World Class Transportation & Modes of Transportation

World class Transportation• In order to manage international logistics ,it is

fundamental to have a good understanding of the transportation alternatives open to an international shipper.

• Customers are now geographically dispersed.• Emerging and established global markets now

demand higher quality products at lower cost in shorter period and also in right form.

• So transportation plays a very vital role and it can be described as a circulatory system of entire trade across the globe.

Continuation• Transportation provides an opportunity for growth

under competitive circumstances.

• Efficient transport system facilitates companies to exploit economies of scale.

• Facilitates deeper penetration into various markets which are far away from the point of production.

• More efficient and lower the transportation cost ,the lower is the selling price.

Principles of transportation function• 1. Continuous flow

One of the prime objectives of transportation is to provide for the uninterrupted flow of products from the producer through each node in the distribution network to the consumer. Transportation in order to fulfil this objective ,must pursue ways and technologies to increase efficiency while reducing cost of service.

• 2. Optimize unit of cargo Proper use of transportation requires that the cargo being

transported effectively optimizes transportation vehicle capacities. This principle seeks to ensure that transporters are utilizing the best choice of vehicles ,material handling equipment and manpower that provide the best service for the price.

• 3. Maximum vehicle unit.

As the size of shipping load grows larger ,the capacity of transporting vehicle should grow accordingly. but in actuality it may not happen so because of vehicle capacity limitation. So larger shipment should be split into smaller multiple shipments. It results in increased cost .

• 4. Adaptation of vehicle unit to volume and nature of traffic.

• This principle requires that transportation vehicle size ,weight, storage capacity, and speed be optimized to permit as free as possible, a flow through traffic medium.

• 5.Standardization

• If standard is fixed the existence of standardized vehicles provide an economical method of transportation. standardization provides low cost because of their general availability, capacity to handle a wide variety of products.

• 6. Compatibility of unit load equipment

This principle states that material handling equipment should be placed in transport vehicles and further more the containers to be readily fit and maximize cube space. The equipment should be placed so as to minimize damage to the cargo and reduce load shift during transport.

• 7.Minimum of dead weight to total weight.

This principle states that the ratio of deadweight to total weight to be minimum. Here the components like cost of fuel, products being transported are referred to as pay load while weight of vehicle ,containers and material handling equipment is referred to as dead weight. Normally as the vehicle becomes larger the ratio of pay load to total weight becomes more favourable. The dead weight can be decreased by using light weight materials and vehicles design.

continuation

8. Maximum unitization of capital, equipment and personnel

• Factors like transport vehicles design, routing and scheduling and operational practices can significantly impact the effective utilization of transport resources. The main objective of transport management is to reduce inefficiencies in these above stated practices.

continuation• Transportation objectives

• Manufacturer should decide the service level that the company can offer based on the expectations of the customer.

• Costs incurred at which these services can be provided.• Level of flexibility and control over transportation

activities• Trade off between customer service levels and costs.

• Selecting mode of transportation

• Identify various modes of transportation available in the market.• Decide on single mode of transportation or inter modal

transportation.

• Main types of modes are Common carriers. Contract carriers. Private carriers. Freight forwarders. Speed post • Transport functions • Depending upon the mode selected functions to be performed by

logistics manager varies.

Evaluation and control • The reason for setting objectives before choosing the mode was to have

a bench mark with which to compare our actual performance. This is important to allocate and monitor resources.

• The efficiency of the transport system can be measured by using the following tools

1. Customer perception measurement This can be measured by a simple survey on efficiency in terms of order

cycle time, information, availability, quality and order fulfilment.

2. Best practice bench marking. Companies use this measure so as to evaluate their efficiency with that

of market leader and its competitors. In this technique various transportation policies, processes and practices are reviewed with those of a comparable organization.

continuation• Customer satisfaction measurement.

• It measures the company’s ability to provide perfect order., that is ability to fulfil an order by the requested rate ,with actual rate documentation and in perfect condition.

• If a company finds variance in bench mark and actual performance then it takes corrective measure to reduce these variations.

Transportation documents• 1. Bill of Lading A bill of lading is a fundamental international shipping

document used in ocean transportation. It is also referred as ocean bill of lading. It is a contract of carriage used for the shipment of containers, automobiles, crates and any form of cargo that does not require the capacity of entire ship .BOL is very important because it fulfils three roles in an international transaction.

1. It is a contract. 2. It is a receipt for the goods. 3. It is a certificate of title .

BOL is negotiable. in other words ,it allows the sale of the cargo while it is at sea

Uniform BOL

• The uniform BOL is a document which fulfils the same functions as an ocean BOL ,but it is used either for inland transportation between the exporters place of business and the port of departure or for land transportation between the exporter and a foreign customer. it is also a straight BOL.

Intermodal BOL

• This document is of a very recent origin because of the substantial increase in the number of international shipments in which the exporter delivers the goods to a carrier who will arrange for the transportation and delivery of the shipment until its final destination. Since the shipment takes more than one mode of transportation it is known as intermodal shipment. This is also a straight BOL in most cases.

Air way bill

• An air way bill is a document that fulfils the same function as an ocean bill of lading and applicable to air freight. it is a straight bill and non negotiable.

Charter parties

• Whenever an exporter ships bulk quantities like oil, ore, grains, polymers, cement, sand, sugar and so on an entire ships often necessary to accommodate the goods. In those cases the contract between carrier and the shipper is called a charter party. charter parties can be of two types.

1.voyage charter party

2. Time charter party. Contract of affreightment (one shipment every other

month), bare boat charter party are other types of contracts.

Packing list

• A packing list always accompanies the shipment. it is a detailed document provided by the exporter that spells out how many containers there are in the shipment and which merchandise is contained in each container etcetera.

Shipper’s letter of instruction

• A shipper’s letter of instruction is delivered to the shipping company if the shipper wants specific steps taken during the transport of the merchandise.

Shipment of dangerous goods

• There are such an extensive number of regulations that can affect a shipment of hazardous goods so it is always best to entrust a specialized shipper to handle the paper work associated with such a shipment .it is a complex process it understand various procedures, rules and regulations.

Manifest

• Manifest is a document created by the shipping company, which lists the exact makeup of the cargo. Its ownership, its port of origin and its port of destination. specific handling instructions and so on.

Electronic data interchange

• Alternative way to send documents overseas is through electronic data interchange. it is not a fax or an e mail.

• Edi is an electronic exchange of documents ,from computer to computer , following a format to which both the sending and receiving parties have agreed.

Third party Logistics (3PL)

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Third Party Logistics

• “Third-party Logistics is simply the use of an outside company to perform all or part of the firm’s materials management and product distribution function.”

-- Simchi-Levi (2000)

• “A relationship between a shipper and third party which, compared with the basic services, has more customized offerings, encompasses a broad number of service functions and is characterized by a long-term, more mutually beneficial relationship”

-- Murphy & Poist (1998)

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Third Party Logistics

In-house Logistics Department

Shipper

Transportation

IT support

Warehousing

Others

In-house Operation

Outsourced Operation

3PL

Shipper

Shipper

Shipper

Transportation

Warehousing

IT support

SC integration

Others

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3PL Providers

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Characteristics of 3PL• Perform outsourced logistics activities

• Process management / Multiple activities

• More customized services

• Mutually beneficial and risk-sharing relationship

• Long-term commitments (1~ 3 years)

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Why Use 3PL?

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3PL Vs. Transportation Services

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Models of 4PLA) Lead logistics provider: The 4PL provider acts as an in house freight management company, it might or might not have a role in the selection of 3 PL partners. It takes care of transport invoicing and the monitoring of the performance of the 3 PLs.

B) Solution Integrator: In this variant of the model, the 4PL acts as the integrator of various 3PLS and as a single window for freight negotiations, 3PI selection and freight management on behalf of its client.

C) Industry Innovator: Under this model the 4PL uses its expertise and resources to create a solution not for any single client, but for offering 4PL services to a number of clients in an industry.

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Services Offered by Third Party Logistics Providers

Standard Advanced Complete

Warehouse managementTransportationDispatchingDelivery documentationCustoms documentation

AssemblyPackagingReturnsLabelingStock accounting

Order planning and processingIT managementInvoicingPayment collection

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Why is it Needed?• Advantages

o Cost reductiono Focus on core competencyo Improved efficiency, service and flexibilityo Industry-specific application – “built-to-order” systems and e-merchants

• Penetrate new markets• Reduce the inherent financial investment risks associated with

owning logistics assets like trailers and warehouses.• Coordinate producers and distributors within a global approach.• Access new technologies, sophisticated warehousing operations, or

new delivery options.

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Services by 3PL

• Basic services• Physical contract logistics services• Management contract logistics services• Integrated contract logistics

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Associated Risks

• Strategic risk- same services to competitors

• Commercial risk- manufacturer reputation and future

orders are in hands of 3PL

• Management risk- Costs and real value of service

provided must be visible at both the ends.

When to opt for 3PL• The prerequisite for the company before hiring a

logistics provider is to explain him clearly as what is expected out of his services.

• In logistics terminology it is known as ‘Base case’. The base case is defined as the situation the company presents before the arrangement with a 3PL ,in terms of the metrics it considers relevant for its performance.

• Generally there are four dimensions a company looks into before deciding to outsource the services of logistics service provider.

Continuation. They are• 1. Company needs (is logistics a core competence ?)

• 2. Tangible values( are there any measurable advantages?)

• 3. Management commitment

• 4. Provider capabilities.

Viewing seriously all the above dimensions with other company specific requirements involves an overall evaluation of the entire logistics system, including inbound, in plant and outbound logistics.

Modes of TransportationInternational Ocean Transportation

Liner ships• Liner ships undertake regular voyages.• They follow a pre established schedule & call on pre-

determined ports.• The scheduled trip could be between point to point or RTW

(round the world)• They are either east bond or west bound passing through

panama canal or Suez canal.• Depending upon the route they undertake there are many

types of liner ships• Size and equipment depend upon the type of port they visit.• Type of vessel also depending upon the specific cargo it

carries in a particular route.• Ships are also classified by their size which is expressed in

tons.

Modes of TransportationInternational Ocean Transportation

Tramp Ships (on the basis of scheduling)• Tramp ship operates depending on the requirement

and dynamics of the market.• They do not operate on a regular schedule.• It moves wherever the company using the vessel

wants the cargo delivered.• Because of the way they operate, tramp ships usually

carry only one type of cargo at a time, for one exporter or importer.

Modes of TransportationInternational Ocean Transportation

Tramp Ships• Tramp ship operates depending on the requirement

and dynamics of the market.• They do not operate on a regular schedule.• It moves wherever the company using the vessel

wants the cargo delivered.• Because of the way they operate, tramp ships usually

carry only one type of cargo at a time, for one exporter or importer.

Modes of TransportationInternational Ocean Transportation

Panamax Vessel (on the basis of size)• Just pass through the locks of panama canal

• 75000 deadweight tonnage (DWT)

• Post Panamax vessels

Suez-max VesselJust pass through the locks of Suez canal 1,50,000 deadweight tonnage (DWT)

Panamax Vessel

Modes of TransportationInternational Ocean Transportation

Cape Size ShipsDry bulk carriers

DWT- 80,000 tons

VLCC• Oil tanker with upto 3,00,000 DWT

ULCCOil Carriers with more than 3,00,000 DWT

Cape Size Ship

VLCC

ULCC

Modes of TransportationDead Weight Tonnage (DWT)• Dead weight tonnage is the total capacity of the ship that

means the maximum weight of the cargo that a vessel can carry.

• It can be expressed in long tons(2.240 lbs)or metric tons(2240.6lbs)

• It is the measurement used by the companies in shipping the cargo and often referred as tonnage.

• It is measured using the weight of the difference in water displacement when the ship is empty and when it is fully loaded to its maximum.

• The dead weight tonnage includes the bunker and stores.• Bunker means the fuel that needs for the ship to travel• And stores means the supplies that it needs to function.

Modes of TransportationRegistered tonnage• The gross registered tonnage is the total volume capacity

of the ship expressed in hundreds of cubic feet. • It only measures the capacity of the ship below the deck

and does not include the cargo carried on above the deck. • This measurement is used generally to determine how

much tax a ship owner will have to pay to the country in which the ship is registered or to the authorities of the ports it visits or to the authorities of the canals it uses.

• Net registered tonnage means one has to delete the volume occupied by engine room, the crew, and other space necessary for the goods operation.

Modes of TransportationDisplacement tonnage

Displacement tonnage is the total weight of the ship ,when fully

loaded ,measured by the weight of the volume of water it

displaces.

Light tonnage

It is the weight of the ship measured ,measured as above

when the vessel is empty. Both are measured generally in

long tons.

Plimsoll Lines•Before understanding plimsoll lines we have to understand the term draft•Draft means when the ship is fully loaded how deep the ship sits in the water.

The deepest a ship can sit is called a tropical line.It is followed by summer line, winter line, and Winter North Atlantic line.Fresh water line is the line where in ship will sit lower in fresh water than it would in salt water with the same quantity of cargo.

All these lines are painted on the hull and forms a diagram called the plimsoll mark. The dead weight tonnage is generally determined at the summer line or at the line that represents accurately the conditions under which a ship is used.

Modes of Transportation

Types of Ships• Container Ships• RORO Ships• Break-Bulk Ships• Combination Ships• LASH Ships• Crude Carriers• Dry Bulk Carriers – agricultural products (OBO Ships)• Gas CarriersChartering NVOCC

Gas Carriers

LASH ShipsOBO Ships

International Air Transportation Low volume-high value, perishable, emergency items.

Most Expensive form of mode

Limited by space constrainTypes:• Passenger Planes• Combis• Air Freighters-liners with rollers• Charters

Combis

International Land Transportation High volume-low value, longer shelf life,industrial

items.

Trucks are used as main medium.

Limited by space constrainTypes:• 9 Tonners• 6.5 Tonners• Single axle trailers• Double axle trailers• Flat track trailer• Semi bed trailer• Containerized trailer

Semi bed trailer

International Land Transportation Rail transport• Carrying bulk freight including, coal, ore, iron, grains, oils

etc.• Break bulk freight placed in boxes, palletized or in simple

package.• Automobiles, placed on flat track racks.• Right now containerized cargo also is being transported

through railways.The main advantage of this transportation is carrying large

quantities, over long distances very economically. Rail road documents are honored by banks and are negotiable instruments. sizable insurance costs can be saved as railways claim settlement machinery is efficient.

Other Modes of Transportation

Pipeline

Barges

HovercraftsHovercrafts

International Trade• Growing demand in new markets.• Demand for foreign products• Convergence of market demand through

centralized manufacturing.• Removal of trade barriers• Manufacturers aiming for economies of scale• Specialized support available in the market.

(3PL)• Integration of the supply chain• Greater demand on suppliers• Changing practices in logistics• Improved communication among customers• Improved communication in business• Saturation in home market.

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