Chapter Three

Transportation and
Freight Management
 3.1 Introduction
• Transportation and freight management
defined as the
planning,
 organizing,
 implementing, and
controlling of transportation services and
freight movements to achieve organizational
objectives.
3.2 Selection of Transportation
• Selection of transportation take place in two
ways
mode selection- availability of mode
 carrier selection- service providers
 Selection of mode depend on:
• nature of materials to move, the volume and
distance.
• Value of materials: as expensive items raise
inventory costs and encourage faster modes
• Importance: as even low-value items that would
hold up operations need fast, reliable
• Transport transit times: as operations that have
to respond quickly to changes cannot wait for
critical supplies using slow transport
• Reliability: with consistent delivery often
being more important than transit time
• Cost and flexibility to negotiate rates
• Reputation and stability of carrier
• Security, loss and damage
Comparison of transport mode
 Factors to be considered when selecting
mode of shipments
1. Required delivery time:
2. Reliable and service quality
3. Available service
4. Types of items being shipped
5. Size of shipment
6. Possibility of damage
7. Cost of transport service
8. Carrier financial situation
 Carrier Selection
• The selection is made to ensure that your goods
are delivered in the most economical way with
your needs.
• The Carrier Selection Decision:
– Various modes of transportation should be considered.
– Choose a carrier or carriers within the selected mode,
if there is a choice.
– Carefully examine the service capabilities of the carrier
as services can vary widely between carriers.
 Carrier Selection Determinants:

1. Total cost: includes fees charged, cost of extra

inventory, warehousing, brokers fee etc
2. speed: measures as time from when the shipment is
released at the supplier facility to the time of receipt at
the buyers receiving time
3. Reliability: the ability to delivered with accuracy and
consistency
4. Capability: the ability of the carriers to move special
materials, hazardous materials etc
5. Accessibility: whether the carrier is capable of picking
the shipment and delivering it door to door
 Motor Carrier selection criteria

• Rate related variables

-Door- to-door transportation rates or costs
-Willingness of the carrier to negotiate rate changes
 
• Customer service
-Transit time reliability or consistency
-Total door-to-door transit time

• Claims handling and follow up

-Equipment availability
-Special equipment
-Quality of operating personnel
-Line-haul service
-Scheduling flexibility
 3.3 Routing Identification
• Routing is the design of transportation
network.
This network created, when different points or
lines linked together in to a structure.
• Such networks by carrying flows of goods,
people, information or anything else that is
moved from one place give rise the benefits of
transportation system.
 Good identification of routing:

• Reduce transportation costs

• Improve customer services
• Minimize time or distance
• Increase accessibility
 3.3.1Transport network
• The term network refers to the framework of
routes within a system of locations, identified
as nodes.
• A route is a single link between two nodes
that are part of a larger network that can refer
to tangible routes such as roads and rails, or
less tangible routes such as air and sea
corridors.
• A network is a set of nodes (locations) linked
by links (arcs between places), for all nodes to
be linked, n-1 links are necessary.
• The efficiency of a network can be measured
through graph theory and network analysis.
 Graph theory
• Graph theory depends on the concept of
representing networks as a graph or matrix.
The underlying basics of this science assumes
that transport networks can be represented by
directed graph with nodes and links where the
nodes represent junctions while links indicate
homogeneous road section between nodes.
 Cont…..
• Node. Any location that has access to a transportation
network.
• Link. Physical transport infrastructures that enable to
connect two nodes.
• Flow. The amount of traffic that circulates on a link between
two nodes and the amount of traffic going through a node.
• Hub / Interface. A node that is handling a substantial
amount of traffic and which acts as compulsory passage for
various flows. Many economic and transport activities as
generally located at hubs, including distribution,
warehousing, finance and retailing.
 Cont….
• Feeder. A node that is linked to a hub. It
organizes the direction of flows along a
corridor and can be considered as
consolidation and distribution point.
• Corridor. A sequence of nodes and links
supporting modal flows of freight, people or
information.
 Routing types
A, Direct shipment network
 all shipments come directly from different plants of
the supplier to stock lists or customers

• The routing of each shipment is specified and the

logistics and supply chain managers have to decide
the quantity to be shipped and mode of
transportation
Figure1 Direct shipment networks
 Cont’d
b) Direct shipment with milk runs
 In this design a truck collects goods from
various plants of the shipper/supplier and
delivers them to a customer or collects goods
from one plant and delivers them to many
customers.
Figure 2 Direct shipping with milk runs
 Cont’d
c) Direct shipment via distribution center
 goods from various plants of the supplier are
consolidated at a central distribution center/warehouse
and then delivered to individual customer.
Figure 3 direct shipment via distribution center
 Cont’d
d) Shipping via destination center using milk
runs
• This network is the extension of direct shipping with
milk runs, where there is inclusion of a distribution
center in between supplier and customer
E.g. Pepsi and Coca Cola distribute their soft drinks
as per this network design.
Figure 4 shipping via distribution center using milk runs
3.5 Loss & damage claims
• The carrier’s liability varies depending on the
service provided and the contractual terms
between the shipper and carrier.
• The carrier liable for the total or partial loss of
the goods and for damage there to occurring
between the time when he takes over the
goods and the time when he takes over the
goods and the time of delivery, as well as for
any delay in delivery.
 Some important aspects in loss and damage claims

• Determination of freight claim damages: one

of the most difficult aspects of claims work is
determining the exact value amount of the
damage, the law indicates that the common
carrier is responsible for the full actual loss
sustained by the shipper or consignee.
• Concealed loss and damage: it is defined as
damage that is not discovered until a package
is opened.
 Cont……….
• Another difficult area for shippers and carriers
alike involves concealed loss or damage. If
shipments arrive in obviously damaged
condition(Unconcealed loss or damage), the
consignee either refuses the goods or makes a
notion of the damage on the delivery receipt.
 Cont……….
• However concealed-loss-and-damage
situations are more difficult to determine.
Often, the exterior package does not appear
to be damaged or tampered with: the damage
is within the package thus the damage of loss
discovered only when the consignee opens
the package. different writers appreciated
carriers are reluctant to pay all concealed-loss-
and-damage claims for two reasons:
 Cont…..
• If the package comes through the shipment
with no exterior damage, then there is a strong
possibility that the product was improperly
protected within the package. If this is the
case, the carrier is expected from liability as
improper packaging is a fault of the shippers.
• The possibility that the consignee’s employees
broke or stole the products.
3.4 Transport Regulation and deregulation

• Deregulation is the act or process of removing

or reducing state regulations.
• It is therefore opposite of regulation, which
refers to the process of the government
regulating certain activities.
 Cont…..
• Government transport regulation falls in to two
categories: economic and social regulation.
• Economic regulation exists in the form of price
controls to protect the consumer from price
gouging.
• Social regulation exists to protect the public as
in the case of safer work places and a clean
environment.
 A. Economic regulation

– The prevention of monopolists

– Development of fair competition
– Development of financial performance of the
transportation to provide dependable
transportation service.

• Economic regulation generally implemented

by controlling entry, rates, and services.
 Entry and Exit Regulation:
• this regulation controls carrier entry and exit
as well as the market served in order to:
– Reduce the cutthroat competitive characteristics
in larger markets and ensuring viable services
levels for smaller market.
– Limits a carrier’s ability to leave a market if this
would results in a substantial reduction in service
 B. Social /Safety Regulation

• Safety of transportation
» Quality and durability of the roads, railways, airport etc.
» Technical capability of the modes

• Safety of the people due to externalities such as:

» Pollution of air ,water and damage
» Petroleum combustion
» Hazardous materials
» Traffic congestion(overcrowding)
» Noise disturbance