Description
logistics transporation
Transportation
Chapter 8 Chapter 8 Logistics Management Logistics Management Satish Ailawadi,Rakesh Singh Vinod V Sople
Contents
• Definition • Functions • Principles • Roles • Importance • Participants in transportation decisions • Transportation Infrastructure – Modal characteristics & Classification / Different Modes of Transportation • Road, rail, water, air, pipelines, ropeways • Advantages & Disadvantages of individual modes
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... Contents
• Intermodal Transport • Transportation Networks • Vehicle Turnaround Time [VTT] • Transport Networks • Factors Influencing Transportation Pricing [Costs] / Transport Economics • Mode & Carrier Selection • Transportation Costs • Total Transportation Cost • Containerization / RO-RO / lash / milk run to be done from unit 4 3
Introduction
• Transportation ensures movements of people & goods, both manufactured & produced, from one place to another • A good transportation system is one of the pillars of growth of industry & commerce • Across the world, modes of transport adopted are changing with the needs of changing times and technology • The degree of sophistication of transportation modes varies with the level of economic development & growth in the particular region or country 4
... Introduction
• In ancient times – Various modes of transportation such as human beings, animals, bullock carts & ships were in use – Capacities & speeds were a constraint for these modes • With the advent of industrial revolution in Europe – Rapid changes occurred in the transportation systems – Resulted in the development of four main modes of transport viz road, rail, air & water • Simultaneous upgradations of infrastructure took place to support the transportation modes helping achieve faster speeds 5
... Introduction
• In India – Before arrival of the British, trade of goods such as wood, cloth, spices, rubber & indigo was carried out through land & sea routes – The port infrastructure was one of the finest & India accounted for almost 70% of world trade – The British introduced the railways & modernized the road infrastructure – After Independence, the Indian Government developed further the road, air, rail & water transport infrastructure – In recent times the Government has embarked upon projects such as the Golden Quadrilateral & DFC
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Transportation
Definition Refers to the movement of products from one location to another • Involves movement from the beginning of the supply chain to the customer • Is the physical link connecting the firm to its suppliers and customers • An important supply chain driver because products are rarely produced & consumed in the same place • Adds value to the product by providing time and place utility for the firm’s goods
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... Transportation
• Transportation mode choice decisions are strategic decisions • Closely linked to inventory decisions • While air shipments maybe fast, reliable & require lower levels of safety stocks, they are expensive • Whereas transportation by sea or rail maybe cheaper but they necessitate holding relatively large amounts of inventory to buffer against longer transit time • Customer service levels & geographical location also play a role in decisions regarding choice of mode of transport • Since transportation costs more than 30% of logistics costs, operating efficiencies are required • Shipment sizes (consolidated bulk shipments vs. Lot-for-Lot), routing or scheduling are keys to effective management of a firm's transportation strategy 8
Principles of Transportation
Two basic principles guide transportation management & operations • Economy of scale • Economy of distance Economy of scale • Refers to the characteristics that transportation cost per unit of weight decreases when size of shipment increases • e.g. shipments that utilize the entire vehicle's capacity viz truck load [TL] cost less per kg than less than truck load [LTL] shipments as LTL utilize only a portion of the vehicle capacity
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... Principles of Transportation
Economy of scale • Large capacity transport modes such as rail or water are less expensive per unit weight than lower capacity modes such as road or air • Economies of scale are achieved because fixed expenses involved with moving load are spread out over larger weights thereby decreasing costs per unit weight • Fixed expenses are those that do not vary with shipment volume & include administrative costs of taking the order, time to position the vehicle for loading & unloading, invoicing & equipment costs • Implies it costs the same to administer a shipment of 1 kg as it does to administer a shipment of 1000 kg
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... Principles of Transportation
Economy of distance • Refers to the characteristic that transportation cost per unit distance decreases as distance increases • e.g. a single shipment of 1000 miles will cost less than two shipments (of the same combined weight) of 500 miles • Since rates taper with increasing distance, distance transportation economy of distance is also referred to as the tapering principle • The rationale is that fixed expenses incurred to load & unload the vehicle get spread over per unit of distance • Longer distances allow fixed expenses to be spread over more kilometers, resulting in lower overall per kilometer charges 11
Transportation Functionality
Provides two major functions • Product Movement • Product Storage Product Movement • Whether the product is in the form of raw materials, subassemblies, work-in-progress or finished goods, transportation is necessary to move it to the next stage of the production process or physically closer to the customer • A primary transportation function is to move the product up & down the supply chain • Since transportation involves the use of temporal, financial & environmental resources, it is important to transport items only when it truly enhances product value 12
... Transportation Functionality
Product Movement • Product movement involves the utilization of the following resources – Temporal Resources – Financial Resources – Environmental Resources
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... Transportation Functionality
Product Movement Temporal Resources • Transportation uses temporal resources • The product is inaccessible during the transportation process • During transportation, the product is in-transit inventory • Due to practices such as quick-response & JIT, intransit inventories are gaining importance, thereby reducing manufacturing & distribution center inventories
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... Transportation Functionality
Product Movement Financial Resources • Transportation uses financial resources, as expenses are incurred for private fleets or for commercial or public transport • Expenses result from driver labor, vehicle operating costs & general administrative costs • Expenses also result from product loss or damage
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... Transportation Functionality
Product Movement Environmental Resources • Transportation uses environmental resources directly & indirectly • Directly transportation is one of the largest consumers of energy viz fuel & oil • Although over time this level of consumption has decreased because of fuel-efficient vehicles, it is likely to remain steady due to increased operations • Indirectly transportation creates environmental expenses through congestion, air pollution & noise pollution
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... Transportation Functionality
Product Movement • The major objective of transportation is to move products from an origin location to a destination • This must be achieved by minimizing – Temporal, financial & environmental resources – Loss & damage • Movement must take place in a manner that meets customer demand regarding delivery performance & shipment information delivery
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... Transportation Functionality
Product Storage • Though it is not very common, but one of the functions of transportation is also temporary storage • Using the transport vehicle for temporary storage is costly • However in cases wherein the goods have to be moved once again within just a few days, it is advisable to keep them stored in transport vehicles themselves • This will avoid the cost of unloading and loading as well as the possible damage to goods during such a operation 18
... Transportation Functionality
Product Storage • Where the warehouse space is limited, utilizing transportation vehicles maybe a viable option • For this there are two options Option 1 – Deployed in cases where the origin & destination warehouse have limited storage capacity – Goods are loaded onto transport vehicles & the driver is asked to take a indirect longer route to the destination, as the transit time would be higher – The goods are moving instead of staying idle & temporary storage is created on the vehicle
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... Transportation Functionality
Product Storage Option 2 – Temporary storage is achieved through diversion – Occurs when an original shipment destination is changed while the inventory is in transit – e.g. • A shipment is originally scheduled from Mumbai to Hyderabad • During the delivery process, it is determined that Vishakapatnam (Vizag) warehouse is in greater need of the product or has storage capacity • The shipment is diverted & delivered to Vizag
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Participants in Transportation Decisions
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... Participants in Transportation Decisions
Unlike most commercial buying & selling, transportation transactions are influenced by five parties • Shipper / originating party / consignor • Receiver / destination party / consignee • Carrier • Government • Public Shippers & Consignees • Have the common objective of moving goods from origin to destination within shortest possible time & lowest cost • Service expectations include specified pickup & delivery times, predictable transit time, zero loss & damage, accurate & timely exchange of information and invoicing 22
... Participants in Transportation Decisions
Carrier • Objective is to maximize revenue associated with the transaction while minimizing costs thereon • Carrier would like to – Charge the highest rate that the shipper will accept – Minimize the labor, fuel & vehicle costs required to move the goods • To achieve the above, carrier desires flexibility in pickup & delivery times which will allow individual loads to be consolidated into economic moves
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... Participants in Transportation Decisions
Government • Desires a stable & efficient transportation environment to sustain economic growth • Expects efficient movement of products to markets throughout the country thereby ensuring product availability at a reasonable cost • Government involvement may take the form of regulation, promotion or ownership • May regulate carriers by restricting the markets they can serve – In India regulation is done through permits – Vehicles that require to ply to locations outside their state of registration require All-India-Permit – e.g. a transport vehicle registered in Maharashtra can ply to any destination in Maharashtra, but to ply to other destinations outside Maharashtra an All-India-Permit is required
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... Participants in Transportation Decisions
Government • May support & promote carriers by providing right-of-way infrastructures • In India – The Golden Quadrilateral provides a pan-India network of right-of-way roadways to carriers – The Dedicated Freight Corridor provides a rail network exclusively for goods transportation • May support carriers by providing government owned transport modes – The Indian Railway which accounts for a large quantum of goods transportation is owned, run & maintained by the Indian Railways 25
... Participants in Transportation Decisions
Public • Creates the need for transportation by demanding goods from around the world at reasonable prices • Concerned with the transportation accessibility, expense & effectiveness and environmental & safety standards • While minimizing transport cost is important to consumers, trade-offs associated with environmental & safety standards also require consideration • Air pollution & oil spills remain a significant transportation issue even though efforts have been made to reduce pollution & increase safety • In India an issue of great concern is the increase in pirate attacks on freighter & container ships in the Arabian Sea 26
... Participants in Transportation Decisions
• The transportation relationship is complex because of the interaction between the parties • Often leads to conflict between parties with a microinterest – shippers, consignees & carriers and the parties with macorinterest – government & the public
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Transportation Infrastructure
• Transportation infrastructure consists of – Rights-of-way – Vehicles – Carrier organizations that offer transportation services for-hire or internal basis • Nature of infrastructure also determines a variety of economic & legal characteristics for each mode or multimodal system • Mode is the basic transport method or form
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... Transportation Infrastructure
Modal Characteristics • The six basic modes of transport are – Rail – Road – Water – Air – Pipeline – Ropeways • Modal characteristics refer to the features of various modes of transportation
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... Transportation Infrastructure
Rail Characteristics • Principle carriers of men & material • Play an important role in a country's trade & commerce activities • Main source of transporting essential commodities • Across the world, railways have played an important role in industrialization & development of nations • Rail network has the capability to transport large shipments economically with more frequency • Incur high fixed costs because of high cost of laying down railway tracks, switching tracks and terminals • Have relatively low variable operating costs
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... Transportation Infrastructure
Rail Characteristics • Replacement of steam by diesel power has considerably reduced the variable cost per kg/km • Electrification has further reduced the variable cost per kg/km • Indian Railways [IR] operates through – A network 6896 railway stations – Route length 62,800 kilometers – 44,200 kms converted to broad gauge accounting for 85% cargo movement – Goods movement is done through 2,53,186 wagons having a total carrying capacity of 10.6 million tonnes 31
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... Transportation Infrastructure
Rail • In 2000-01 IR handled 4.02 million tonnes of freight on the above network • IR's 96% cargo consists of bulk items such as coal, iron ore, cement, fertilizers, raw materials for steel plants, finished steel products & petroleum • In 1967 IR introduced container service & goods trains to carry box containers • Currently IR handles 2 million tonnes equivalent units [TEU] of box container load • IR is tying up with national road carriers to provide door-to-door service • Konkan Railways has introduced a scheme of transporting a truck fully loaded with cargo to the destination 32
... Transportation Infrastructure
Rail Advantages • A convenient mode of transport for transporting goods over long distances • Relatively faster than road transport • Suitable for carrying heavy goods in large quantities over long distances • Its operation is less affected by adverse weather conditions like rain, floods, fog, etc
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... Transportation Infrastructure
Rail Disadvantages • Involves huge capital expenses • It is relatively expensive for carrying goods and passengers over short distances • It provides service according to fixed time schedule and is not flexible for loading or unloading of goods at any place • Does not provide door-to-door pickups & deliveries • Involves heavy losses of life as well as goods in case of accident
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... Transportation Infrastructure
Road Characteristics • Road transportation is important for agricultural & industrial advancements of a country • Provides the basic infrastructure to bring trade & commerce from remote rural areas to urban areas and vice-versa • Suitable for locations that are not easily accessible • Suitable for short & medium distances
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... Transportation Infrastructure
Road Characteristics Trucking industry in India • Unorganized private sector & bulk of truck drivers are single truck owners • Problems that impede free flow of goods – Levy of multi-point octroi – Traffic police checks – Bad road conditions • Currently 25 million trucks ply Indian roads • Average distance traveled by Indian trucks is 250-300 kms per day as against 550-600 kms per day in foreign countries 36
... Transportation Infrastructure
Road Characteristics Trucking industry in India • Average operating cost of an Indian truck Rs. 15 per km. km • Major domestic cargo is moved on national & state highways • National highways spread over 34,850 kms whereas state highways spread over 1,37,120 kms • Only 2% of the total national highways are four lane, 34% are two lanes and 64% are single lane • The road index (per capita road availability) as computed by Cooper & Lybrand – Hungary 0.41 – India – 0.58 – China – 0.29 – Brazil – 0.47 – Indonesia - 0.47 – Mexico - 0.27 37
... Transportation Infrastructure
Road Advantages • Door-to-door service • Flexible mode of transport as loading and unloading is possible at any destination • Perishable goods can be transported at a faster speed by road carriers over a short distance • Ability to reach remote place • Speed • Compared to rail, carriers make a relatively small fixed investments
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... Transportation Infrastructure
Road Disadvantages • Due to limited carrying capacity road transport is not economical for long distance transportation of goods • Transportation of heavy goods or goods in bulk by road involves high cost • Variable cost per km is high because of increasing fuel costs, driver & cleaner costs and vehicle maintenance & repairs costs
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... Transportation Infrastructure
Air Characteristics • The fastest & most costly mode of transport • Capability is constrained by load size constraints & aircraft availability • Preferred for highly perishable commodities whose life is short & value is very high • Airway equipment & airports are generally developed & maintained with public funds • Fixed costs involved are costs of aircrafts • Variable costs are extremely high & include fuel, maintenance and in-flight & ground crew costs • Although cargo handled by air is growing at a rate of 15-16%, it is insignificant compared to cargo handled by other modes of transportation 40
... Transportation Infrastructure
Air Characteristics • In India – Air cargo traffic is handled by 8 international airports, 87 domestic airports & 28 civilian airports (share with defense forces) – In 1994, post liberalization there was a sudden increase in the no. of air transporters – Within 2 years several private operators were unable to sustain competition & cost pressures, hence closed down operations – 87% of India's air cargo trade is around metro cities Mumbai, Delhi, Chennai, Bangalore & Kolkata – Due to prospects of increase in air cargo increase in India, government is inviting private party participation in air transportation & related infrastructure
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... Transportation Infrastructure
Air Advantages • It is the fastest mode of transport • Useful in transporting goods to the area, which are not accessible by any other means • Most convenient mode of transport during natural calamities Disadvantages • It is the costliest mode of transport • Not suitable for transporting heavy and bulky goods • Affected by adverse weather conditions
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... Transportation Infrastructure
Water
• Water transport can be broadly divided into two groups – Sea [Shipping] • Coastal shipping • Overseas shipping – Inland water transport [IWT]
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... Transportation Infrastructure
Water Sea • Shipping industry is divided into several parts – Industrial Services – Liner Service – Tramp Shipping – Tanker Operations Liner Service – Regularly scheduled shipping operations on fixed routes – Cargoes are accepted under a bill-of-lading contract issued by the ship operator to the shipper – Competition is regulated generally by agreements, known as conferences, among the shipowners – Conferences stabilize conditions of competition & set passenger fares or freight rates for all its members
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... Transportation Infrastructure
Water Sea Tramp Shipping – AKA general-service ships or tramper – Maintain neither regular routes nor regular service nor itinerary nor schedule – Are available at short notice to load any cargo from any port to any port Industrial services – Industrial carriers are vessels operated by large corporations to provide transportation to manufacture and distribution – Vessels are run to ports and on schedules determined by the specific needs of the owners – The ships may belong to the corporations or may be chartered 45
... Transportation Infrastructure
Water Sea Tanker Operations – Are private or contract carriers – Employed to transport crude petroleum from the oil fields to refineries – The refined products, such as gasoline, kerosene, and lubricating oils, are distributed by smaller tankers (generally less than 30,000 dwt) and by barges
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... Transportation Infrastructure
Water Sea • Shipping fleet across the world – Comprises of tankers, dry bulk carriers, container ships & special vessels – Tanker fleet accounts for 33% of the total fleet – Dry bulk cargo accounts for 32% of the total fleet
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... Transportation Infrastructure
Water Sea India • Has 55 shipping companies – 19 are exclusively for coastal trade – 29 in overseas trade – Remaining in both • Crude oil, oil products, iron ores, coal, food grains & steel are major products transported through sea • Ranks 6th in Asia & 15th in the world merchant shipping trade 48
... Transportation Infrastructure
Water Sea India • Comprises of 510 ships – 240 are overseas fleet – 270 are coastal ships including • 70 offshore support vessels • 25 supply vessels for offshore service • 12 dredges
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... Transportation Infrastructure
Water Sea India • Indian Companies SCI & Essar – Are slowly moving towards becoming a complete sea logistics solution providers – Focusing on oil transportation business by providing one stop integrated logistics solutions • 11 major ports handle 95% international trade and 85% domestic sea trade • In 2000-01 handled around 272 million tonnes of both domestic & international cargo through 11 major ports & 117 small ports 50
... Transportation Infrastructure
Water Sea Characteristics • High fixed costs as carriers have to develop & maintain their own fleets • Right-of-way is developed & maintained by government • Since large volumes are carried, variable costs are spread over very large quantities
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... Transportation Infrastructure
Water Sea Advantages • Relatively economical mode of transport for bulky goods • Safe mode of transport with respect to occurrence of accidents Disadvantages • The depth and navigability of waterways vary affecting operations of different vessels • Slow moving mode of transport and therefore not suitable for transport of perishable goods • Unless point of origin & destination are close to waterways, need to be supplemented by rail or road
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... Transportation Infrastructure
Water Inland Water Transportation [IWT] • Involves transport over a body of water, such as a river, canal or lake which is deep & wide enough to allow navigation and slow enough for a vessel to pass • Includes natural modes as navigable rivers and artificial modes such as canals • Is an environment friendly mode of transport • Has a vast potential to act as an alternate and supplementary mode of transportation
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... Transportation Infrastructure
Water Inland Water Transportation [IWT] India's IWT • The Inland waterways have played an important role in the Indian transport system since ancient times • India has about 14,500 km of navigable waterways which comprise of rivers, canals, backwaters, creeks, etc • About 55 million tones of cargo is being moved annually by IWT • Cargo movement through IWT is a meager 1% as compared to 10-12 % in UK, Europe and China • To improve IWT, the government & Inland Waterways Authority of India [IWAI] are inviting private participation for creation of infrastructure and for fleet operations to supplement the government's efforts 54
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... Transportation Infrastructure
Water Inland Water Transportation [IWT] India's IWT Operations are currently carried out over • A few stretches in the Ganga-Bhagirathi-Hubly rivers • The rivers of Brahmaputra • The Barak river • The rivers in Goa • The backwaters in Kerala • The deltaic regions of the Godavari - Krishna rivers
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... Transportation Infrastructure
Water Inland Water Transportation [IWT] Advantages • Environmentally friendly mode of transport • Lower capital cost Cost of developing an inland waterway is 5-10% of the cost developing an equivalent railway or a four-lane expressway • Lower maintenance cost The maintenance cost of an inland waterway is only 20% of the maintenance cost of an equivalent roadway • Greater fuel efficiency (low cost of transportation) It is estimated that 1 liter of fuel can move 105 ton-km by IWT whereas only 85 ton-km can be moved by rail and 24 ton-km by road, even less by air 56
... Transportation Infrastructure
Water Inland Water Transportation [IWT] Advantages • Easy integration with sea transport IWT can be easily integrated with sea transport and hence it reduces the extra cost required for land-sea or air-sea transport interface infrastructure development and the time taken to transfer the goods to and from sea transport vessels Disadvantages • Low availability of inland waterways Out of the total inland water body available in the world, only a very low percentage of it is suitable for IWT • Low speed Much slower than its road, rail, or air 57
... Transportation Infrastructure
Pipelines Characteristics • Developed in 1870 by Samuel Van Syckel for transporting petroleum • Later pipelines were deployed for commodities such as coal in slurry form, iron ore fines in slurry form, chemicals, natural gas etc • High fixed costs which involve expenses incurred in laying pipelines • Very low operational costs
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... Transportation Infrastructure
Pipelines India • Used for oil transportation by all public & private sector petroleum refineries • Used by Kudremukh Iron Ore Co. Ltd. to transport slurried iron ore fines over 67kms along the western ghats • 27% of petroleum products (petrol, kerosene & diesel) are moved by pipelines over a distance of 6350 kms • Pipelines move 58.7 million tonnes of oil per annum • Laying new pipelines costs Rs. 15 millions per km • Transportation cost of moving oil is Rs. 1.15 per ton per km on a new pipeline & Rs. 0.87 on a depreciated pipeline • Rail transport of oil costs Rs. 2 per ton per km & road transport at current rates costs Rs. 2.50 per ton per km
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... Transportation Infrastructure
Pipelines Advantages • Operate round the clock • Operation time limited only by maintenance • No empty container or vehicle to be returned • Lowest variable cost as there are no labor costs and high fixed costs are spread over very large volumes Disadvantages • Not flexible • Limited to the commodities that can be transported in gaseous, liquid or slurry form 60
... Transportation Infrastructure
Ropeways • More than 16% of India's geographical area is hilly • Transportation is difficult due to complications involved in laying of roads / railway lines & long circuitous routes • Herein other transportation modes are not economical hence ropeways are used Advantages • Cause least damage to the environment • Inaccessible hilly areas can be reached through the shortest distance • Bulk material can be moved faster over short distances
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... Transportation Infrastructure
Ropeways • Mode of transport is used in the hilly areas of Sikkim, Meghalaya, Mizoram, Himachal Pradesh & Uttar Pradesh • Currently 175kms of ropeways are in use in the above states for transportation of humans & goods
• Damodar Ropeways & Infra Ltd. has implemented material handling ropeways in Manipur, Maharashtra, MP, Arunachal Pradesh, West Bengal, Cochin, Bihar, Andhra Pradesh, Bhutan and Nepal
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Intermodal Transportation
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... Intermodal Transportation
Definition • Refers to the use of two or more carriers of different modes in the through movement of a shipment • The shipment of cargo involving more than one mode of transportation during one seamless journey • The shipment of containerized cargo using more than one mode – AKA Multimodal Transportation – Involves the use of more than one means of transport such as a combination of truck, railcar, airplane or ship in succession to each other
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... Intermodal Transportation
– Transportation is carried out under the control or ownership of one operator – Intermodal transportation is always used in international transportation of imported goods – Intermodal transportation is also sometimes used in domestic transportation – Combines the inherent advantages of several modes – Offers cost economies – Involves containerization of cargo – Reduces loss or damage through containerization – Efficiency through reduced handling & storage
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... Intermodal Transportation
• The primary intermodal combinations are – Piggyback [Rail-truck] – Fishyback [Truck-water] – Birdyback [Truck-air] – Landbridges • Intermodal transportation also takes other forms which are designed to take advantage of different types of transport – * RO-RO – * LASH * Covered in Unit 4, Network analysis
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... Intermodal Transportation
Piggyback [Rail-truck] • Combination of rail & road • Combines the speed and reliability of rail on long hauls with the door-to-door flexibility of road transport for collection & delivery • Accomplished in two ways – Container on Flat Car [COFC] – Trailer on a flatcar [TOFC]
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... Intermodal Transportation
Container on Flat Car [COFC] • ISO containers without a chassis is placed on top of a train flatcar • At the destination terminal, the container is unloaded and attached to a chassis that is hooked onto a motor carrier
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... Intermodal Transportation
Trailer on Flat Car [TOFC] • Motor Carrier highway trailers are placed on top of a train flatcar • At the destination terminal, the trailers are then unloaded and hooked up to motor carriers
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... Intermodal Transportation
Fishyback [Truck-water] • At shipping docks, ISO containers without chassis are placed on top of a ships by means of huge specialized cranes • At the destination terminal, the containers are unloaded by means of huge specialized cranes and attached to chassis that is hooked onto a motor carrier • Motor carriers haul away containers to a warehouse or directly to delivery
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... Intermodal Transportation
Birdyback [Truck-air] • The containers are directly loaded onto airplanes • At the destination airport, containers are unloaded and delivered by means of delivery trucks • A unit load device (ULD), is a pallet or container used to load luggage, freight, and mail on wide-body aircraft and specific narrow-body aircraft • It allows a large quantity of cargo to be bundled into a single unit
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... Intermodal Transportation
Landbridge • AKA land bridge • Involves the use of coordinated systems known as Landbridges • A commonly used in the intermodal freight transport • Three applications for the term – Land bridge – Mini Land bridge – Micro Land bridge
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... Intermodal Transportation
Land bridge • Transportation happens over water-land-water route • Involves – Beginning by shipping a product across water – Transferring the shipment to surface transportation – Finishing the move across water • Thus a land bridge is provided between two water movements • e.g. a container shipment from China to Germany, is loaded onto a ship in China, unloaded at a Los Angeles (California) port and transported via rail transport to a New York (New York) port, and loaded on a ship for Hamburg • Transportation by oceangoing vessel across a large landmass can take days or even weeks • A landbridge creates a shortcut across the landmass 73
... Intermodal Transportation
Mini Land bridge • Involves water-land movement • e.g. a container shipment from China to New York, is loaded onto a ship in China, unloads at a Los Angeles (California) port and travels via rail transport to New York, the final destination
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... Intermodal Transportation
Micro Land bridge • Involves a non-port city as either the origin or destination of shipment • An intermodal container shipped by ocean vessel from country A to country B, passes across a large portion of land to reach an interior inland destination • e.g. a container shipment from China to Denver (Colorado), is loaded onto a ship in China, unloads at a Los Angeles (California) port and travels via rail transport to Denver (Colorado), the final destination 75
Vehicle Turnaround Time [VTT]
• Is the process of unloading and loading and servicing a truck or vessel or aircraft for a return trip • e.g. a truck arrives from Pune. How much time does it take to unload goods and ready the truck for a return trip • Logistics managers should try to minimize VTT • Advantages of low VTT – Vehicle vacates the warehouse dock as quickly as possible leaving it free for use for handling another shipment – Expediting loading & unloading saves driver times & warehouse time – Vehicles themselves are scarce & expensive resources, their value is wasted if they are not moving 76
Transport Networks
• Movement of goods from point of production to point of consumption is done through various modes of transport • Depending on transportation load, number of delivery points, existing distribution centers, product value, frequency, urgency of delivery and different types of networks are deployed
– Point-to-Point Network – Nodal Network – Multiple Delivery Points – Hub & Spoke Network – Trans-Shipment Points
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... Transport Networks
Point-to-Point Network • Method of distribution in which goods come directly from the suppliers to the retail stores • Points of origin and destination are fixed • Does not involve any intermediary facilities such as warehouses and distribution centres
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... Transport Networks
Multiple Delivery Points • Used for round-trip operations with multiple pick-ups and deliveries • e.g. the delivery of filled bottles and pick-up of empty bottles of soft drinks at multiple points [retailers] on a fixed route 79
... Transport Networks
Trans-Shipment Points • Trans-shipment points are two local area networks (across national and state highways) having a common point • At the common point loading & unloading takes place for freight consolidation or break-bulk • Most national transporters maintain two types of vehicles – Type 1 vehicles are dedicated for long-distance haulage – Type 2 are dedicated for local network transportation • The consignment from long distance is moved to a local vehicle at a trans-shipment point 80
... Transport Networks
Nodal Network • Networks used for multi-modal transportation system • Includes multi-stops and trans-shipment pickup and delivery stations • e.g. a box container truck may travel over a multi-point pickup for freight consolidation and arrive at a rail terminal. After being transported over a rail route, the box container maybe taken to a port terminal for loading onto a ship 81
... Transport Networks
Hub and Spoke Network • Similar to the hub and spoke of a wheel • The hub acts like a central feeder point to the distribution centers, which are at strategic locations spread across the geographical area • High volume and high speed shipments take place from hub to the distribution centers through the predetermined shortest routes called spokes 82
... Transport Networks
Hub and Spoke Network
• The distribution hub is the location that holds inventory for a large region, with each spoke leading to smaller distribution centre, which houses inventory for a smaller region • The main driver of the hub and spoke model is the proximity to the customer, with the goal being to supply to a maximum numbers of customers in minimum time • The arrangement – Optimizes the number of distribution centres in the network – Ensures reduction in inventory – Improvement in customer service Read caselet Tata Steel plans hubs for better customer service Logistics Management – Sople Pg 138 83
Factors Influencing Transportation Pricing [Costs] / Transport Economics
• Transport pricing are concerned with the factors that determine transport costs & rates • To develop an effective logistics strategy & to successfully negotiate transport agreements, it is necessary to understand the economies of the industry • Factors are AKA Economic Factors • While not direct components of transport rate tables , each factor is considered when developing rates • Divided into two categories – Product Related Factors – Market Related Factors 84
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors 1. Distance 2. Volume 3. Product Density 4. Product Stow-ability 5. Product Handling 6. Liability • In general the above sequence reflects the relative importance of each factor
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Market Related Factors 1. Competition 2. Lane Balance 3. Movement Seasonality 4. Market Dynamics
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Distance • Major influence on transportation cost since it directly contributes to variable costs such as labor, fuel and maintenance • As shown in figure – Cost curve does not start at origin as there are fixed costs associated with shipment pick-up and delivery irrespective of distance – Cost curve is based on the tapering principle viz as distance increases, costs increase at a decreasing rate
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Distance
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Volumes • When large volumes are shipped, costs are spread over large volumes resulting in lower per unit cost of cargo movement • As shown in the figure as weight increases, cost reduces as fixed costs such as pickup & delivery costs and administrative costs are spread over a larger volume • e.g. A 9-ton loading capacity will have the same costs of fuel, loading & unloading charges, administrative costs for the distance covered, irrespective of whether the truck is full or partially loaded
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Product Density • Refers to a product's weight to volume ratio • Items such as steel, canned foods, building products & bulk paper goods have a high weight to volume ratio viz heavyweight • They are relatively heavy given their size • Whereas products such as electronics, clothing & toys have a low weight to volume ratio viz lightweight • In case of heavyweight products, freight cost per unit weight is relatively higher • Since there is a limit to the vehicle payload, in case of heavyweight products, trucks are partly loaded with respect to space available on vehicle 89
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors
Product Stow-ability • Stow-ability is a measurement of how easy the freight is to store and to load into shipping containers • Items with standard rectangular shapes are easier to stow than odd-shaped items • Other factors that determine stow-ability are whether goods are hazardous or whether the freight can be stacked • Excessive weight, length or protrusions can make freight impossible to load with other freight
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Product Handling • Shape & size of the product – Pose difficulty in handling – Affect the speed of vehicle movement • Very big & odd-sized products require specialized arrangements for loading & unloading which further increases cost • Costs further increases considerably for heavy payloads which require vehicles with long trailers • Requirements of escorts to accompany vehicles also adds to costs • Goods such as heavy steel vessels for chemical processing, heavy-duty transformers attract higher transportation costs91
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Liability • Liability is probability of freight theft or damage, or damage to adjacent freight • Includes 6 product characteristics that affect risk and can result in claims viz susceptibility to damage, property damage to freight, perishability, susceptibility to theft, susceptibility to combustion or explosion and value per rupee • Carriers must have insurance to protect against possible claims or accept responsibility for any damage • Shippers can reduce risk by better packaging
92
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Market Related Factors Competition • Generally as competition increases, market becomes more price sensitive which results in decrease in transportation rates • A transport service provider may face competition at two levels – Intra-mode Competition Competition from other service providers using the same transport mode viz a road carrier facing competition from another road carrier – Inter-mode Competition Competition from other service providers using a different transport mode viz a road carrier facing competition from railway 93
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Market Related Factors Lane Balance • In the to & fro transportation between origin & destination points – Carriers must find a backhaul load or vehicle is returned empty (deadhead) – When deadhead movements occur labor, fuel and maintenance costs must be charged against the fronthaul • Ideally there should be balanced moves where volumes are equal in both directions • Balance is also influenced by seasonality • Imbalances in volume between shipping points can result in higher transport costs • Logistics design must take into account balance and add backhaul movement wherever possible 94
94
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Market Related Factors Seasonality • For some routes, the movement is seasonal in nature • e.g. In regions producing seasonal fruits / agricultural products, the fronthaul transportation will be very high during season's peak and will be very low during offseason
95
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Market Related Factors Market Dynamics • Market dynamics too affect transport economics Indian context • Large fleets owners who operate across India & have their own marketing infrastructure, fix their own rate structure • Rates of the goods transportation business are fixed by transport agents & not truck owners • Freight rates keep fluctuating based on demand & supply situation • If more trucks are available, there is cut-throat competition & under cutting of rates happen • For problematic routes, rates are on the higher side to cover the risks involved 96
Mode & Carrier Selection
• The selection of mode of transport depends on – Product characteristics – Customer service levels • The mode of transport is usually chosen is with reference to the relative Importance of the following factors – Speed & Availability – Reliability (dependability) – Capability – Frequency – Other Factors – Freight Cost
97
• The logistics manager has to achieve objectives of freight cost reduction, speed & reliability in delivery
... Mode & Carrier Selection
Speed & Availability of Service • Speed of the service – Is dependent on the time taken to move product from one location to another & finally to the customer – Often more important than cost of service • Slower modes of transport – Often involve lower costs – Result in lower service levels • Availability depends – On the existing infrastructure – Ability of the mode to serve the given pair of locations
98
... Mode & Carrier Selection
Reliability • Ability of the carrier to deliver the shipment in a good condition, with the stipulated time frame to the customer Capability • Ability of the carrier to accommodate the cargo in size, weight & quantity for transportation • Very important for odd-sized & heavy products over long distances • Usually for odd-sized & heavy products trailers are required in which case costs increase • Also require special material handling equipments
99
... Mode & Carrier Selection
Frequency • Refers to the number of scheduled trips of the carriers between a pair of locations • Pipelines have the best frequency as they operate round the clock but can be used only for liquid, slurry or gaseous products Other factors • Transportation decisions also depend on a number of other factors such as – Unit value of the product – Predictability of demand – Transit time saving – Cost of transport mode – Impact of transport costs on inventory cost – Desired level of customer service 100
... Mode & Carrier Selection
Freight Cost Factors Influencing freight cost • Distance [Slides 86 & 87] • Volume [Slide 88] • Product Density [Slide 89] • Product Stow-ability [Slide 90] • Product Handling [Slide 91] • Product Shape • Product Type • Liability [Slide 92] • Market Related Factors [Slide 93 - 94]
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... Mode & Carrier Selection
Freight Cost Product Shape • Very big & odd-sized products require specialized arrangements for loading & unloading • These equipments are usually not available at loading & unloading points because of very low frequency of usage • Hence these equipments have to be organized specially • This further adds to per unit transportation costs
102
... Mode & Carrier Selection
Freight Cost Product Type • Products such as perishable food items and certain pharmaceutical formulations require certain temperature & humidity conditions for transportation • Such products need to be transported through refrigerated vans increasing transportation costs to about 3 to 4 times that of a normal vehicle • Products susceptible to explosion, damage or theft require specially constructed vans or box containers which add to transportation costs
103
Transportation Costs
Costs associated with transportation • Joint Costs • Fixed Costs • Common Costs • Variable Costs Fixed Costs • Expenses that do not change in the short run & must be paid even when the company is no operating such as during a holiday or strike • Includes costs not directly affected by shipment volume • For transportation firms, fixed costs include vehicles, terminals, right-of-ways, information systems & support equipment • Must be covered by contribution above variable costs on a per shipment basis 104
... Transportation Costs
Variable Costs • Includes direct costs associated with movement of load • Expenses are generally measured as a cost per mile or cost per unit of weight • Typical variable cost components include labor, fuel and maintenance • Represents the minimum amount a carrier must charge to pay daily running • Transport rates must at least cover variable cost • Not possible for any carrier to charge less that variable costs & stay in business for long
105
... Transportation Costs
Joint Costs • Expenses created by the decision to provide a particular service • When a carrier accepts to haul a truckload from location A to location B, it is implied that a cost of back-haul or return trip from location B to location A would be incurred • Have a significant impact on charges and carrier quotations must include implied joint costs based on assessment of back-haul or return trip recovery
106
... Transportation Costs
Common Costs • A cost which is incurred simultaneously for a whole organization, where it cannot be allocated directly to any particular product – e.g. whilst transporting 3 shipments of separate clients by truck from Mumbai to Pune, the truck breaks down and a major repair cost is incurred; How much of this repair cost should be allocated to the 3 different shipments? • Also includes terminal or management expenses • Usually allocated to shippers based on level of activity for that customer e.g. number of shipments 107
References
Ppt Image •
Introduction • Logistics Management -Sople Pg 122 Definition • Supply Chain Management Strategy, Planning & Operation – Chopra Pg 392 • A Logistics Approach to Supply Chain Management – Coyle Pg 214 • Logistics Management -Sople Pg 122 • Logistics Management -Ailawadi Pg 77 • Principles of Transportation • Logistics Management -Ailawadi Pg 79 • Logistical Management – Bowersox Pg 314 •http://www.thefreedictionary.com/temporal Participants in transportation decisions • Logistics Management -Ailawadi Pg 90 • Logistical Management – Bowersox Pg 314 Transportation infrastructure • Logistics Management -Ailawadi Pg 82 • Logistical Management – Bowersox Pg 316 • Logistics Management -Sople Pg 126 •http://www.nos.org/Secbuscour/cc10.pdf Shipping Indsutry •http://www.pfri.uniri.hr/~bopri/documents/00IntroductiontoShippingIndustry-vjezbeFin_000.doc Bill of lading •http://www.investopedia.com/terms/b/billoflading.asp#ixzz1XBca3tmJ 108
... References
Dwt •http://en.wikipedia.org/wiki/Deadweight_tonnage Special vessels •http://www.omzest.com/maersk.htm Dredges •http://en.wikipedia.org/wiki/Dredging Cos. •http://www.essar.com/section_level1.aspx?cont_id=CMIiy80JNpU= •http://en.wikipedia.org/wiki/Essar_Shipping •http://www.shipindia.com/ Ports •http://en.wikipedia.org/wiki/Ports_in_India •http://www.indianetzone.com/4/port_cities_india.htm Pipelines •http://www.petroleumhistory.org/OilHistory/pages/Pipelines/van_syckel.html •
Ropeways •http://www.ropeways.com/ropeway_completed.html •
Inland Water Transportation •http://www.tcil.com/water.asp •http://en.wikipedia.org/wiki/Navigability#Inland_water_transport_systems •http://www.ilfsindia.com/downloads/bus_concept/inland_water_transport.pdf VTT •http://www.thefreedictionary.com/turnaround •http://books.google.com/books? id=Do6SH2K3hy0C&pg=PA229&dq=vehicle+turnaround+time&hl=en&ei=vsFsTq_3GYTsrQfZkaGzBQ&sa=X&oi=book_result&ct =result&resnum=1&ved=0CC0Q6AEwAA#v=onepage&q=vehicle%20turnaround%20time&f=false Mode & Carrier Selection • Elements of Logistics & Supply Chain – Nitin Kulkarni Pg 82, 88 • Logistical Management – Bowersox Pg 365 •http://www.csun.edu/~vcmkt002/447PowerPoint/Chap009.ppt
109
... References
Intermodal Transportation • A Logistics Approach to Supply Chain Management – Coyle Pg 232 •http://www.unescap.org/ttdw/CapBuild/Module -Multimodal Transport Operations.pdf •http://www.ise.msstate.edu/ncit/NCIT_WEB_UPDATE/Final Report Developing a Standard Definition for %20Intermodal%20Transportation.pdf •http://www.elaclogistics.com/modules/module4/work_int_workplace.html •http://books.google.com/books? id=uB_pLYvTdfYC&pg=PA366&lpg=PA366&dq=intermodal+services+fishyback&source=bl&ots=Qt60JV7s9R&sig=sc27Ml2ohbB xr0MYuZMCDc7A7d8&hl=en&ei=XttrTuG_I4blrAfgqMShBQ&sa=X&oi=book_result&ct=result&resnum=2&ved=0CBcQ6AEwATg K#v=onepage&q=intermodal%20services%20fishyback&f=false •http://homepage3.nifty.com/container/COFC-1-E.htm •
•http://www.flickr.com/photos/40105782@N08/3818985073/in/photostream/ •http://en.wikipedia.org/wiki/File:Colombo.Express.wmt.jpg •http://www.google.com/imgres? q=truck+on+ship&hl=en&biw=1272&bih=764&gbv=2&tbm=isch&tbnid=Dz2gnN1UMD5DyM:&imgrefurl=http://www.martasgroup.c om/en/sea-transport.html&docid=hOFOgPDH71XU8M&w=440&h=340&ei=C6lsTuObJI_wrQfEkeXEBQ&zoom=1 •http://www.supplychainedge.com/services/metrics-identification-and-scor-application.shtm •http://www.militaryphotos.net/forums/showthread.php?55765-Today-s-Pic-s-Thursday-Sep.-8th/page2 •http://ic-interfreight.com/Air_Freight_Container 1.htm •http://alaskarails.org •http://seabay.en.made-in-china.com/...-Sea-Freight-Air-FreightShipping-Service.html •http://www.airloggroup.com/wp-content/uploads/2011/04/Airfreight-containers.pdf •http://en.wikipedia.org/wiki/Unit_load_device Landbridge • Logistics – Bloomberg Pg 108 •http://en.wikipedia.org/wiki/Intermodal_freight_transport#Landbridges •http://www.3gintermodal.com/pages/3gi-rail
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doc_813481231.pdf
logistics transporation
Transportation
Chapter 8 Chapter 8 Logistics Management Logistics Management Satish Ailawadi,Rakesh Singh Vinod V Sople
Contents
• Definition • Functions • Principles • Roles • Importance • Participants in transportation decisions • Transportation Infrastructure – Modal characteristics & Classification / Different Modes of Transportation • Road, rail, water, air, pipelines, ropeways • Advantages & Disadvantages of individual modes
2
... Contents
• Intermodal Transport • Transportation Networks • Vehicle Turnaround Time [VTT] • Transport Networks • Factors Influencing Transportation Pricing [Costs] / Transport Economics • Mode & Carrier Selection • Transportation Costs • Total Transportation Cost • Containerization / RO-RO / lash / milk run to be done from unit 4 3
Introduction
• Transportation ensures movements of people & goods, both manufactured & produced, from one place to another • A good transportation system is one of the pillars of growth of industry & commerce • Across the world, modes of transport adopted are changing with the needs of changing times and technology • The degree of sophistication of transportation modes varies with the level of economic development & growth in the particular region or country 4
... Introduction
• In ancient times – Various modes of transportation such as human beings, animals, bullock carts & ships were in use – Capacities & speeds were a constraint for these modes • With the advent of industrial revolution in Europe – Rapid changes occurred in the transportation systems – Resulted in the development of four main modes of transport viz road, rail, air & water • Simultaneous upgradations of infrastructure took place to support the transportation modes helping achieve faster speeds 5
... Introduction
• In India – Before arrival of the British, trade of goods such as wood, cloth, spices, rubber & indigo was carried out through land & sea routes – The port infrastructure was one of the finest & India accounted for almost 70% of world trade – The British introduced the railways & modernized the road infrastructure – After Independence, the Indian Government developed further the road, air, rail & water transport infrastructure – In recent times the Government has embarked upon projects such as the Golden Quadrilateral & DFC
6
Transportation
Definition Refers to the movement of products from one location to another • Involves movement from the beginning of the supply chain to the customer • Is the physical link connecting the firm to its suppliers and customers • An important supply chain driver because products are rarely produced & consumed in the same place • Adds value to the product by providing time and place utility for the firm’s goods
7
... Transportation
• Transportation mode choice decisions are strategic decisions • Closely linked to inventory decisions • While air shipments maybe fast, reliable & require lower levels of safety stocks, they are expensive • Whereas transportation by sea or rail maybe cheaper but they necessitate holding relatively large amounts of inventory to buffer against longer transit time • Customer service levels & geographical location also play a role in decisions regarding choice of mode of transport • Since transportation costs more than 30% of logistics costs, operating efficiencies are required • Shipment sizes (consolidated bulk shipments vs. Lot-for-Lot), routing or scheduling are keys to effective management of a firm's transportation strategy 8
Principles of Transportation
Two basic principles guide transportation management & operations • Economy of scale • Economy of distance Economy of scale • Refers to the characteristics that transportation cost per unit of weight decreases when size of shipment increases • e.g. shipments that utilize the entire vehicle's capacity viz truck load [TL] cost less per kg than less than truck load [LTL] shipments as LTL utilize only a portion of the vehicle capacity
9
... Principles of Transportation
Economy of scale • Large capacity transport modes such as rail or water are less expensive per unit weight than lower capacity modes such as road or air • Economies of scale are achieved because fixed expenses involved with moving load are spread out over larger weights thereby decreasing costs per unit weight • Fixed expenses are those that do not vary with shipment volume & include administrative costs of taking the order, time to position the vehicle for loading & unloading, invoicing & equipment costs • Implies it costs the same to administer a shipment of 1 kg as it does to administer a shipment of 1000 kg
10
... Principles of Transportation
Economy of distance • Refers to the characteristic that transportation cost per unit distance decreases as distance increases • e.g. a single shipment of 1000 miles will cost less than two shipments (of the same combined weight) of 500 miles • Since rates taper with increasing distance, distance transportation economy of distance is also referred to as the tapering principle • The rationale is that fixed expenses incurred to load & unload the vehicle get spread over per unit of distance • Longer distances allow fixed expenses to be spread over more kilometers, resulting in lower overall per kilometer charges 11
Transportation Functionality
Provides two major functions • Product Movement • Product Storage Product Movement • Whether the product is in the form of raw materials, subassemblies, work-in-progress or finished goods, transportation is necessary to move it to the next stage of the production process or physically closer to the customer • A primary transportation function is to move the product up & down the supply chain • Since transportation involves the use of temporal, financial & environmental resources, it is important to transport items only when it truly enhances product value 12
... Transportation Functionality
Product Movement • Product movement involves the utilization of the following resources – Temporal Resources – Financial Resources – Environmental Resources
13
... Transportation Functionality
Product Movement Temporal Resources • Transportation uses temporal resources • The product is inaccessible during the transportation process • During transportation, the product is in-transit inventory • Due to practices such as quick-response & JIT, intransit inventories are gaining importance, thereby reducing manufacturing & distribution center inventories
14
... Transportation Functionality
Product Movement Financial Resources • Transportation uses financial resources, as expenses are incurred for private fleets or for commercial or public transport • Expenses result from driver labor, vehicle operating costs & general administrative costs • Expenses also result from product loss or damage
15
... Transportation Functionality
Product Movement Environmental Resources • Transportation uses environmental resources directly & indirectly • Directly transportation is one of the largest consumers of energy viz fuel & oil • Although over time this level of consumption has decreased because of fuel-efficient vehicles, it is likely to remain steady due to increased operations • Indirectly transportation creates environmental expenses through congestion, air pollution & noise pollution
16
... Transportation Functionality
Product Movement • The major objective of transportation is to move products from an origin location to a destination • This must be achieved by minimizing – Temporal, financial & environmental resources – Loss & damage • Movement must take place in a manner that meets customer demand regarding delivery performance & shipment information delivery
17
... Transportation Functionality
Product Storage • Though it is not very common, but one of the functions of transportation is also temporary storage • Using the transport vehicle for temporary storage is costly • However in cases wherein the goods have to be moved once again within just a few days, it is advisable to keep them stored in transport vehicles themselves • This will avoid the cost of unloading and loading as well as the possible damage to goods during such a operation 18
... Transportation Functionality
Product Storage • Where the warehouse space is limited, utilizing transportation vehicles maybe a viable option • For this there are two options Option 1 – Deployed in cases where the origin & destination warehouse have limited storage capacity – Goods are loaded onto transport vehicles & the driver is asked to take a indirect longer route to the destination, as the transit time would be higher – The goods are moving instead of staying idle & temporary storage is created on the vehicle
19
... Transportation Functionality
Product Storage Option 2 – Temporary storage is achieved through diversion – Occurs when an original shipment destination is changed while the inventory is in transit – e.g. • A shipment is originally scheduled from Mumbai to Hyderabad • During the delivery process, it is determined that Vishakapatnam (Vizag) warehouse is in greater need of the product or has storage capacity • The shipment is diverted & delivered to Vizag
20
Participants in Transportation Decisions
21
... Participants in Transportation Decisions
Unlike most commercial buying & selling, transportation transactions are influenced by five parties • Shipper / originating party / consignor • Receiver / destination party / consignee • Carrier • Government • Public Shippers & Consignees • Have the common objective of moving goods from origin to destination within shortest possible time & lowest cost • Service expectations include specified pickup & delivery times, predictable transit time, zero loss & damage, accurate & timely exchange of information and invoicing 22
... Participants in Transportation Decisions
Carrier • Objective is to maximize revenue associated with the transaction while minimizing costs thereon • Carrier would like to – Charge the highest rate that the shipper will accept – Minimize the labor, fuel & vehicle costs required to move the goods • To achieve the above, carrier desires flexibility in pickup & delivery times which will allow individual loads to be consolidated into economic moves
23
... Participants in Transportation Decisions
Government • Desires a stable & efficient transportation environment to sustain economic growth • Expects efficient movement of products to markets throughout the country thereby ensuring product availability at a reasonable cost • Government involvement may take the form of regulation, promotion or ownership • May regulate carriers by restricting the markets they can serve – In India regulation is done through permits – Vehicles that require to ply to locations outside their state of registration require All-India-Permit – e.g. a transport vehicle registered in Maharashtra can ply to any destination in Maharashtra, but to ply to other destinations outside Maharashtra an All-India-Permit is required
24
... Participants in Transportation Decisions
Government • May support & promote carriers by providing right-of-way infrastructures • In India – The Golden Quadrilateral provides a pan-India network of right-of-way roadways to carriers – The Dedicated Freight Corridor provides a rail network exclusively for goods transportation • May support carriers by providing government owned transport modes – The Indian Railway which accounts for a large quantum of goods transportation is owned, run & maintained by the Indian Railways 25
... Participants in Transportation Decisions
Public • Creates the need for transportation by demanding goods from around the world at reasonable prices • Concerned with the transportation accessibility, expense & effectiveness and environmental & safety standards • While minimizing transport cost is important to consumers, trade-offs associated with environmental & safety standards also require consideration • Air pollution & oil spills remain a significant transportation issue even though efforts have been made to reduce pollution & increase safety • In India an issue of great concern is the increase in pirate attacks on freighter & container ships in the Arabian Sea 26
... Participants in Transportation Decisions
• The transportation relationship is complex because of the interaction between the parties • Often leads to conflict between parties with a microinterest – shippers, consignees & carriers and the parties with macorinterest – government & the public
27
Transportation Infrastructure
• Transportation infrastructure consists of – Rights-of-way – Vehicles – Carrier organizations that offer transportation services for-hire or internal basis • Nature of infrastructure also determines a variety of economic & legal characteristics for each mode or multimodal system • Mode is the basic transport method or form
28
... Transportation Infrastructure
Modal Characteristics • The six basic modes of transport are – Rail – Road – Water – Air – Pipeline – Ropeways • Modal characteristics refer to the features of various modes of transportation
29
... Transportation Infrastructure
Rail Characteristics • Principle carriers of men & material • Play an important role in a country's trade & commerce activities • Main source of transporting essential commodities • Across the world, railways have played an important role in industrialization & development of nations • Rail network has the capability to transport large shipments economically with more frequency • Incur high fixed costs because of high cost of laying down railway tracks, switching tracks and terminals • Have relatively low variable operating costs
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... Transportation Infrastructure
Rail Characteristics • Replacement of steam by diesel power has considerably reduced the variable cost per kg/km • Electrification has further reduced the variable cost per kg/km • Indian Railways [IR] operates through – A network 6896 railway stations – Route length 62,800 kilometers – 44,200 kms converted to broad gauge accounting for 85% cargo movement – Goods movement is done through 2,53,186 wagons having a total carrying capacity of 10.6 million tonnes 31
31
... Transportation Infrastructure
Rail • In 2000-01 IR handled 4.02 million tonnes of freight on the above network • IR's 96% cargo consists of bulk items such as coal, iron ore, cement, fertilizers, raw materials for steel plants, finished steel products & petroleum • In 1967 IR introduced container service & goods trains to carry box containers • Currently IR handles 2 million tonnes equivalent units [TEU] of box container load • IR is tying up with national road carriers to provide door-to-door service • Konkan Railways has introduced a scheme of transporting a truck fully loaded with cargo to the destination 32
... Transportation Infrastructure
Rail Advantages • A convenient mode of transport for transporting goods over long distances • Relatively faster than road transport • Suitable for carrying heavy goods in large quantities over long distances • Its operation is less affected by adverse weather conditions like rain, floods, fog, etc
33
... Transportation Infrastructure
Rail Disadvantages • Involves huge capital expenses • It is relatively expensive for carrying goods and passengers over short distances • It provides service according to fixed time schedule and is not flexible for loading or unloading of goods at any place • Does not provide door-to-door pickups & deliveries • Involves heavy losses of life as well as goods in case of accident
34
... Transportation Infrastructure
Road Characteristics • Road transportation is important for agricultural & industrial advancements of a country • Provides the basic infrastructure to bring trade & commerce from remote rural areas to urban areas and vice-versa • Suitable for locations that are not easily accessible • Suitable for short & medium distances
35
... Transportation Infrastructure
Road Characteristics Trucking industry in India • Unorganized private sector & bulk of truck drivers are single truck owners • Problems that impede free flow of goods – Levy of multi-point octroi – Traffic police checks – Bad road conditions • Currently 25 million trucks ply Indian roads • Average distance traveled by Indian trucks is 250-300 kms per day as against 550-600 kms per day in foreign countries 36
... Transportation Infrastructure
Road Characteristics Trucking industry in India • Average operating cost of an Indian truck Rs. 15 per km. km • Major domestic cargo is moved on national & state highways • National highways spread over 34,850 kms whereas state highways spread over 1,37,120 kms • Only 2% of the total national highways are four lane, 34% are two lanes and 64% are single lane • The road index (per capita road availability) as computed by Cooper & Lybrand – Hungary 0.41 – India – 0.58 – China – 0.29 – Brazil – 0.47 – Indonesia - 0.47 – Mexico - 0.27 37
... Transportation Infrastructure
Road Advantages • Door-to-door service • Flexible mode of transport as loading and unloading is possible at any destination • Perishable goods can be transported at a faster speed by road carriers over a short distance • Ability to reach remote place • Speed • Compared to rail, carriers make a relatively small fixed investments
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... Transportation Infrastructure
Road Disadvantages • Due to limited carrying capacity road transport is not economical for long distance transportation of goods • Transportation of heavy goods or goods in bulk by road involves high cost • Variable cost per km is high because of increasing fuel costs, driver & cleaner costs and vehicle maintenance & repairs costs
39
... Transportation Infrastructure
Air Characteristics • The fastest & most costly mode of transport • Capability is constrained by load size constraints & aircraft availability • Preferred for highly perishable commodities whose life is short & value is very high • Airway equipment & airports are generally developed & maintained with public funds • Fixed costs involved are costs of aircrafts • Variable costs are extremely high & include fuel, maintenance and in-flight & ground crew costs • Although cargo handled by air is growing at a rate of 15-16%, it is insignificant compared to cargo handled by other modes of transportation 40
... Transportation Infrastructure
Air Characteristics • In India – Air cargo traffic is handled by 8 international airports, 87 domestic airports & 28 civilian airports (share with defense forces) – In 1994, post liberalization there was a sudden increase in the no. of air transporters – Within 2 years several private operators were unable to sustain competition & cost pressures, hence closed down operations – 87% of India's air cargo trade is around metro cities Mumbai, Delhi, Chennai, Bangalore & Kolkata – Due to prospects of increase in air cargo increase in India, government is inviting private party participation in air transportation & related infrastructure
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... Transportation Infrastructure
Air Advantages • It is the fastest mode of transport • Useful in transporting goods to the area, which are not accessible by any other means • Most convenient mode of transport during natural calamities Disadvantages • It is the costliest mode of transport • Not suitable for transporting heavy and bulky goods • Affected by adverse weather conditions
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... Transportation Infrastructure
Water
• Water transport can be broadly divided into two groups – Sea [Shipping] • Coastal shipping • Overseas shipping – Inland water transport [IWT]
43
... Transportation Infrastructure
Water Sea • Shipping industry is divided into several parts – Industrial Services – Liner Service – Tramp Shipping – Tanker Operations Liner Service – Regularly scheduled shipping operations on fixed routes – Cargoes are accepted under a bill-of-lading contract issued by the ship operator to the shipper – Competition is regulated generally by agreements, known as conferences, among the shipowners – Conferences stabilize conditions of competition & set passenger fares or freight rates for all its members
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... Transportation Infrastructure
Water Sea Tramp Shipping – AKA general-service ships or tramper – Maintain neither regular routes nor regular service nor itinerary nor schedule – Are available at short notice to load any cargo from any port to any port Industrial services – Industrial carriers are vessels operated by large corporations to provide transportation to manufacture and distribution – Vessels are run to ports and on schedules determined by the specific needs of the owners – The ships may belong to the corporations or may be chartered 45
... Transportation Infrastructure
Water Sea Tanker Operations – Are private or contract carriers – Employed to transport crude petroleum from the oil fields to refineries – The refined products, such as gasoline, kerosene, and lubricating oils, are distributed by smaller tankers (generally less than 30,000 dwt) and by barges
46
... Transportation Infrastructure
Water Sea • Shipping fleet across the world – Comprises of tankers, dry bulk carriers, container ships & special vessels – Tanker fleet accounts for 33% of the total fleet – Dry bulk cargo accounts for 32% of the total fleet
47
... Transportation Infrastructure
Water Sea India • Has 55 shipping companies – 19 are exclusively for coastal trade – 29 in overseas trade – Remaining in both • Crude oil, oil products, iron ores, coal, food grains & steel are major products transported through sea • Ranks 6th in Asia & 15th in the world merchant shipping trade 48
... Transportation Infrastructure
Water Sea India • Comprises of 510 ships – 240 are overseas fleet – 270 are coastal ships including • 70 offshore support vessels • 25 supply vessels for offshore service • 12 dredges
49
... Transportation Infrastructure
Water Sea India • Indian Companies SCI & Essar – Are slowly moving towards becoming a complete sea logistics solution providers – Focusing on oil transportation business by providing one stop integrated logistics solutions • 11 major ports handle 95% international trade and 85% domestic sea trade • In 2000-01 handled around 272 million tonnes of both domestic & international cargo through 11 major ports & 117 small ports 50
... Transportation Infrastructure
Water Sea Characteristics • High fixed costs as carriers have to develop & maintain their own fleets • Right-of-way is developed & maintained by government • Since large volumes are carried, variable costs are spread over very large quantities
51
... Transportation Infrastructure
Water Sea Advantages • Relatively economical mode of transport for bulky goods • Safe mode of transport with respect to occurrence of accidents Disadvantages • The depth and navigability of waterways vary affecting operations of different vessels • Slow moving mode of transport and therefore not suitable for transport of perishable goods • Unless point of origin & destination are close to waterways, need to be supplemented by rail or road
52
... Transportation Infrastructure
Water Inland Water Transportation [IWT] • Involves transport over a body of water, such as a river, canal or lake which is deep & wide enough to allow navigation and slow enough for a vessel to pass • Includes natural modes as navigable rivers and artificial modes such as canals • Is an environment friendly mode of transport • Has a vast potential to act as an alternate and supplementary mode of transportation
53
... Transportation Infrastructure
Water Inland Water Transportation [IWT] India's IWT • The Inland waterways have played an important role in the Indian transport system since ancient times • India has about 14,500 km of navigable waterways which comprise of rivers, canals, backwaters, creeks, etc • About 55 million tones of cargo is being moved annually by IWT • Cargo movement through IWT is a meager 1% as compared to 10-12 % in UK, Europe and China • To improve IWT, the government & Inland Waterways Authority of India [IWAI] are inviting private participation for creation of infrastructure and for fleet operations to supplement the government's efforts 54
54
... Transportation Infrastructure
Water Inland Water Transportation [IWT] India's IWT Operations are currently carried out over • A few stretches in the Ganga-Bhagirathi-Hubly rivers • The rivers of Brahmaputra • The Barak river • The rivers in Goa • The backwaters in Kerala • The deltaic regions of the Godavari - Krishna rivers
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... Transportation Infrastructure
Water Inland Water Transportation [IWT] Advantages • Environmentally friendly mode of transport • Lower capital cost Cost of developing an inland waterway is 5-10% of the cost developing an equivalent railway or a four-lane expressway • Lower maintenance cost The maintenance cost of an inland waterway is only 20% of the maintenance cost of an equivalent roadway • Greater fuel efficiency (low cost of transportation) It is estimated that 1 liter of fuel can move 105 ton-km by IWT whereas only 85 ton-km can be moved by rail and 24 ton-km by road, even less by air 56
... Transportation Infrastructure
Water Inland Water Transportation [IWT] Advantages • Easy integration with sea transport IWT can be easily integrated with sea transport and hence it reduces the extra cost required for land-sea or air-sea transport interface infrastructure development and the time taken to transfer the goods to and from sea transport vessels Disadvantages • Low availability of inland waterways Out of the total inland water body available in the world, only a very low percentage of it is suitable for IWT • Low speed Much slower than its road, rail, or air 57
... Transportation Infrastructure
Pipelines Characteristics • Developed in 1870 by Samuel Van Syckel for transporting petroleum • Later pipelines were deployed for commodities such as coal in slurry form, iron ore fines in slurry form, chemicals, natural gas etc • High fixed costs which involve expenses incurred in laying pipelines • Very low operational costs
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... Transportation Infrastructure
Pipelines India • Used for oil transportation by all public & private sector petroleum refineries • Used by Kudremukh Iron Ore Co. Ltd. to transport slurried iron ore fines over 67kms along the western ghats • 27% of petroleum products (petrol, kerosene & diesel) are moved by pipelines over a distance of 6350 kms • Pipelines move 58.7 million tonnes of oil per annum • Laying new pipelines costs Rs. 15 millions per km • Transportation cost of moving oil is Rs. 1.15 per ton per km on a new pipeline & Rs. 0.87 on a depreciated pipeline • Rail transport of oil costs Rs. 2 per ton per km & road transport at current rates costs Rs. 2.50 per ton per km
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... Transportation Infrastructure
Pipelines Advantages • Operate round the clock • Operation time limited only by maintenance • No empty container or vehicle to be returned • Lowest variable cost as there are no labor costs and high fixed costs are spread over very large volumes Disadvantages • Not flexible • Limited to the commodities that can be transported in gaseous, liquid or slurry form 60
... Transportation Infrastructure
Ropeways • More than 16% of India's geographical area is hilly • Transportation is difficult due to complications involved in laying of roads / railway lines & long circuitous routes • Herein other transportation modes are not economical hence ropeways are used Advantages • Cause least damage to the environment • Inaccessible hilly areas can be reached through the shortest distance • Bulk material can be moved faster over short distances
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... Transportation Infrastructure
Ropeways • Mode of transport is used in the hilly areas of Sikkim, Meghalaya, Mizoram, Himachal Pradesh & Uttar Pradesh • Currently 175kms of ropeways are in use in the above states for transportation of humans & goods
• Damodar Ropeways & Infra Ltd. has implemented material handling ropeways in Manipur, Maharashtra, MP, Arunachal Pradesh, West Bengal, Cochin, Bihar, Andhra Pradesh, Bhutan and Nepal
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Intermodal Transportation
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... Intermodal Transportation
Definition • Refers to the use of two or more carriers of different modes in the through movement of a shipment • The shipment of cargo involving more than one mode of transportation during one seamless journey • The shipment of containerized cargo using more than one mode – AKA Multimodal Transportation – Involves the use of more than one means of transport such as a combination of truck, railcar, airplane or ship in succession to each other
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... Intermodal Transportation
– Transportation is carried out under the control or ownership of one operator – Intermodal transportation is always used in international transportation of imported goods – Intermodal transportation is also sometimes used in domestic transportation – Combines the inherent advantages of several modes – Offers cost economies – Involves containerization of cargo – Reduces loss or damage through containerization – Efficiency through reduced handling & storage
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... Intermodal Transportation
• The primary intermodal combinations are – Piggyback [Rail-truck] – Fishyback [Truck-water] – Birdyback [Truck-air] – Landbridges • Intermodal transportation also takes other forms which are designed to take advantage of different types of transport – * RO-RO – * LASH * Covered in Unit 4, Network analysis
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... Intermodal Transportation
Piggyback [Rail-truck] • Combination of rail & road • Combines the speed and reliability of rail on long hauls with the door-to-door flexibility of road transport for collection & delivery • Accomplished in two ways – Container on Flat Car [COFC] – Trailer on a flatcar [TOFC]
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... Intermodal Transportation
Container on Flat Car [COFC] • ISO containers without a chassis is placed on top of a train flatcar • At the destination terminal, the container is unloaded and attached to a chassis that is hooked onto a motor carrier
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... Intermodal Transportation
Trailer on Flat Car [TOFC] • Motor Carrier highway trailers are placed on top of a train flatcar • At the destination terminal, the trailers are then unloaded and hooked up to motor carriers
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... Intermodal Transportation
Fishyback [Truck-water] • At shipping docks, ISO containers without chassis are placed on top of a ships by means of huge specialized cranes • At the destination terminal, the containers are unloaded by means of huge specialized cranes and attached to chassis that is hooked onto a motor carrier • Motor carriers haul away containers to a warehouse or directly to delivery
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... Intermodal Transportation
Birdyback [Truck-air] • The containers are directly loaded onto airplanes • At the destination airport, containers are unloaded and delivered by means of delivery trucks • A unit load device (ULD), is a pallet or container used to load luggage, freight, and mail on wide-body aircraft and specific narrow-body aircraft • It allows a large quantity of cargo to be bundled into a single unit
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... Intermodal Transportation
Landbridge • AKA land bridge • Involves the use of coordinated systems known as Landbridges • A commonly used in the intermodal freight transport • Three applications for the term – Land bridge – Mini Land bridge – Micro Land bridge
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... Intermodal Transportation
Land bridge • Transportation happens over water-land-water route • Involves – Beginning by shipping a product across water – Transferring the shipment to surface transportation – Finishing the move across water • Thus a land bridge is provided between two water movements • e.g. a container shipment from China to Germany, is loaded onto a ship in China, unloaded at a Los Angeles (California) port and transported via rail transport to a New York (New York) port, and loaded on a ship for Hamburg • Transportation by oceangoing vessel across a large landmass can take days or even weeks • A landbridge creates a shortcut across the landmass 73
... Intermodal Transportation
Mini Land bridge • Involves water-land movement • e.g. a container shipment from China to New York, is loaded onto a ship in China, unloads at a Los Angeles (California) port and travels via rail transport to New York, the final destination
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... Intermodal Transportation
Micro Land bridge • Involves a non-port city as either the origin or destination of shipment • An intermodal container shipped by ocean vessel from country A to country B, passes across a large portion of land to reach an interior inland destination • e.g. a container shipment from China to Denver (Colorado), is loaded onto a ship in China, unloads at a Los Angeles (California) port and travels via rail transport to Denver (Colorado), the final destination 75
Vehicle Turnaround Time [VTT]
• Is the process of unloading and loading and servicing a truck or vessel or aircraft for a return trip • e.g. a truck arrives from Pune. How much time does it take to unload goods and ready the truck for a return trip • Logistics managers should try to minimize VTT • Advantages of low VTT – Vehicle vacates the warehouse dock as quickly as possible leaving it free for use for handling another shipment – Expediting loading & unloading saves driver times & warehouse time – Vehicles themselves are scarce & expensive resources, their value is wasted if they are not moving 76
Transport Networks
• Movement of goods from point of production to point of consumption is done through various modes of transport • Depending on transportation load, number of delivery points, existing distribution centers, product value, frequency, urgency of delivery and different types of networks are deployed
– Point-to-Point Network – Nodal Network – Multiple Delivery Points – Hub & Spoke Network – Trans-Shipment Points
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... Transport Networks
Point-to-Point Network • Method of distribution in which goods come directly from the suppliers to the retail stores • Points of origin and destination are fixed • Does not involve any intermediary facilities such as warehouses and distribution centres
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... Transport Networks
Multiple Delivery Points • Used for round-trip operations with multiple pick-ups and deliveries • e.g. the delivery of filled bottles and pick-up of empty bottles of soft drinks at multiple points [retailers] on a fixed route 79
... Transport Networks
Trans-Shipment Points • Trans-shipment points are two local area networks (across national and state highways) having a common point • At the common point loading & unloading takes place for freight consolidation or break-bulk • Most national transporters maintain two types of vehicles – Type 1 vehicles are dedicated for long-distance haulage – Type 2 are dedicated for local network transportation • The consignment from long distance is moved to a local vehicle at a trans-shipment point 80
... Transport Networks
Nodal Network • Networks used for multi-modal transportation system • Includes multi-stops and trans-shipment pickup and delivery stations • e.g. a box container truck may travel over a multi-point pickup for freight consolidation and arrive at a rail terminal. After being transported over a rail route, the box container maybe taken to a port terminal for loading onto a ship 81
... Transport Networks
Hub and Spoke Network • Similar to the hub and spoke of a wheel • The hub acts like a central feeder point to the distribution centers, which are at strategic locations spread across the geographical area • High volume and high speed shipments take place from hub to the distribution centers through the predetermined shortest routes called spokes 82
... Transport Networks
Hub and Spoke Network
• The distribution hub is the location that holds inventory for a large region, with each spoke leading to smaller distribution centre, which houses inventory for a smaller region • The main driver of the hub and spoke model is the proximity to the customer, with the goal being to supply to a maximum numbers of customers in minimum time • The arrangement – Optimizes the number of distribution centres in the network – Ensures reduction in inventory – Improvement in customer service Read caselet Tata Steel plans hubs for better customer service Logistics Management – Sople Pg 138 83
Factors Influencing Transportation Pricing [Costs] / Transport Economics
• Transport pricing are concerned with the factors that determine transport costs & rates • To develop an effective logistics strategy & to successfully negotiate transport agreements, it is necessary to understand the economies of the industry • Factors are AKA Economic Factors • While not direct components of transport rate tables , each factor is considered when developing rates • Divided into two categories – Product Related Factors – Market Related Factors 84
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors 1. Distance 2. Volume 3. Product Density 4. Product Stow-ability 5. Product Handling 6. Liability • In general the above sequence reflects the relative importance of each factor
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Market Related Factors 1. Competition 2. Lane Balance 3. Movement Seasonality 4. Market Dynamics
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Distance • Major influence on transportation cost since it directly contributes to variable costs such as labor, fuel and maintenance • As shown in figure – Cost curve does not start at origin as there are fixed costs associated with shipment pick-up and delivery irrespective of distance – Cost curve is based on the tapering principle viz as distance increases, costs increase at a decreasing rate
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Distance
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Volumes • When large volumes are shipped, costs are spread over large volumes resulting in lower per unit cost of cargo movement • As shown in the figure as weight increases, cost reduces as fixed costs such as pickup & delivery costs and administrative costs are spread over a larger volume • e.g. A 9-ton loading capacity will have the same costs of fuel, loading & unloading charges, administrative costs for the distance covered, irrespective of whether the truck is full or partially loaded
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Product Density • Refers to a product's weight to volume ratio • Items such as steel, canned foods, building products & bulk paper goods have a high weight to volume ratio viz heavyweight • They are relatively heavy given their size • Whereas products such as electronics, clothing & toys have a low weight to volume ratio viz lightweight • In case of heavyweight products, freight cost per unit weight is relatively higher • Since there is a limit to the vehicle payload, in case of heavyweight products, trucks are partly loaded with respect to space available on vehicle 89
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors
Product Stow-ability • Stow-ability is a measurement of how easy the freight is to store and to load into shipping containers • Items with standard rectangular shapes are easier to stow than odd-shaped items • Other factors that determine stow-ability are whether goods are hazardous or whether the freight can be stacked • Excessive weight, length or protrusions can make freight impossible to load with other freight
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Product Handling • Shape & size of the product – Pose difficulty in handling – Affect the speed of vehicle movement • Very big & odd-sized products require specialized arrangements for loading & unloading which further increases cost • Costs further increases considerably for heavy payloads which require vehicles with long trailers • Requirements of escorts to accompany vehicles also adds to costs • Goods such as heavy steel vessels for chemical processing, heavy-duty transformers attract higher transportation costs91
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Product Related Factors Liability • Liability is probability of freight theft or damage, or damage to adjacent freight • Includes 6 product characteristics that affect risk and can result in claims viz susceptibility to damage, property damage to freight, perishability, susceptibility to theft, susceptibility to combustion or explosion and value per rupee • Carriers must have insurance to protect against possible claims or accept responsibility for any damage • Shippers can reduce risk by better packaging
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Market Related Factors Competition • Generally as competition increases, market becomes more price sensitive which results in decrease in transportation rates • A transport service provider may face competition at two levels – Intra-mode Competition Competition from other service providers using the same transport mode viz a road carrier facing competition from another road carrier – Inter-mode Competition Competition from other service providers using a different transport mode viz a road carrier facing competition from railway 93
... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Market Related Factors Lane Balance • In the to & fro transportation between origin & destination points – Carriers must find a backhaul load or vehicle is returned empty (deadhead) – When deadhead movements occur labor, fuel and maintenance costs must be charged against the fronthaul • Ideally there should be balanced moves where volumes are equal in both directions • Balance is also influenced by seasonality • Imbalances in volume between shipping points can result in higher transport costs • Logistics design must take into account balance and add backhaul movement wherever possible 94
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Market Related Factors Seasonality • For some routes, the movement is seasonal in nature • e.g. In regions producing seasonal fruits / agricultural products, the fronthaul transportation will be very high during season's peak and will be very low during offseason
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... Factors Influencing Transportation Pricing [Costs] / Transport Economics
Market Related Factors Market Dynamics • Market dynamics too affect transport economics Indian context • Large fleets owners who operate across India & have their own marketing infrastructure, fix their own rate structure • Rates of the goods transportation business are fixed by transport agents & not truck owners • Freight rates keep fluctuating based on demand & supply situation • If more trucks are available, there is cut-throat competition & under cutting of rates happen • For problematic routes, rates are on the higher side to cover the risks involved 96
Mode & Carrier Selection
• The selection of mode of transport depends on – Product characteristics – Customer service levels • The mode of transport is usually chosen is with reference to the relative Importance of the following factors – Speed & Availability – Reliability (dependability) – Capability – Frequency – Other Factors – Freight Cost
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• The logistics manager has to achieve objectives of freight cost reduction, speed & reliability in delivery
... Mode & Carrier Selection
Speed & Availability of Service • Speed of the service – Is dependent on the time taken to move product from one location to another & finally to the customer – Often more important than cost of service • Slower modes of transport – Often involve lower costs – Result in lower service levels • Availability depends – On the existing infrastructure – Ability of the mode to serve the given pair of locations
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... Mode & Carrier Selection
Reliability • Ability of the carrier to deliver the shipment in a good condition, with the stipulated time frame to the customer Capability • Ability of the carrier to accommodate the cargo in size, weight & quantity for transportation • Very important for odd-sized & heavy products over long distances • Usually for odd-sized & heavy products trailers are required in which case costs increase • Also require special material handling equipments
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... Mode & Carrier Selection
Frequency • Refers to the number of scheduled trips of the carriers between a pair of locations • Pipelines have the best frequency as they operate round the clock but can be used only for liquid, slurry or gaseous products Other factors • Transportation decisions also depend on a number of other factors such as – Unit value of the product – Predictability of demand – Transit time saving – Cost of transport mode – Impact of transport costs on inventory cost – Desired level of customer service 100
... Mode & Carrier Selection
Freight Cost Factors Influencing freight cost • Distance [Slides 86 & 87] • Volume [Slide 88] • Product Density [Slide 89] • Product Stow-ability [Slide 90] • Product Handling [Slide 91] • Product Shape • Product Type • Liability [Slide 92] • Market Related Factors [Slide 93 - 94]
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... Mode & Carrier Selection
Freight Cost Product Shape • Very big & odd-sized products require specialized arrangements for loading & unloading • These equipments are usually not available at loading & unloading points because of very low frequency of usage • Hence these equipments have to be organized specially • This further adds to per unit transportation costs
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... Mode & Carrier Selection
Freight Cost Product Type • Products such as perishable food items and certain pharmaceutical formulations require certain temperature & humidity conditions for transportation • Such products need to be transported through refrigerated vans increasing transportation costs to about 3 to 4 times that of a normal vehicle • Products susceptible to explosion, damage or theft require specially constructed vans or box containers which add to transportation costs
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Transportation Costs
Costs associated with transportation • Joint Costs • Fixed Costs • Common Costs • Variable Costs Fixed Costs • Expenses that do not change in the short run & must be paid even when the company is no operating such as during a holiday or strike • Includes costs not directly affected by shipment volume • For transportation firms, fixed costs include vehicles, terminals, right-of-ways, information systems & support equipment • Must be covered by contribution above variable costs on a per shipment basis 104
... Transportation Costs
Variable Costs • Includes direct costs associated with movement of load • Expenses are generally measured as a cost per mile or cost per unit of weight • Typical variable cost components include labor, fuel and maintenance • Represents the minimum amount a carrier must charge to pay daily running • Transport rates must at least cover variable cost • Not possible for any carrier to charge less that variable costs & stay in business for long
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... Transportation Costs
Joint Costs • Expenses created by the decision to provide a particular service • When a carrier accepts to haul a truckload from location A to location B, it is implied that a cost of back-haul or return trip from location B to location A would be incurred • Have a significant impact on charges and carrier quotations must include implied joint costs based on assessment of back-haul or return trip recovery
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... Transportation Costs
Common Costs • A cost which is incurred simultaneously for a whole organization, where it cannot be allocated directly to any particular product – e.g. whilst transporting 3 shipments of separate clients by truck from Mumbai to Pune, the truck breaks down and a major repair cost is incurred; How much of this repair cost should be allocated to the 3 different shipments? • Also includes terminal or management expenses • Usually allocated to shippers based on level of activity for that customer e.g. number of shipments 107
References
Ppt Image •
... References
Dwt •http://en.wikipedia.org/wiki/Deadweight_tonnage Special vessels •http://www.omzest.com/maersk.htm Dredges •http://en.wikipedia.org/wiki/Dredging Cos. •http://www.essar.com/section_level1.aspx?cont_id=CMIiy80JNpU= •http://en.wikipedia.org/wiki/Essar_Shipping •http://www.shipindia.com/ Ports •http://en.wikipedia.org/wiki/Ports_in_India •http://www.indianetzone.com/4/port_cities_india.htm Pipelines •http://www.petroleumhistory.org/OilHistory/pages/Pipelines/van_syckel.html •
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... References
Intermodal Transportation • A Logistics Approach to Supply Chain Management – Coyle Pg 232 •http://www.unescap.org/ttdw/CapBuild/Module -Multimodal Transport Operations.pdf •http://www.ise.msstate.edu/ncit/NCIT_WEB_UPDATE/Final Report Developing a Standard Definition for %20Intermodal%20Transportation.pdf •http://www.elaclogistics.com/modules/module4/work_int_workplace.html •http://books.google.com/books? id=uB_pLYvTdfYC&pg=PA366&lpg=PA366&dq=intermodal+services+fishyback&source=bl&ots=Qt60JV7s9R&sig=sc27Ml2ohbB xr0MYuZMCDc7A7d8&hl=en&ei=XttrTuG_I4blrAfgqMShBQ&sa=X&oi=book_result&ct=result&resnum=2&ved=0CBcQ6AEwATg K#v=onepage&q=intermodal%20services%20fishyback&f=false •http://homepage3.nifty.com/container/COFC-1-E.htm •
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doc_813481231.pdf