Introduction to Trade & Logistics Chapter 6

Chapter 6: Transportation

1 THE OBJECTIVE OF TRANSPORTATION

Wisner, Tan and Leong (2012, p.315) state that the objectives of transportation should be to
“satisfy customer requirements while minimizing costs and making a reasonable profit”.
From the logistics or supply chain management perspective, this should include the forms of
transportation, material handling and storage, and most appropriate vehicle scheduling and
routing to use.

Transportation has two major logistical functions: product movement and product storage
[ CITATION Bow13 \l 1033 ].

The value provided by transportation is to move materials, components, work-in-process or

finished products to specific destinations throughout the supply chain. The performance of
transportation affects procurement, manufacturing and customer relationship. Without
reliable transportation, most commercial activity cannot take place [ CITATION Bow13 \l
1033 ].

Transportation consumes time, financial and environmental resources. In-transit inventory

should be minimized because inventory is generally inaccessible during transportation.
Financial resources due to transportation come in the form of driver labour, fuel, capital
invested, vehicle maintenance, administration, and product loss and damage. Fuel and oil
consumption by transportation has a direct impact on environmental resources. Indirect
impact comes in the form of congestion, air pollution and noise pollution [ CITATION
Bow13 \l 1033 ].

Transportation is also a means of product storage. A product being transported is being

stored at the same time. Vehicles are sometimes used as temporary storage to avoid the
cost of unloading, warehousing and reloading [ CITATION Bow13 \l 1033 ].

2 MODE OF TRANSPORT & INFRASTRUCTURE

A mode identifies a basic transportation method. There are basically five modes of
transport: road, rail, air, water and pipeline (Bowersox, Closs, Cooper, & Bowersox, 2013;
Waters, 2003; Wisner, Tan, & Leong, 2012).

2.1 ROAD CARRIERS

Motor carriers or trucks are considered the most flexible. They can accommodate small or
large shipments and provide door-to-door services with considerably short journey time.
Trucks are cheap to own and operate. However, susceptibility to traffic and weather
conditions is the disadvantage of this mode of transport (Waters, 2003; Wisner, Tan, &

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Leong, 2012). Other challenges with this mode of transport include safety restrictions, driver
shortages, work regulations and fuel costs [ CITATION Bow13 \l 1033 ].

Figure 6.1 DHL truck in the desert [ CITATION Haq10 \l 1033 ]

In Australia, trucks pulling multiple trailers, known as road trains, traverse the country.
These road trains can be as long as 50 metres in length [ CITATION Wis12 \l 1033 ].

Figure 6.2 A road train in Australia [ CITATION Ham11 \l 1033 ]

Relative Advantages

 flexible service over a dispersed geographical area

 able to handle relatively small lots over intermediate distances
 service is extensive and adaptable
 no major investment in route facilities
 fast and dependable service
 largely independent of weather conditions
 point-to-point service
 faster than other modes, especially for truckload shipments, because handling of the
load is minimized
 reduction of in-transit shocks and handling mean less stringent and less costly
packaging requirements
 versatile as products of varying sizes and weights can be transported

Relative Disadvantages

 unit size of load is limited by highway construction, regulation and the vehicle’s
maneuvering capability

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 more expensive on long hauls than rail or water modes when the terminal costs of the
latter modes are relatively less important.

2.2 RAIL CARRIERS

Rail carriers are suitable for transporting heavy or bulky cargo over long land distances
efficiently. Rail carriers are comparatively less expensive than air and road carriers. They
have high capacities and can run at reasonably high consistent speed. Fixed costs for
railroad operations are high due to expensive equipment (e.g. train), facilities (e.g. train
terminal) and infrastructure (e.g. railroads). However, rail carriers are able to enjoy low
variable operating costs. Trains have the disadvantage of being inflexible. Train services
follow a fixed timetable and will thus not be able to cater for last-minute or emergency
deliveries. They also only travel along specific routes between fixed terminals and cannot
stop at intermediary points. (Bowersox, Closs, Cooper, & Bowersox, 2013; Waters, 2003;
Wisner, Tan, & Leong, 2012).

Figure 6.3 A freight train [CITATION Net15 \l 1033 ]

Relative Advantages

 generally offers the lowest cost for transportation

 transport of low-value and high-density products between major distribution centres,
where the amount of sorting and classification is minimal
 enormous capacity to handle a wide variety of goods in large quantities
 when moving goods in large quantities over intermediate to long distances, the
railroads are unsurpassed in economy for most products
 reliable and not seriously hindered by weather or competitive traffic
 possess an inherent energy efficiency compared with motor transport

Relative Disadvantages

 competitively uneconomical for small shipments

 uneconomical and inefficient for short hauls, where the inflexibility of terminals (rail
yards) and the high cost of terminal handling result in both service and cost
disadvantages
 operate on less-flexible time schedules, therefore less frequent and less flexible
service to shippers than do motor carriers

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 competitive disadvantage to motor carriers because trains operate from terminal to

terminal, with siding deliveries a separate function, rather than directly from point to
point
 slower and less dependable than motor transport, largely because a shipment, even if
a carload quantity, is likely to spend most of its time waiting to be loaded into a train,
switched at an intermediate terminal, or switched at the final destination to the
consignee

2.3 AIR CARRIERS

Air transportation is preferred for products which prioritize speedy delivery over
transportation cost. These products are usually light in weight, in small quantity, of high
value and need to travel over long distances quickly (Waters, 2003; Wisner, Tan, & Leong,
2012). Common examples of products transported by air include fashion goods, fresh fish,
repair parts and medical supplies [ CITATION Bow13 \l 1033 ].

There are three main types of operation: regular service, cargo service and charter
operations. In a regular service which passenger transport contributes most to the business
of the airline, cargo space on the plane not needed for baggage is used for cargo transport.
In cargo service, airlines operate cargo planes on regular schedules, moving goods for any
customers. In charter operations, the entire plane is hired exclusively for a particular
delivery (Waters, 2003; Wisner, Tan, & Leong, 2012).

Space is limited on aircrafts and they are not able to carry extremely heavy or bulky cargo.
Products transported by air are less prone to damages. While airlines have good schedule
frequency, the geographic coverage of air transport is limited by the existence of airports and
regularly-scheduled air services (Bowersox, Closs, Cooper, & Bowersox, 2013; Wisner, Tan,
& Leong, 2012). A combination of high fixed costs (e.g. expensive aircrafts, handling
equipment etc.) and high variable costs (e.g. fuel, landing fees, maintenance, labour etc.)
makes airlines expensive to operate [ CITATION Wat03 \l 1033 ].

Figure 6.4 Loading cargo into passenger aircraft [ CITATION ALG15 \l 1033 ]

The world biggest commercial jet freighter is the Soviet-built Antonov An-225. The original
purpose of the plane, when built in 1988, was to transport rocket boosters and space
shuttles. Since then, it has transported locomotives and generators, as well as vast
quantities of relief supplies to disaster areas [ CITATION Wis12 \l 1033 ].

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Relative Advantages
 speed of service
 good frequency and reliability of service, particularly along routes connecting major
cities
 for high-value, low-weight products delivered over long distances especially where the
transport cost forms a smaller proportion of the total product cost
 significant reduction in in-transit and warehouse inventories and costs

Relative Disadvantages
 high cost of air service
 limited cargo capacity
 terminal-to-terminal rather than point-to-point service makes air transport slower than
truck over short distances

Reasons for using air cargo:

 Emergency transfer of parts to maintain or repair critical or expensive equipment.
 Emergency shipments to avoid loss of sales due to unavailability of product.
 Avoidance of run out of inventory of critical items needed to maintain production.
 Reduction in inventory and warehousing costs.
 Savings in gross transportation cost when allowance is made for more direct routing
 Reduction in packing cost and weight, especially for smaller shipments.
 Expansion of product markets to obtain sales otherwise impossible, due to
perishability, fragility or other product characteristics.

2.4 WATER CARRIERS

Water transportation can take place over inland waterways, lakes, coastal waters or deep
seas. Services by water carriers tend to be slow and the ability to stop only at appropriate
ports makes them inflexible. Pairing up with road carriers improves its flexibility by enabling
door-to-door delivery services. One main advantage of water transportation is the capacity
to transport extremely large shipments at moderate fixed costs and low variable costs
(Bowersox, Closs, Cooper, & Bowersox, 2013; Waters, 2003; Wisner, Tan, & Leong, 2012).

Over 90% of the world trade is moved by sea. Inexpensive products, such as coal and
grain, are shipped on bulk carriers. Manufactured products are usually transported in
containers on specially-designed container ships (Waters, 2003; Wisner, Tan, & Leong,
2012).
The biggest container ship in the world – Maersk Line’s new Triple-E class container ship –
can carry up to 18,000 containers. It is 400 metres in length but requires as few as 13 crew
members to operate. The first Triple-E vessels delivered in 2013 are deployed to sail
between Asia and Europe [ CITATION Mae14 \l 1033 ].

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Figure 6.5 Maersk Triple-E class container ship [ CITATION Eur13 \l 1033 ]
Relative Advantages
 competitively low cost
 limited to bulk cargo service between markets on the waterway systems
 unchallenged in the transoceanic movement of products

Relative Disadvantages
 inherently comparatively slow
 less predictable delivery times

2.5 PIPELINE CARRIERS

Pipelines are usually used to move oil, gas and water. They are unique in comparison to
other modes of transport as they operate 24 hours seven days a week.

An advantage of pipelines is the ability to move large quantities over long distance.
Pipelines have high fixed cost from the construction of the pipelines and the control stations.
Since pipelines are not labour-intensive, the variable operating cost is extremely low.
Pipelines are inflexible, serving only fixed points, and can only move products in liquid or
gaseous forms (Bowersox, Closs, Cooper, & Bowersox, 2013; Waters, 2003).

Figure 6.6 Pipeline for gas delivery [ CITATION Nov09 \l 1033 ]

There is 265,000 kilometres of oil pipeline in the United States in 2010 [ CITATION Bow13 \l
1033 ]. In the North Sea, a 1,200km pipeline 900 metres under the sea delivers natural gas
from Norway to the United Kingdom [ CITATION Wis12 \l 1033 ].

Relative Advantages
 relatively low-cost mode due to the low-labour requirements for operation and
maintenance
 long useful life of the investment
 extremely high level of service dependability

Relative Disadvantages
 requires a high fixed investment
 specialized nature of mode restricts the type of products that can be transported

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2.6 INFRASTRUCTURE

Infrastructure, such as roads and power grid, plays a very important role for every mode of
transport as well as the economic growth of a country.

Figure 6.7 Infrastructure plays an important role for every mode of transport [ CITATION Rov06 \l
1033 ]

3 SELECTION OF TRANSPORT MODE

Between 1975 and 2004, the volume of manufactured products transported by air grew by
7.4% per annum while products transported by sea grew by 4.4% per annum. Valuable
goods are transported over long distances by plane. While less than 1% of products are
now transported by air in terms of volume, their value amounts to more than a third of the
value of goods imported by the United States by air [ CITATION Beh10 \l 1033 ].

As seen above, each mode has different characteristics. Factors such as distance, the type
of goods to be moved and the volume to be transported will need to be considered while
selecting the best transport mode to use. Other factors include:
 Locations
 Value of product
 Transit time
 Reliability
 Cost and flexibility to negotiate rates
 Reputation and stability of carrier
 Security, loss and damage
 Schedules and frequency of delivery
 Special facilities available
(Behar & Venables, 2010; Waters, 2003).

4 BULK CARGO & UNITIZATION

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Bulk cargo is cargo transported without bagging or packaging. They are commonly moved
by trucks, trains, ships or pipelines. Examples of dry bulk include grain and coal, while
examples of liquid bulk include sulphuric acid and crude oil [ CITATION Pac85 \l 1033 ].

Figure 6.8 Grain is a common example of bulk cargo [ CITATION Cen12 \l 1033 ]

Transporting bulk cargo requires high level of skills and knowledge of the cargo. Serious
risks such as ship stability, corrosion, intoxication, fire or explosion, and leakage and
contamination, could occur. These have the potential to cause injury and death, and
damage to the cargo or carrier, during loading, unloading or transportation (Lloyd's Register,
2013a; Packard, 1985).

Figure 6.9 Coal fire on board a ship [ CITATION Llo3b \l 1033 ]

Unitization was discussed in chapter 3. It is the process of grouping loose products together
into one physical unit with the objective of improving handling and transport efficiency. The
ultimate goal is to reduce logistical cost [ CITATION Bow13 \l 1033 ].

Figure 6.10 Palletization as a form of unitization [ CITATION Mar15 \l 1033 ]

Containerization is also a form of unitization. It began in 1956 and took 20 years to

complete. This evolution saves time and cost of loading and unloading ships.
Containerization drastically reduces the cost of shipping goods over long distances, opening
up the possibility of offshore production. It also allows supply chains to be lengthened to

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reach new customers and bring in new sources of labour, raw materials, components and
logistics services to facilitate global trade [ CITATION Ben08 \l 1033 ].
While containerization virtually eliminated the need for longshoremen in the ports, it created
jobs in trucking, rail freight, warehousing and logistics services. Accessibility to new sources
of labour and new suppliers of components and raw materials created new manufacturing
centres and new ports. Cities such as Hong Kong, Mumbai, Shanghai and Singapore thus
grew in significance [ CITATION Ben08 \l 1033 ].

The container is considered the largest unit load used for long distance transportation. The
use of weatherproof metal shipping containers simplifies intermodal transfers and makes
efficient door-to-door delivery possible without the need to directly handle the product
(Oakden & Leonaite, 2012; Peters, 1989).

Containers are of standard sizes to facilitate transfers between different modes of transport.
Containers of 20 feet (20’), 40 feet (40’) and 45 feet (45’) in length are common in sea
transportation. The common term for 20-foot container is TEU (20-foot equivalent unit) and
FFE (40-foot equivalent unit). While all containers are 8’ wide, 20’ containers are 8 feet 6
inches (8’6”) tall and 45’ containers are 9 feet 6 inches (9’6”) tall. 40’ containers can be
either 8’6” or 9’6” tall. Different types of containers exist to transport various types of
products, such as frozen food and liquid products [ CITATION Oak12 \l 1033 ].

5 INTERMODAL TRANSPORT

In addition to the five basic modes of transport, a number of intermodal combinations are
available. The more popular combinations are trailer-on-flatcar (TOFC) and container-on-
flatcar (COFC). Intermodal movements combine the cost and/or service advantages of two
or more modes in a single product movement.

(a) TOFC/COFC

This is also known as piggyback service. A motor carrier trailer or a container is placed on a
rail flatcar and transported from one terminal to another. At the terminal facilities, motor
carriers perform the pickup and delivery functions. Piggyback service combines the low cost
of long-haul rail movement with the flexibility and convenience of truck movement.
Truck and rail partnerships are relatively common. The railroad carries freight on the long
haul, and the trucking company picks up and delivers between customer and railroad.

(b) Roadrailers

This concept was introduced in the late 1970s. Roadrailers, or trailertrains as they are
sometimes called, combine motor and rail transport in a single piece of equipment. As
shown in Figure 12, the roadrailer resembles a conventional motor carrier (truck) trailer.
However, the trailer has both rubber truck tires and steel rail wheels. Over highways, tractor
power units transport the trailers in the normal way, but instead of placing the trailer on a
flatcar for rail movement, the wheels of the trailer are retracted and the trailer rides directly
on the rail tracks.

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Forms of Intermodal Transportation

Advantages
 rail flatcars are not required
 switching time to change wheels on the trailer is less than the time to load and unload
the trailer from the flatcar

Disadvantages
 added weight of the rail wheels reduces fuel efficiency, resulting in higher movement
costs
 higher cost of the equipment

6 REFERENCES

ALG Aviation. (2015). Air Cargo Loading - Nigeria [Online image]. Retrieved September 25,
2015, from http://algaviation.com/wp-content/uploads/2014/11/air-cargo-loading-
nigeria.jpg
Bahn, J. (2011). Shippers and Ports Are Calling for the IMO to Amend the SOLAS to Include
the Weight of Containers before They Are Loaded to Ships. Retrieved September 25,
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http://www.porttechnology.org/news/shippers_and_ports_unite_in_call_for_container
_weight_verification
Behar, A., & Venables, A. J. (2010). Transport Costs and International Trade. Retrieved
September 22, 2015, from University of Oxford:
http://economics.ouls.ox.ac.uk/14816/1/paper488.pdf
Bensman, D. (2008). Globalization and the Labor Markets of the Logistics Industry.
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http://web.mit.edu/is08/pdf/bensman.pdf

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Bowersox, D. J., Closs, D. J., Cooper, M. B., & Bowersox, J. C. (2013). Supply Chain
Logistics Management (4th ed.). Singapore: McGraw-Hill.
Canadian Supply Chain Sector Council. (2015). Supply Chain Definitions. Retrieved August
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ign=GlossaryPDF
Eurogate. (2013). Second Maersk Line’s Triple E-Class Vessel to Call at EUROGATE in
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vessel-to-call-at-eurogate-in-wilhelmshaven-germany/
Hampton Transport Services. (2011). [Untitled illustration of road train]. Retrieved
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Haq, R. (2010). [Untitled illustration of DHL truck]. Retrieved September 25, 2015, from
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deal-in-doha/
Lloyd's Register. (2013a). Carrying Solid Bulk Cargoes Safely. Retrieved September 25,
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35783_IMSBC_Code_pocket_guide_final_web_tcm155-247233.pdf
Lloyd's Register. (2013b). Coal on Fire in a Cargo Hold [Online image]. Retrieved
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35783_IMSBC_Code_pocket_guide_final_web_tcm155-247233.pdf
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Oakden, R., & Leonaite, K. (2012). A Framework for Supply Chains: Logistics with an Asia-
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Packard, W. V. (1985). Sea-Trading Volume 2: Cargoes. Coulsdon: Fairplay Publication.
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01901362843/Rendered/PDF/multi_page.pdf

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Richter, F.-J. (2014, January 29). Transport Infrastructure Key to Domestic, Export Growth.
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Approach (3rd ed.). Canada: South-Western Cengage Learning.
Yahoo Finance. (2016, February 15). News. Retrieved from Yahoo Finance Web site:
https://sg.finance.yahoo.com/news

7 KEY TERMS

Road carriers

Rail carriers

Air carriers

Water carriers

Pipeline carriers

Containerization

TEU (20-foot equivalent unit)

FFE (40-foot equivalent unit)

TOFC (Trailer-on-flatcar)

COFC (Container-on-flatcar)

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