2[1]-277 TRANSPORTATION MANAGEMENT

8/14/2019 2[1]-277 TRANSPORTATION MANAGEMENT

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After this unit you should be able to answer following questions

A. Concept Questions B. Short notes

1. Containerization

2. Nodal Points

1. Principles of transportation

C. Section II descriptive questions [10 marks each]

Various modes of transportation, their advantages and cost elements

Various pricing factors for transportation

What is transportation performance? Distinguish between DKP&MBP

Selection of mode of transport to achieve minimum cost

Discuss transportation

What is an inland container depot [ICD]? What type of coordination with

transportation will be required?

Transportation function modes importance, problems facedVarious modes of transportation, their advantages and cost elements

Various pricing factors for transportation

. What is transportation performance? Distinguish between DKP&MBP

D. Review all the past university question papers. You should be able to answer

questions from the portion 'Transportation Management' as described below

Functions of transportation, Principles of transportation,

Participants in Transportation Decisions

Transport infrastructureVarious modes of transport, nodal points

Freight rate structure

Selection of Carrier

Transportation policy

Transportation

Transportation functionality

Transportation is the most visible of all functions of logistics and high contributor to

logistics cost. We can see trucks, containers and wagonloads of material being

moved from place to place as an activity directly associated with trade and business.


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We should also appreciate that this is an activity that adds highest amount of cost to

the activity of making inputs and outputs available to consumers. Transportation

function moves the products to meet customer expectations at minimum cost.

Functions of transportation

1. Product movement:

What is moved?

Raw Material, Semi Finished items, WIP, Finished goods, packaging material, rejected

material - movement is required up or down the supply chain.

How is this done? What Resources are used?

Resources used by transportation:

A.Temporal - product is locked up during transit, hence inaccessible. We have to spend a

positive amount of time in transporting the material. Time is a resource [temporal

resource] that is expended in transportation. During the time the product is locked up

costs are incurred in proportion to the time

B. Financial - several cost elements like administration costs, salaries, maintenance costs

are expended. Loss on account of product loss and damage also needs to be accounted

for. Fuel consumed is a big cost in transportation

C. Environmental this activity is a fuel guzzler, eats up natural fuels like oil, directly

and indirectly. - 67% of all domestic fuel usage in the US is by transportation activity.

Creates congestion, air pollution and noise pollution. Environmental cost is tangible and

substantially intangible. As transportation utilizes temporal, financial and environmental

resources items must be moved only when product value is enhanced

2. Product Storage:

Temporary storage in stationary vehicles or Vehicles kept moving on a circuitous

route - Product storage is expensive in a transport vehicle. But some times keeping

overall cost in mind this is adopted.

A. When unloading and loading is more expensive than storage

B. When storage space is limited. [Situation when inventory levels are very high]

Principles of transportation

1. Economy of scale


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It is common knowledge that per unit transportation cost comes down as the bulk of

the items transported increases. Hence in order to gain benefits in terms of

reduction in transportation costs logistician tries to consolidate the bulk and then

ship the consignment rather than shipping half truck loads or half container loads.

This benefit is Economy of scale

2. Economy of distance

The transportation cost per kilometer comes down as the distance moved increases.

Hence transportation is planned in a single long lap rather than number of short laps to

reach the destination. The fixed costs and costs like overheads of loading and unloading

are spread over the distance through which the load is moved.

When alternate transportation strategies are evaluated to meet customer service

expectation, economy of scale and economy of distance are fundamental.

Participants in Transportation Decisions

Normal commercial transaction has limited number of parties to the business decision.

They are seller, buyer and directly or indirectly government. But a transportation decision

has number of parties to the decision. These parties have very important roles to play in

transportation environment. Parties to a transportation decision are those who have a

stake in the transportation. They are

1. Shipper: shipper is a party who wants to transport the goods to his customer in a

business transaction

2. Consignee is the party to whom the goods are sent

3. Carrier is the service provider who carries the consignment from shipper to

consignee.

4. Government has a role to play as they are keenly interested in transportation and

have a stake in it. Transportation makes business happen which is fundamental to the

economy of any society. Economic prosperity to the society is the objective of the

government of the day. Government also collects tax on the transaction. Government

represents general public whose interest they have to protect.

5. General public is another party who has a large stake in the transaction involving

transportation. Public want goods produced at different parts of not only country but

also world. Their demand cannot be met without transportation.


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Roles and perspective of each party

Shipper and consignee:

Predictable and minimum transit time, minimum cost, minimum taxation, specified pick

up and delivery times, zero loss and damage, timely exchange of information and

invoicing. These are the needs of the above parties. They look at transportation from this

angle. They are the basic elements of transportation. Business between them initiates the

need for transportation

Carrier:

What does he want? Revenue maximization and cost [labor, fuel and vehicle costs,

taxation] minimization. Flexibility in pick up and delivery times to consolidate

movement. Carrier facilitates the business between shipper and consignee. He gets paid

for his service. He adds value to the supply chain by moving the material from supplier to

the customer. Carriers' strike in our country is a repetitive phenomenon to protest against

role of government.

Government: government while playing their role exercise control on all the players.

They want the business to flourish, at the same time benefits to reach uniformly all over

the country. They also have to provide the necessary infrastructure to support

transportation. It is said that one of the causes that expedited the break up of Soviet

Union was the weak infrastructure on account of which products could not be transported

to far-flung parts of the country. Hunger deaths in India in spite of self-sufficiency in

food production are examples to illustrate the interest of the government. Government

controls carrier rates and licenses. Government owned carrier service is probably the

cheapest option for transportation available to business. Government supports

transportation by providing a network of roads, Airports and ATC, Ports and Harbors.

Government wants taxes to support above activities in national interest. Ultimately the

consumer, general public, has to bear the burden of tax.

Public

What do public want?

Public as consumers trigger transportation activity by demanding products and services

of high quality from all over the world at minimum cost. They have concern for safety as

accidents of various kind have been a bye product of transportation. Degradation of the


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environment is another threat about which public are concerned as transportation is at the

root cause of many such concerns. Eg. Degradation of atmosphere and water, rise of

noise levels, oil spills due tankers carrying cargo of crude oil.

When these parties with separate and distinct interests interact transportation environment

is created.

Conflict of interests raises issues that interrupt smooth transport of goods in the country.

Government as the main arbiter steps in to iron out these differences in the interests of

business.

What is transportation mode?

Mode of transport identifies transportation method or form. The vehicle used indicates all

other parameters of the mode. If ship is the vehicle used, then we know that it is

associated with other parameters of transport like water, ports etc. There are several

options available now for moving goods and services from one place to another. These

modes have emerged over a period of time representing changes in technology and

contemporary business environment. Science & Technology have played major role in

development of these modes and relevant infrastructure. March of bullock cart mode to

mode of aviation is the contribution of Science & Technology to logistics performance.

Mode selection is an important decision in transportation strategy as it has an impact on

cost transportation. Rail, Road, Water, Pipeline & Air are well known modes of

transport extensively used in logistics. Various important features of these modes like

transportation time are discussed elsewhere in these notes.

We can say such important features are, transit time, risk or liability, smoothness of

passage & flexibility

Impact oftransportation mode on other costs associated with transportation

Movement costs: cost of power to drive the vehicle of transport depends on the

mode selected

Inventory costs : It is quite clear that inventory holding costs are temporal costs and are

directly proportional to the transit time. Longer the inventory is in transit larger are the

costs. Transit capital remains blocked during transit time and unavailable for use. Mode

of transport determines the transit time and thereby influences these costs


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Obsolescence: Specially, when the transit time is quite large the inventory can become

redundant when it arrives at the point of use. We know that in the changed environment,

product life cycles are shrinking and hence this cost becomes highly relevant. Other

situations are product deterioration time & expiration date of the product.

Packaging: These costs are mode dependent as bad road condition needs robust

packaging and smooth transit does not need such packaging. This will also depend on

handling system.

Insurance: This cost obviously proportional to risk of damage and loss in transit as this

is the liability of carrier.

Breakage: This depends on smoothness of transit and handling system associated with

the mode.

Pilferage: This cost can be eliminated by switching to options like container transport

Customer Service Costs: Shortage of product when demanded by the customer

leads to customer dissatisfaction and thereby loss of sale for the company. So customer

service should be raised to be able to meet customer expectations. When we try to raise

customer service level costs are incurred. Conventionally, companies stockpile to raise

service level. But the current thinking is to reduce response time to customer need rather

than increase the stock, as costs of inventory are well understood. This is done by

improving information flow to anticipate demand and reduce transit time by changing to

fastermode of transport. The second method is cheaper than the conventional. But rise

in customer service beyond a certain level does not result into increased revenue. In other

words it is only cost and not value.

Transport infrastructure

Infrastructure is the main facilitator for any activity to take place. For transportation to

take place a strong infrastructure is primary. If this infrastructure is inadequate

transportation gets slowed down resulting into a major obstacle in the growth of trade and

business in that area.

Elements of transportation infrastructure

Terminal facilities - well maintained loading unloading facilities, space for movement of

vehicles, platforms, railway yards

Vehicles- trucks, ships or wagons depending on the mode. Their size, shape & speed


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Right of way- passage to move on. Rails, roads, airways, limitations on speed, weight,

height etc. If we use this particular passage.

Prime movers the powerhouses moving the vehicle of transport shortage of which

seriously affect transportation. Shortage of good locomotives impairs the utility of

railway as a mode of transport.

Carrier organizations are the transportation service providers in business.

Transportation is their core business. Good service provides a vital fillip to business and

trade. Railways, roadways, airlines, shipping lines are service providers.

What are various features of modes or modal characteristics?

Modal characteristics are features of a particular mode that indicate the relative

importance of that mode. By measuring these features one can determine the relative

importance of each mode.

How do we measure relative importance of each mode? We measure relative

importance of each mode as of now or over a specific time span by measuring the modal

characteristics. Importance is the popularity or wide spread usage of this mode in

business. Modal characteristics are System mileage, Traffic volume, nature of traffic

composition and revenue.

System mileage: Mileage covered by the modal net work. Like total length of roads in

the road network in miles or kilometers is System mileage for road as a mode. This

measure explains to what extent road is being used or how popular in business as a mode

of transport today.

Traffic volume: is the amount of ton kilometers moved by a mode. This is a better

measure as this indicates the tonnage shipped by this mode as well.

Revenue: is the amount of transportation business in rupees or dollars transacted by

a mode. In simple terms how many rupees worth material is shipped in this mode.

Nature of traffic composition: what variety of goods are moved by this mode is a

measure to indicate the spectrum of goods handled. This speaks of the flexibility of the

mode.

RAIL NET WORK


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Rail network is fully owned and operated by the government in India. This a major step

for facilitating movement of goods through out the country at a very low cost for

promoting trade & business in the country. Rail net work stands for maximum tonne

kilometers moved in India now, thereby being an important mode of transport in the

country. Rail network accounts for 226 billion tonne kilometres and 55.8% of total tonne

kilometers moved in 1982 in India. If we try to compare these figures with US a much

more prosperous economy, we find that 37.4% of ton-miles moved were by rail in 1990.

Post world war business experienced auto boom and rapid spread of road network in the

US. As a result rail net work is facing very stiff competition there. This trend is quite

relevant in India too which has forced the railways to assume a friendly posture in terms

of service offered to customers who were taken for granted by the administration until

now.

Rail n etwork needs a high capital investment due to right of way, switching yards,

terminals but it operates with low running costs. To capitalize on this basic advantage

railways focus on specific products rather than on broad range. Wooing raw material

extractive industries that are away from waterways is an example of this customer

friendly policy. In the US, inter modal transport by railways through alliances and

acquisition is practiced to provide hassle free service to customers. We can see an

example of this practice in courier business. Various modes of transport are used for

taking the parcel to the addressee by this business.

Development of Specialized Equipment: as a result of above change in thinking several

special equipment are developed to attract customer in an environment of competition.

All of these are in vogue in the US and some can be seen in India. It will not be very long

before we see all of them here.

Enclosed tri-level automobile car

Cushioned appliance cars

Unit trains - entire train carrying a single product that can go directly to the customer

without getting shunted off in marshaling yards.

Articulated cars - flexible units with extended chassis that can hold ten containers.

Double stack containers- containers in two levels


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Nodal points in distribution system

[ref. KKK, pages [343 to 350]

In the context of Indian economy, in spite of liberalization, state exercises immense

influence on the national economy. Bulk of material transported is either produced or in

some form controlled by the state. Such materials are coal, steal, fertilizer, cement etc that

are to be made available at consumption centers. On the other hand, state also has the

responsibility to distribute essential commodities through the public distribution system

[PDS]. Hence the responsibility for logistics of those items falls on the state. State also

owns the network of railways that encompasses entire country. Rail network is the

cheapest mode of transport for hauling bulk material in the country. In the value chain of

such commodities, if the state develops some facilities or nodes, large amount of benefit

may be derived by way of movement consolidation. State owned rail network could link

these nodes to the best advantage of state and thereby to that of national economy.

Problems of our distribution system are well known what is produced never reaches the

consumer in time and in good shape. Hunger deaths in a country that is self sufficient in

food production is the indicator of our national logistical performance.

Some characteristics of nodal points are as under.

1. Nodal points should be closer to consumption points.

2. Number of nodal points would depend on volume of distribution. Too many would

be costly and too less would not make the desired change.

3. Nodal points should be well connected by rail network. Terminal and shunting

facilities are required at these places. There should be facilities for loading, unloading,

necessary facility for inter modal handling. Shipments from the nodal points would be by

road in trucks or bullock carts

4. Nodal points should be connected to consumption centers by roads

5. Normally, nodal points are district headquarters where necessary operational support

can easily be available.

6. Nodal points service an area with a radius of 100kms. So, generally 200kms separate

one nodal point from another.

Development of such nodal points in the country would give a shot in the arm to

logistical operations in the country for essential commodities and bulk materials.


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ROAD TRANSPORT

Road transport is rapidly pulling the carpet from under the feet of railways, as we saw

earlier, post world war. Its popularity is growing everyday. I n India, roadways moved

179.2 billion tonne kilometers in 1982. This is 44.2% of total tonne kilometres moved by

all modes as against 55.8% by railways. Important features of this mode of transport are

discussed below.

High flexibility and speed: this is the strength of roadways. No other mode can connect

any given pair of shipper & consignee as roadways. Nor any other mode can handle the

variety as roadways do. As there is no need for shunting and waiting for, as in railways

road transport reaches the goods to the consignee very fast.

Ultimate mode of transport: irrespective of the mode chosen ultimately theconsignment reaches the doorsteps of the customer by road

Low capital cost as compared to railways: railways obviously need huge amount of

capital for setting up the infrastructure needed for movement of goods by rails.

This feature along with flexibility forms the formidable strength of this mode.

Operating costs are higher:due to fuel requirement and higher labor requirement. This

feature makes roadways ideal for small shipments over short distances.

Occasional fuel shortages: as the fuel is not available in full measure in the country

internally, scarcity is experienced once in a while.

Disputes with government: on account of conflicting interests between the parties to

transportation decision. We have experience of transportation contractors or carriers

going on strikes to project their problems with the government.

Vehicle availability: limited availability of trucks poses a constraint. Now as more and

more truck manufactures have come into business this difficulty is likely to be short

lived.

Maintenance and spares costs and availability of service facilities: as the road

network is quite extended and reaches deep in the rural India non-availability of such

services is a problem.

Octroi: is a long-standing grouse of carriers. Octroi posts are notorious for delays and

harassment of carriers


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Old Motor Vehicles Act: the legislation that controls movement of vehicles on the roads

is an important law for this business. There is a feeling that this law is now outdated and

new legislation should made to tackle the challenge of current business environment

Bad and unsafe road conditions: pathetic condition of our roads a major stumbling block

for business which causes delays, accidents and damage.

Restrictive permits: carriers resent restrictive regime of permits and licenses imposed by

the government all over the country.

Developments in this area

Entry of several manufacturers of trucks and trailers is relieving the strain from this

business. Construction of expressways and a national grid of highways is another

important step in this direction.

WATER TRANSPORT

This mode is the link between countries separated by water. Business is known to have

existed between far off lands for a long time in the past. Sailing vessels existed since far

away times. Mechanized water transport came into being in the form of steamships since

1800, diesel driven ships came into existence since1920. Water transport is classified into

deep-water transportation and navigable inland water transportation or domestic water

transportation on lakes, rivers or canals. Main advantage of water transportation is its

capacity to move extremely large shipments at a very low cost. Inland water Transport is

not used to its full potential in India although we have used mechanized Inland Water

Transport [IWT] since early 1800. Lack of policy, lack of clarity in thinking receding

water levels in rivers and tough competition offered by other modes of transport appear to

be the hurdles. Main features of water transport are the following.

Low capital costs and low operating costs

Low speed

Capacity to carry huge bulk

Limitation due to availability of harbor

Maneuverability is low due to size

Deep-water ships designed for ocean and lakes are limited to deep-water ports

Shallow water vessels like diesel towed barges are flexible but are limited by their

range of operations and speed


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PIPELINES

What is transported in a pipeline? Generally liquids like oils, crude, petroleum productsare transported in a pipeline. In India pipelines are extensively used for transporting crude

and petroleum products. More than 5,000 km of pipeline exists in India for crude and

petroleum products. In addition to the products above slurries, gases, vapors and solids in

powder form are also transported in pipelines.Slurries - coal slurry, iron ore, lime, huge quantity of water is necessary which is a

concern for environment, In India pipeline is used for transporting iron ore.

Gases and vapors - natural gas, LPG, in India LPG pipeline is in existence.

Pulverized dry bulk material - cement by hydraulic suspension

Main features of this mode of transport

Reliable all weather means of transport

Low energy consumption

Pipeline being under ground space occupation is minimal

Pipeline operates all the time except when it is shut down for maintenance

No empty container or wagon to be brought back

Highest fixed costs, due to right of way and laying of pipeline, and lowest

operating costs [not labor intensive].

Not flexible by nature. Pipe lines are stationary

Physical state of the commodity to be transported is a limitation.

This mode of transport can release capacity of other modes for transport for essential

commodities

ROPE WAYS

Used for transporting materials in hilly and otherwise inaccessible area. Fruits produced

in hilly area are brought to the low land for further transportation to consumption centers.

This mode is good when gradients are steep as road or rail would take a very long route

to negotiate the gradient. Rope way causes minimum ecological imbalance. Rope way

connects point of supply and demand by shortest route.

AIR TRANSPORT

Generally, this transport mode is used in emergency rather than in normal times.

Speed of transport is highest

Fixed costs are lower than rail or road or pipe line. But operating costs are highest

Air transport brings distant markets closer - perishables market in gulf countries


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Overcomes the hassle and cost of setting up depots and service centers overseas

Full potential of peak seasonal demand can be exploited.

Moving entire facility to meet peek demand.

Test marketing is easy. Products can be shipped directly from the factory as time

is of high importance

Freight rate structure

Freight rates are transportation rates charged by carriers for shipping the goods to the

consignees premises. These rates are structured round some principles. Some of the

principles are commercial nature and some of them are structured by the state.

Principle of freight rates:

1. Should cover actual cost of transportation: fundamental principle is that the rate

should cover the cost without fail.

Factors influencing cost of transportation

A. Fixed costs:

Interest on capital invested in the fleet

Depreciation

Insurance premium

Administrative overheads and expenses on fixed facilities

B. Semi fixed costs:

Salaries of the staff

Miscellaneous maintenance expenses directly related to running of the transport

vehicle.

C. Variable costs:

Cost of fuel and lubricants

Maintenance directly attributable to a particular trip. Damage to the vehicle and also

the cargo. E.g. Hilly roads, bad roads, war effected sea routes

2. Vehicle utilization: Carrier likes to gain maximum mileage out of his vehicle. If

vehicle is idle it is a big loss to the carrier organization. Hence the carrier would like to


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run his vehicle at top speed to cover max. Distance at min time. While structuring the

rates carrier would like to charge more if opportunity for maximum utilization is limited.

Quote higher rates if following are not conducive to the above

Road conditions are bad. Hence vehicle can not be driven fast.

Terminal detentions [congestion, formalities, for loading unloading (handling) etc.]: a

delay at the terminal brings down vehicle utilization as the vehicle is idling. If the

destination is known for this kind of delays carrier would charge higher rates.

Obtaining a return load [market factors]. If the destination does not offer opportunity

for a return load carrier asks for a higher rate as would not be able to utilize his vehicle

during return trip. Normally if the destination is a production center one would always

find return trip to consumption center. But the other way round probability of return load

is very low. O

Nature of goods, hazardous, corrosive[liability, insurance]. Such goods are detrimental

to the safety of the transport vehicle and operating staff. Hence rates are high when such

goods are shipped.

Density, consignment light by weight: when the consignment is light by weight the

truck becomes full without full load being loaded. Hence the carrier doesn't get paid for

the full load. So he hikes his rates when the consignment is light.

Stowability, shape and size of the product. When the load has an odd shape speed of the

vehicle is reduced to accommodate the center of gravity. This brings down the utilization

apart from being risky.

3. Traffic Bearing Capacity: transportation adds value by making the product available

to the customer. But the cost incurred by the shipper while transporting should not

outweigh the value added. The carrier structures rates keeping this principle in mind.

4.

Public use: state introduces the principle that the transportation of essential commodities

should be done at a lower rate.

5. Government Policy: freight rates are controlled by the state for promotion of certain

type of trade and development of certain type of industry as per the industrial policy


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prevalent at that time. Freight rates are hiked or depressed by state the to meet the

objectives of the policy.

6. Profit: Freight rate should cover costs of operation, capital investment and margin for

reasonable return on investment. It should also compensate entrepreneurial time and

efforts.

Business should generate enough funds to provide for future development of business.

The freight is expected to generate enough money to cover all these requirements.

Selection of Carrier

Following care is to be taken while selecting a carrier for shipping the consignment to the

consignee.

Shipper should carefully see constitution of the carrier's constitution to assess what

kind of an organization he has to deal with. Is it professional? Family or proprietorial?

Volume of business or business turns over, to get an idea of the infrastructure the

company can afford to provide for business.

Area of operation, the length and breadth of business, the extent to which the carrier

can reach the goods in the country.

Branch offices or associates' office. Check if the carrier can manage his his

operations at far away places through the network of own offices or the offices of

associates.

Strength of fleet. The size of fleet owned by the carrier which can be committed to

business at any given time.

Ask for up to date clients list for seeking the opinion of other clients of the carrier.

Ask specifically for list current clients, for ascertaining reliability.

Type of business the carrier is doing will indicate if the carrier is suitable for the

shipper.

The average transit time quoted by the carrier for some well known destination.


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Record of claims settlement by carrier to know how good or bad the carrier is whenever

there is a claim settlement

Reference from other shippers' banks, carriers' associations as a measure of confidence.

Transportation policy

Before one tries to formulate transportation policy for his company one should

understand components of transportation decisions. Transportation decisions weigh

cost/benefit with respect to these components before finalizing the choice which would

ultimately formulate the policy.

Components of transportation decisions

Mode of transportation

Air - most expensive, but very fast

Road - relatively quick and inexpensive, highly flexible

Rail - An inexpensive mode for large quantities

Water - the slowest but most economical for large overseas consignments

Pipeline - primarily for oil and gas

Transportation decision here is selection of mode for transportation of goods from our

company

Route and network selection


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Route is the path the product takes and network is locations and routes along which a

product can be shipped. In this case, the transportation decision is selection of network.

Carrier in house or out sourced

whether product owner performs the function or out sources it.

Trade off - customer service efficiency & growth in business

Improvement in customer service level cost

money to the company. But improved service level ensures customer loyalty and growth

in business. But improvement beyond a certain level may not result into benefits

proportionately. We have to identify this level and should not expend resources for

improvement beyond this point.

Trade off - cost of transportation and cost of inventory

Transportation decision is about establishing the trade off point between cost of

transportation and cost of inventory. Increased transportation cost results in savings in

inventory cost as increased transportation cost crashes transportation time. But the benefit

ceases after a point if you go on increasing the transportation cost. This is the point of

trade off which should be identified and we must stop increasing transportation cost

beyond this.

Above decisions form the core of transportation policy

Transportation network options

DESIGN OPTIONS FOR A TRANSPORTATION NETWORK

Retail

storesRetail stores

Supplier

SupplierRetail stores

supplier

Suppliers


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Retail stores

MILK RUNS FROM DC

Retail storesALL SHIPMENT S

VIA DC

DIRECT SHIPMENTDIRECT SHIPMENT WITH MILK RUNS

Supplier

NETWORK

STRUCTURE

PROS CONS

DIRECT

SHIPPING

NO DC

COORDINATION

EASY

HIGH

INVENTORY

SIGNIFICANTRECEIVING

EXPENSE

DIRECT

SHIPPING WITH

LOWER TRANSP

COSTS

INCREASED

COORDINATION


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MILK RUNS SMALLER INVENTORY

COMPLEXITY

ALL SHIPMENTS

VIA DC WITH

INVENTORY

STORAGE

MOVEMENT

COSOLIDATION

INVENTORY

COSTS

INCREASED

HANDLING INCREASED

COORDINATION

COMPLEXITY

ALL SHIPMENTSVIA DC WITH

CROSSDOCK

LOWINVENTORY

MOVEMENT

COSOLIDATION

INCREASEDCOORDINATION

COMPLEXITY

ALL SHIPMENTSVIA DC WITH

MILK RUNS

LOWEROUTBOUND

TRANSORTATION

COSTS

INCREASEDCOORDINATION

COMPLEXITY

TAILORED

NETWORK

TRANSPORTATONSUITES TO

INDIVIDUAL

NEEDS

STILL HIGER

COORDINATIONCOMPLEXITY

A logistics manager's options for scheduling and routing decisions are

v Direct shipment network- From shipper directly to retailers.

Features:

1. Warehouses are eliminated, as the dispatch goes directly to retailer warehouses are

redundant, inventory in the warehouse and warehouse costs are gone

2. Long route, hence low cost, as the distance is long cost per unit is expected to be low.

3. Simplicity of operation, as the network is simple as it consists of only shipper and

retailer management of operation is simple.

4. Time of transportation is short, in the absence of warehouse product moves directly.

5. Decision points are quantity and mode, no other decisions are relevant.

6. Decisions are on dispatch to dispatch basis, directly connected to customer's schedule.

Mode and quantity decisions can be changed from dispatch to dispatch

7. Inventory costs and receiving costs are high, inventory will have to be held at

customer's place to cover transportation lead time. Customer also will have to receive

consignments directly from the supplier.


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Direct shipping with milk runs:

1. Single supplier to a number of retailers - deliver like a milaakman.

2. From a number of suppliers deliver to a single retailer

E.g. Toyota plant in US

Features:

1.Movement consolidation

2. Truck utilization

3. Transport cost reduction

All shipments via Central Distribution Center

Suppliers send the supplies to Distribution centers and Distribution center caters to the

needs of retailers.

Features:

1. Supply to DC with movement consolidation results into supply chain costs reduction

when distances are large.

2. DC stores inventory and acts like a transfer point for supplies to individual retailers

4. Economies of scale in inbound transportation to DC.

5. From DC Outbound transportation cost is low as retailers are close to DC

Shipping via Distribution Center Using Milk Runs

Small lot sizes to large number of retailers from DC.

Features:

1. Consolidation of small lots - reduction of outbound transportation cost

Tailored Network

Tailor made to the company needs. This may be a new network synthesized from above

models. Or for some logistical mission one model and for some other mission another

model.

Features:

1. Matches the needs of the company

2. Coordination is complex. As the tailored network is synthesized management may

involve several decisions.


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Inter-modal transportation:

In addition to the five basic modes of transport, a number of intermodal combinations are

available to the shipper. The more popular combinations are TOFC [Trailer On Flat Car]

and COFC [Container On Flat Car]. Intermodal movements combine the cost and/or

service advantages of two or more modes in a single product movement. Benefits of long

haul, short time & flexibility are optimized for achieving overall cost reduction

RAIL

COMMON

ROAD

COMMON, CONTRACT, EXEMPT, PRIVATEWATER

COMMON, CONTRACT, EXEMPT, PRIVATE

AIR

COMMON, CONTRACT, EXEMPT, PRIVATE

FISHY BACK

TRAIN SHIP

AIR TRUCK[BIRDYBACK]

PIGGY BACK

LAND BRIDGE

LAND [RAIL OR ROAD]

WATER OR AIR

WATER OR AIR


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Containerization

[kkk pages 350 to 362]

Containers were introduced in US during 1955 and in India during 1960

Features of a container:

1. Robust but still light to ensure several handlings during unbroken transport of

goods by several modes

2. Equipped with fittings to facilitate safe and easy handling

3. Easily be stuffed or unstuffed in a short time


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4. Water tight and air tight outer shell

5. Internal lining that doesn't buckle under temperature and can be easily cleaned

6. Watertight flooring, air tight door seals and locks

7. Insulation to protect refrigerated cargo. Interior washable to required hygienic

standard

8. Construction to allow circulation of air around cargo. Potential areas for

containerization are food stuff

Universal advantages of container as a packaging unit

1. Reduction in loss, pilferage and damage of goods

2. Reduction in paper work

3. Expedites door to door pick up and delivery

4. Eliminates multiple handling of contents as this is shipped as a single unit

5. Consolidation of movement of small lots

6. Standardization of handling methods and equipment

7. Reduction in packaging cost as container itself acts like a package

8. Optimizes the services of various modes. Container can easily be transshipped.

Benefits of owning containers by product owners

1. Ensures supply of containers

2. Product specific internal fittings can be provided

3. Reduction in transportation costs if the traffic is two way

4. Control of internal cleanliness as per product need

5. It can be used for delivery after arrival

6. Good storage system

Major benefits of containerization to business

1. Integration of various modes of transport

2. Reduction in handling time and thereby turn around time of vehicles

3. Standardized size of containers reduces reduce capital as well as operational costs

4. Reduction in packaging cost as container itself is a robust packaging

5. Need for enclosed warehouses redundant


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6. Regularity and reliability of transport service

Infrastructure of containerization

1. Deep water ports

2. Mechanized handling equipment

Roll On/Roll Off [RORO]

High cost of lifting a container from the truck and loading on to a ship made logisticians

look for a new idea. Concept of RORO is driving the truck loaded with the container

directly on to the deck of a ship and driving off the deck on reaching the destination.

Truck loaded with container uses the ship as a mobile bridge! You may have seen

passenger buses rolling on to ferries and rolling off

after crossing the river.

LASH [Lighters Aboard A Ship]

All ports are not accessible to deep water vessels. The deep water ships stand a long way

off on sea. Cargo from shallow ports is loaded on the barges, the barges are towed to the

ship. The huge crane of the ship lifts the entire barge and places it on the deck. After

reaching the destination barge is placed on shallow waters to reach the port.

Inland container depots

Inland Container Depots [ I C Ds ]

ICDs are dry ports. Dry ports at a distance far away from the shoreline handle all the

import export formalities. ICDs act like deep-water ports installed inland or interior

where the natural benefit of shoreline is non-existing. This a large warehouse where

containerized cargo is accepted for export. The exporter books his cargo at an ICD and

completes all export formalities. Thereon ICD moves the containers by movement

consolidation to natural port. Cargo crosses the dock and goes into the waiting ship.

connect major ports [able to handle container ships] to hinterland. Hinterland is

deprived of natural deep water ports because of geography. This hinders exports.

Congestion gets created at natural deep water ports when export cargo arrives from

hinterland. Deep water ports being limited in number suffer congestion as deep water

ships carrying export cargo dock only at deep water ports.


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facilitate customs clearance, export import formalities. ICDs ensure that businessperson

does not have to go to the deep water ports with his cargo for clearing import/export

formalities.

ICD to be located after ascertaining export import potential and good road network. One

of the objectives of creating ICDs is to facilitate harnessing export potential of hinterland.

Hence this location analysis is essential.

Serve as consolidation facility and should have handling equipment. Facility to group

small consignments and create container loads needs handling equipment.

goods transfer from road to rail and otherwise. Inter modal transfer is a major operation

in an ICD. ICD consolidates consignments arriving by trucks and transfer the cargo in

containers to another mode, say rail for onward movement to a natural port.

increase the export potential of industries in the hinterland and also simplifies import of

goods by hinterland.

Decongest major ports. This is another benefit provided by ICDs which is of immense

importance for a country with weak infrastructure like ours.

Benefits of containerization can be fully exploited only when we have a good net

work of ICDs [Inland Container Depots]

While most of the bulk goods are transported by rail, all other goods are transported by

road.

Although Rajasthan is a land-locked state, four inland container depots (ICDs)

at Jaipur, Jodhpur, Bhiwadi and Bhilwara, along with an air cargo complex at

Jaipur's Sanganer Airport act as efficient and convenient gateways for outbound

cargo. The customs department, shipping companies, handling agencies,

surveyors for authentication of stock, banks, customs house agents and clearing

and forwarding agents are all based at the ICDs.

The infrastructure at the ICDs has been strengthened with the deployment of

better equipment. This has resulted in the quicker handling of containers,

reduction of transit time from ICDs to ports. Of the total export cycle time, the

dwell time is down to 1.9 days, compared to three days at other ICDs.

Tariff at the Jaipur and Jodhpur ICDs has been reduced by 20 per cent, recently.


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The air cargo complex provides facilities for customs inspection and shipment

of non-bulk goods for exports by air. To overcome the problem of a limited lifting

capacity of Indian Airlines, a scheme of bonded trucks has been started.

JNPT is directly connected to the following Inland Container Depots:

Ludhiana Delhi

Kerala Sabarmati

Nagpur Pune

Mumbai (Wadibunder) Hyderabad

Chinchwad (Pune) Visakhapatnam

Bangalore Muradabad (U.P)

Chennai Kolkata

Jaipur Pitampur (M.P )Jodhpur Aurangabad

Baroda Kanpur

Mirage Malanpur

Kandla Agra

Mulund --

Documents

2[1]-277 TRANSPORTATION MANAGEMENT