Delivering your products or services

When the last time you picked up an item from a grocery store shelf and asked, "How did this get
here?" Most people never ask that question at all. If they did, the answer would give them a new
perspective on the importance of logistics in their own supply chains.

Take the example of a simple tub of margarine. Margarine is made from vegetable oil. This
complex supply chain stars with farms that harvest the vegetables and send them by truck or train
to factories for processing. The oils are processed into margarine and then packaged in small
containers that are placed in larger containers, which are placed on pallets. The pallets of
margarine are shipped by truck or train, in refrigerated containers, to distribution centers. Then
the distribution centers break the pallets apart and send a smaller amount of the margarine to the
individual stores. Last but certainly not least, someone in the store unloads the truck, and the
margarine is stocked on the store shelves.

Every step in this supply chain involves several players and many decisions. Every step needs to
work properly; otherwise, customers won's get their margarine. Understanding how to coordinate
all these logistics is a critical part of supply chain management.

This chapter examines the different kinds of transportation that you can use and explains the steps
involved in moving products through a distribution center, including the different ways to
replenish inventory. The end of the chapter discusses the important role that third-party logistics
providers can play in your supply chain.

Understanding modes of transportation

Moving products from one place to another involves transportation. Productos that is being
transported is called cargo or freight. if you're the one sending the freight, you're the shipper. The
place from which you ship the freight is the origin. If you´re the one to whom the freight is being
sent, you're the recipient. The place where you have the freight delivered is the destination. Each
combination of an origin (o) and a destination (D) is called an O-D pair, and the time that it takes
cargo to get from its origin to its destination is the transit time.

The method you use to ship products from an origin to a destination is called the mode of
transportation. When you choose a transportation mode for an O-D pair, you create a lane.

Many ways exist to ship cargo from one place to another, but seven primary modes of
transportation cover the vast majority of logistics scenarios:

 Pipeline
 Ocean
 Barge
 Rail
 Trucks
 Parcel
 Airplane
In addition to these seven transportation modes is multimodal, in which modes are combined to
move product from origin to destination. Moving a shipment from one mode to another is called
transloading. A shipping container may be loaded onto a truck, transloaded to a ship, unloaded on
a train, and delivered to its destination, for example.

Pipeline
For liquids and gases, pipelines are often the cheapest, safest, and most reliable form of
transportation. Most people are familiar with the pipelines that deliver water and natural gas to
homes. On a large scale, pipelines are used around the world to transport huge amounts of water,
petroleum, gasoline, and natural gas.

Ocean
For most products moving from one continent to another, cargo ships or freighters are likely to be
the lowest-cost option. Even though most freighters are powered by diesel engines, they're still
commonly called steamships. The companies that operate these cargo vessels are called
steamship lines.

There are different kinds of ships that are designed to carry specific kinds of cargo. Depending on
the kinds of material flowing through your supply chain, you may rely on several kinds of cargo
ships. The most common freighters these days are container ships; bulk carriers; tankers; and roll-
on, roll-off vessels.

Cargo that isn't liquid is called dry goods cargo, and dry goods can be shipped in bulk or placed in
shipping containers. Container ships are designed to carry breakbulk dry goods that are loaded in
standardized sea containers. Bulk carriers, called bulkers, haul bulk dry goods that don't need to
be placed in containers, such as ores. Tanker ships haul liquids, especially petroleum and liquefied
natural gas. Roll-on, Roll-off vessels, called ROROs, are used to transport cars and other large items
that need to be driven or dragged on and off the ship.

BREAK BULK CONTAINER SHIPPING

There are two kinds of dry goods cargo: bulk and breakbulk. Bulk dry goods are commodities like
coal and iron ore that can be poured into the ship's storage area called the hold. Breakbulk dry
goods are placed into containers. In the old days, shippers put breakbulk cargo in barrels, buckets,
bags, and justs about every other kind of custom-made packaging that you can imagine. This
means there was a huge amount of manual labor involved in loading a ship with these individual
packages, and that created many jobs for longshoremen and stevedores. Since the 1950s, a
growing amount of this breakbulk freight has been transported by specializes container ships in
standardized 20- and 40- foot sea containers (see the figure). The sea containers can be quickly
loaded and unloaded from a ship using gantry cranes, which has greatly increased the speed and
efficiency of global supply chains.
The size of a container ship is measured by the number of 20-foot containers that it can carry. The
unit of measures for container ships is 20-foot equivalent units (TEUs). One 40-foot container
takes the same amount of room as two 20-foot containers, of course. The largest container ships
can carry almost 20.000 TEUs, but these ships are too large for many ports and canals.

If you ship an entire container form one destination to another, the transportation mode is called
full container load (FCL). Sometimes, several smaller shipments are combined in a single container;
this mode is called less than container load (LCL). Because it's complicated to combine multiple
shipments in one container, LCL tends to be more expensive than FCL.

Rail
For big, heavy cargo that needs to travel long distances over land, railroads are often the way to
go. The type of railroad car you use depends on the type of cargo you're shipping. Boxcars are
enclosed, providing the greatest flexibility and protection for cargo (see figure 9-1). Refrigerated
boxcars are used for food products that need cargo to be temperature-controlled. Hopper cars are
used for bulk cargo such as grain and coal. Tankers haul liquids and compressed gases. Flatcars
haul just about everything else.

When you send shipments by rail, you're at the mercy of the railroad schedule and the locations of
the railroad tracks. Your car will get tied with other cars that are heading in the same general
direction, and they will need to stop along the way to drop off an end up sitting somewhere for
quite a while, waiting for another train to pick it up and take it on the next leg of its journey. The
result is that rail cargo is often slow, and transit times can be unpredictable.
For a train to pick up and deliver cars, it needs railroad tracks. Many factories and distribution
centers that ship a lot of otf cargo on trains have their own set of tracks installed, called rail spurs.
If not rail spur exists, the cargo may have to be loaded on trucks to be delivered to a railroad
ramp- a facility that railroads use to move cargo between trucks and trains.

Truck
One of the most common ways to ship cargo overland is to use big trucks. Some people call these
trucks 18-wheelers, but the professionals refer to them as tractor-trailers. The companies that
operate these big rigs recalled carriers. The truck itself is a tractor or a power unit, and the trailer
is called... well, a trailer.

The amount of cargo that a single truck can carry is limited by two things: size and weight. Trailers
have to be small enough to fit under bridges and short enough to turn corners. Also, trailers can't
be so heavy that they damage the roads that they run on, and weather conditions such as freezing
and thawing can change the strength of a road. So there are regulations that limit the amount of
weight you can load onto a trailer, and these might change depending on your location and the
time or yer. Regulations also govern how long truck drivers can spend behind the wheel and how
often they need to stop for breaks.

Two trucking modes are common in the united states: full truckload (FTL) and less than truckload
(LTL). Even though the trucks and trailers look virtually identical, the process and the pricing for
FTL and LTL are different.

With FTL, you can choose any origin and destination, and generally pay a flat rate per mile. It
doesn't matter whether you're shipping a single shoebox or enough shoeboxes to fill the trailer to
the top; you pay the same price either way. Therefore, it's in your best interest to fill your trailers
as full as possible. In other words, you should maximize the utilization of your trailer capacity.

TIP
Because FTL shipments travel directly from the origin to the destination, without stopping in
between, they generally are the fastest and most reliable way to ship a load.

Whit LTL, however, your cargo is combined with other shippers' cargo in the same trailer. You're
only charged for the amount of capacity you're using in the trailer. Depending on the carrier, you'll
be charged for some combination of the weight and the dimensions of your shipment, as well as
the distance over which it's being sent.

FTL is more economical for large shipments, an LTL is better for small shipments. It is common to
set a threshold weight to decide which mode you should use for a shipment. Many shippers use
15,000 pounds as their threshold. Any shipment that is lighter than 15,000 pounds should be LTL,
and any shipment heavier than this should be FTL.

TIP
Trucking prices can change over time. When prices go up because the demand for trucks is
outpacing carriers' supply, you don't have much choice but to pay the higher price. Otherwise,
your freight will get left behind while your carriers go where they can make more money. When
prices are going down, your carriers may still try to collect the highest amount they can from you.
The price that you would pay to hire a truck today is called the spot market rate. If you ship
frequently you can negotiate lower rates, called contracted rates, whit a carrier. Negotiating rate
contracts with trucking carriers provide some protection against price swings, but those
contracted rates might not be honored if the market price for trucking goes too high, too quickly.
If you do a lot of shipping by truck, it's a good idea to regularly compare the rates you're paying
with the amounts that other shippers are paying. Two companies that provide this benchmark
data are Cass Information Systems, Inc. and Chainalytics. This can help to ensure that you aren't
paying more than you should, and can also show if your rates are too far below the market.

Trucking prices are a function of supply and demand, and they change all the time. Trucking prices
are also different depending on origin and destination. A shipment from Spokane to savannah
could cost more than a shipment from savannah to Spokane.

Types of trailers

The three types of trailers that are most common in the united states are dry vans, flatbeds, and
refrigerated trailers.

 Dry vans are basically big aluminum boxes with wheels on the bottom. You can ship
virtually anything in a dry van as long the cargo fits inside and isn't too heavy. Because the
doors are in the back of the trailer, you have to load from front to back; you can't get to
the cargo in the from the trailer until you unload everything behind it.
 Flatbeds are good alternatives for cargo that don't need protection from the elements and
that's easier to load and unload from the side. For example, it's a lot easier to load long
pipes from the side of a flatbed than it is to push them into the back of a dry van.
 For perishable foods, you need a refrigerated trailer ( or, as we say in the biz, reefers).
Reefers are similar to dry vans, except that they are insulated and have a refrigeration unit
mounted in the front that cools the air inside.

Parcel
If you're sending a relatively small load, such as a couple of boxes, you'll probably choose a parcel
carrier. In the united stated, the parcel market is dominated by four companies: United parcel
services (UPS), FedEx, DHL, a U.S postal service (USPS). The price you pay for a parcel shipment is
determined by four things: weight, dimension, O-D pair (refer to "Understanding modes of
transportation" earlier in this chapter). and speed. If you're sending a big, heavy box far away and
need it to arrive tomorrow, that shipment will be expensive. if you're shipping a small, lightbox
across town and don't care when it arrives, that shipment will be relatively cheap.

Air
For cargo that needs to travel long distances quickly, the best option usually is an airplane. (See
figure 9-2). Generally speaking, heavy items cost more to ship by air than light items do, which
means that it's easier to justify the cost of air freight for small, light items such as cellphones than
it is for heavy products such as tractor parts. Nonetheless, you may need an item so urgently that
you're willing to pay the high cost of air freight. Air cargo is often loaded into special containers
called igloos that are designed to protect both the cargo and the airplane.

Selecting modes of transportation

Managing logistics includes selecting your modes of transportation. Your Choice of transportation
mode for your freight shipments depends on three factors:

 Product characteristics: You need to think about what modes make sense for the product
that you are shipping, and you also should consider the type of container that you need to
ship it in. For example, small, light, and valuable products can be shipped cheaply by air.
Bur air freight is usually not a practical choice for big, heavy, and low-value products. LTL
may be cheaper than FTL, but your freight is more likely to be damaged because it will be
loaded and unloaded several times during its journey. Some food products can be shipped
in a dry wan, and others require a reefer. Some products, such as lumber and pipes, are
easier to load and unload from a flatbed from a dry wan trailer.
 Facility characteristics: You need to consider the design and capabilities of the facilities
that the product will flow through. This includes the origin and destination facilities, and
the distribution centers, ports, and cross-docks in between. Some facilities have rail spurs,
bur many don't. There are different designs and heights for loading docks in facilities. And
every distribution center has different material handling equipment. You might find a
situation where you could save money shipping a 10,000-pound load by LTL, but because
the dock at the destination is the wrong height you need to ship the load FTL instead.