Chapter 1 TRNASPORTATION IN SUPPLY CHAIN

1.1 Transportation in General

Transportation generally refers to the movement by a carrier of goods or person from one place to another.

Transportation as a component of "public utilities" and "public service"

"Public utilities," as defined in Pantranco vs. Public Service Commission, 70 Phil. 221, "are privately owned and
operated businesses whose service are essential to the general public. They are enterprises which specially cater
to the needs of the public and conduce to their comfort and convenience. As such, public utility services are
impressed with public interest and concern. The same is true with respect to the business of common carrier
which holds such a peculiar relation to the public interest that there is super induced upon it the right of public
regulation when private properties are affected with public interest, hence, they cease to be juris privati only.
When, therefore, one devotes his property to a use in which the public has an interest, he, in effect grants to
the public an interest in that use, and must submit to the control by the public for the common good, to the
extent of the interest he has thus created."

"Public service," on the other hand, is a term that Section 13(b) of Commonwealth Act No. 146 or The Public
Service Law (of 1936), as last amended by Republic Act No. 2677, defines as that which "includes every person
who owns, operates, manages or controls, for hire or compensation, and done for general business purposes,
any common carrier, railroad, street railway, traction railway, sub way motor vehicle, either for freight or
passenger, or both with or without fixed route and whatever may be its classification, freight or carrier service
of any class, express service, steamboat, or steamship line, pontines, ferries, and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine railway, marine repair shop, wharf or dock, ice
plant, ice refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and
power, petroleum, sewerage system, wire or wireless communications systems, broadcasting stations and other
similar public services."

Simply stated, a public utility is a "business or service engaged in regularly supplying the public with some
commodity or service of public consequence such as electricity. gas, water, transportation, telephone or
telegraph service" (National Power Corporation us. Court of Appeals, 345 Phil. 9 [1997]). It provides a service
or facility needed for present day living which cannot be denied to anyone who is willing to pay for it (Martin G.
Glaeser, Public Utilities in American Capitalism [New York: The MacMillan Co., 1957].

Clearly, the term "transportation" is subsumed in the foregoing definitions of "public utilities" and "public service,"
it being an essential part and parcel of the enterprises which especially cater to and serve the needs of the
public.

1.2 Role of Transportation in Supply Chain

The strategies of carriers and shippers are very much interrelated. The competitive environment requires that
transportation be an integral part of supply chain strategy. Carriers must understand the role that transportation
has in their customers' supply chains. Executives in shipper firms must be aware of how carriers assist in helping
them to satisfy their customers' needs at a profit. In many organizations, the traditional role of the transportation
executive has been expanded considerably, with greater emphasis being placed on how transportation decisions
affect the firm's marketing mix, impact supply chain efficiency and effectiveness, and aid in the creation of
sustainable competitive advantage.

Today's transportation environment is complex and becoming more difficult for manage ment. Impacted by
energy costs, an infrastructure in need of repair and expansion, fluctuations in financial markets, and global
instability due to geo-political uncertainties, transportation is an important part of supply chain management
that must be managed successfully. Several trends specifically impact transportation, including:

• Omnichannel retailing consumers buying more products online, but also wanting to buy in multiple
channels.
• The "Amazon Factor": next day and same day delivery becoming commonplace, placing greater
challenges on transportation carriers.
• Globalization: variability in transportation lead times as markets and sources of supply expand
globally.
• Increased risk: rules, regulations, and other uncertainties have increased risks associated with costs,
material availability, and service levels.
• Collaboration: need for greater cooperation and collaboration between partners from both the
demand and supply sides.
• Outsourcing: increasing and becoming more complex.
 • Cost and profitability: total landed costs and last-mile delivery are critical issues to companies and
customers.
• System integration: ROI is dependent on IT and other software systems integration.

These trends impact the shippers, carriers, and customers of transportation through cost and/or service
dimensions.

Within individual organizations, the transportation function must interface with other departments such as
logistics (transportation management); accounting (freight bills); engineering (packaging, transportation
equipment); legal (warehouse and carrier contracts); manufacturing (just-in-time deliveries); purchasing
(expediting, supplier selection); marketing/ sales (customer service standards); receiving (claims,
documentation); and warehousing (equipment supply, scheduling).

Supply chain management involves the movement of products (raw materials, parts, supplies, and finished
goods) from point of origin to point of consumption. A product produced one point has very little value to the
prospective customer unless it is moved to the point where it will be consumed. Transportation performs this
movement. Movements across space or distance create value or place utility. Time utility is primarily added by
the warehousing and storage of products until they are needed by customers. Transportation is also a factor in
the creation of time utility because it determines how fast (time-in-transit) and how consistently (consistency of
service) products move from one point to another. If products are not available at the precise time they are
needed, there may be expensive repercussions, such as lost sales, customer dissatisfaction, or production
downtime. Most supply chain executives are familiar with the problems caused by the late arrival of needed
items. United Parcel Service, FedEx, DHL, and other "overnight" carriers have been successful because they can
increase the time and place utilities of their customers' products through fast and consistent product delivery.
This capability has become even more important as customers are demanding same-day delivery of consumer
products.