WAYS OF REDUCING TRANSPORTATION COST

WHAT IS TRANSPORTATION COST?

The expenses a company incurs when it
transfers its inventory or other assets to another
location. For example, a company must pay a
trucking or shipping company. If a company is
delivering a product, it may pass on the costs to the
customer.

WAYS ON HOW TO REDUCE:

Increased Customer Expectations
The consumer demand for ever faster DOCUMENTATION REQUIREMENTS- INBOUND
delivery times for everything from food to furniture AND OUTBOUND SHIPMENTS
echoes down the supply chain to force shippers to WHAT IS INBOUND AND OUTBOUND SHIPMENT?
find new ways, and more budget, to keep their Inbound logistics refers to the transport, storage
customers happy. and delivery of goods coming into a
business.
The Global Market Place Outbound logistics refers to the same for goods
The web may have expanded your markets, going out of a business.
but you need to find cost effective ways to ship to
them. WHAT IS SHIPMENT DOCUMENT?
The shipping document is the central
More Demand For Transportation Logistics element of transportation planning and shipment
The boom in ecommerce, produced by both completion. It contains all the information
start-ups and the shift by bricks and mortar to online necessary for carrying out transportation.
channels, means more competition to find
transportation logistics solutions USE
You create shipment documents using a
More Paperwork And Fewer Drivers worklist. Different types of shipment documents
Recently imposed regulations, like the have been defined to enable you to reflect in the
electronic logging device (ELD mandate in the U.S., system the various forms of transportation used in
and driver shortages on both sides of the border your organization.
have pushed up shipping prices. For example, you use the individual shipment
Minimizing costs is always a central focus for document to plan and process the transportation of
businesses. But the number and speed of recent cost goods from one location to another. You use the
increases for shippers can quickly put them in a collective shipment to move goods from one or more
competitive crunch. Their expenses have risen, but, points of departure to one or more destinations.
with inflation still at relatively low levels, price Separate document types deal with inbound and
increases may not be enough to offset them. outbound shipments.
So keeping freight costs in check is both more
important than ever and more difficult than ever. REQUIRED DOCUMENTS FOR INBOUND
Whether you ship internationally, or locally, here are SHIPMENTS:
just a few ways to lower your transportation logistics 1.commercial inverse
costs. 2.packing list
3.certificate of origin
4.payment certificate
5.insurance policy
6.PAN certificate (income tax certificate), firm
registration certificate
 7.CTD (custom transit declaration/export)
8. Bill of Lading
9.Freight Bill
10.FOB Terms of Sale
REQUIRED DOCUMENTS FOR OUTBOUND
SHIPMENT
Commercial Invoice
The commercial invoice is a legal document
between the supplier and the customer that clearly
describes’ the sold goods, and the amount due on
the customer.
Packing List
A packing list is a document that includes
details about the contents of a package.
Certificate of Origin
A certificate of origin (CO) is a document
declaring in which country a commodity or good
was manufactured.
Authorization Letter
A document used by the company to
authorize a broker to take the delivery order
Other required documents . . . . .
ROLE OF INFORMATION TECHNOLOGY IN
TRANSPORTATION
INFORMATION TECHNOLOGY
The use of computers to store, retrieve,
transmit, andmoney data, or information, often in
the context of a business or other enterprise.
TRANSPORTATION
Transport or transportation is
the movement of humans, animals and goods from
one location to another. In other words, the action
of transport is defined as a particular movement of
an organism or thing from a point A to a Point B.
Modes of transport includes:
1. Air
2. Land (rail and road)
3. Water
4. Pipeline
City growth generates an increase of traffic
due to a higher movement of vehicles for the
transport of people and the distribution of goods.
This makes mobility problems more evident and
more complex every day.
The problem of increased transport not only
creates congestion problems, but also affects the
economy, environment, health and competitiveness
of cities and businesses.
Companies and cities perform logistics
operations less efficiently due to traffic, which
involves higher costs and lower service levels,
resulting in big loss.
INTELLIGENT TRANSPORTATION SYSTEM (ITS)
Is an advanced application which, without
embodying intelligence as such, aims to provide
innovative services relating to different modes of
transport and traffic management and enable users
to be better informed and make safer, more
coordinated, and 'smarter' use of transport
networks.
WITH THE USE OF INTELLIGENT TRANSPORTATION
SYSTEM (ITS)
1. Transport operations are performed
optimally
2. It allows the exchange and coordination of
information
3. It interconnects the different information
systems aimed to capture, communicate,
compute and assist decision-making
4. Proper management of a transport system
and technologies and it is designed to
capture and analyze the required
information.
ROUTE PLANNING — Sensors in the vehicle
communicate with GPS services to determine the
best route, which is then displayed on a head-up
display that physically directs the driver along route.
ACCIDENT PREVENTION — Sensors alert drivers to
the position of other vehicles on the road and
prevent collisions. The cars can even override driver
controls to avoid an accident.
SAFETY — A series of sensors in the seat belt can
track the driver’s physiological indicators and
determine whether the driver is fatigued or
intoxicated. If the driver fails any of the tests
performed by the sensors, the vehicle becomes
inoperable.
One example of the intersection between
technology and transportation that has received a
lot of media coverage is AUTONOMOUS VEHICLE
TECHNOLOGY.
1. A self-driving car, also known as an autonomous
car, driverless car, or robotic car, is a vehicle
that is capable of sensing its environment and
moving safely with little or no human input.
2. Self-driving cars combine a variety of sensors to
perceive their surroundings, such as radar, GPS
etc. Advanced control systems interpret sensory
information to identify appropriate navigation
paths, as well as obstacles and relevant signage.
3. Long distance trucks are seen as being in the
forefront of adopting and implementing the
technology.
4. Many companies (i.e. Otto, Starsky Robotics, ...)
have focused on autonomous trucks.
Automation of trucks is important, not only due
to the improved safety aspects of these very
heavy vehicles, but also due to the ability of fuel
savings.
Autonomous vans are being used by online
grocers such as Ocado.
AUTOMATED VEHICLE TECHNOLOGY OFFERS
SEVERAL BENEFITS:
1. Without driver error, fewer vehicle crashes
will result.
2. Vehicle occupants could spend travel time
engaged in other activities, so the costs of
travel time and congestion are reduced.
3. Fuel efficiency can be increased and
alternative energy sources facilitated.
4. Because such vehicles won't need proximate
urban parking, space used for parking could
be repurposed.
RISK MANAGEMENT IN TRANSPORTATION &
DISTRIBUTION
RISK MANAGEMENT
1. Risk management is a process of analytical and
management activities that focus on identifying
and responding to the inherent uncertainties of
managing a complex organization and its
assets.
2. The risks transportation companies face may
vary but can include fleet integrity and safety,
driver safety and retention, and compliance
issues. Some of these risks are directly impacted
by outside influences, particularly weather
events, traffic and road conditions.
3. Risk distribution, also known as risk sharing, is a
fundamental feature of insurance.
RISK MANAGEMENT TO TRANSPORTATION
RISK MANAGEMENT PAST TO FUTURE
HOW DOES TRANSPORTATION RISK
MANAGEMENT WORK?
1. Develop executive support for risk
management
2. Define risk management leadership and
organizational responsibilities
3. Formalize risk management approaches
using a holistic approach to support decision
making and improve the successful
 achievement of strategic goals and
objectives
4. Use risk management to reexamine existing
policies, processes and standards
5. Embed risk management in existing business
processes so that when assets, performance,
and risk management are combined,
successful decision making ensues
6. Identify risk owners and manage risks at the
appropriate level
7. Use the risk management process to support
risk allocation in agency, program, and
project delivery decisions
8. Use risk management to make the business
case for transportation and build trust with
stakeholders
9. Employ sophisticated risk analysis tools, but
communicate results simply
BENEFITS OF RISK MANAGEMENT
1. Helps with making the business case for
transportation and building public trust
2. Avoids or minimizes managing-by-crisis and
promotes proactive management strategies
3. Explicitly recognizes risks in multiple investment
options with uncertain outcomes
4. Provides a broader set of viable solution options
earlier in the process
5. Communicates uncertainty and helps focus on
key strategic issues
6. Improves organizational alignment
7. Promotes an understanding of the
repercussions of failure
8. Helps apportion risks to the party best able to
manage them
9. Facilitates good decision making and
accountability at all levels of the organization
CHALLENGES OF RISK MANAGEMENT
1. Gaining organizational support for risk
management at all levels
2. Evolving existing organizational culture, which
can be risk averse
3. Developing and funding organizational
expertise for risk management
4. Implementing and embedding a new process for
risk management
5. Difficulty in applying risk allocation alternatives
within organizational constraints
6. A lack of willingness to accept and address
issues that risk management will identify
LOGISTICAL TOOLS IN SUPPORT OF
TRANSPORTATION AND DISTRIBUTION ACTIVITIES
DISTRIBUTION LOGISTICS focuses on achieving
efficient distribution and movement of finished
product that takes goods from the end of production
line to reach consumers.
3 MAIN AREAS:
Order Fulfillment
 helps businesses redesign their costumer
service organization. At the same time, it
takes care of costumers orders and question.
Taking orders and dispatching focuses on ff:
1. process throughput
2. Transaction efficiency
3. Transaction reliability
4. Timely and accurate external and internal
info. communication
Transportation Management
1. Handling outbound, inbound and internal
transportation is prioritized.
2. Deals with transportation network design
and the leveled flow of requirements for
transportation
Warehouse Management
1. Involves focusing on racking systems,
communication between product stations
and physical warehouse infrastructure.
2. Deals with storage and receipt of
merchandise in diff. locations
3. Includes outbound distribution,
management centres, inbound warehouses,
and cross docking
TOOLS OF A DISTRIBUTION CENTER
Warehouse Racking
1. Supports the staging and storing of product
2. Most distribution centre configurations,
racking will be configured to hold products in
bulk. This often means that the height of
warehouse racking will be configured to
accommodate a standard six food high
pallet.
Equipment
1. Distribution centre relies heavily on the
FORKLIFT (enhanced with motors)to ensure
product is moved throughout the warehouse
and reach capabilities to give works a lower
cost.
Technology
1. Most important tool within the warehouse is
the software stack that runs it.
CENTRALIZED SYSTEM:
Warehouse Management System (WMS)
 Integrate directly into org. main ERP. WMS is
expected to hold slotting plan, enable
batching and manage the receiving process.
Modern warehouses having some sort of
Transportation Management system to guide the
inbound (manage inbound appointments) and
outbound process (optimized outbound routes).
ESSENTIAL TECHNOLOGY STACK FOR MODERN
LOGISTICS COMPANIES
Asset Tracking and Inventory Management
Software
1. to monitor stock levels both for goods that
move through the supply chain for in-house
inventory that are necessary to keep high-
value assets in working order.
2. Tracking those assets efficiently using a
combination of barcode, QR codes, and
technology such as RFID tags coupled with
asset tracking software, is the foundation of
successful logistics operation.
Computerized Maintenance Management System
Cmms
Can schedule and monitor maintenance
activities to provide cost and reporting history
and other information
Accounting Tools
are important for logistics companies with large
volume of moving parts, labor costs,
maintenance cost and inventory costs to
manage
Analytics tools
AT making possible to identify the most
profitable products, pinpoint production problems
and implement prompt actions to mitigate those
issues before to create bottlenecks, analyze
suppliers and costs, lower costs and incrrease
margins by optimizing procurement spending and
more.
LOGISTICAL TOOLS
Freight Shipping Tools
1. easily manage your shipping and logistics
challenges with tools you can access online,
anytime
2. Track shipments, get quotes, print bills of
lading, review invoices and more-all from
location.
Tracking tool
1. Get real-time shipment tracking
Quote Tools
1. Estimate shipping costs quickly and
efficiently
LTL Quote
1. Time-critical/expedite quote
2. Truck load quote
3. Final mjile quote
Calculator Tools
1. From estimating transit times to cube density
and time comparisons, you’ll find the
calculators you need to plan even most the
complex logistics challenges
Transit Times
1. Cube
2. Density
Documentation Creation tools
1. Prepare, print and store your shipping
documents from one place. Generate bills of
lading, shipping labels, packing slips.
Shipment planning tools
1. Plan your shipment with accuracy
2. Fuel surcharge index
3. Rules and special service charges
4. Routing and service
5. Center search
Scheduling tools
1. Schedule and pick up quickly and easily
2. Pick up request
Document retrieval tool
1. Quickly view, download, email and print your
shipping documents, including bills of lading,
weight certificates, delivery receipts
Claims tools
1. Submit a claim or check the status of claim
2. Overcharge claim
3. Loss and damage claim
Reporting Tool
1. Make informed shipping and logistics
decisions by reviewing, measuring and
analyzing your shipping data
Billing tools
1. Make bookkeeping simple- review invoices,
view payment history, monitor bills and more
Management tools
1. Manage your shipment operations with ease
2. Manage your commodities, shipment
planner, expedite in transit, reroute delivery
DESIGN OPTIONS FOR
TRANSPORTATION AND
DISTRIBUTION NETWORK
DESIGN OPTIONS FOR TRANSPORTATION
NETWORK
1. Direct shipping network
2. Direct shipping with milk runs
3. All shipments via central dc
4. Shipping via dc using milk runs
5. Tailored network
Direct Shipment Network
1. The buyer structures his transportation
network so that all shipments come directly
from each supplier to each buyer location
2. The routing of each shipment is specified and
the supply chain manager only needs to
decide on the quantity to ship and the mode
of transportation to use. (trade off between
transportation and inventory costs)
3. Used if demand at buyer locations is large
enough
Direct Shipping With Milk Runs
1. A milk run is a route on which a truck either
delivers product from a single supplier to
multiple retailers or goes from multiple
suppliers to a single buyer location.
2. A supplier delivers directly to multiple buyer
locations on a truck or a truck picks up
deliveries destined for the same buyer
location from many suppliers.
3. Major decision supply chain manager has to
decide on the routing of each milk run.
Advantage:
 Eliminates intermediate
warehouses. Lower transportation
cost and increases utilization by
consolidating shipments to multiple
locations on a single truck.
All Shipments Via Central Dc
1. Suppliers do not send shipments directly to
buyers locations.
2. Suppliers send their shipments to the DC and
the DC then forwards appropriate shipments
to each buyer location.
3. Product is shipped from suppliers to a Central
Distribution Centre where it is stored until
needed by the buyers when it is shipped to
each buyer location.
Shipping Via Dc Using Milk Runs
1. Can be used from a DC if lot sizes to be
delivered to each buyer location are small.
Milk runs reduce outbound transportation
costs by consolidating small shipments. The
use of cross-docking with milk runs requires
a significant degree of coordination and
suitable routing and scheduling of milk runs.
 ✓ Drop shipping offers the manufacturer the
opportunity to postpone customization
✓ Effective for high value, large variety, low
demand products
✓ High transportation cost

Tailored Network
1. Here transportation uses a combination of
cross-docking, milk runs, and TL and LTL
carriers, along with package carriers in some
cases.
2. Requires significant investment in
information infrastructure to facilitate the
coordination. Manufacturer Storage With Direct Shipping and
Advantage: In-Transit Merge
 Allows for the selective use of a
shipment method to minimize the
transportation as well as inventory
costs.

DESIGN OPTIONS FOR DISTRIBUTION NETWORK

1. Manufacturer storage with direct shipping
Unlike pure drop-shipping, under which each
network
product in the order is sent directly from its
2. Manufacturer storage with direct shipping
manufacturer to the end customer, in-transit merge
and in transit merge
combines pieces of the order coming from different
3. Distributor storage with carrier delivery
locations so that the customer gets a single delivery
4. Distributor storage with last mile delivery
✓ In-transit merge has been used by direct sellers
5. Manufacturer or distributor storage with
such as Dell
consumer pick up
6. Retail storage with customer pick up ✓ Best suited for low- to medium-demand, high-
value items the retailer is sourcing from a
Manufacturer Storage with Direct Shipping limited number of manufacturers.
network ✓ Best implemented if there are no more than four
1. In this option, product is shipped directly or five sourcing locations.
from the manufacturer to the end customer,
bypassing the retailer (who takes the order Distributor Storage with Carrier Delivery
and initiates the delivery request). This
option is also referred to as drop shipping.
All inventories are stored at the
manufacturer.
✓ Products are shipped directly to the consumer
from the manufacturer
✓ Retailer is an information collector
✓ Passes orders to the manufacturers 1. Inventory is not held by manufacturers at the
✓ It does not hold product inventory factories but is held by distributors/retailers
✓ Inventory is centralize at manufacturers in intermediate warehouses and package
carriers are used to transport products from
 the intermediate location to the final
customer.
With respect to direct shipping
✓ Inventory aggregation is less
✓ Higher Inventory Costs
✓ Less information to track
Warehouses are physically closer to
consumers which leads to
✓ Faster Response Time
✓ Lower Transportation Cost
Effective for medium to fast moving items
Example:
Manufacturer or Distributor Storage with
Consumer Pickup
1. In this approach, inventory is stored at the
manufacturer or distributor warehouse but
customers place their orders online or on the
phone and then travel to designated pickup
points to collect their merchandise. Orders
are shipped from the storage site to the
pickup points as needed.
2. Such a network is likely to be most effective
if existing locations such as coffee shops,
convenience stores, or grocery stores are
used as pickup sites, because this type of
network improves the economies from
existing infrastructure.

Distributor Storage with Last Mile Delivery

1. Last-mile delivery refers to the
distributor/retailer delivering the product to
the customer's home instead of using a
package carrier.
2. Can only be justified if there is a large
customer segment willing to pay for this
convenience. Hence, used if customer orders
are large enough to provide economies of Retail Storage with Customer Pickup
scale. 1. Most traditional types of Supply Chain
3. Distributor storage with the last-mile 2. Inventory stored locally at retail store
delivery requires higher levels of inventory 3. Suitable for fast moving items
than the other options (except for retail
stores) because of its lower level of
aggregation.
4. From inventory perspective, warehouse
storage with last-mile delivery is suitable for
the FMCG items, as they are needed quickly
and some level of aggregation is beneficial
for them.