Presentation on theme: "TRANSPORTATION FUNDAMENTAL OF

LOGISTICS MANAGEMENT"— Presentation transcript:

11 1 TRANSPORTATION PL201 FUNDAMENTAL OF LOGISTICS MANAGEMENT

2 INTRODUCTIONTransportation is moving and transferring units, personnel, equipment,

and supplies to support the concept of operations.Transportation involves the physical
movement of goods between origin and destination points.The transportation system links
geographically separated partners and facilities in a company’s supply.Transportation
facilitates the creation of time and place utility in the supply chain.Transportation also
has a major economic impact on the financial performance of businesses.

3 RELATIONSHIP BETWEEN TRANSPORTATION AND LOGISTICS IN SUPPLY CHAIN

MANAGEMENT
Transportation is a key activity in logistics because it moves product through the various
stages of production and ultimately to consumers.Transportation is usually the largest
single cost expenditure in most logistics operations.

4 Role of Transportation in Supply Chain Management

Transportation provides the critical links between these organizations, permitting goods
to flow between their facilities.Transportation service availability is critical to demand
fulfillment in the supply chain.Transportation efficiency promotes the competitiveness of a
supply chain

5 TRANSPORT PRINCIPLES Economy of scale Economy of distance

The cost per unit of weight decreases as the size of a shipment increases.Economy of
distanceDecreased transportation cost per unit of weight as distance increases.

6 TRANSPORT FUNCTIONALITY
Product MovementWhether in the form of materials, components, WIP or finished goods,
the basic value provided by transportation is to move inventory to specified
destinations.The primary transportation value proposition is product movement throughout
the supply chain.The performance of transportation is vital to procurement, manufacturing
and customer accommodation.Product StorageA less visible aspect of transportation is
the performance of product storage.While a product is in a transportation vehicle, it is
being stored.Transport vehicles can also be used for product storage at shipment origin or
destination but they are comparatively expensive storage facilities.

7 RECOGNIZE PARTICIPANTS DECISIONS

PublicGovernmentShipperCarrier and agentsConsignee(Receiver)Internet

8 MODES OF TRANSPORTAirSeaIn-landLandPipelines

9 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN

TRANSPORTATIONLO4RailroadsIntermodal TransportationPiggy-Back or Trailer on Flatcar
(TOFC)Containers16-9

10 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN

TRANSPORTATIONLO4Motor CarriersAir Carriers and Express CompaniesFreight
Forwarders/ Express Companies16-10
11 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
TRANSPORTATIONLO4PipelinesWater16-11

12 Rail A long hauler and slow mover for raw materials

(coal, lumber, chemicals) and low-valued products (food, paper & wood products)In US,
typical length of haul 720 miles with average train speed of 22 miles/hour and average
distance travelled of 64 miles/daySlow speed is due to long overhead time in
loading/unloading, moving within terminal, rail car assembly

13 TruckA transportation service for semi-finished and finished products and for small
shipmentIn US, the average length of haul is 646 miles for less-than-truckload (LT) and 274
miles for truckload (TL)Provide high frequency door-to-door servicewithout extra
loading/unloadingRestrictions on shipment’s weight, length and width

14 Air Provide quick transportation service over long distance

Good dependability and availability under normaloperating conditionsDelivery time
variability is low in absolute magnitude, but the variability, when compared with average
delivery time, is ranked as one of least reliable modesHas a distinct advantage in terms of
loss and damageIn US, average length of freight is 1300 miles

15 Water Confine to inland waterway system and costal areas

Large carrying capacity, super container vesselscan carry up to 7200 TEU (i.e tons)Loss
and damage is lowSubstantial packaging is needed to protect goods against rough
handling during loading-unloading operation

16 Pipeline Offer very limited range of service and capabilities

The most economically transportation service forcrude oil, natural gas, and refined
petroleum productProduct movement speed is slow, about 3-4 miles/hr, but effective
speed can be high because of 7-24 operationsMost dependable in terms of transit
timeLoss and damage is low

17 FIGURE 16-5 Advantages and disadvantages of five modes of transportation

16-17

18 SUPPLIER TRANSPORTATION SERVICES

Single modesSpecialized carrierIntermodal operatorsHarmonyHarmonious fit with nature
and perhaps as well with the environment (unity with nature, protection of the
environment, world of beauty).MasteryValues give priority to the dominance of the
surroundings through self-affirmation (ambition, success, risk). It is related with affective
individualism through sharing the desire for activity and stimulation and presupposing the
legitimacy of changing the status quo.

19 Single modesThe most basic carrier type is a single-mode operator that offers service
utilizing only one transport mode. This degree of focus allows a carrier to become highly
specialized, competent, and efficient. However, the approach creates significant
difficulties for intermodal transport because it requires negotiation and a transaction with
each individual carrier. Airlines are an example of a single-mode carrier for both freight
and passenger service since they only offer service from airport to airport. The shipper or
passenger is responsible for movement to and from the airport. A series of single-mode
operations require more management effort and, thus, increase cost

20 Specialized carrierOver the past several decades a serious problem existed in small-
shipment transportation. It was diffietilt for a common carrier to provide a reasonably'
priced small-shipment service because of significant overhead cost associated with
terminal and line-haul service. This overhead forced motor carriers to assign a minimum
charge for handling any shipment.

21 Intermodal operatorsIntermodal operators use multiple modes of transportation to

take advantage of inherent economies of each arid thus provide integrated service at the
lowest total cost.

22 SummaryMost commercial transactions, transportation decisions are influenced by

shipper, carriers, government, public and internet.Transportation system contains 5
modes of operation: rail, motor, water, pipeline and airTransportation services offered by
suppliers are single modes, specialized carriers and intermodal operators.

23 THANK YOU

Presentation on theme: "Transport Fundamentals"—

Presentation transcript:

1 Transport Fundamentals
Chapter 6CR (2004) Prentice Hall, Inc.

2 The Role of Transportation in Logistics

In 1999, U.S. firms spent an estimated $554 billion to move freight, or 9.9% of the GNP1;
this is up from 397 billion, or 6.3% of the GDP in 1993.

3 The Role of Transportation in Logistics

In 1999, as a percentage of sales, transportation was 3.24%, warehousing 1.84%,
customer service 0.48%, administration 0.38%, and carrying cost 1.52%.

4 The Transport Selection Decision

The Transportation – Supply Chain RelationshipFirms need to recognize that the lowest
cost carrier does 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.

5 The Transport Selection Decision

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.

6 Figure 9-1 The Carrier Selection Decision

7 The Transport Selection Decision
Carrier Selection Determinants:CostTransit time and reliabilityCan be a competitive
advantageLowers customers’ inventory costsCapabilityAccessibilitySecurity

8 Figure 9-2 Carrier Selection Determinants and User Implications

9 The Transport Selection Decision

The Pragmatics of Carrier Selection:Transit time reliabilityNegotiated ratesConsolidating
shipments among a few carriersFinancial stabilitySales repSpecial equipment

10 Figure 9-3 Importance Ranking of Carrier Selection Determinants

11 The Basic Modes of Transportation3

The basic modes available to the logistics manager are rail, motor, water, pipeline, and
air.

12 The Basic Modes of Transportation: Railroads

Capable of carrying a wide variety of products, much more so that other modes.Very small
number of carriers; likely only one will be able to serve any one customer location.Trend is
to merge smaller companies into larger ones with ultimate goal of having perhaps two
transcontinental rail carriers.

13 The Basic Modes of Transportation: Railroads

Rail is a long haul, large volume system (high fixed costs; own rights-of-way).Accessibility
can be a problem.Transit times are spotty, but are generally long.

14 The Basic Modes of Transportation: Railroads

Reliability and safety are improving and are generally good.Premium intermodal
servicesStraight piggyback and containerized freightDouble stacksRoadRailer service

15 The Basic Modes of Transportation: Motor Carriers

The motor carrier industry is characterized by a large number of small firms. In 1999, there
were 505,000 registered motor carriers.Low cost of entry causes these large
numbers.Used by almost all logistics systems and account for 82 percent of U.S. freight
expenditures.Consists of for-hire and private carriers.

16 The Basic Modes of Transportation: Motor Carriers

Large number of small firms; in 1999, there were 12,500 regulated carriers, only 7% of
which had revenues >$10 million, with 76% having revenues <$3 million.Characterized by
low fixed costs and high variable costs.Do not own their rights-of-way.Limited operating
authority regarding service areas, routes, rates and products carried.

17 The Basic Modes of Transportation: Motor Carriers

High accessibilityTransit times faster than rail or water.Reliability can be affected greatly
by weather.Relatively high cost compared to rail and water; trade-off is faster service.

18 The Basic Modes of Transportation: Domestic Water Carriers

Available along the Atlantic, Gulf and Pacific coasts, along the Mississippi, Missouri,
Tennessee and Ohio River systems and the Great Lakes.Regulated common and contract
carriers haul about 5% of the freight, while private and exempt carriers haul the other 95%
of the ton-miles.
19 The Basic Modes of Transportation: Domestic Water Carriers
Relatively low cost mode; do not own the rights-of-way; easy entry and exit.Typically a
long distance mover of low value, bulk-type mineral, agricultural and forest productsLow
rates but long transit timesLow accessibility

20 The Basic Modes of Transportation: International Water Carriers

General cargo shipsLarge high capacity cargo holdsEngaged on a contract basisMany
have self-contained cranes for loading/unloading

21 The Basic Modes of Transportation: International Water Carriers

TankersSpecially designed for liquid cargoesLargest vessels afloat, some VLCCs at 500k+
tonsContainer shipsHigh speeds for ships; increasingly more common and importantLarger
vessels can handle up to 5,000 containers.

22 The Basic Modes of Transportation: International Water Carriers

RO-RO (Roll on-Roll off)Basically a large ferry that facilitates the loading and unloading
process by using drive on/off rampsMay also have the capacity to haul containers

23 The Basic Modes of Transportation: Air Carriers

Limited number of large carriers earn about 90% of the revenue.Any of the air carriers can
carry air freight although some haul nothing but freight.Cost structure is highly variable;
do not own rights-of-way.Transit times are fastest of the modes, but rates are highest.

24 The Basic Modes of Transportation: Air Carriers

Average revenue per ton mile 18 times higher than rail; twice that of motor carriers.Seek
goods with a high value to weight ratio.Accessibility is low as is capability.Reliability
subject to weather more than other modes.

25 The Basic Modes of Transportation: Pipelines

Refers only to the oil pipelines, not natural gasNot suitable for general transportationSome
research has been performed to move minerals in a liquid medium, but outside of a few
attempts to transport slurried-coal via pipeline, no real successes have occurred.

26 The Basic Modes of Transportation: Pipelines

Accessibility is very low.Cost structure is highly fixed with low variable costs.Own rights-
of-way much like the railroads.Major advantage is low rates.

27 Table 9-2: Performance Rating of Modes

SelectionDeterminantsRailroadMotorModesWaterAirPipelineCost3 4 2 5 1Transit time---
ReliabilityCapabilityAccessibilitySecurity

28 Importance of Modes (Cont’d)

By Volume MovedPercentTransportationof
totalmodevolumeRailroads36.5%Trucks24.9Inland waterways16.3Oil
pipelines22.0Air0.3Total100.0CR (2004) Prentice Hall, Inc.

29 Relative Costs of Performance

Price,Mode¢/ton-mileRail2.28Truck26.19Water0.74Pipeline1.46Air61.20CR (2004) Prentice
Hall, Inc.
30 Rate Types Class rates Exception rates Commodity rates Contract rates
Freight all kinds (FAK)Released value ratesDiffered ratesContainer ratesSpecial service
chargesCR (2004) Prentice Hall, Inc.

31 Special Carriers and 3PL

Freight forwardersShippers’ associationTransportation brokersContainer leasing
Co.Freight audit/paymentEquipment leasing (e.g., Ruan)CR (2004) Prentice Hall, Inc.

32 Intermodal Transportation
Refers to use of two or more modes of transportation cooperating on the movement of
shipment by publishing a through rate.Logistics managers are looking for the best way to
move shipments and these often attempt to take advantage of multiple modes of
transportation, each of which has certain useful characteristics.

33 Figure 9-6 Types of Intermodal Services

34 Intermodal Transportation
Biggest disadvantage is that carriers are reluctant to participate.Cultural bias towards
using only one mode and this makes change more difficult.Certain types have been fairly
well developed, such as rail/water, motor/water, rail/motor, and motor/air.

35 Intermodal Transportation: Containerization

Referred to as Container-on-Flat-Car (COFC); goods are placed in a large box, where they
are untouched until they arrive at the consigee’s unloading dock.Reduces theft, damage,
multiple handling costs and intermodal transfer time.Changes materials handling from
labor intensive to capital intensive and may reduce costs from 10 to 20%.

36 Intermodal Transportation: RoadRailers

Newest concept referred to as a “RoadRailer”Essentially a trailer that has been reinforced
to ride on a rail bogey and be coupled together directly without first being placed on a rail
flat carSaves weight and locomotive power and thus fuel for the railroadSpecial lower
ratesMotor competitive transit times