Modes of Transportation - Logistics Management | Logistics Management - B Com PDF Download

Modes of Transportation

1. Airlines

Air transport is mainly used for international transport and in emergency rather than in normal times.

Advantages:

1. It is the fastest mode of transportation.

2. Fixed costs are lower than rail or road or pipeline.

3. It brings distant markets closer.

4. It overcomes the hassle and cost of setting up depots and service centers overseas.

5. Full potential of peak seasonal demand can be exploited.

6. Makes test marketing easy – Products can be shipped directly from the factory

Disadvantages:

1. Most expensive – Operating costs are highest.

2. Generally used to transport small volume items.

3. Certain categories of items are not allowed

4. Require secondary mode of transport to deliver to ultimate customer

2. Water Transport

This mode of transportation is the link between countries separated by water. Water transport is classified into deep-water transportation and inland water transportation on lakes, rivers or canals.

Advantages:

1. Water transport has low capital costs and low operating costs.

2. Heavy and bulk goods of large quantities are transported by this mode.

3. Private or ‘for hire’ shippers available in water transport.

Disadvantages:

1. Water transport is limited due to availability of harbor.

2. Water transport is the slowest mode of transportation.

3. Require secondary mode of transport to deliver to ultimate customer.

4. Deep-water ships designed for ocean and lakes are limited to shallow-water ports.

5. Shallow water vessels like diesel-towed barges are flexible but are limited by their range of operations and speed.

3. Railways

Advantages:

1. Railways is comparatively fastest mode of transport

2. Railways is an inexpensive mode of transportation

3. Railways are suitable for large quantities.

4. Railways provide door deliveries for industries.

Disadvantages:

1. Unreliable mode; especially for high value goods and directly usable consumer goods.

2. Railways lack flexibility of high-speed delivery.

3. Railways require modal combination alongwith roadways.

4. Rail network needs a high capital investment due to right of way, switching yards, and terminals.

4. Roadways

Advantages:

1. Speedy – Deliver the goods directly to the consignee very fast.

2. Highly flexible – handling different types of goods

3. Ultimate mode – consignment reaches the doorsteps of the customer.

4. Low capital cost as compared to railways.

5. Private or ‘for hire’ shippers available.

Disadvantages:

1. Higher operating costs – due to fuel requirement and higher labor requirement.

2. Occasional fuel shortages – leads to delay in delivery.

3. Strikes of carriers – due to disputes with government making the transportation idle.

4. Limited availability of trucks poses a constraint.

5. Octroi – posts are notorious for delays and harassment of carriers.

6. Restrictive permits for licenses – imposed by the government all over the country.

5. Pipeline                                                         

Pipeline mode of transportation facilitates the movement of liquids like oils; crude petroleum products and wateretc. In India more than 5,000 km of pipeline exists for crude and petroleum products. Slurries, gases, vapors and solids in powder form are also transported in pipelines.

Advantages:

1. Pipelines are reliable mode – pilferage and loss of product is not possible.

2. Pipelines have low energy consumption.

3. Pipelines being under ground, space occupation is minimal.

4. Pipelines operate all the time except when it is shut down for maintenance.

5. No need to bring back empty container or wagon.

Disadvantages

1. Highest fixed costs – due to lying of pipeline but lowest operating costs.

2. Pipelines are fixed – so the accessibility of product is limited on the rout.

3. Only liquid commodity can be transported.

Intermodal transportation is the use of more than one mode of transport to move a shipment to its destination. Intermodal movements combine the cost and 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

Depending upon the type and amount of goods, time of delivery, and prices following three Intermodal combinations are available:

1. Piggyback: It is coordination between railways and road transport. It is also called as TOFC (Trailer on Flatcar) or COFC (Container on Flatcar). In piggyback the motor carrier trailer placed on rail flatcar, which moves the trailer by rail for a long distance. Then the motor carrier moves the trailer for short distance for deliveries. Here the placement of trailer on a railcar can lead to damages.

2. Fishyback: It is coordination between waterways and road transport. In fishyback the truck or trailer rides on the ship for small portion of its journey. This service is provided in coastal waters between Atlantic and Gulf ports.

3. Birdyback: It is coordination between airways and road transport. In birdyback the major portion of journey is covered by airways then the cargo is transported by trucks or trailers.

4. Others: Water and railways, air and railways, air and waterways, pipeline and water, pipeline and roadways etc.

INALND CONTAINER DEPOTS (ICDs)

ICDs are dry ports at a distance far away from the shoreline and handle all the import export formalities. This a large warehouse where exporter books his cargo and completes all export formalities. Then ICD moves the containers to natural seaport. The customs department, shipping companies, handling agencies, banks, customs house agents and clearing and forwarding agents are all based at the ICDs.

Advantages / Uses

1. Connect major ports to hinterland i.e. land deprived of natural deep-water ports because of geography.

2. Handle containers from road and rail to a container yard.

3. Performing activities like weighing, inspection of scales, damages and safety stickers.

4. Facilitate customs clearance and export import formalities.

5. Increase the export potential of industries in the hinterland and also simplifies import of goods by hinterland.

6. Decongest major ports.

TRANSPORTATION NETWORK OPTIONS

1. Direct Shipping – From shipper directly to retailers.

2. Direct Shipping using Milk Runs – Single supplier to a number of retailers, deliver like a milkman.

3. All Shipping via CDC  – Suppliers send the supplies to Central Distribution centers and distribution center caters the needs of retailers.

4. All Shipping via CDC Using Milk Runs – Suppliers send the supplies to CDC and from CDC to large number of suppliers.

5. Tailored Network – Tailor made network as per the company needs. One model for some logistical mission and another model for some other mission.

Milk Run

Milk Run is a transportation network, in which Suppliers send the supplies to CDC and from CDC to large number of suppliers. Milk Run reduces out bound transportation costs by consolidating small shipments.A milk run is a route in which a truck either delivers product from a single supplier to multiple retailers or goes from multiple suppliers to single retailer as shown in Figures (a) and (b). In other words, in a milk run, a supplier delivers directly to multiple retail stores on a truck or a truck picks up deliveries for many suppliers of the same retail store. The main job of the supply chain manager is to decide on the routing of each milk run.

1. Reduces cost: Milk runs help to reduce the transportation costs by consolidating shipments to multiple stores on a single truck. The use of milk runs allows deliveries to multiple stores to be consolidated on a single truck, resulting in a better utilization of the truck and somewhat lower costs.

2. Proximity of suppliers: The use of milk runs is helpful if very frequent small deliveries are needed on a regular basis and either a set of suppliers or a set of retailers is in geographical proximity.

3. Reduces inventory: Milk runs also help to reduce the amount of inventory need to be kept as safety stock in the warehouses. One of the major challenges faced by the milk run system of distribution is the high degree of coordination and synchronization required among the members of the supply chain.

CROSS DOCKING 

Cross Docking is a new logistics technique used in the retail and trucking industries which means receiving goods at one door and shipping to the other door almost immediately without putting them into storage.

Advantages / Objectives

1. It helps to reduce operating costs by eliminating handling and storage of products.

2. It helps to reduce inventory level by direct shipment to the customers.

3. It helps to increase sales by providing on time delivery to the customers.

4. It encourages the electronic communication between the supplier and retailers.

Disadvantages

1. Cross docking requires a strong IT base and real-time information sharing facilities, e.g. (Bar codes on cartons)

2. Cross docking is appropriate for products with large, predictable demands and also requires that the distribution centers should be set up such that the benefits of economies of scale in transportation can be achieved on both the inbound and the outbound side.

3. It requires a great degree of coordination and synchronization between the incoming and "outgoing shipments which, in turn, relies on better information and planning.

4. Further the product availability, accuracy and quality are also critical. The company can't force other members of the supply chain to incur additional costs or efforts so as to take the benefits of cross docking.

Traditional warehouses move materials into storage, keep them till they are needed and then move them out to meet the customer demand. Cross docking co-ordinates the supply and delivery so that the goods arrive at the receiving area and are transferred straight away to the loading area, where they are put into delivery vehicles. In other words, Cross docking is the movement of materials from the receiving docks directlyto the shipping docks. It is said, "Cross docking is a flow through concept and we don't want product to stop anywhere, because space, brick and mortar is getting very expensive these days.

 Goods do not need to be placed in storage, creating a significant cost savings in inventory and material handling. Cross docking helps reduce direct cost associated with excess inventory by eliminating unnecessary handling and storage of product. Fewer inventories means less space and equipment required for handling and storing the products. This also means reduced product--damages and product obsolescence. Thus, the step of filling a warehouse with inventory before shipping it out is virtually eliminated. Cross docking shifts the focus from "supply chain" to "demand chain''. For example, stock coming into cross docking centre has already been pre-allocated against a replenishment order generated by a retailer in the supply chain. Cross docking helps retailers streamline the supply chain from point of origin to point of sale. Cross docking also encourages electronic communications between retailers and their suppliers.

Two Basic Forms Of Cross Docking

1. Basic Cross Dock: In this form the packages are moved directly from the arriving vehicles to the departing ones. This form of cross docking does not need a warehouse and a simple transfer point is enough.

2. Flow Through Cross Dock: In case of the flow through concept, when the materials arrive and they are in large packages, these packages are opened and broken into smaller quantities, sorted, consolidated to deliver them to different customers and transferred to vehicles.

Cross docking can develop to a phase where nothing actually moves through a warehouse. The stock kept within vehicles is referred to as stock on wheels. Nowadays wholesalers use the method of drop-shipping, where they do not keep the stock themselves, but coordinate the movement of goods from the upstream suppliers to the downstream buyers.

TERMINAL DELAYS

Delays which take place at terminals due to documentation problems, congestion, poor unloading facilities etc. Influence vehicle turnaround time. Adds cost to transportation, as vehicle is unutilized. E.g. at sea port or airport cargos can get stuck.


Transport Economics

Transport Economics is the study of the movement of people and goods over space and time. It is a branch of economics that deals with the allocation of resources within the transport sector. Historically, it has been thought of as the intersection of microeconomics and civil engineering, as shown on the right.

However, if we think about it, traditional microeconomics is just a special case of transport economics, with fixed space and time, and where the good being moved is money, as illustrated on the right.

Topics traditionally associated with Transport Economics include Privatization, Nationalization, Regulation, Pricing, Economic Stimulus, Financing, Funding, Expenditures, Demand, Production, and Externalities.