Logistics Transportation Systems

Logistics Transportation Systems

MD Sarder

Bowling Green State University, Bowling Green, OH, USA

Table of Contents

Cover image

Title page

Copyright

Preface

Acknowledgments

Chapter 1. Overview of transportation logistics

Abstract

1.1 Introduction: what is transportation logistics?

1.2 The importance of transportation systems

1.3 The history of transportation systems

1.4 Transportation management

1.5 Logistics costs

1.6 Logistics/transportation cost implications

1.7 Transportation modes

1.8 Practical implications

1.9 Conclusion

1.10 Discussion questions

References

Chapter 2. Network and cost analysis of transportation system

Abstract

2.1 Introduction

2.2 Terminology

2.3 Transportation network

2.4 Classification of transportation network

2.5 Operational network structure

2.6 Hub advantages

2.7 Hub disadvantages

2.8 Performance criteria

2.9 Algorithms

2.10 Mathematical tools

2.11 Layers of network

2.12 Transportation cost

2.13 Network problems

2.14 Conclusion

References

Further reading

Chapter 3. Transportation infrastructure and equipment

Abstract

3.1 Transportation infrastructure

3.2 Transportation equipment

3.3 Truck/road infratructures

3.4 Rail infrastructures

3.5 Maritime infrastructures

3.6 Aviation infrastructures

3.7 Containerization

3.8 Significance of transportation infrastructure on economy

3.9 US transportation infrastructure plan

3.10 Conclusion

3.11 Discussion questions

References

Chapter 4. Transportation rules and regulations

Abstract

4.1 Introduction

4.2 Creating transportation laws

4.3 Federal transportation laws

4.4 Railroad industry regulations

4.5 Motor carrier regulation

4.6 Regulations in the airline industry

4.7 International water regulations

4.8 Importing procedures

4.9 Trade agreements

4.10 Hazardous materials regulations

4.11 Foreign trade zones

4.12 Freight forwarding

4.13 Incoterms

4.14 Conclusion

References

Further reading

Chapter 5. Intermodal transportation

Abstract

5.1 Introduction

5.2 Modality

5.3 Intermodal freight transportation

5.4 Components of intermodal transportation

5.5 Domestic transportation

5.6 International transportation

5.7 Selection criteria of mode of transportation

5.8 Last mile delivery

References

Further reading

Chapter 6. Logistics transportation problems with linear programming

Abstract

6.1 Overview

6.2 Introduction

6.3 Literature review

6.4 Solving transportation problems

6.5 Graphical method

6.6 Simplex method and the transportation tableau

6.7 Solver method

6.8 Sensitivity analysis

6.9 Conclusion

References

Chapter 7. Assignment and transshipment problems with linear programming

Abstract

7.1 Overview

7.2 Introduction

7.3 Literature review

7.4 Assignment problems

7.5 Transshipment problems

7.6 Sensitivity

7.7 Conclusion

References

Further reading

Chapter 8. Logistics customer services

Abstract

8.1 Introduction

8.2 Definition of customer service

8.3 Order cycle time

8.4 Importance of logistics customer service

8.5 Sales–service relationship

8.6 Sales–service relationship model

8.7 Costs versus service

8.8 Determining optimum service levels

8.9 Customer service variability

8.10 Service as a constraint

8.11 Measuring logistics service quality

8.12 Conclusion

References

Further reading

Chapter 9. Transportation rates and decision analysis

Abstract

9.1 Introduction

9.2 Rates for different modes of transportation

9.3 Importance of choosing the most cost-effective transportation system

9.4 Service choices

9.5 Factors affecting transportation rates and costs

9.6 Documentation

9.7 Approaches to negotiating transportation rates

9.8 Collect and analyze data: preparing an request for proposal

9.9 Building strong service provider relationships

9.10 Post negotiation support

9.11 Common misconceptions in rate negotiation

9.12 Analytical problems

9.13 Discussion questions

Review questions

9.14 Conclusion

Further reading

Chapter 10. Transportation routing

Abstract

10.1 Introduction to transportation routing

10.2 Choosing a route planning system

10.3 Vehicle routing

10.4 Vehicle routing and scheduling

10.5 Transportation routing analysis geographic information system

10.6 Freight consolidation

10.7 Hazardous material (HazMat) routing and risks

10.8 Advantages of choosing the right routing system

10.9 Analytical problems

Reference

Further reading

Chapter 11. Transportation security

Abstract

11.1 Introduction

11.2 Importance of transportation security

11.3 Cybersecurity in logistics transportation

11.4 Security risk assessment

11.5 Practical implications

11.6 Transportation security in the United States

11.7 Cost of security

11.8 Modal aspects of transportation security

11.9 Privately initiated transportation security

11.10 Conclusion

References

Further reading

Chapter 12. Reshoring and its impact on transportation and economy—a US perspective

Abstract

12.1 Introduction

12.2 What is reshoring?

12.3 Literature reviews

12.4 Developing reshorability index

12.5 Implementation of reshorability index

12.6 Evaluating economic impact of reshoring

12.7 Economic impact analysis

12.8 Analysis Summary

12.9 Conclusion and future research

References

Chapter 13. Automotive transportation logistics

Abstract

13.1 Introduction

13.2 Overview of automotive supply chain

13.3 Logistics functions and strategies

13.4 Significance of a supply chain and logistics in the automotive industry

13.5 Contributors of the automotive supply chain

13.6 Challenges in automotive transportation

13.7 How the automotive industry plans and manages their transportation

13.8 3PL: third-party logistics

13.9 Role of 3PL in the automotive supply chain

13.10 Conclusion

Appendices

Appendix A: Impact of logistics cost on reshorability index

Appendix B: Correlation between different factors

Appendix C: Weight of different factors on different industries location

Appendix D: Reshorability index from China (3-digit NAICS code)

Appendix E: Reshorability index from China (4-digit NAICS code)

Appendix F: Reshorability index from China (6-digit NAICS code)

Appendix G: Logistics cost from China (6-digit NAICS code)

Appendix H: Score on different factors (US vs. India)

Appendix I: Reshorability index from India (3-digit NAICS code)

Appendix J: Reshorability index from India (4-digit NAICS code)

Appendix K: Reshorability index from India (6-digit NAICS code)

Appendix L: Score on different factors (US vs. South Korea)

Appendix M: Reshorability index from South Korea (3-digit NAICS code)

Appendix N: Reshorability index from South Korea (4-digit NAICS code)

Appendix O: Reshorability index from South Korea (6-digit NAICS code)

Appendix P: Score on different factors (US vs. Japan)

Appendix Q: Reshorability index from Japan (3-digit NAICS code)

Appendix R: Reshorability index from Japan (4-digit NAICS code)

Appendix S: Reshorability index from Japan (6-digit NAICS code)

Index

Copyright

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Preface

MD Sarder, msarder@bgsu.edu

Logistics and transportation systems have changed significantly in recent times. Customers no longer want to wait months, weeks, or even days to receive their orders. They want to receive their orders within a very tight time window and want to know the status of their orders at every turn. These ever-increasing customer expectations are challenging for businesses but also provide opportunities to offer differentiating services. For instance, Amazon’s two-hour delivery, drone-based delivery, GPS-enabled real-time order tracking, and robotic food delivery are some examples of logistics services that can make a business competitive. Those who are responsible for planning, designing, operating, and managing logistics systems must possess a wide variety of skills including engineering design, economic analysis, and business decision making. Skill-based technical shift has been a pervasive feature of today’s businesses. Technology-skill complementarity has also been widespread over the past century with new technologies from those associated with internet and computer revolution to the artificial intelligence revolution, which has been primarily shaping the future of the logistics industry.

I developed a logistics transportation systems course and have been teaching it since 2009 at undergraduate and graduate levels. I could not find a single text that was suitable for this course, primarily due to the lack of coverage of all topic areas and the overemphasis on either engineering or business aspects. Logistics transportation is an evolving area. A text covering a wide range of logistics transportation systems, while keeping the right balance between engineering and business scopes, is needed to prepare today’s graduates to do their jobs. This text tries to address some of the issues.

The Logistics Transportation Systems textbook provides a one-semester introduction to the fundamentals of logistics. This text provides an overview of the basic concepts and mathematics determining operational business decisions that logistics engineering, systems engineering, and applied science students will encounter every day when they enter the workforce. This text will also prove useful to students focused on supply chain management, operations management, economics, and international business. A basic knowledge of logistics allows students to balance costs with performance in their future endeavors. This knowledge base will provide a context for students in the larger world around them, regardless of their specialty.

This text is basically a course resources for a logistics transportation systems or similar course where students can get exposure to the fundamentals of logistics and transportation systems, transportation infrastructures and equipment, and historical evolution of transportation systems. Engineering and design aspects are primarily covered for transportation network analysis, transportation problem formulation and solution, assignment and transshipment problem formulation and solution, and transportation routing. Economic and contemporary aspects are covered for transportation cost analysis, transportation security, and reshoring impact analysis. Business aspects are covered for logistics customer service, transportation rates and decision analysis, transportation rules and regulations, and intermodal transportation. Dr. Jehan, who works for Ford Motor Company, contributed the Automotive transportation logistics chapter, which presents a real-life case of how automobile logistics works. Following is a synopsis of the 13 chapters covered in this text.

The Overview of transportation logistics chapter describes basic concepts of logistics and transportation systems. This chapter illustrates the difference between a supply chain system and a logistics system, explains the importance of the logistics system and how it evolved over time, and provides a brief overview of different modes of transportation.

The Transportation network and cost analysis chapter explains the different types of transportation networks and what exactly they entail including cost, effectiveness, and quality. From the information provided within this chapter, one can easily learn how the different aspects of transportation networks affect the overall transportation cost.

The Transportation infrastructure and equipment chapter describes various infrastructures and equipment and explains different characteristics and capabilities of the infrastructures and equipment used for each mode of transportation. Transportation systems cannot operate without necessary infrastructures and equipment as the performance of a transportation system is heavily dependent on the appropriate infrastructure and equipment.

The Transportation rules and regulations chapter explains transportation rules and regulations and how they are designed to improve the efficiency of transportation systems. Transportation rules and regulations are important to know as they impact the performance of transportation systems.

The Intermodal transportation chapter explains intermodal transportation from a US perspective as well as international perspective. Other topics include components of intermodal transportation such as containers, shippers, carriers, mode selection considering total cost of shipment, and last-mile delivery.

The Logistics transportation problems with linear programming chapter describes mathematical modeling of transportation problems. It explains how to formulate transportation problems into mathematical equations in terms of defining objective functions and constraints that prevent to achieve the objectives.

The Assignment and transshipment problems with linear programming chapter describes formulating and solving two special types of transportation problems: assignment problems and transshipment problems. Assignment problems are similar to resource allocation problems in transportation. Transshipment problems are real-time issues where suppliers ship their products to customers through cross-docking or hub facilities.

The Logistics customer service chapter discusses customer service in logistics in terms of service elements, the relative importance of those elements, and how it impacts the effectiveness of logistics operations. This chapter also explains the sales–service relationship and how to measure set service levels for businesses.

The Transportation rates and decision analysis chapter discusses transportation rates and explains the process of how to choose cost-effective transportation options with analytical examples. Other topics covered in this chapter include factors affecting rates and total cost, negotiation approaches, common misconceptions of negotiation, and documentation needed for transportation.

The Transportation routing chapter focuses on routing selection and the importance of planning in transportation decisions. This chapter discusses how routing and scheduling problems carefully take into consideration time windows to fulfill demands, demand flexibility, capacities of equipment, etc., to determine the problem and eventually a technique to yield a solution.

The Transportation security chapter discusses various issues of transportation security and safety. This chapter introduces various factors that contribute to transportation security and safety as well as their impacts on transportation. In addition, this chapter also discusses cybersecurity in general and how logistics and transportation businesses can prevent cyberattacks.

The Reshoring and its impact on transportation and economy—a US perspective chapter discusses one of the contemporary issues of logistics and supply chain from the US perspective. This chapter defines reshoring, measures reshorability for select industries, and quantifies the impact of reshoring on US transportation and economy.

The Automotive transportation logistics chapter presents a real-life case of how automakers manage their logistics. Automakers are continuously looking for the best way to fulfill their customers demand while keeping the cost low. This chapter explores how the automotive supply chain works. It also discusses the main challenges automotive manufacturers are facing, how they are dealing with these challenges, and how they manage and operate their transportation logistics systems.

Logistics Transportation Systems presents the above material in a format that is easy to use and learn from. The text defines the terms, explains the concepts, illustrates concepts with visuals and graphics when possible, demonstrates with analytical problems where possible, and provides critical analysis throughout. Presenting the material this way allows students to quickly grasp the concepts. Other key features of the text include:

• A wide variety of topics related to logistics and transportation systems

• Balanced topics among engineering design, economic analysis, and business decisions

• Showing readers how to apply the logistics principles

• Contemporary issues such as reshoring and its impact on transportation and economy

• Clear, real-world examples of logistics systems solutions for multiple transportation modes, including seaports, rail, barge, road, pipelines, and airports

• A wide range of business aspects, including customer service, cost, and decision analysis

• Key-term definitions, concept overviews, discussions, and analytical problem-solving

The textbook also comes with instructor resources such as PowerPoint slides for all chapters and sample test questions and solutions and student resources including MS Excel templates for easy-to-run analytical problems. Author contact information for instructors adopting the book is also provided. Feedback for improving future editions is welcomed.

Acknowledgments

I would like to express my sincere appreciation to numerous students and graduate assistants of mine for their inspiration, feedback, and editing help. I would like to thank Dr. Musarrat Jehan for her contribution to the Automotive transportation logistics chapter and for encouraging me to finish this book. I would also like to acknowledge and give credits to Shutterstocks for the images used in this text. Credits also goes to several public agencies such as US DOT, TRB, US Census Bureau, UNCTAD, etc., for providing their publicly available data and graphics. I acknowledge and give credit to Dr. Ronald Ballou. I shadowed his Business Logistics Management book for several chapters covering business aspect of logistics.

I would like to acknowledge the support provided to me by CFIRE funding, my coresearchers, and Harry Moser (founder of reshoring.org) for the Reshoring and its impact on transportation and economy—a US perspective chapter.

Finally, I would like to thank the people to whom I owe the most – my family. They have sacrificed just as much, if not more, than I have during my manuscript preparation. Thanks to my wife, Shimu, for her well-organized management of our family. Thanks to my three daughters, Mariah, Sarah, and Sawdah, for their love and inspiration. They had to be without their daddy many nights while I was busy working on this book.

July 31, 2020

Chapter 1

Overview of transportation logistics

Abstract

Logistics transportation systems have evolved in many ways over time. This chapter will cover this evolution along with a history of transportation systems. As is the case for any system, as it grows so does its impact on societies and day-to-day life. The increased growth of usage of the transportation systems across all modes can change to be better suited for each society and that time period in which it is needed. This chapter explains the different types of transportation systems along with cost and effectiveness. As discussed here, the logistics of a transportation system must be considered thoroughly in order to fully comprehend its effectiveness and quality to meet the needs of a society.

Keywords

Absorption cost; actual capacity; aggregate planning; capacity; certification of suppliers; change management; cost to benefit analysis; cost effectiveness; logistics planning; multiple zones pricing; phantom cost; single zone pricing; supply chain management

1.1 Introduction: what is transportation logistics?

What is transportation logistics? Broadly, it is the process of obtaining raw materials, material handling and distributing products from the point of origin to point of consumption with the help of transportation. Logistics is a subset and an integral part of supply chain systems. Acquiring and transporting raw materials and subsystems, inbound and outbound movements within the production facilities, storing, loading and unloading, and getting the products to customers is supply chain. Logistics then can be defined as the processes involved in moving these materials in the supply chain. Transportation system and distribution system are part of logistics system. Fig. 1.1 shows the relationship among all these concepts.

Figure 1.1 Logistics and transportation systems within supply chain systems.

According to the Council of Supply Chain Management Professionals (CSCMP), logistics management can be defined as that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements. Logistics management typically includes inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, network design, inventory management, supply/demand planning, and management of third-party services providers. To varying degrees, logistics also includes sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service.

The CSCMP defines supply chain management as the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance, and information technology.

Logistics involves planning, implementing, and controlling of efficient and effective forward and reverse flow. Logistics also involves storing of goods from the source of production to the destination of consumption to fulfill consumers’ requirements. The popular concept of seven Rs in logistics refers to getting the right product in the right quantity in the right condition at the right place at the right time to the right recipient at the right price.

When an order is placed, and a product needs to be delivered from one place to another, there are four major components involved in the process: physical flow of the product, information flow related to the process, processes involved in the delivery and shipment, and roles and responsibilities of appropriate personnel. In this book, we will focus on the physical flow of the product and everything associated with the flow.

In the current state of our global market, logistics managers play a key role for companies as they bring their merchandise from source to market. The merchandise may be physical products such as food, medicine, furniture, and toys or it can be services such as information technology. For many companies, the transportation of goods from production to end user constitutes up to two thirds of total costs associated with a particular item. This is because the logistics management of physical products requires integration of several elements such as planning and implementation, information flow, material handling, product fabrication, packaging of the final product, storage and inventory control, warehousing, and transporting the final product to the consumer. Logistics management is a crucial part of supply chain management as it ensures the efficient and effective movement of goods through the supply chain. Logistics plays a critical role in determining the overall cost of delivering a product to the market, it generates significant revenues for companies and firms around the globe.

According to the North American Transportation Statistics Database, more than 3 trillion metric tons of freight was transported domestically throughout the United States in 2010. The massive shipments of freight represent a large portion of the global economy. Freight shipments is how the world moves its money. On a typical day in 2007, over 35.7 million tons of goods, valued at $32.4 billion, moved nearly 9.6 billion ton-miles on the nation’s transportation network (US Department of Transportation, 2008). Over the years, there has been a significant increase in the miles traveled. In 2016, over 3.2 trillion miles were traveled on roads, moving both people and goods across the nation (2017 Infrastructure Report Card, 2018). Of these freight shipments more than 90% were shipped using a single mode of transportation and the remaining was shipped using two or more modes of transportation (US Department of Transportation, 2008). In 2010, the United States exported trillions worth of merchandise all over the world (US Department of Transportation, 2009a,b). The transportation and transportation-related service industries employed 12 million Americans alone in 2009, which constitutes 9.3% of the total labor pool (US Department of Transportation, 2010) These numbers are staggering but not surprising when you consider the diversity of the logistics field.

There are five major modes of transportation—air, rail, road, maritime, and pipeline—and each of these modes of transportation must have a number of employees directly working on transportation operations and additional employees of service companies that provide other services directly related to these same operations, such as maintenance. These logistics service personnel play a pivotal role in ensuring that fleet operations are efficient. This can be a bit complicated when you consider that in 2009 there were more than 1 million freight cars and locomotives as well more than 40,000 barges or ocean-going ships using the US transportation system (US Department of Transportation, 2010). These numbers only consider the US transportation system. If you expand the scope to the global logistics transportation system you will begin to understand why logistics management is a growing field. The management and improvement of global logistics transportation systems will be a challenge for future logisticians because we must improve the efficiency of our given system while at the same time ensuring that growth is managed properly and effectively. Table 1.1 provides examples of the physical infrastructure found around the world in 15 countries.

Table 1.1

Examples of physical transportation systems in World’s Top Economies, 2008.

1.2 The importance of transportation systems

Transportation systems can have both positive and negative societal, environmental, and economic impacts. All of these impacts should be critically analyzed in the systems processes. As our population continues to grow, so does the demand for products, which therefore increases the need for transportation of goods from suppliers to consumers. However, this may also create issues regarding road transportation. The more road transportation is used, the more the roads will need to be serviced and repaired from overuse and damage. Although this problem is almost impossible to avoid, it does create a need for money to be spent on repairing roads and increases the chances of traffic for everyday consumers or anyone using road transportation.

With transportation playing such a crucial role in business operations, logisticians are asked to serve in two main capacities. First, logisticians, professionals in the field of logistics management, act as subject matter experts on transportation system design and components within a given supply chain. Second, the logistician must act as a catalyst for improvement in the operating systems and decision making associated with supply chain management. This text will serve to broaden the logistician’s knowledge on transportation systems, specifically the key terms, components of the supply chain, and modes of transportation. Additionally, this chapter will cover pertinent transportation industry rules and regulations. To lay the groundwork for our study of logistics transportation systems let us begin with a review of some definitions.

Table 1.1 shows the distance in which each country has transported goods through the different modes of transportation in the order of most distance traveled by roadways to the least distance traveled. As you can see, this data does not take into account our drastically increasing societies and populations; however, Table 1.2 accounts for this difference in data. Table 1.2 shows how much the demand for transportation is changing. From this data, collected by the US Department of Transportation, we can see that over time, the number of miles traveled will increase. Because of this, different modes of transportation are more efficient and cost effective.

Table 1.2

Table 1.3 shows the Logistics Performance Index rankings for those countries with the highest rank based on the types of shipments within the country and internationally in 2018. Each of the score columns are on a scale from one to five, one being the lowest rank and five being the highest. In order to be assigned a number on the scale, several factors are taken into account. Some of these factors are quality, competence, frequency, ability of tracking and arranging the shipments, and time and ease (Logistics Performance Index, 2019). This concept will also be further discussed in a later chapter.

Table 1.3

There are many accepted definitions of the term logistics, ranging from simple to complex. For example, the CSCMP defines logistics as the part of supply chain management that plans, implements, and controls the efficient forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer’s requirements (Council of Supply Chain Management Professionals, 2011).

It can be inferred from these definitions that logistics refers to getting a product from point A to B during business operations. What ties together this network of manufacturers, distributors, retailers, and transportation companies? The entire globe is connected through logistics transportation systems. Logistics transportation systems are considered all water, air, and land assets and routes utilized in the movement of cargo or freight across the globe from points of supply to points of demand. They are the glue that holds the entire global market together. All of the assets and routes falling under this broad definition will be discussed in the following text. This includes all equipment, infrastructure, and links that are incorporated into logistics transportation systems.

1.3 The history of transportation systems

There are many aspects that have changed from when transportation systems first emerged in the early 1700s. Although many transportation modes were used from the 1700s to the present, the years are segmented into two groups to help describe the modes of transportation used: the preintermodal era and intermodal era. Intermodal era is when the trailer-sized containers began transforming the way freight is packed and loaded onto trucks and ships. This term first emerged in the 1960s and helped to define transportation systems.

During the preintermodal age, some of the earliest containers were similar to the containers used to ship coal along the Bridgewater Canal in England during the 1780s. Wooden containers of coal were transported through the railway near the 1830s on the Liverpool and Manchester Railway, but iron containers were used to transport coal at a later time. In 1841, Isambard Kingdom Brunel introduced iron containers to move coal from the vale of Neath to Swansea Docks. (Fig. 1.2).

Figure 1.2 Early transportation.

The early ages of intermodal transportation began in 1914 and ended in 1954. During this time, World War I was just beginning as well, and transportation was crucial for each side of the war. The Trinity Freight Unit was developed during this time, which was a 10-ft. container developed to be carried by any mode of transportation. Between 1936 and 1950, a new system of intermodal transportation system, involving trucks and rails was introduced by Benjamin Franklin Fitch.

The early stages of transportation were very different from what transportation looks like today. In the beginning, transportation originated on foot for miles at a time in order to get to a destination. It was not until 4000 and 3000 BCE when animals were even introduced for transporting people and goods. Around 3100 BCE the sail boat was created by the Egyptians and later wooden ships were used for trading overseas (Lambert, 2018). Over time, pathways that later became roads were established so that people could travel from one area to another, and more wealthy people began to travel on horses or with canvas covered wagons. In the 19th century, railways were created and helped to transform the history of transportation by increasing the speed of delivery (Lambert, 2018).

Each of these milestones in the history of transportation has been influenced by the increase of volume from consumers, and recently, technology has played an important role in what transportation is like today. For example, the magnetic train is a high-speed train developed to help compensate for issues regarding congestion in other transportation modes. The magnetic train is faster than a conventional train because the train creates a magnetic force with the track so that it can essentially levitate above the track, removing the friction found on a conventional train track (Bonsor, 2018). The tube train being built in California is similar to a magnetic train; however, it will instead be propelled by air instead of magnets (Lewis, 2015). Recent technology has also helped to create drone deliveries that are beginning to be used by well-known companies such as Walmart, Amazon, and even some pizza companies. (Fig. 1.3).

Figure 1.3 (A) Modern magnetic rail in China; (B) Driverless car in the United States.

When it comes to moving goods from one place to another, there are various delivery options: one can transport products by airplane, train, truck, or ship. One can also transport them by bicycle, horse, or donkey, or even walk them to a destination. All of these modal options come with different premiums. New technological advancements in each of these modes will continue to make them faster, cheaper, and smarter in the future. Just look at the rise of driverless cars, for example. There has been a lot of buzz about this technology in the past couple of years, with companies like Google, Volvo, and Ford (among many others) making news in this area. In a speech at the 2012 Mobile World Congress in Barcelona, Ford Chairman Bill Ford Jr. predicted that fully autonomous cars would hit the road by 2025. (Fig. 1.4).

Figure 1.4 Sample delivery by a drone.

Drones are seemingly everywhere and are being used for new and different tasks every day. The consumer-oriented drones that have become so popular are only a small segment of the market and offer only some of the controls and functions available by their commercial counterparts. Enhanced functions that include precise controls, GPS mapping and flight planning, geofencing, and larger carrying capacities make industrialized drones suitable for many commercial purposes.

Companies engaged in supply chain operations are deploying drones, otherwise known as unmanned aerial vehicles, to serve in a wide variety of roles that make some tasks that were previously either very time-consuming or labor intensive, highly efficient and less expensive, and also significantly improving worker safety when deployed properly.

1.4 Transportation management

Transportation management is a crucial part of logistics transportation and deals with the planning, execution, and optimization of the physical movements of goods. In simpler terms, it deals with the management of transportation operations of all types, including delivery routing, mapping, fuel costing, warehousing, communications, tracking and managing of transportation vehicles, traveler and cargo handling, carrier selection, and accounting to manage and optimize the daily operations of transportation fleets.

1.4.1 Logistics planning

Planning involves strategic and tactical tasks. It calls for the knowledge and experience of engineers to model optimized designs. On the other hand, execution tasks involve procurement and shipment and can be mostly automated.

Strategic planning addresses questions such as:

• What carriers should I partner with and how?

• How will seasonality affect my carrier assignments?

• Should I use dedicated or private fleets?

• Which carriers provided quality services in the past?

• Should I use pool points, cross-docks, or multistop routes?

Tactical planning answers questions such as:

• How can I quickly secure rates for a new DC/plant/lane?

• What lanes are having performance problems?

• Which carriers are complying to or exceeding their contracts?

• Are site managers complying with the strategic plan?

• Where should I establish a seasonal contract?

Execution or operational planning answers questions such as:

• Which carrier should I tender this load to?

• How can I collaboratively source this week’s loads?

• How do I prevent maverick/rough behavior?

• Should I use a contract carrier or look at the spot market?

• How can I best communicate with my carrier?

1.4.2 Logistics functions

Four major functions of logistics are transportation, warehousing, third- and fourth-party logistics (3PL and 4PL) logistics, and reverse logistics.

Transportation: Many modes of transportation such as air, rail, water, road, or pipeline play a role in the movement of goods through supply chain. Efficient logistics depends on selection of the most effective combination of the modes.

Warehousing: Warehousing is related to activities such as receiving, storing, and shipping products to and from production or distribution locations; when the product is not on the move between locations, it waits in the warehouse.

Third- and fourth-party logistics (3&4 PL): According to the CSCMP glossary, 3PL is defined as outsourcing all or much of a company’s logistics operations to a specialized company. These services are integrated together by the provider. Services they provide include transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. On the other hand, 4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners; a 4PL organization acts as a single interface between the client and multiple logistics service providers. All aspects of the client’s supply chain are managed by the 4PL organization. It is possible for a major third-party logistics provider to form a 4PL organization within its existing structure.

Reverse logistics: This refers to handling returns, recycling, reuse, or disposal of materials that travel from customers to suppliers.

1.4.3 Logistics goals and strategies

Some important logistics goals/objectives include:

1. Quick response to change in the market and customer orders

2. Minimize variances in logistics service

3. Minimize inventory to reduce expense

4. Combine product movement by grouping shipments

5. Uphold high quality and engage in constant enhancement

6. Support the entire product life cycle and the reverse logistics supply chain

To design an effective logistics strategy, tactics such as the following can be used:

1. Coordinating and managing functions: Physical inventory can be reduced by improving communication with suppliers by communicating