ADVANCED SUPPLY CHAIN MANAGEMENT &

LOGISTICS IN THE PUBLIC SECTOR

M-SCM-532-9
TRANSPORT MANAGEMENT
 Learning Outcomes

• After reading this chapter, you will be able to

understand the following:
 Meaning of transportation
 Nature of transport decisions
 Factors influencing the choice of a transport mode
 Modes of transport and their characteristics
 Advantages and disadvantages of modes of transport
 Operating characteristics of transport Modes
 Types of transport costs
 Learning Outcomes - continued

• You will be able to understand the following:

 Ro-Ro Vessels
 Transportation planning
 Lane operations
 Transportation model
 Third- Party Logistics Service Providers
 Freight charges paid to Third-Party Carriers
 The role of Freight forwarders
 Learning Outcomes - continued

• You will be able to understand the following:

 How to minimize freight charges
 Transport Fleet Management
 Transport Management Software Application
(TMS)
 Introduction

• In a supply chain, transportation plays a central

role by moving inbound materials from suppliers
to manufacturing plants, repositioning inventory
among different plants and distribution centers,
and finally, delivering finished products to
customers.
• The management of transport in a supply chain is
therefore important because effective transport
management ensures that the goods are delivered
safely and on time to the customer.
 Meaning of transportation
• Transportation is the movement of goods and
people from one place to another.
• The transportation system of a supply chain,
therefore, provides for the mobility of people
and goods, and ensures that goods are
conveyed from one place to another at the
right time to meet customers’ demands
 A Transportation System
• A modern transport system usually involves the
following:
 equipment (e.g. vehicles, train, boats, ships and
pipelines),
 people (including technicians and operators) and
 transport decisions (e.g. which mode of transport to
use to dispatch goods, the quantity of goods to load,
when to use it, etc.) as well as
 a reliable software application designed to manage the
transportation operations.
 Transport Decisions

• Transport management involves making long-

term, medium term and short term decisions.
These decisions may be classified as follows:
1) Strategic Decisions
2) Tactical Decisions
3) Operational Decisions
 1. Strategic Decisions

• These are long-term decisions (2 to 5 years)

regarding the most appropriate transportation
modes for freight movement. Transport Managers
need to make long-term decisions on the following:
a) The mode of transportation appropriate for
moving raw materials and component parts from the
supplier to the manufacturing plant;
b) The mode of transport appropriate for moving
finished goods from the manufacturing plant to the
distribution centres or warehouses;
 Strategic Decisions - continued
c) The mode of transport appropriate for moving
finished goods from the distribution centres to
customers considering the type of product, the
locations of the customers and the possibility of
transport consolidation (i.e. putting goods meant
for customers in the same location into, for
example, the same truck to reduce transportation
cost); and
d) Whether the company should purchase its own
trucks or lease them for its operations.
 2. Tactical Transport Decisions
• Tactical decisions are medium term decisions
(1 week to 1 year) relating to the selection and
management of external carriers if the
company is using third-party logistics service
providers or internal private fleet of carriers.
3. Operational Transport Decisions
• Operational transport decisions are short term
decisions made from day to day. A typical
example is lane operation decisions, i.e.
decisions regarding the mode of transport to
use to dispatch goods each day from the
distribution centre to customers. An example is
deciding on the mode of transport to use to
dispatch 200 cartons of fish from Addis
Ababa to Hawassa
 Factors to consider when selecting a mode of transport

1. Type of products - what type of products are

to be transported by the organization?
2. Distance - How far are the products required to
travel?
3. Availability – is the transport mode readily
available or accessible?
4. Flexibility – Is the transport mode able to
change routes or perform door-to-door
services?
Factors to consider when selecting a mode
of transport - continued
5. Speed of the transport mode - how urgently
are the goods required?
6. Certainty of timing – is the movement
schedule of the transport mode clearly
defined?
7. Freedom from interruption – does the
transport mode have less interruption? For
example, trains, ships and aeroplanes have
less interruption than trucks.
 Factors to consider when selecting a
mode of transport - continued
8. Avoidance of damage – which transport mode can
minimise damage to goods?
9. Avoidance of loss through pilferage – which
transport mode can minimise the pilferage of goods?
10. Quality and/or impact of ancillary services – which
transport mode can provide efficient ancillary
services?
11. Facilities available at the terminals for the despatch
and receipt of the goods - these facilities include:
 Facilities available at the terminals -
continued
 Ro-Ro facilities
 Container ship-to-shore cranes
 Transit sheds at the airport
 Airports in the vicinity
 Oil tanking facilities
 Refrigeration facilities
 Modes of Transport
• The modes of transport available are:
 Motor
 Air
 Rail
 Water
 Pipeline
 Intermodal
 Characteristics of Motor Transport

a) It is the most widely used mode of transport;

b) It is the most flexible mode of transport
because it can change routes easily and can
also deliver goods from door- to- door;
c) It is used mostly for the conveyance of small
loads, for example, medium and light
products, food, clothing, and all retail goods;
d) It is highly accessible;
 Characteristics of Motor Transport -
continued
e) It has lower costs especially under consolidated
transportation;
f) It is not as fast as trains and aero planes;
g) It cannot take too much load like trains because
of highway and safety regulations; and
h) Pilferage or damage to goods is higher than air,
water and rail transport.
 Characteristics of Air Transport
a) It is faster than all the other transport modes;
b) Very good for the carriage of light/small, high-value
items;
c) Very inflexible because aeroplanes can only move from
one airport to another;
d) It is suitable for lightweight and small items, for example,
perishable and time sensitive goods: flowers, produce,
electronics, mail, emergency shipments, documents, etc.;
e) It is quick, reliable and expensive; and
f) It is often combined with trucking operations because
door-to-door delivery is impossible.
 Characteristics of Rail Transport
a) Lowest overall cost per unit weight for large
quantities or bulky goods over long distances;
b) It may be cheaper than other modes (except
sea);
c) It is not flexible because it moves on a fixed track
and cannot deliver goods from door to door;
d) It can be easily linked with other transport
modes;
 Characteristics of Rail Transport -
continued
e) It has a more consistent time schedule than
trucks or airlines;
f) It is weather friendly because it moves on a
fixed track and is not normally affected by poor
climatic conditions;
g) It is safe for the carriage of hazardous
materials; and
h) It has longer in-transit lead times than trucks
 Characteristics of Water Transport

a) It is used mostly for the carriage of bulky,

heavy and/or large items, e.g. Liquids,
minerals, grain, petroleum, lumber, etc.;
b) Freight charges are usually low;
c) It is not as flexible as road transport because
it has limited routes;
d) Lead time is usually long because ships are
relatively slow;
 Characteristics of Water Transport -
continued
e) Not very reliable because congestion at the
port may cause ships to delay;
f) Standardized containers can be used to
improve services and security of the goods;
and
g) It can be combined with rail and motor
transport, i.e., trucks or trains may be used to
convey the goods to the seaport before cranes
are used to load the goods into the vessel
 Characteristics of Pipeline Transport

a) It is usually used for high-volume liquids and gases,

for example, oil & refined oil products (petroleum
products);
b) Slurry lines are used to carry coal or kaolin;
c) It requires a high capital investment;
d) It has low operating costs;
e) It can cross difficult terrain;
f) Movement through a pipeline is slow, thus making it
to have a long lead time; and
g) It is highly reliable and has very low product losses.
 Characteristics of Intermodal Transport

• It is the use of more than one transport mode

for the conveyance of goods from the
distribution centre to the customer or a
transportation method where transport mode
changes for the same transport container or
land vehicle, but the goods themselves are not
handled during these changes;
• It is a transport method that integrates the
advantages of different transport modes;
 Intermodal Transport - continued
• The method reduces cargo handling, and so
improves security, reduces damages and
losses, and allows freight to be transported
faster;
• In intermodal transport, the aim is to achieve
an effective combination of cost, delivery time
and service quality;
 Intermodal Transport - continued
• Some of the transport modes combination
available are:
 Containerisation (putting goods into
standardized containers) using road, rail, sea
and inland waterway
 Sea transport combined with rail transport
 Road and rail combinations e.g. trailer on
truck or truck/trailer on train
 Intermodal Transport - continued
• For example, an exporter in England may load
goods intended for an importer in Ethiopia
(Addis Ababa) first into a container, which is
moved by road to a rail terminal which in turn
sends it to the port of departure. The container
is then put into a container ship and sent to the
port of Djibouti. On arrival of the container in
the port of Djibouti, it will be put into a truck and
delivered to the importer at Addis Ababa; and
 Intermodal Transport - continued
• Intermodal transport systems may be international or
domestic. International intermodal shipping is based on
an agreement between ocean carriers and railroads in
different countries which enables railroads to transfer
containers between ports, while domestic intermodal
transport involves trucking companies and railroads
which operate locally, and is based on the intermodal
movement of trailers, domestic containers, and rail-
highway vessels (roadrailers). Trucking companies enter
into arrangements with railroads to decrease their costs
and improve the overall efficiency of their services.
 Operating Characteristics of Transport
Modes
• The operating or performance characteristics of
transport modes are:
1) Speed
2) Lowest Per-Unit Cost
3) Accessibility
4) Dependability
5) Capability
6) Flexibility
7) Environmental
 1. Speed
• According to Monczka et al. (2009), speed is
measured as “the time from when the
shipment is released at the supplier’s facility
to the time of receipt at the buyer’s receiving
dock”. For organizations operating in a time-
sensitive environment, speed is always a
critical issue.
 2. Lowest per-unit cost

• The freight cost per unit is the total freight cost

divided by the quantity or volume of goods. For
example, if the total freight costs are 500,000 Birr and
the volume of goods is 5,000 metric tonnes, the cost
per tonne is 100 Birr, i.e.:
Total Freight Cost
Total Weight
= 500,000 Birr
5,000.
= 100 Birr
 3. Availability/Accessibility

• According to Monczka et al. (2009),

accessibility refers to a carrier’s ability to
provide a service over a geographical area. A
totally accessible carrier is capable of picking
up a shipment from Addis Abba and delivering
it to a customer in Hawassa or the Tigray
Region. Thus, a carrier must be able to pick
goods from one point and deliver them door-
to-door.
 4. Dependability (Reliability)

• According to Monczka et al. (2009), reliability means “the

ability of a transport service to deliver goods on time or
according to the agreed time.” Reliability is different from
speed because a fast carrier who is unable to deliver the
goods on time because of, say, a breakdown or an accident,
cannot be considered as reliable.
• Under reliability or dependability, actual arrival time is
compared with the planned arrival time. Carriers who are
able to meet the delivery times are considered reliable.
 Capability
• According to Monczka et al. (2009), capability
refers to the ability of the carrier to move the
material, including special materials,
hazardous materials, etc. Capability depends
upon the following:
• The physical capability of the carrier to
transport the item, and transport it safely to
the final destination;
 Capability - continued

• Does the carrier have the right equipment in

the right locations to handle the goods on
arrival; and
• Can the carrier repeatedly perform the
assignment over a period of time?
 Flexibility

• Flexibility refers to the ability of the carrier to

easily change routes or respond to changes in
the routes in order to reach its final
destination. Motor transport is the most
flexible mode of transport because when
there is a problem with one route, the vehicle
will use another route to get to its final
destination.
 Environmental Effect
• It is believed that the operations of each
transport mode have a major impact on the
environment. Some of the issues that affect
the environment are:
 Noise/vibration;
 Atmospheric pollution;
 Water pollution; and
 Infrastructure damage
 Ranking of the transport modes according to
their operating characteristics
• According to Lysons and Farrington (2006) and
Monczka et al. (2009), the relative ranking of
the different modes of transport against their
operating characteristics or the performance
criteria mentioned above are:
Please rank modes of transportation
using 5-Point Performance Rating Scale.
Operating Road Rail Air Water Pipeli
Characteristic ne

Speed

Lowest Per-Unit Cost

Availability/Accessibility

Dependability

Capability

Flexibility

Environmental Effect
 Types of transport costs
• There are two main types of transport costs:
fixed Costs and variable costs.
• Although the cost structure of the various
transport mode varies by mode, the nature of
the fixed and variable costs incurred is as
follows:
 Fixed and Variable Costs
Fixed Costs Variable Costs
They include: They include:
•Terminal facilities •Fuel
•Transport equipment •Labor
•Carrier administration •Equipment
maintenance
•Handling, pickup &
delivery and taxes
 Characteristics of the transport costs of the
various transport modes
• According to Lysons and Farrington (2006), the characteristics
of the transport cost of various transport modes are as
follows:
Transport Fixed Costs Variable Costs Cost per unit
Mode
Road Low as Medium Higher unit costs
transporters do than rail due to
not need to own the lower
or maintain roads capacity per truck

Rail High low Lower unit costs

than road and air
due to the large
volume of goods
 Characteristics of the transport costs of
the various transport modes - continued
Transport Fixed Costs Variable Cost per
Mode Cost unit
Pipeline High Low Lower unit costs
than road and air
due to the large
volume of goods
Air Transport Low High High because
only small
volumes of goods
are carried
Water Medium low Very low because
it can take a large
volume of cargo
 Ro-Ro Vessels
• Roll-on/roll-off (RORO) ships are vessels
designed to carry wheeled cargo such as
automobiles, trailers or railway carriages.
RORO vessels have built-in ramps which allow
the cargo to be efficiently "rolled on" and
"rolled off" the vessel when in port. Examples
of RORO vessels are as follows:
 Transportation Planning
• The transportation planning process requires
developing strategies for operating, managing,
maintaining, and financing the supply chain’s
transportation system in such a way as to achieve
the organization’s long-term goals.
• The planning process results in a transport plan
which indicates the general nature of product
flows, including volume, frequency, seasonality,
physical characteristics, and the special handling
requirements.
 Transportation Analysis
• The Transport Manager will be expected to minimize
the combination of vehicles, hours, and miles
required to deliver the product by conducting
Transportation Analysis. In transportation analysis,
the questions to be answered include the following:
 How should deliveries be grouped to form routes?
 What is the best delivery sequence for servicing
customers?
 Which routes should be assigned to which vehicle
types?
Transportation Analysis - continued
 What is the best type of vehicle for servicing
different customer types?
 What delivery sequence should be used to
accommodate time restrictions imposed by
customers?
• A transportation manager must also be involved in
the network decisions of transportation. He must,
for example, understand the total supply chain
freight flows and make adequate input into the
network design
Transportation Analysis - continued
• Generally, the network link/node structure will
consider the following:
 The supplier
 The plant (s)
 The distribution center(s)
 The customer locations as well as the various
physical movements among them
 Lane Operations
• After making strategic mode and carrier-
sourcing decisions, the second level of
decision-making in transport management is
lane operation decisions. Lane operation
decisions focus on daily operational freight
transactions, i.e. the movements between, for
example, a plant to a distribution
centre/warehouse and a distribution centre to
customers’ destination points.
 Lane Operations - continued
• In lane operation decisions, transport
managers use available real-time information
on the needs of distribution centres and
customers to coordinate product movements
along inbound, inter-facility, and outbound
shipping lanes to meet service requirements
at the lowest total costs.
 Lane Operations - continued
• Transportation managers should endeavour to
reduce transportation costs through
inbound/outbound consolidation, temporal
consolidation, vehicle consolidation, and
carrier consolidation. Vehicle consolidation
involves putting goods meant for different
customers in the same location or
geographical area in one vehicle to reduce
transportation costs
 Lane Operations - continued
• For example, if there are orders meant for
customers in two adjacent regions, it will be
cost-effective to put the goods in one mode of
transport.
 Transportation Cost Model

• This is a model used to determine the most

cost-effective way of transporting goods from
the various plants to distribution centres or
finding the most economically efficient means
of transporting goods available at a given set
of suppliers to designated destinations.
Transport managers must usually use an
approach which will minimize the total
transportation cost.
Transportation Cost Model - continued
• The basic transportation model used to determine
the total least transportation cost for sending
goods from manufacturing plants to distribution
centres requires the following data:
 Output of the various manufacturing plants
 Requirements of the various distribution centres
 Transportation cost from each manufacturing
plant to the individual distribution centres.
Transportation Cost Model - continued
• The model, which is a computer software
application, enables the enterprise to know
the best supply-mix and the least total cost for
transporting the goods. In a manual approach
however, various scenarios of sending the
goods are used, and the scenario with the
least transportation cost selected for
implementation
 Example
• A company has three plants located in the
Oromia Region, Tigray Region and Addis
Ababa. The company produces cleaning
equipment which it distributes to three
distribution centres in Awassa, Gambella and
Bole. The monthly production, sales and
transportation costs of the cleaning
equipment from the plant to the various
distribution centres are as follows:
 Monthly Production
Plant Output
Oromia 5,000
Tigray 2,000
Addis Ababa 1,500
Total 8,500
 Monthly Demand of the Distribution Centres

Distribution Centre Demand

Awassa 3,000
Gambilla 4,000
Bole 1,500
Total 8,500
 Transportation costs to Distribution Centres

Plant Awassa Gambilla Bole

(Birr) (Birr) (Birr)
Oromia 50 75 80
Tigray 65 85 100
Addis Ababa 45 90 20
 Required:
• Determine the best supply mix which will minimize the
transportation costs for transporting the goods from the three
manufacturing plants to the distribution centres.

Solution

• In order to determine the least transportation costs, we need to

use different scenarios for supplying the goods from the
manufacturing plants to the distribution centres. For the
purpose of this assignment, we shall use the following
scenarios:
•
 Scenario 1 – Supply mix

Plant Demand for Demand for Demand for Total

Awassa Gambilla Bole Demand
Oromia 3,000 2,000 - 5,000
Tigray - 2,000 2,000
Addis Ababa 1,500 1,500
Total 3,000 4,000 1,500 8,500
 Scenario 2 – Supply mix

Plant Demand for Demand for Demand for Total

Awassa Gambilla Bole Demand
Oromia - 4,000 1,000 5,000
Addis Ababa 1,000 - 500 1,500
Tigray 2,000 - - 2,000
Total 3,000 4,000 1,500 8,500
 Scenario 3 – Supply mix

Plant Demand for Demand for Demand for Total

Awassa Gambilla Bole Demand
Oromia 1,500 3,500 - 5,000
Addis Ababa 1,500 - 1,500
Tigray - 500 1,500 2,000
Total 3,000 4,000 1,500 8,500
 Transportation Cost for Scenario 1
a) Transportation cost for Awassa
Plant Quantity Transport cost per Transportation
Equipment (Birr) Cost (Birr)

Oromia 3,000 50 150,000

Tigray - - -

Addis Ababa - - -

Total 150,000
 b) Transportation cost for Gambilla

Plant Quantity Transport Cost Transportation

per Equipment Cost (Birr)
Oromia 2,000 75 150,000

Tigray 2,000 85 170,000

Addis Ababa - - -

Total 4,000 320,000

 c) Transportation cost for Bole
Plant Quantity Transportation Transportation
Cost per Cost (Birr)
Equipment (Birr)

Oromia - - -

Tigray -

Addis Ababa 1,500 20 30,000

Total 1,500 30,000

 Total Transportation cost Summary for Scenario 1

Distribution Quantity Transportation

Centre Cost (Birr)
Awassa 3,000 150,000

Gambilla 4,000 320,000

Bole 1,500 30,000

Total 8,500 500,000

 Scenario 2 – Supply mix

Plant Demand Demand Demand Total

for for for Demand
Gambilla
Awassa Bole
Oromia - 4,000 1,000 5,000

Addis 1,000 - 500 1,500

Ababa
Tigray 2,000 - - 2,000

Total 3,000 4,000 1,500 8,500

 The transportation cost for scenario 2

a) Transportation cost to Awassa

Plant Quantity Transport Total
Cost per Transportati
Equipment on Cost
(Birr) (Birr)
Tigray 2,000 65 130,000

Addis Ababa 1,000 45 45,000

Total 3,000 175,000

b) Transportation cost for Gambilla
Plant Quantity Transport Total
Cost per Transportati
Equipment on Cost
(Birr) (Birr)
Oromia 4,000 75 300,000

Total 4,000 300,000

 c) Transportation cost to Bole

Plant Quantity Transport Total

Cost per Transportati
Equipment on Cost
(Birr) (Birr)
Addis Ababa 500 20 10,000

Oromia 1,000 80 80,000

Total 1,500 90,000

 Summary of Total Transportation Cost for Scenario 2

Distribution Quantity Total

Centre Delivered Transportation
Cost (Birr)
Awassa 3,000 175,000

Gambilla 4,000 300,000

Bole 1,500 90,000

Total 8,500 565,000

 Scenario 3 – Supply mix

Plant Demand Demand Demand Total

for for for Demand
Gambilla
Awassa Bole
Oromia 1,500 3,500 - 5,000

Addis 1,500 - 1,500

Ababa
Tigray - 500 1,500 2,000

Total 3,000 4,000 1,500 8,500

 a) Transportation cost for Awassa

Plant Quantity Transport cost Total

per Equipment Transportation
(Birr) Cost (Birr)
Oromia 1,500 50 75,000

Addis Ababa 1,500 45 67,500

Total 3,000 142,500

 b) Transportation cost for Gambilla

Plant Quantity Transport cost Total

per Equipment Transportation
(Birr) Cost (Birr)
Tigray 500 85 42,500

Oromia 3,500 75 262,500

Total 4,000 305,000

 c) Transportation cost for Bole

Plant Quantity Transport cost Total

per Equipment Transportation
(Birr) Cost (Birr)
Tigray 1,500 100 150,000

Total 1,500 150,000

 Summary of total transportation cost for Scenario 3

Distribution Quantity Cost

Centre
Awassa 3,000 142,500

Gambilla 4,000 305,000

Bole 1,500 150,000

Total 8,500 597,500

 Recommendation

• The total transportation cost for each of the

three scenarios is as follows:
Scenario Total Ranking
Transportation
Cost(Birr)
1 500,000 Ist

2 565,000 2nd

3 597,500 3rd
 Recommendation - continued

• Scenario 1 is recommended for

implementation because it has the least total
transportation cost.
 Third-Party Logistics Service Providers
(3PLs)
• In order to concentrate on their core activities,
many manufacturers outsource logistics
functions to third- party service providers.
According to Investopedia, outsourcing is a
practice used by different companies to
reduce costs by transferring portions of work
to outside suppliers rather than completing it
internally.
 3PLs - continued

• Lysons and Farrington (2006), also define

outsourcing as “a management strategy by
which major non-core functions are transferred
to specialist and efficient external providers”.
• Third Party Logistics Providers (3PLs) are
organizations which provide logistics support
for companies by managing or controlling the
movement and storage of products for the
companies that hire them.
 3PLs - continued

• In most cases, according to Monczka et al. (2009),

3PL providers perform the following functions:
 Routine transport operations to pick up, move
and deliver materials
 Running warehouses and logistics centers
 Sorting and consolidating of shipments
 JIT deliveries from local storage points
 International shipping, including customs
brokerage, export and travel documentation
 3PLs - continued

 Managing shipments with other carriers and

freight forwarding
 Export packaging and containerization
 Finishing operations for delivery to final
customers
 Consolidation of accounts and billing
(invoicing and accounts receivable
management)
 Types of 3PL providers

• 3PL providers can be categorized as follows:

a) Standard 3PL - This type of 3PL performs the most
basic logistics functions such as, pick and pack,
warehousing, and transportation
b) Service Developer - This type of 3PL offers enhanced
value-added services (over and above those that the
standard 3PL provider offers) including IT, track and
trace, cross-docking, packaging specifics/re-work,
security and a more focused approach to scope for
efficiencies and managing economies of scale.
 Types of 3PL providers - continued

c) Customer adapter – This type of 3PL is on standby and comes

in only at the request of the customer to take over the
complete control of the company's logistics activities. For
example, in a peak season, the company may call in the 3PL
provider to handle logistics activities to ensure efficient
services to consumers.
d) Customer Developer – This type of 3PL provider sees himself
as part of the customer’s business and performs the highest
level of service because he integrates himself with the
customer and assumes all the logistics and process activities
 Fourth-Party Logistic Service Provider
(4PL)
• Accenture, a consultancy firm, defines 4PL as “A
supply chain integrator that assembles and manages
the resources, capabilities, and technology of its
own organization with those of complementary
service providers to deliver a comprehensive supply
chain solution (Accenture, 2009).”
• The basic characteristic feature of 4PL is that the
logistics service provider uses his facilities in
addition to those of other service providers to
perform his duties.
 4PL - continued

• This denotes that the 4PL service provider

enters into sub-contracts with some existing
3PL service providers in the performance of its
duties. A 4PL service provider also plays an
advisory role which includes advising on how
to choose the best 3PL service provider, right
up to the day-to-day management of essential
logistical tasks being performed for the
principal company
 Procedure for engaging the services of a
logistics service provider
• The stages involved in the engagement of a third-
party logistics service provider are:
1) Inviting 3PL service providers to submit an
expression of interest (EOI) and short-listing of
candidates
2) Request for proposals from service providers who
have been shortlisted
3) Evaluating the proposals received
4) Site Visit by management
5) Award of Contract
 1. Inviting 3PL service providers to submit an
expression of interest (EOI)
• The invitation for the expression of interest must
be clear and unambiguous. It should state the
detailed description of the areas to be outsourced,
and this will usually include the following:
a) The scope of the contract, including locations,
facilities, departments;
b) Information on volumes involved; number of
deliveries, warehouse sizes, number of items, etc.;
Contents of request for EOI - continued

c) The logistics tasks to be performed, e.g.

warehousing, transportation, etc.; and
d) The level of performance required.
 2. Request for proposals

• The expressions of interest (EOI) received will

be evaluated and a shortlist of potential
bidders prepared.
• The shortlisted bidders will then be asked to
submit a proposal for consideration. On
receipt of the proposals, management will
appoint a committee or use the existing
Tender Evaluation Committee to evaluate the
proposals.
 3. Evaluating the proposals received

• Questions to be asked during the evaluation

will include, amongst other things, the
following:
 Does the 3PL provide the services required?
 Does the 3PL have the technology required to
perform the tasks required?
 Does the company have the required
warehouse space, dock capacity, warehouse
personnel, etc.?
 Proposals Evaluation - continued
 Is the 3PL financially sound?
 Are the 3PL’s geographical locations suitable to cover
the network?
 Does the 3PL have the flexibility to respond to
changes?
 Are the 3PL’s environmental policies compatible?
 Are the costs of the services detailed enough for
comparison to other bids?
 Are the customer references acceptable?
 Is the 3PL a good cultural fit?
 4. Site Visit by management
• After evaluating the bids received, the bids
evaluation committee will recommend, say, the top
two or three companies to management in order
that a team can pay a site visit to familiarize itself
with their facilities and hold face to face interviews
with the management and operational staff of the
service providers.
• Management will also review their audited financial
statements for at least the past three years to
assess their financial strength.
 5. Award of Contract

• Based on the outcome of the site visits and

the financial statements review, management
will select the most appropriate service
provider and commence negotiations with the
company.
• A contract will be signed by the two parties if
the negotiations are completed successfully.
Advantages of third- party logistics service
providers
• According to Monczka et al. (2009), the advantages third- party
logistics service providers are:
 Economies of scale and increased flexibility
 Improve service performance levels because of the skilled
expertise of the service providers
 Assets originally used in performing logistics functions can be
sold and the proceeds utilized elsewhere
 Costs incurred originally to operate and run its own transport
and warehouse are released when the organization uses a
third-party service provider.
 Enables the organization to concentrate on core business
activities
 Disadvantages of third- party logistics
service providers
 The organization may lose control and ownership over
the company’s business processes
 Loss of dedicated in-house manages staff
 Loss of integration between sales and supply
 Changeover costs and operational problems. For
example, the service provider may not give full attention
to the company because of other users of its facilities
 Sacrifice key business service differentiation because the
3PL service provider may provide general services
 Freight charges paid to Third-Party
Carriers
• Amounts paid to external carriers for the
conveyance of goods may be classified as
follows:
1) Volume freight charges
2) Distance-related freight charges
3) Demand-related freight charges
 1. Volume Freight Charges
• These are rates based on the volume of cargo
shipped. Organizations which consistently ship
high-volume goods enjoy lower rates than
organizations with small consignments
 2. Distance-related freight charges

• These are freight charges based on the

distance covered. The rates may take the
following forms:
a) Uniform Rates
b) Proportional Rates
c) Tapering Rates
d) Blanket Rates
 a) Uniform Rates
• The same freight charge is charged for all
origin-distances. For example, a transport
company may charge a fixed amount for
conveying goods from one location to another
location in Addis Ababa
 b) Proportional Rates
• These rates are based on the actual distance
covered. Thus, the longer the distance, the
higher the freight charges.
 c) Tapering Rates

• Although the rates increase with distance, the

amount payable slightly reduces. For example, a
transport company may fix rates as follows:
i) Up to 50 km – 500 Birr
ii) Distance in excess of 50km – additional charge of 8
Birr per km.
For example, If goods are being transported to the
Tigray Region and the distance is 1,000 km, the
freight charges will be:
 Tapering Rates - continued
Birr
Ist 50 km 500.00
Next 950 km 7,600.00
Total Freight Charges 8,100.00
• The average rate per km is 8.10 Birr for the
distance covered (1,000 km) instead of 10 Birr for
per km for a distance of only 50 km.
 d) Blanket Rates

• These are rates payable for specified products

for some specified areas. These rates are
often adjusted to make them competitive.
 3. Demand-related Freight Charges

• These freight charges depend upon the

demand for the services. The rates will be
high in the peak periods and low in the non-
peak periods.
•
 Factors that influence freight charges

• In practice, the following factors influence the

charges of carriers:
 Volume of cargo to be shipped
 Distance to be covered
 Fragility of the goods – fragile goods require
careful handling
 The freight provider’s pricing policy including
the provision of incentive rates
 Level of service
 Freight Forwarders

• These are persons or organizations, who for a fee,

undertake to have goods carried and delivered to
a destination. Many organizations engage the
services of freight forwarders when the cargo to
be shipped involves successive carriers or the use
of successive means of transport. Freight
forwarders also advise their clients on the best
way of shipping goods to their customers.
•
 Minimizing Freight Costs

• According to Lysons and Farrington (2006), the

following actions can be taken by organizations
to reduce their freight costs:
 Locating manufacturing and assembly plants
nearer to customers and suppliers
 Cross-docking, i.e. unloading materials from an
inbound carrier to an outbound carrier, without
the goods or products actually entering the
warehouse or being put away into storage
 Minimizing Freight Costs - continued

 Transport consolidation, i.e. putting

consignment of goods meant for different
customers in the same geographical area into
one mode of transport, for example, a truck or
train in order to reduce transportation cost
 Avoiding, if possible, empty vehicles on return
journeys
 Using smaller vehicles, particularly for
transportation in urban areas
 Minimizing Freight Costs - continued

 Arranging delivery times at off-peak periods to avoid idle or waiting

times (demurrage)
 Negotiating lower rates, either directly or via freight forwarders,
especially for large-volume shipments;
 Analyzing the total cost to ascertain areas where costs can be cut
down
• For each shipment, the company must analyze the following in order
to be able to take appropriate decisions on which mode of transport
to use:
 the factors that influence the choice of transport mode, for example,
speed, availability, dependability, and security
 inventory carrying costs
 cost of alternative modes of transport
 Transport Fleet Management

• A company which has a fleet of transport for

the distribution of its products needs to
manage the modes of transport efficiently in
order that the overall transportation cost of its
products can be reduced.
• Effective fleet management usually ensures
cost effective utilization of the company’s
modes of transport, fuel, spare parts and
other consumables.
 Transport Fleet Management - continued

• According to Wikipedia, fleet management is

the function that oversees, coordinates and
facilitates various transport and transport
related activities. Fleet management,
therefore, includes the management of
vehicles (cars, vans, and trucks), ships, trains
and warehouse handling equipment.
• In the subsequent slides, we shall restrict the
discussion to the management of vehicles
 Objective of Fleet Management

• The objectives of fleet management are as follows:

 To remove or minimize the risks associated with

vehicle investment
 To efficiently use the vehicles and reduce the
overall transportation and staff costs
 To comply with government legislation on vehicle
roadworthiness, insurance and speed limits on the
road.
 Components of Fleet Management

• The various elements of fleet management are:

1) Vehicle Policy
2) Identifying fleet needs
3) Acquisition of vehicles (outright purchase or leasing)
4) Vehicle Financing
5) Speed Management
6) Insurance of vehicles
7) Vehicle Maintenance
8) Vehicle Usage
9) Vehicle Disposal
 Components of Fleet Management -
continued
10. Driver Behavior
11. Health, Safety & Security
12. Vehicle Tracking
13. Remote Vehicle Disabling Systems
14. Fleet management replacement and lifecycle
management
 1. Vehicle Policy

• Every organization which owns or leases vehicles for its

operations must have a Vehicle Policy. A documented
Vehicle Policy indicates, amongst other things, the
following:
 Introduction
 Purpose
 Scope
 Objectives
 Planning, approval and budget process
 Procurement
 Approved types for vehicles
 Vehicle Policy - continued
Ordering of vehicles process
Assignment of vehicles
Personal use of vehicles by staff
management of vehicles:
– control of fuel, maintenance/repairs of vehicles
– vehicle insurance scheme
– vehicle replacement
– sale of vehicles
 Management of vehicles - continued
• Guidelines for drivers:
– assignment of Motorcycles
– security
– environment
– Reports
– revisions
 2. Identifying Fleet Needs
• The nature, size and area of the company’s
operations will determine the number and
types of vehicles to be used. For example,
smaller vehicles can be used for urban
operations and bigger vehicles long-distance
trips.
3. Acquisition of vehicles (outright purchase
or leasing
• After knowing the organization’s fleet requirements, the
next step is to determine whether :
 the company will purchase the fleet of vehicles,
 Lease them, or
 combine outright purchase of some quantities of vehicles
and leasing
• The company must analyze each option carefully before
taking a decision, but ideally, option 3 is the best. Public
bodies must, however, comply with the Public
Procurement Proclamation when buying or leasing
vehicles.
 4. Vehicle Financing

• If the company decides to own its vehicles, the most

important question is: how will the acquisition of the
vehicles be financed? For example,:
 Is it by a bank loan?
 Is it from the proceeds of debentures sold?
 Is it from the proceeds from the sale of shares?
 Is it by a credit purchase?
 Is it by hire-purchase?
• Management should decide on the best method of
financing after considering the merits and demerits of each
option.
 5. Speed Management

• Drivers must be educated on the dangers of over-

speeding either on highways or in the urban areas. They
need to comply with highway rules and urban rules on
speed limits. The company must have a speed policy, for
example, to ensure that:
 The company’s vehicles are protected from reckless
accidents
 Passengers and pedestrians are protected from
accidents
 Other vehicles on the road are protected from accidents
caused by reckless driving
 Speed Management - continued

 The company is not sued by third parties for

damage caused to their property by reckless
driving by our drivers
 Insurance premiums payable on the
company’s vehicle annually do not increase
because of accidents caused by drivers.
 6. Insurance of vehicles

• Insurance policies for the vehicles used by the

company must be renewed annually based on the
renewal date of each policy. Renewal of the policies
will enable the insurers to indemnify the company
of all losses suffered as a result of accidents. A
comprehensive insurance policy, even though
expensive, is the best policy to be pursued.
• Organizations must also endeavour to have an
insurance cover for the drivers.
 7. Vehicle Maintenance

• There should be a proper program in place for the

maintenance of vehicles. Maintenance of vehicles
in an organization may take the following forms:
 Preventive Maintenance
 Remedial (Corrective) Maintenance
 Capital Rehabilitation
 Preventative Maintenance
 Cannibalization of Government Equipment

 Preventive Maintenance

• Preventive Maintenance is an equipment

maintenance strategy based on replacing,
overhauling or remanufacturing an item at a fixed
interval, regardless of its condition at the time.
• Generally, a preventive maintenance system is a
series of service and repair procedures performed
at regularly scheduled intervals for the following
reasons:
 To preserve and prolong the useful life of the
vehicle
 Preventive Maintenance - continued

 To minimize the incidence of failure through

breakage of its component parts
 To ensure the safety of the general public
 To promote the full usage of vehicles through
maintenance of high standards of condition
and performance
 Remedial (Corrective) Maintenance

• This is maintenance that is performed when a

vehicle is faulty in order to correct that fault.
Remedial maintenance is usually any maintenance
activity which is required to correct a failure that
has occurred or is in the process of occurring.
• This activity may consist of repair, restoration or
replacement of components. Remedial
maintenance measures are, therefore, measures
designed to correct deficiencies in vehicles as they
become known.
 Capital Rehabilitation

• Capital rehabilitation means carrying out major repairs

on a vehicle to restore it to its original condition. This
expenditure usually significantly extends the useful life
of the asset and must be capitalized.
• GOFAMM stipulates that the cost of major overhauls to
machinery or vehicles should be capitalized provided
that the overhaul amounts to virtually a complete
rebuilding of the asset with replacement of all worn-out
parts, the effect of which being to significantly extend
the useful life of the asset.
• nn
 Capital Rehabilitation - continued

• Where a motor vehicle needs major repairs to

bring it back to its original condition, the Fixed
Asset Management Unit shall get permission
from the Head of Public Body before doing the
needed work. If the work must be done
outside and the cost is significant, the
contractor for the job must be selected in a
competitive manner.
 Preventative Maintenance

• This type of maintenance involves checking

the basic things that could cause a problem in
vehicles or affect their daily performance. The
organization must develop an inspection
checklist which will be used by the drivers to
check vehicles each day before they start their
errands.
• Preventative maintenance is an ongoing
process.
 Cannibalization of a Motor Vehicle to repair another vehicle

• Cannibalization is the removal or exchange of

parts or assemblies from an item of equipment to
replace a damaged or worn out part or assembly
of another item of equipment. For example,
when two similar vehicles are inoperative
because of a different failed component in each,
a common maintenance practice is to cannibalize
the required part from one vehicle to restore the
other. Thus, cannibalization is often used
 Cannibalization of a Motor Vehicle -
continued
in the absence of available spare parts to enable
maintenance managers to satisfy performance
constraints such as the readiness required by
contracts.
• Cannibalization is a common practice in the private
sector but in Ethiopia, public bodies will be
expected to dispose of the two vehicles in
accordance with GOFAMM’s disposal procedures
and not to cannibalize any vehicle.
 8. Vehicle Usage

• Vehicles must be used only for official purposes

and drivers must have training and education
on topics aimed at:
 prolonging the lives of the vehicles,
 preventing accidents and
 protecting the lives of the general public.
• In order to effectively and efficiently manage
the company’s fleet of vehicles, the following
measures should be in place:
 Vehicle Usage - continued

 Every vehicle must carry a logbook

 logbooks must be checked on a weekly basis
 Vehicles are logged out and signed for before
every trip. A vehicle allocation chart is
recommended
 Drivers must record all fuel and maintenance
costs in the log book or fuel request and
purchase voucher, indicating the reading on the
odometer at the time of the expense
 Vehicle Usage - continued

 Fuel must be purchased from a central or recognized

petrol stations and receipts obtained for immediate cash
payments
 All vehicle keys must be surrendered at the end of the day
to the Security Department
 Drivers must adhere to the carrying capacity as provided
by the traffic law
 No unauthorized staff member should be allowed to drive
the company’s vehicles
 Vehicles must be washed and cleaned regularly, preferably
daily
 9. Vehicle Disposal
• Vehicle disposal must be in accordance with the
provisions of the FGE Government Owned Fixed
assets Management Manual (GOFAMM). A
summary of GOFAMM’s requirements is as
follows:
a) The Fixed Assets Management Unit (FAMU) of
the public body shall first prepare a report on all
fixed assets to be disposed of and send it to the
Head of the public body for approval. The report
shall state:
 Vehicle Disposal - continued
 the list of the assets;
 their book values and the reasons for their disposal;
and
 the estimated market value of each asset
b) On receipt of the approval of the Head of the Public
Body, FAMU shall present the report to the public
body’s Valuation Committee. The Valuation
Committee shall go through the report carefully,
inspect the condition of the assets and assess the
fairness of the market values proposed by the FAMU.
 Vehicle Disposal - continued
c) After a thorough review of the report, the Valuation
Committee shall decide on the “reserve price” for
each and every asset in the report. The committee
shall give the approved report to the FAMU with a
copy to the public body’s disposal committee.
d) The Disposal Committee will review the reports on
the disposal of the assets and recommend the
appropriate method of disposal for the assets or
approve the recommendation of the
FAMU/Valuation Committee.
 Vehicle Disposal - continued
e) The methods that can be used to dispose of
the vehicles include:
 Transfer to other public bodies
 Disposal by sale, e.g.
Sale by public auction
Sale through public tender or
sale as scrap
 Vehicle Disposal - continued
f) If the Disposal Committee recommends disposal by
public auction or public tender, it must follow up
the process of bid advertisement, bid collection,
bid opening to ensure that the process is carried
our transparently and even-handedly.
g) The Disposal Committee will recommend the sale
of the assets after evaluating the bid documents or
attending the auctions. It may also recommend
disposal of the assets in any other method other
than tender and auction.
 10. Driver Behaviour

• The drivers of the organization must receive training

and education in ethical behavior in order to
minimize accidents, take good care of vehicles and
also reduce the running costs of the vehicles.
• Organizations need to profile the behavior of their
drivers and record their patterns. Without
information about their habits, routines and
capabilities, it will be difficult to maintain a tight and
efficient schedule, avoid setbacks, implement
positive strategies and, perhaps most importantly of
all, keep unforeseen costs to a minimum.
 Driver Behaviour - continued
• The easiest and most dependable way to
create a driver profile is to install a Vehicle
Tracking System and make use of fleet
management software to compile a list of the
relevant data.
 11. Health, Safety & Security (HSS) Policy

• The organization must have a Health, Safety and Security

(HSS) policy whose objective is to protect the safety and
welfare of its employees, visitors and the community in
which it operates by conducting business in a safe
manner
• This policy must be posted on the notice board of the
organization in its premises or all workplaces. It must
also be printed and distributed to all employees.
• Finally, employees must receive training and education
on the HSS policy to enable them to clearly understand
and appreciate the contents.
 12. Vehicle Tracking

• The most basic function in all fleet management

systems is the vehicle tracking component. A
vehicle tracking system combines the installation
of an electronic device in a vehicle with purpose-
designed computer software at least at one
operational base to enable the owner or a third
party to track the vehicle's location, collect data
in the process from the field, and deliver it to the
base of operation.
 Vehicle Tracking - continued

• The vehicle tracking system enables the

organization to know the following for each
vehicle:
 Location at any point in time
 Speed
 Mileage
 Fuel consumption
 Engine temperature
 Altitude
 Vehicle Tracking - continued

• Although there are many technologies for vehicle

tracking systems, many modern vehicle tracking
systems use the Global System for Mobile
Communication (GPS) and Digital mapping, i.e., the
General Packet Radio Service (GPRS) and the Internet.
According to Mehta et al. (2010), the basic
characteristic features of this vehicle tracking system
are:
a) The system consists of GSM-based vehicle tracking
devices, a communications server, a web-server, a
database server, and a map server
 Vehicle Tracking - continued

b) The tracking devices mounted in the vehicles

collect location information in real-time via the
GSM and transfers it continuously through GPRS or
SMS (Short Message Service) to a central databas e.
c) The users are able to view the current location of
the vehicles on a digital or electronic map via the
Internet or specialized software
 Vehicle tracking system
• In conclusion, a vehicle tracking system comprises:
a) A GPS tracking device – this is fixed in the vehicle
to enable it capture GPS location information
apart from other vehicle information at regular
intervals to a central server;
b) A GPS Tracking Server – this server has three
responsibilities: receiving data from the GPS
tracking device, securely storing it, and providing
this information on demand to the user; and
Vehicle tracking system - continued
c) User interface - The User Interface determines
how one will be able to access information,
view vehicle data, and elicit important details
from it.
 13. Remote Vehicle Disabling Systems
• These are systems which make it difficult for
unauthorized persons to start a vehicle or move a
vehicle for a long distance. For example, the remote
control can be set for the vehicle to stop automatically
after, say, 5 minutes. According to Wikipedia, the basic
functions of a remote vehicle disabling system are:
a) To provide authorized users at remote locations the
ability to prevent an engine from starting, prevent
movement of a vehicle and to stop or slow an operating
vehicle.
 Remote Vehicle Disabling Systems -
continued
b) A Remote disabling system allows a dispatcher or
other authorized personnel to gradually decelerate a
vehicle by downshifting, limiting the throttle
capability, or bleeding air from the braking system
from a remote location.
c) Some of these systems provide advance notification
to the driver that the vehicle disabling is about to
occur. After stopping a vehicle, some systems will lock
the vehicle's brakes or will not allow the vehicle's
engine to be restarted within a certain timeframe.
 Remote Vehicle Disabling Systems -
continued
d) Remote disabling systems can also be integrated into
a remote panic and emergency notification system.
In an emergency, a driver can send an emergency
alert by pressing a panic button on the dashboard, or
by using a key-fob panic button if the driver is within
close proximity of the truck. Then, the carrier or
other approved organization can be remotely alerted
to allow a dispatcher or other authorized personnel
to evaluate the situation, communicate with the
driver, and/or potentially disable the vehicle.
 14. Fleet management replacement and
lifecycle management
• The timely replacement of vehicles and
equipment that have reached their useful lives
is important because operating costs of assets
become high when they are getting old. As
organizations maintain fixed assets registers
for their vehicles, they should be able to use
the life-cycle costs recorded in the registers to
make effective replacement decisions.
Fleet management replacement and lifecycle
management - continued
• Lifecycle management is managing all the
various expense (and revenue) components
involved in providing and operating a vehicle
from the beginning to the end.
• Lifecycle cost elements include acquisition,
license, insurance, fuel, maintenance, repair,
salvage, debt expense, administration,
accidents, inventory, and downtime.
Fleet management replacement and lifecycle
management - continued
• The most important question under Vehicles
management is "When should we replace our
vehicles?" When it comes to purchasing new vehicles,
the fleet manager may be confronted with a number
of vehicles that meet a fleet’s functional requirements,
but which have different capital costs, fuel efficiency
and environmental performance. How does a fleet
manager decide? The best solution to the problem is
to conduct lifecycle analysis which involves
determining the total cost of ownership of the vehicle
over its useful life.
 Transport Management System (TMS)

• A Transportation Management System (TMS) is a

software system designed to manage transportation
operations. It is a subset of Supply Chain
Management (SCM) software which focuses on
transport logistics. TMS systems facilitate interactions
between an Order Management System (OMS) and
the Warehouse or Distribution Center (DC).
• TMS is an important Supply Chain Execution and
Collaboration System and the common TMS software
modules include:
 TMS - continued
• Route planning and optimization
• Load optimization
• Execution
• Freight audit and payment
• Yard management
• Advanced shipping
• Order visibility
• Carrier management
 TMS - continued
• Generally, A TMS product serves as the logistics hub in a
collaborative network of shippers, carriers and
customers. A fully deployed TMS should achieve the
following goals:
 Reduce costs through better route planning, load
optimization, carrier mix and mode selection;
 Improved accountability with visibility into the
transportation chain;
 Greater flexibility to make changes in delivery plans; and
 Completion of key supply chain execution requirement
Shipping Documents in International Trade

• The shipping documents which are delivered to

the importer’s bankers by the exporter to enable
the importer to clear goods from the port include:
a) Bill of Lading;
b) Commercial Invoice;
c) Packing List;
d) Inspection certificate from an inspection
company in the exporter’s country (where this
document is a requirement);
 Shipping Documents - continued
e) Certificate of Origin;
f) Dock Receipt ; and
g) Freight Invoice
 Shipping Documents –
a) Bill of Lading (B/L)
• A Bill of Lading is a contract for the ocean
transportation of goods stating all the terms of
the carriage between the consignor and the
carrier.
• It confirms the condition of the cargo at the
time of receipt and serves as a receipt of the
shipment.
 Bill of Lading (B/L) - continued
• A bill of lading shows, amongst other things,
the following:
o the name of the consignor (shipper)
o the name of the consignee (receiver)
o the name of the master of the ship
o the name of the ship and the voyage number
o the place of departure (Port of loading)
 Contents of a Bill of Lading (B/L) -
continued
o the destination of the goods (Port of
discharge)
o the cost of the freight
o the date of loading;
o the marks and numbers of the things shipped
 Types of bill of lading
• There are two types of bill of lading:
o Negotiable bill of lading
o Non-negotiable bill of lading
a) Negotiable bill of lading
A negotiable bill of lading allows ownership to
the goods to be transferred by endorsement
and delivery of the bill of lading. For a bill to
be negotiable, it must state “to order”.
Negotiable bill of lading - continued

For example, if I owe Ato Mulugeta 500,000

Birr and I import goods from France, on arrival
of the goods, I can endorse the negotiable bill
of lading to Ato Mulugeta in order that he can
take delivery of the goods in settlement of my
indebtedness to him.
 b) Non-negotiable bill of lading

• A Non Negotiable Bill of Lading, on the other

hand, declares that the cargo is consigned to a
specific person and is non-negotiable, that is
not transferable to any third party.
• A sample bill of lading is as follows:
 Shipping Documents –
b) Commercial Invoice

• A commercial invoice is a bill for the goods from

the seller to the buyer.
• These invoices are often used by customs
authorities to determine the true value of goods
when assessing customs duties. Governments that
use the commercial invoice to control imports will
often specify its form, content, and number of
copies, language to be used, and other
characteristics.
• A sample commercial invoice is as follows:
 Shipping Documents –
c) Packing List

• An export packing list gives a detailed description of the

items shipped. It shows, amongst other things, the
following:
o The seller
o The buyer
o The shipper
o Invoice number
o Date of shipment
o Mode of transport
o Carrier
 Contents of a Packing List - continued
o Description of the goods and quantity
o The type of package, such as a box, crate,
drum, or carton, the quantity of packages
o The total net and gross weight (in kilograms),
o Package marks, and dimensions, if
appropriate.
• A sample packing list is as follows:
 Shipping Documents –
d) Inspection Certificate
• The import regulations of some countries require
that goods entering the country must be
accompanied by inspection certificates. These
certificates confirm the quality of the goods and
also attest to the specifications of the goods
shipped.
• This inspection is usually performed by a third
party recognized independent testing organization.
 Shipping documents –
e) Certificate of Origin
• A Certificate of Origin is a signed document
declaring the true origin of the goods shipped.
In many cases, a statement of origin printed
on the company’s letterhead will suffice.
• A sample certificate of origin is as follows
 Shipping Documents –
f) Dock Receipt
• A dock certificate is a shipping document
certifying receipt of goods from a freight
forwarder for further consolidation or
international transportation.
• A sample dock receipt is as follows:
 Shipping Documents –
g) Freight Invoice

• This is an invoice from the carrier to the

shipper. The freight invoice shows the freight
cost for the items shipped as well as the
following:
o The description of the goods and quantity
o The type of package, such as a box, crate, drum,
or carton, the quantity of packages
o The total net and gross weight (in kilograms),
o Package marks, and dimensions, if appropriate
 Conclusion

• Transportation plays an important role in

a supply chain because it ensures that
goods are delivered safely and on time to
the customer.
• Manufacturers may decide to purchase
and own their own fleet of vehicles or
may use the services of third-party
transporters.
 Conclusion

• After determining the company’s transportation

capacity, the best transport decision however is
to acquire some trucks and also engage the
services of third-party transporters.
• Organizations may also decide to use freight
forwarders to handle their shipments instead of
owning a fleet of vehicles or directly contracting
with transport owners to carry the company’s
goods.
 QUESTIONS FOR PRACTICE

• What is the role of transportation in logistics

management?
• What factors must be considered when selecting a mode
of transport?
• Discuss the characteristic features of pipeline transport.
• Discuss the differences between air transport and road
transport
• Discuss the characteristics of Water transport and rail
transport.
• Discuss the basic operating characteristics of the various
transport mode
 QUESTIONS FOR PRACTICE
• Discuss the role of Third-Party Logistics Service
providers in a supply chain
• What is transport fleet management?
• Discuss the function of a vehicle tracking
system in transport management.
• Briefly discuss the difference between third-
party logistics service providers and fourth-
party logistics service providers