MANAGING TRANSPORT

OPERATIONS
JLB 20103

Prepared by:
MOHD LUTFI BIN NADZAR
Department of Logistics Studies
UniKL MITEC
Johor Bahru
 CHAPTER 1:

CHARACTERISTICS OF
TRANSPORT
OPERATIONS
INTRODUCTION
Logistics is a broad, far reaching function
which has a major impact on a societys
standard of living.
To understand some of the implications to
consumer of logistics activity, consider:
the difficulty in shopping for food, clothing, etc
the frustration of going to the store to
purchased an advertised item
To get variety of goods/products
DEFINITION OF LOGISTICS
In Business context;
McKinnon states:
The collective term for the series of
interrelated functions, involved in the
physical transfer of finished goods from
producer to consumer directly or via
intermediaries.
DEFINITION OF LOGISTICS
- contd
Logistics is the Art and Science of Determining
requirement; Acquiring them; Distributing them and finally
Maintaining them in an operational ready condition for their
entire life. Stone, 1968
the management of all activities which facilitate
movement and the coordination of supply and demand in
the creation of time and place utility Hesket, Glaskowsky
and Ivie, 1973

the positioning of resource at the right time, in the right

place, at the right cost, at the right quality UK ILT, 1998
 Logistics Management
Logistics is the process of planning,
implementing and controlling the efficient,
effective flow and storage of goods,
services, and related information from
point of origin to point of consumption for
the purpose of conforming to customer
requirement
- The Council of Logistics Management-
Logistics(Transport) in the
Organization
Effective logistics management has been recognized as a
key opportunity to improve both the profitability and
competitive performance of firms.
Logistics is concern with demand satisfaction, whereas
marketing seeks to create demand.
Logistics support marketing (customer-driven)
Marketing concept is marketing management
philosophy which holds that achieving organizational
goals depends on determining the needs and wants of
target markets and delivering the desired satisfactions
more effectively and efficiently than competitors
 Elements of Logistics
Transportation
Purchasing
Inventory Management
Order processing
Storage and Warehousing
Return goods handling
Material handling
Demand and Forecasting
Packaging
Information system & Control
 Total Logistics Concept
- Transport is part of TLC
TLC is the management of the various elements of
distribution, as a single integrated system, through
the use of a systems approach.
The aim is to gain the best overall solution, even at
the expense of sub-optimum performance in some of
the elements in distribution mix.
Overall plan must be weighed up the total distribution
problem from start to finish, and devise a system of
operations which will achieve the desired result at the
least possible cost.
 Total Logistics Cost
The cost of moving goods are clearly interrelated, so that they
must be viewed as complementary costs
Greater efficiency in transportation will reduce storage, while
greater warehousing efficiency will enable the goods to wait
safely and economically while transport is organized.
Includes expenses associated with Transportation, Material
Handling and Warehousing, Inventory, Stockouts, Order
Processing, etc.
Trade-off must be managed among these costs so increases in
costs can be offset by added savings
 Total Logistics Cost
-contd
Total logistics cost is the aggregate of the following cost:
In-plant movement and storage
Plant-to-depot transport
Depot operating costs
Depot inventory costs
Depot-to-customer costs
Collection and distribution charges where the carrier is
not operating a door-to-door service
Customs duty and associated charges where these are
levied on the CIF valuation basis
 The Role of
Transportation
in Logistics
Transportation is the physical
link connecting the firm to its
suppliers and customers.
In a nodes and links
scenario, transportation is
the link between fixed
facilities (nodes).
Transportation also adds
value to the product by
providing time and place
utility for the firms goods.
 The Role of
Transportation
in Logistics contd
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%.
Cost trade-offs abound in
transportation and are
typified by trading lower
inventory costs for higher
transportation costs.
 TRANSPORTATION IN LOGISTICS
contd

FORWARDING AGENT TRANSPORTER STORAGE / DEPOT OPERATOR

Documentations ie BL,CDN,EIR,CMO Delivery / Collection Supply of containers
Port / Custom Clearance ie Duties, Coordination & Communication Inventory Management
declaration, cargo scanning Transportation
Order Processing

KEY FEATURES
EFFICIENCY
RELIABILITY TRANSPORTER

PORT / TERMINAL OPERATOR TRANSPORTER

SHIPPER / MANUFACTURER
Port of Destination Collection Process
Production
Outbound Shipment Hauling back consignment
 TRANSPORTATION
IN LOGISTICS contd
 COMPONENTS IN
TRANSPORTATION
SYSTEM
BASIC MODES: Involves Rail, Road, Water/Sea,
Air and Pipeline.
INTERMODAL: The use of two or more carriers in
different modes to provide a transportation
services. Logistics managers often use different
transportation modes to service a given link
INDIRECT AND SPECIAL CARRIERS: Offer
specialized or intermediate transportation service
including small package carriers, freight
forwarders, shippers associations, brokers and
intermodal marketing companies
 TRANSPORTATION
SELECTION DECISION
The Transportation and Total Logistics
relationship
Firms 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.
 TRANSPORTATION
SELECTION DECISION
contd
 5 Modes of Transport
Road transport
- very accessible and move products in small quantities with low,
consistent transit time
Rail transport
- offer low cost for long hauls of large volumes, but they have
accessibility limitations and long transit time
Sea/Water transport
- is relatively low cost and is desirable for moving large volumes over
long distances. Disadvantages is long transit times and service
disruptions caused by weather
Air transport
- very low transit times but very high rates
Pipeline
- offer low rates for the movement of liquids but are not a viable
option for manufacturing goods
 Characteristics of
Rail Transportation
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.
 Characteristics of
Rail Transportation contd
This would permit seamless
dock-to-dock service by one
company; a distinct
improvement over current
systems.
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.
 Characteristics of
Rail Transportation contd
Reliability and safety are
improving and are generally good.
Premium intermodal services
Straight piggyback and
containerized freight
Double stacks
RoadRailer service
Unit train service
Intermodal Marketing Company
(IMC)
 Characteristics of
Rail Transportation contd
Its difficult to assess the railroad industry without
getting into the subject of service
Shippers complain; rail carriers say they are
trying to improve.
Wall Street says that improving service is
imperative.
Actual improvements are coming, but slower than
the demand for faster, more reliable, and cheaper
service. One problem is that standards continue
to increase.
 Characteristics of
Road Transportation
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.
 Characteristics of
Road Transportation contd
 Characteristics of
Road Transportation contd
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.
 Characteristics of
Road Transportation contd
High accessibility
Transit times faster than rail
or water.
Reliability can be affected
greatly by weather.
Small vehicle size coincides
with lower inventory
strategies and quick
replenishment (QR).
Relatively high cost
compared to rail and water;
trade-off is faster service.
 Characteristics of
Domestic Water Transportation
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 products
Low rates but long transit
times
Low accessibility but high
capability
Characteristics of Domestic Water
Transportation contd
 Characteristics of
International Water Transportation
General cargo ships
Large high capacity cargo
holds
Engaged on a contract basis
Many have self-contained
cranes for loading/unloading
Bulk carriers
Specially designed to haul
minerals
Can handle multiple cargoes
 Characteristics of International
Water Transportation contd
Tankers
Specially designed for
liquid cargoes
Largest vessels afloat,
some VLCCs at 500k+ tons
Container ships
High speeds for ships;
increasingly more common
and important
Larger vessels can handle
up to 5,000 containers.
 Characteristics of International
Water Transportation contd
RO-RO (Roll on-Roll off)
Basically a large ferry that
facilitates the loading and
unloading process by
using drive on/off ramps
May also have the
capacity to haul
containers
Other
OBO multipurpose
carriers
Barges (not transoceanic)
 Characteristics of
Air Transportation
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.
 Characteristics of
Air Transportation contd
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.
 Characteristics of
Pipeline Transportation
Refers only to the oil
pipelines, not natural gas
Not suitable for general
transportation
Some 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.
 Characteristics of Pipeline
Transportation contd
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.
 Modes of Transport :
Performance Rating of Modes
Selection Sea/
Determinants Rail Motor Water Air Pipeline
Cost 3 4 2 5 1
Transit time 3 2 4 1 ---
Reliability 2 1 4 3 ---
Capability 1 2 4 3 5
Accessibility 2 1 4 3 ---
Security 3 2 4 1 ---
Intermodal Transportation

Basic reason for to use intermodal

services is the various modes
service characteristics and costs.
 Intermodal Transportation

contd
Basic reason for to use intermodal services is
the various modes service characteristics and
costs.
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.
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 consigees 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%.
Intermodal Transportation:
Containerization
Land bridge concept
may apply for international
shipments where oceans are separated by a
large land mass.
For example, containers moving from Japan to
Europe may dock at Long Beach, CA, transfer
the containers to a railroad, and reload the
containers onboard another ship in Norfolk,
VA., continuing on to a European port.
Intermodal Transportation:
Piggyback
Trailer-on-Flat-Car (TOFC)
Over the road trailers ride in
special rail cars.
Takes advantage of motor
flexibility and rails long haul
economic advantage.
Multiple service plans for shippers.
Some railroads provide varying levels of service,
differentially priced.
 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 car
Saves weight and locomotive power and thus fuel
for the railroad
Special lower rates
Motor competitive transit times
 CARRIER 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.
 5 Types of Transport
Operators
Common carrier
- for-hire carrier that serves the general public at reasonable rates
and without discrimination. It is the most heavily regulated of all the
legal carriers type
Regulated carrier
- offer low cost for long hauls of large volumes, but they have
accessibility limitations and long transit time
Contract carrier
- a for-hire carrier that does not serve the general public, but limited
number of customers under specific contract
Exempt carrier
- for-hire carrier exempt from economic regulation regarding rates
and services. Exemption is given for the types of commodity hauled
Private carrier
- firms own transport and not-for-hire carrier. Firm invest in private
carriage for the same reasons of cost and service
Legal Classifications of Carriers:
Common Carrier
For-hire carrier that serves the
general public at reasonable rates
and without discrimination.
Stringent economic regulation
designed to protect the public.
Must transport all commodities offered...
Commodities are limited to those that the carriers
equipment will handle.
Legal Classifications of Carriers:
Common Carrier
Carrier is liable for damages to products carried.
Exceptions to liability include acts of God, acts of
the public enemy, acts of public authority,
acts of the shipper and defects inherent in the
goods.
Continued service is assisted by ceiling and floor
limits on the rates charged.
Backbone of the transportation industry.
Legal Classifications of Carriers:
Regulated Carrier
Regulated carriers are found in motor and water
carriage.
The ICC Termination Act of 1995 eliminated most of
the common carrier economic regulation for these
two modes, including entry controls, reasonable
rates, and nondiscrimination provisions.
When acting as a contract carrier, not
subject to STB economic regulations.
Must provide safe and adequate service.
Legal Classifications of Carriers:
Contract Carriers
For-hire carrier that does
not have to serve the
general public.
May serve one or a few
shippers exclusively.
May offer specialized equipment.
Not subject to regulation on services; rates
usually lower than common or regulated
carriers.
Legal Classifications of Carriers:
Contract Carriers
Other aspects of the carrier/shipper
relationship are made a part
of the contract between the
two parties.
Becoming more popular as
logistics managers use
contract carriage to
assure rates and service
levels.
Legal Classifications of Carriers:
Exempt Carriers
For-hire carrier exempt from
economic regulation regarding rates
and services.
Limited entry controls; low rates.
Usually haul agricultural products,
but there are special rules as to
what may be hauled by each mode
of transportation, e.g., rail piggyback
is exempt..
Limited number of carriers restricts
availability.
Legal Classifications of Carriers:
Private Carriers
Private carriage is the firms own
transportation.
Not for-hire and not subject to Federal
regulations.
May not be the firms primary business
but can charge a intracompany fee for
transportation services.
Almost exclusively motor, but some rail, air and
water also exist.
Legal Classifications of Carriers:
Private Carriers
Firms gain ultimate control over
shipments and achieve maximum
flexibility in moving goods.
Backhauls are usually empty or return
materials to the firms plants and/or
warehouses.
Requires a large capital investment.
Requires management time and expertise.
Indirect and Special Carriers
Small-Package Carriers
Evolved to carry small, irregular
shipments
Fast service, premium rates
examples are UPS, FedEx, RPS, etc.

Consolidators and Freight Forwarders

Consolidates many small shipments
Saves shippers by using CL or TL rates
Indirect and Special Carriers
Shippers Associations
Acts as a consolidator for members
Object is also to get lower rates

Brokers
Acts as an intermediary
May be licensed by STB
Often used to provide backhauls for private
carriers
 Indirect and Special Carriers

Intermodal Marketing Companies (IMC)

An intermediary that solicits shipments for
rail/motor intermodal service.
Can speed traffic through consolidation
(fills the normal two-trailer load on an
intermodal flat car, avoiding delays waiting
for another trailer going to the same
destination).
Particularly advantageous for small (one
trailer) shippers.
TRANSPORT PROVIDER
SERVICE DIMENSIONS
Is the operational area of logistics that geographically moves
and positions inventory.
Provides movement for materials in the system. There are
FIVE modes that can be evaluated on six service
dimensions:
COST charges for transportation services

TRANSIT TIME speed of transit

CAPABILITY what can be carried with the mode

DEPENDABILITY reliability in terms of time, loss and

damages
ACCESIBILITY Nearness to the modes routes

FREQUENCY - scheduled
 Impact of
Logistics(Transport)
Operations to the
Logistics plays Economy
a key role in the economy in TWO
significant ways:
Logistics is one of the major expenditures for business
e.g. warehousing, storage, and holding inventory
Logistics supports the movement and flow of many
economic transactions; it is an important activity in
facilitating the sale of virtually all goods and services
Logistics add value by creating utility. This represent
the value or usefulness that an item or service has in
fulfilling a want or need
 Impact of
Logistics(Transport)
Operations to the

Economy- contd
Logistics/Transport relates to TWO types of utility:
Form Utility
- the process of creating the goods or services, or putting it
in the proper form for the customer to use
Possession Utility
- the value added to the product or service because the
customer is able to take actual possession
Time Utility
- by having an item when it is needed. So that production
line does not have to shut down
Place Utility
- having the item or services available where it is needed.