Transportation

Backbone of Logistics
The elements….
Carrier Claims
Rate
evaluation/ Administratio
Negotiation
selection n

Shipment Documentatio
Freight Management
Scheduling n

Route Freight Transport

Planning Consolidation modes mix
 Distribution of Ports
West Coast
Gujarat 40 Major Port:
Maharastra 53
• Haldia
Goa 5
• Paradip
Daman & Diu 2
Karnataka 10 • Vishakapatnam
Kerala 13 • Chennai
Lakshadweep 10 • Ennore
133 • V.O.Chidambaranar
East Coast
• Cochin
Tamil Nadu 15
Pondicherry 1 • New Mangalore
Andhra Pradesh 12 • Mormugao
Orissa 2 • Mumbai
West Bengal 1 • Kandla
Andaman & Nicobar 23 • JNPT
54
TOTAL 187
 •Key factor but not the only one
• Speed – viewed related to cost
Product Movement • also with other objectives as cost
reduction, inventories, CS
• accurate forecasting/ flexible

Transportation Strategy

Carrier
Mode of Relationship with
Customer Needs Performance
Transportation carriers
Air Transport
• Resorted in case of absolute necessity and urgency

• Air freight very high as compared to other modes of transport

• In India, poor connectivity to international and domestic destinations 115

airports (17 international)

• Challenge for perishable exports

• “Cooling off” period – 72 hours

• Advantage of lower loss of damage in transit, pilferage, less expensive

packaging, less insurance cost .
Ocean Transport
• More than 95% of international trade conducted by sea route
• India – 90% - volume and 77% in terms of value
• Size – USD 5.5 billion – SCI (80 vessels), Essar, GE shipping – 1 million
DWT. Container, crude oil, product, bulk, LPG/ ammonia carriers, acid
carriers, passenger, offshore supply vessels
• In India, 12 major ports, 184 minor/ intermediate ports – coastline of
7517 kms
• Carry bulk commodities – ores, grains, crude, acids, etc…
• Modern ships carry 7000+ containers
•Adv- large vol of cargo, loss and damge low
• Dis adv – high %age of loss to high value cargo, insurance premium
higher, longer transit time, higher inventory carrying cost
Rail Transport
• suitable for – raw material, bulk (coal, grain, ore, petroleum, etc..)
• 70% of IR cargo is of Govt agencies – CIL, FCI, Fertilizer Corp of India, ..
• Avg speed 20 -25 km/ hr and approx tonnage – 2000 tonnes of cargo
• Not most favoured – 80% of transit time – wasteful activities
• Disadv:
• freight not cheapest
• cargo drop and pick up from railway yard – additional transport
• additional material handling – cumbersome and expensive
• formalities, approvals for railway siding- time consuming
Road Transport
• suitable for – semi finished, finished, medium, small size products
• door to door service, no additional handling
• saves time, money prevents damage – multiple times cargo handling
• trucks can be hired exclusively by shipper unlike others
• Reasonable fast transport in small bulk 10 – 12 tonnes/ options avl
• India – 3.2 million kms of road network (0.66km per sq km) (US-
0.65km) however infrastructure maintenance poor. Lane capacity poor.
Inland Waterways
• Commercial utility limited – national waterways Ganga – Haldia to
Allahabad, Brahmaputra – Dhubri to Sadiya and West Coast canal from
Kottapuram to Kollam.
• shipper needs to be located on waterway head – transport till head
• average speed is 6 to 10 kms per hour, speed lower if against the wind
• Services affected during monsoon – flooding; summer – depleted level
• not well equipped with material handling and other infrastructures as
sea ports
Cargo/ Class Volume pyramid and optimal
modes of transport
ROAD High Value per unit
of Value

COASTAL, • Consumer Goods FMCG Retail Distn Concentrated in and

PIPELINE,
• Capital Goods Manufacturing Industry around urban
•
INLAND WATERRaw Material (60%) Bulk, Agri, Perishables,.. clusters

RAIL, COASTAL,
PIPELINE,
INLAND WATER
 Transportation
Place in the Supply Chain

Supplier Transportation Stores Transportation

Manuf. Process 2 Transportation Manuf. Process 1

Transportation Warehouse Transportation

Customer Dealer

Logistics Management Sales Distribution & Supply Chain Management 11

 Transportation
Functionality
• Product Movement
• Product Storage
Product Movement
• Primary transport function
• Movement of product up and down the value chain
• Some loss on account of damage or product loss
• Product is accessible for use when in transit
• Environmental hazards – pollution
• Transportation decision making – cost of temporal, financial and
environmental resources considered
Product Storage
• Less common function – vehicles expensive storage facility, useful when…
• In- transit product requires to be moved shortly, cost of loading &
unloading is more
• Origin and destination warehouse space is limited, longer route taken
• Cost of storage in veh. < Cost of unloading + Cost of Reloading + Cost of Warehouse cost

Logistics Management Sales Distribution & Supply Chain Management 12

Transportation
Participants in Transportation
• Shipper ( originating party) • accessibility,
expense
• Consignee (destination party or receiver)
effectiveness
• Carrier •Environmental and
safety standards
• Government
• affects economy –
• Public high level of int. Legend
• regulations, Goods flow
Public
promotions, taxes
etc.. Flow of
information
• Specific pickup • Max revenue asso • Specific pickup
•Delivery time with transaction •Delivery time
•Transit time •Min cost – lab, •Transit time
•Zero loss Government fuel, veh. cost •Zero loss
•Accurate and •Charge highest •Accurate and
timely transaction acceptable timely transaction

Shipper Carrier Consignee

Shipper can take the role of Carrier as well

Logistics Management Sales Distribution & Supply Chain Management 13
 Transportation
Transportation Format

• Private Fleet

• Contract Carrier

• Common Carriage

Logistics Management Sales Distribution & Supply Chain Management 14

Transportation
Transportation Format
Private Fleet
• Firm providing own transportation (not for hire no
economic regulation)
• Must comply with regulations – hazardous, pollution
norms, safety, etc…
• Firm must own or lease and provide managerial directions
for operations
• Could be expensive for longer distances – option for –hire
carriers
• Transportation activity incidental to main business
activities of firm
• Ex: Domino’s Pizza

Logistics Management Sales Distribution & Supply Chain Management 15

Transportation
Transportation Format
Contract Carrier
•Transportation services for select customers
•Contract – agreement between carrier and shipper for
specified transportation service for agreed cost and service
terms
•Agreement basis for carrier to receive permit to transport
commodities
•Charge different rates to different shippers
•They have fleet of vehicles based on commodities carried
•Contract carrier is cheaper than own for :
•Privately owned fleet – need for basic fixed cost of vehicles
•Privately owned fleet require – maintenance, drivers, etc..
•Not the core competencies
Logistics Management Sales Distribution & Supply Chain Management 16
 Transportation
Transportation Format
Common carriage
•Non discriminatory prices to public
•Heavy consignments best transported thru common carr.
•Areas where few contract transporters are available
•Ex: Indian Railways

Logistics Management Sales Distribution & Supply Chain Management 17

 Transportation
Modes of Transportation

Five basic modes:

• Rail
• Road
• Air
• Water
• Pipeline

Logistics Management Sales Distribution & Supply Chain Management 18

 Transportation
Modes of Transportation
Rail
• 2nd largest network in the world – most cities and towns
• Capable for large consignments, long distance –
economical
• Railways have high fixed cost, low variable operating costs
• Greatest source of tonnage – raw material extractive inds
• Becoming more responsive to:
• Customer needs
• Unit trains (coal, grain, etc..)
• Part wagon, boxes, etc..
• http://www.irfca.org/faq/faq-freight.html
Logistics Management Sales Distribution & Supply Chain Management 19
 Transportation
Modes of Transportation
Roadways
• Most common means of transport
• Motor carriers have relatively small fixed investments
• Cost of license, user fees, toll–over the road units & miles
• Variable cost per km is high
• Handle small shipments and high value products
• Flexibility of delivery
• TL, LTL and specialty carriers

Logistics Management Sales Distribution & Supply Chain Management 20

 Transportation
Modes of Transportation
Airways
• Less utilized, high cost
• Speed of delivery – most significant advantage
• Potential opportunity than a reality
• Ideal for firms with large no. of high value products and
time sensitive requirements
• Variable cost is very high

Logistics Management Sales Distribution & Supply Chain Management 21

Transportation
Modes of Transportation
Waterways
• Oldest mode of transport – ocean, seas, lakes, canals, rivers
• Capacity to move extremely large shipments
• Deep water vessels and Diesel towed barges
• Ranks between Rail and Motor transport – fixed cost
• Limited range of ops and speed – major constraints
• Supplementary haul of road and rail required (most times)
• Capability to carry high tonnage at low variable cost when
low freight desired and speed is secondary consideration
• Slow passage of inland river transport – form of
warehousing in transit – fully integrated in design
Logistics Management Sales Distribution & Supply Chain Management 22
Transportation
Modes of Transportation
Pipelines
• Significant part in crude, petroleum and natural gas
• Utilized for manufacturing chemicals, pulverized dry bulk
• Operate on 24 x7 basis – commodity change over and maint.
• No empty container, vehicle to be returned
• Highest fixed cost and lowest variable cost
• Pipelines not flexible and limited materials can be
transported – major dis-advantage

Logistics Management Sales Distribution & Supply Chain Management 23

Transportation
Decision Factors
Three fundamental factors:
• Cost
• Includes direct cost and expense related to administration
• Indirect cost – maintaining in transit inventory

• Speed
• Greater speed – higher cost and vice versa – need to balance

• Consistency
• Variation in time required to perform movement
• Dependability of the transport

Logistics Management Sales Distribution & Supply Chain Management 24

Transportation
Decision Factors
Other factors:
• Distance
• Directly contributes to variable cost
• Greater distance efficient utilization – lower cost per unit distance
• Volume
• Greater load lesser cost per unit of weight, limited to capacity
• Density
• Weight and space consideration
• Increased density allows more units of product, limited capacity
• Stow ability
• Product dimensions – space utilization – odd sizes excessive space
• Handling
• Fragile materials require minimum handling

Logistics Management Sales Distribution & Supply Chain Management 25

Transportation
Transport Documentation

Three primary documents:

• Bill of Lading
• Serves as receipt, documents commodities and quantities shipped
• Accurate description and count essential
• Basis for damage claims
• Designated buyer is bonafide receiver of goods
• Carrier responsible for proper delivery as per instructions
• Title is transferred with completion of delivery
• Specifies terms and conditions, carrier liability
• Freight Bill
• Represents carriers’ method of charging for transportation
• Developed on the information contained in Bill of Lading
• Bill may be either prepaid or collect

Logistics Management Sales Distribution & Supply Chain Management 26

Transportation
Transport Documentation

Three primary documents:

• Shipping Manifest
• Lists individual consignees when multiple shipments are placed in
a single vehicle
• Manifest lists the stop, bill of lading, weight, and case count for
each shipment (each needs a separate bill of lading)
• Purpose to provide a single document that defines the content of
the total load without requiring to review individual bill of lading
• Single stop shipment, manifest is same as Bill of Lading

Logistics Management Sales Distribution & Supply Chain Management 27

Transportation
Fleet Management

Study – improper management of operating assets

result in 35% increase in running cost
Issues to be considered
• Running most suitable types of vehicles
• Selecting the most appropriate type of fuel
• Ensuring vehicle safety
• Controlling associated costs
• Minimizing environmental impact

Logistics Management Sales Distribution & Supply Chain Management 28

Transportation
Fleet Management
Process
1. Develop a fleet action plan
2. Assess current position
3. Identify outline objectives (measurable)
• Cost saving
• Reduction in overall mileage
• Reduction in fuel used
• Reduction in emission
• Time scales
4. Review performance
Factors
5. Transport/ mobility requirements
6. Vehicle Driver
7. Vehicle Selection

Logistics Management Sales Distribution & Supply Chain Management 29

 Transportation
Intermodal Transportation
Mode – term used to differentiate basic ways of transport

Intermodal transport refers to the journey that involves two or

more different modes of transport

Logistics Management Sales Distribution & Supply Chain Management 30

 Transportation
Intermodal Transportation
Choice of mode
Apart from nature of materials to move, volume and distance
other factors affecting choice of mode….
• Value of Materials – expensive items higher inv. cost – faster mode
• Importance – even low value items holding production
• Transit times - ops responding quickly to changes
• Reliability with consistent delivery is important
• Cost and flexibility to negotiate rates
• Reputation and stability of carrier
• Security loss and damage
• Schedule and frequency of delivery
• Special facilities available
• Faster movement through Supply chain need fewer warehouses
• Cheapest modes are sometimes the least flexible
Logistics Management Sales Distribution & Supply Chain Management 31
 Transportation
Intermodal Transportation
Choice of mode
Selection Mode
determinants Railroad Motor Water Air Pipeline

Speed 2 3 4 1 5
Investment 1 2 3 4 5
Freight Cost 4 3 1 5 2
Reliability 2 3 4 5 1
Frequency 2 3 4 5 1
Capability 4 3 2 5 1
1 = Best; 5 = Highest, Worst

Logistics Management Sales Distribution & Supply Chain Management 32

 Transportation
Intermodal Transportation
Choice of mode
• Organization do not have to use the same mode for the entire
journey
• Divide the journey into stages
Main run

Forward
Final Run
Run

Logistics Management Sales Distribution & Supply Chain Management 33

 Transportation
Intermodal Transportation
Limitation
• Carriers reluctant to participate
• Transport of freight from one to another – time delays, adds transport cost
• Brought in the concept of Containerization
• Usual containers are 20 feet and 40 feet long
Benefits of Containerization:
• Simplified transport and flow of goods
• Easier and faster handling
• Faster deliveries
• Reduced loss due to damage, pilferage, misplacement
• Reduced packaging cost
• Separation of incompatible goods
• Protection from environment
• Can act as storage anywhere
• Piggy back or trailers on flat car (TOFC)
Logistics Management Sales Distribution & Supply Chain Management 34
Factors affecting freight cost
🞂Volume
🞂Distance
◦ Variable cost directly proportional to distance covered
🞂Product Density
◦ freight cost depends upon weight per unit volume
🞂Product Shape
🞂Product handling
🞂Product Types
🞂Market Dynamics
Transportation networks
🞂Point to Point
🞂Multiple Delivery Point
🞂Transshipment Points
🞂Nodal Networks
🞂Hub and Spoke
Route Planning
🞂Shortest distance
🞂Less operational problems
🞂Multiple pick up and drop plans
🞂Shelf life of commodity
🞂Return freights – NH and SH