Transportation Management Notes

Transportation
- Refers to the movement of product from one location to another as it makes its way from
the beginning of supply chain to the customer.
- Is an important supply chain driver because products are rarely produced and consumed
in the same location.
The Role of Transportation in Logistics
In 2009, as a percentage of sales, transportation was 3.24%, warehousing 1.84%, customer
service 0.48%, administration 0.38%, and carrying cost 1.52%.
Outbound transportation was clearly the largest component of total physical distribution costs.
Cost trade-off, abound in transportation and are typified by trading lower inventory costs for
higher transportation costs.
Role of Transportation in Supply Chain Management
Raw Materials – Supplier – Manufacturing – Distribution – Costumer – Consumer
The Transport Selection Decision
Firms need to recognize that the lowest cost carrier dos not necessarily guarantee that this carrier
will result in the lowest landed cost.
Therefore, firms need to keep the big picture in mind when attempting to select a carrier.
Carrier Selection Determinants
- Transit Time
- Reliability
- Capability
- Accessibility
- Security
Importance Ranking of Carrier Selection Determinants
Modes of Transportation
1. Railroads
o Is a long haul, large volume system (high fixed cost/ own rights-of way)
o Accessibility can be a problem.
o Transit times are spotty, but are generally long.
o Reliability and safety are improving and are generally good.
2. Motor Carriers
o The motor carrier industry is characterized by a large number of small firms.
o Low cost of entry causes these large numbers
o Used by almost all logistics systems and account for 82 % of US freight
expenditures.
o Consists of for-hire and private carriers.
o High accessibility
o Transit times faster than rail or water.
o Reliability can be affected greatly by weather.
3. Water Carriers
o Relatively low cost mad; do not own the rights-of-way.
o Typically, a long-distance mover of low value, bulk-type mineral, agricultural and
forest products
o Low rates but long transit times
o Low accessibility but high capability
o Container ships
 High speeds for ships; increasingly more common and important
 Larger vessels can handle up to 5,000 containers
o RO-RO (Roll on-Roll off)
 Basically, a larger ferry that facilitates the loading and unloading process
by using drive on/drive off ramps.
 May also have the capacity to haul containers.
4. Air Carriers
o Limited number of large carriers earn about 90% of the revenue.
o Any of the air carriers can carry air freight although some haul nothing but
freight.
o Cost structure is highly variable; do not own rights-of-way.
o Transit times are fastest of the modes, but rates are highest.
o It is the fastest mode of transport. But the cost of its operation is very high and
thus is it suitable for only rich passengers, mails and light and costly cargo Fastest
Mode of transport:
Advantages of Air
 1. It have High Speed
2. It is comfortable and quick services
3. It is easy for access

Disadvantages of Air Transport

1. Very Costly
2. Uncertain and Unreliable
3. Small Carrying Capacity
Advantages of Road transport
1. Cost effective
2. Fast delivery
3. Easy to communicate with driver
Disadvantages of road transport
1. Transport it is focused to traffic delays
2. Transport subject to breakdown
3. Goods susceptible to damage because of careless driving
4. Bad weather
5. Driving regulations can cause delays
Advantages of Water transport
The transport network is quite cheap as we compared it with a rail and road transport
Important of Foreign Trade
Water transport plays important role in foreign trade for example India’s foreign trade is mainly
dependent on water transport.