL GROUPING OF CARRIERS
• Common (Public)carrier :
1) Most frequently employed legal category for transportation resources
2) Common carrier is a firm that transports for revenue at any time & at any
place within jurisdiction
3) Required to published all rates charged for this service & should be similar
for similar services.
4) Authorised to offer transport for hire upon receiving a certificate for public
convenience & need.

• CONTRACT CARRIER
1) Authorised the transportation of specific items over
specified routes.
2) Arises from contractual arrangements between two parties
i.e. the shipper & the carrier
3) Contract provides shipper with defined transportation service at
agreeable price
4) Unlike common carrier they are not required to charged the
same rate for equal service

• EXEMPT CARRIER:
1) do not fall under the umbrella of direct regulation w.r.t. Pricing policies &
operating rights
2) restricted to law of that state in which they are operated
3) transported commodities such as agriculture Products
4) exemptions may also be granted for specified areas such as within the city
and commercial areas of the activity

• PRIVATE CARRIER:
1) originally consisted of transportation resources that are controlled by the
firm through ownership or lease.
2) permitted to use owner operators or others outside sources of vehicles &
drivers
3) restricted in that the materials being shipped must be owned by the firm
& the transportation of the materials must be incidental to the primary
business of the firm

Transportation Costs
• Transportation cost is the cost occurred during
transporting the freight from one place to
another. The followings are the elements of
transportation costs-
1. Tariff of transportation mode: It depends on-
– Nature of the product
– Distance to be covered
– Quantity of the shipment
– Transit time
– En route handling needs
– Trade relationship

Transportation Costs (Cont..)
2. Transit Time Cost:
– Working Capital cost
– Customer service cost
3. Obsolescence & Deterioration Cost:
- Changes in physical feature of the products
resulting in value reduction, especially perishable
items like Milk, Vegetables, Fruits, Fish, Egg etc.

3. Protective Packaging Cost-
– To avoid breakage and pilferage
– To avoid damage due to rain etc
– It depends on the mode of transport or multi
modal needs
4. Transit Insurance Cost-
-To cover the loss during transit
5. Miscellaneous Cost-
- Toll tax, Local levy etc
Transportation Costs (Cont..)

• Nodal Network:
- points or nodes are defined to enable
multi-stop pickup and delivery of consignments.
Hub & spoke Network:
Hub and spoke network works like a hub
and spoke of a wheel. The hub acts like a central
feeder point to the different distribution centers
located across the geography.
Transportation networks

MILK RUN (concept for route planning)
• A milk run, in logistics, is a round trip that
facilitates either distribution or collection.
• A milk run ensures that that minimum distance is
travelled and the maximum demand is carried
into the truck so as to meet both the demand
requirement and effective transportation with
least cost.
• This is applied where the load is scattered in
many different places and in smaller units.

Transportation networks
• Direct shipment Network:
– Different plant of suppliers to customers directly.
Supplier Customer
PLANT-A
PLANT-B
PLANT-C
Customer-1
Customer-2
Customer-3

• Direct Shipment With Milk Runs:
– Collected from one or many en-route suppliers and
delivered to one or many en-route customers directly.
• Direct shipment via Distribution Centers:
– Collected from one or many suppliers and delivered to
customers individually via distribution center.
• Shipment via Distribution Centers Using Milk Runs:
– Collected from one or many suppliers and delivered to
customers using milk run concept via distribution center.

Containerization
Containerization is a system of intermodal freight
transport using intermodal containers (also called shipping
containers and ISOcontainers) made of weathering steel.
The containers have standardized dimensions. They can be
loaded and unloaded, stacked, transported efficiently over long
distances, and transferred from one mode of transport to
another—container ships, rail transport flatcars, and semi-trailer
trucks—without being opened.

Containerization (Cont..)
• Container Dimension:
– Length : 20Ft, 40Ft, 45 Ft
– Width : 8Ft
– Height: 8.6 Ft & 9.6Ft
– TEU (Twenty-foot Equivalent Unit):
– It is a standard unit for describing a ship's cargo
carrying capacity, or a shipping terminal's cargo
handling capacity. A standard twenty-foot
(20x8x8.6 feet) container equals One TEU.

Benefits of Containerization
1.Secure the goods from damages like breakage &
pilferage during transportation
2. Ease of Handling
3. Lessen transit time due to fast loading, unloading,
checking etc.
4. Less documentation
5. Less Insurance cost due to low risk of loss.
6. Improve overall efficiency in operation.
7. It reduces overall transportation costs.
8. Least requirement of protective packaging.

Types of containers
• General purpose containers
• Tank Containers
• Refrigerated containers
• High Cube containers
• Ventilated Containers
• Open-Top containers
• Hard-Top containers
• Flat containers
• Platform containers

Challenges of Logistics
• Just in time requirement
• High customer expectations
• Uncertain demand
• Vehicle breakdown
• Customer line stoppage cost

Assignment Questions:
• Explain different modes of transportation with
their benefits and limitations.
• What transport decisions should a manager
take into consideration while selecting the
transportation mode?
• Explain multimodal transportation.
• Explain concept of containerization and its
benefits.

Logistics transportation

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