Transportation

Transportation

[Ref. Bowersox page 311]

What is transportation?

One of the functions(?) of Logistical

Management

Visibility?
Contribution to Logistical costs?
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Transportation functionality (Functions of transportation) 1. Product movement What is moved? Inputs and outputs of a conversion process Raw Material Semi Finished items WIP
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Finished goods

 Packaging material Rejected material Movement is required up or down the supply chain

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2. Product Storage
Product is in storage (inventory, stock)

When it is moving, containerized in ship,

train, trailer or truck

It is unavailable for conversion (production) Requires maintenance (preservation milk

or other perishable in transit)
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 All storage costs generated by inventory

like insurance, cost of capital etc. are

applicable
Product is in storage when

Vehicle is stationary, stuck in traffic or

waiting

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Vehicles kept moving on circuitous route

When loading and unloading is expensive

Storage space is not available or limited

Airplanes hovering when runway is

unavailable for landing

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Why is this done? Objectives 1. To facilitate trade & business 2. To meet objectives of Logistical Management 3. To keep production process running 4. To meet the customers' demand for products & services at minimum cost
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How is this done? What resources are used? Resources used by transportation Time Money Nature, environment

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Costs generated by transportation a. Time, Temporal Costs - product is locked up during transit, hence inaccessible b. Money, Financial Costs-

Administration Costs, salaries, maintenance,

etc

Product loss and damage

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Cost of fuel for prime mover

c. Nature, Environmental Costs Guzzles natural fuels India consumes about 90% of the total available and imported oil for transportation Transportation Creates congestion, air pollution and noise pollution. Environmental cost is tangible and substantially intangible.
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 As transportation utilizes temporal, financial

and environmental resources, items must be

moved only when product value is raised

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Principles of transportation 1. Economy of scale Bulk shipping brings down per unit transportation cost 2. Economy of distance Cost per unit kilometer decreases as the distance moved increases Principles of transportation are fundamental
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in evaluating transportation strategies.

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Transportation Environment & Transportation decisions Who are the participants in transportation decisions? Shipper Consignee Carrier The government
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Public

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What is transportation mode? Mode identifies transportation method or form

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What mode of transport is this?

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What mode of transport is this?

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What mode of transport is this?

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What mode of transport is this?

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What mode of transport is this?

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What mode of transport is this?

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Impact of transport mode on costs of transportation Transport time Inventory in stores Inventory in transit pipeline inventory (Transit capital) Obsolescence

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Packaging
Breakage

Insurance
air, high insurance

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What constitutes Transport Infrastructure? [Transport elements] Factors that affect the smooth functioning of transportation? 1. Terminal facilities - well maintained loading unloading facilities, space for movement of vehicles, platforms, railway yards 2. Vehicles- trucks, ships or wagons. Their
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size, shape & speed

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3. Rights of way- cost of right to use passage The tax, the toll Rails, roads, airways 4. Routes and sectional capacity-number of lanes 5. Limit on speed, weight, height 6. Weigh bridge facility 7. Nature of product
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8. Carrier organizations

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What are various features of modes or modal characteristics? How do we measure relative weight of each mode? System mileage, traffic volume, revenue, nature of traffic composition

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Railways Rail network

Stands out in terms of tonne-kilometres

moved
226 billion tonne-kilometres and 55.8% of

total tonne-kilometers moved in 1982 in India

449 billion tonne-kilometres and 51.7% of

total tonne kilometers now moved in India

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 Facing very stiff competition from

roadways, as in US after II World War

High capital investment due to right of way,

switching yards, terminals, locomotives and

rolling stock, but low operating costs

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 Focus on specific products than on broad

range

Raw material extractive industries away

from water ways.

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Developments in this area

Recent customer friendly attitude

Inter modal transport through alliances and

acquisitions as in US, providing single

window service to customers

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 Development of Specialized Equipment to

suit the needs of bulk volume of customers

Unit trains
Container trains

Double stack containers

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Enclosed tri-level automobile car

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A unit train, also called a block train

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Double stack containers

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RORO service to road transport - konkan railway

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Private container trains -Adani logistics,

Boxram

CONCOR
Dedicated Freight Corridors, DFCs

Private participation in developing ICDs

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Road transport High flexibility and speed Ultimate mode of transport

Rapid growth, post war

Low capital cost as compared to Railways
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179.2 billion tonne-kilometres and 44.2%

of total tonne kilo-metres moved in 1982 in

India

585 billion tonne-kilometres and 56% of

total tonne kilo-metres moved in India now

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Operating costs are higher

Ideal for small shipments over short

distances

Labor intensive
Occasional fuel shortages

Availability of good quality vehicles

Availability & cost of maintenance and spares
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Bad and unsafe road conditions

Carrier organizations and their disputes with

government
Octroi

Old MVA
Restrictive permits

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Developments in this area Entry of several manufacturers of trucksentry of Daimler to produce Mercedes CVs Trailer-tractor sets National grid of multi lane highways Road widening schemes, bypass to cities Pay and use roads private road builders Express ways
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The Golden Quadrilateral

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Trailers

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Water transport Sailing vessels, steamships-1800, diesel driven ships-1920 Limited scope for deep water transport Limited extent of navigable inland water transport -lakes, rivers, canals Main advantage of water transportation is extremely large shipments & low cost
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Importance of deep water vessels & deep

water ports to fully realize benefits of water

transport
Sailing vessels for IWT

Diesel towed barges, tug-barge

combinations

Ferries
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Diesel towed barges- high flexibility, disadvantages are range of operation (not for long distance) and slow speed Ferries- for small water bodies like rivers and bays.

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Diesel towed barges

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Ferries for river crossing

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LASH [Lighters Aboard a SHip]: when a ship is

loaded on the high seas from barges, instead of

loading the cargo lifted from the barge, entire

barge is lifted and loaded on the ship. At the end

of the voyage barge is put back on water

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LASH
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 Inland water Transport is not used to its full

potential in India although we have used

mechanized IWT since early 1800.

Main hurdles appear to be

1. Low priority in policy

2. Construction of dams

3. Receding water levels in the rivers

4. Tough competition by other modes
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Developments in this area

Construction of deep water ports: JNPT

Construction of ports with private investment

Port Pipavav, India's first port in the private

sector is operated by APM Terminals, one of the

largest operators of container terminals in the

world
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A consortium led by P&O Australia is setting

up a $200 million Container terminal on BOT

(Build-Operate-Transfer) basis at Jawaharlal

Nehru Port. Trial operation started in April 1999

Agreement signed for construction of a captive

Coal Jetty at Mumbai by Tata Electrics.

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Pipelines What is transported in a pipe line? Liquids - oils, crude, petroleum products In India, extensively used for transporting crude and petroleum products More than 5,000 km of pipeline exists in India for crude and petroleum products Slurries - coal slurry, iron ore, lime
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 Huge quantity of water is necessary which is a

concern for environment

In India pipe line is used for transporting iron

ore.

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Pipelines
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Gases and vapors- natural gas, LPG, in India LPG pipe line is in existence Pulverized dry bulk material as hydraulic suspension Main features of this mode of transport Reliable all weather means of transport Low energy consumption

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Pipeline being under ground space occupation is

minimal

Pipe line operates all the time except when it is

shut down for maintenance

No empty container or wagon to be brought

back

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Highest fixed costs, right of way and laying of pipeline, and lowest operating costs Not labour intensive Not flexible by nature. Pipe lines are stationary Physical state of the commodity is a limitation. This mode of transport can release capacity of other modes for transport of essential commodities

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Rope ways
Hilly and otherwise inaccessible area

Steep gradients
Cause minimum ecological imbalance

Point of supply and demand can be connected

by shortest route

Logistics of fruits in Himachal Pradesh

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Rope way
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Air transport 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

Overcomes the hassle and cost of setting up

depots and service centers overseas

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 Full potential of peak seasonal demand can be

taken

Test marketing is easy. Products can be

shipped directly from the factory

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TRANSPORTATION MODES FACTORS: (MODAL CHARECTERISTICS) CAPITAL EX OPERATING COST SYSTEM KM II III 63,000 kms IV II III IV V I RAIL ROAD WATER AIR PIPE LINE I V 5000 kms

15,03,000 15544 kms kms [IWT] (Inland W- ways)

TONNE KM

449 Billion Tonne KM

585 Billion Tonne KM II I

66 BTKM (British-T) [Costal hipping] IV IV I III

70 BTKM

SPEED

III

V V

AVAILABILTY [ABILITY II TO SERVE A SET OF LOCATIONS] 10/12/2012

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Rail

Road Water

Air

Pipe -line

Dependability [minimum deviation from schedule, weather, congestion& other problems] Capability [ capacity to tackle any size of the load] Frequency [quantity of scheduled movement]
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III

II

IV

II

III

IV

IV

II

III

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Freight rate structure Freight (transportation) Rate Structure & Principles: 1. Cover actual cost of transportation. Factors influencing cost of transportation 1a. Fixed costs: Interest on capital Depreciation Insurance premium Facility for servicing,
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periodic maintenance etc

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 Administrative overheads Expenses on fixed facilities like buildings

1b. Semi fixed costs:

Salaries of the staff

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1c. Variable costs Cost of fuel and lubricants Maintenance directly attributable to a particular trip breakdown Damage to the vehicle and also the cargo. Eg. hilly roads, bad roads, war effected sea routes

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1d.Vehicle utilization
Carrier likes to gain maximum mileage out of

his vehicle
Run the vehicle at top speed to cover max.

distance at min time

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Quote higher rates if following are not conducive

to the above

i. Road conditions
ii. Terminal detentions [congestion, formalities,

loading/unloading etc.]
iii. Obtaining a return load [market factors]

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iv. Nature of goods, hazardous, corrosive [liability, insurance] v. Density, consignment light by weight

vi. Stowability, shape and size of the product

2. Traffic Bearing Capacity

Value addition by transportation

Higher the value added, opportunity for higher

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rate

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3. Government Policy
freight rates are controlled by the state (hiked or

depressed) for
Items to satisfy basic needs of common man

Promotion of certain type of trade

Development of certain type of industry

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4. Profit

Margin for reasonable return on investment Entrepreneurial time and efforts Funds for future development of business

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Transportation policy Components of transportation decisions

I. Mode Selection

Air - most expensive, but very fast

Road - relatively quick and highly flexible

but comparatively expensive

Rail - An inexpensive mode for large

quantities

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Water - the slowest but most economical

for large overseas consignments

Pipeline - primarily for oil and gas

Ropeways hilly areas, steep gradients

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Transportation network options

II. Carrier in house or out sourced - whether

product owner performs the function or out

sources it.

Private carrier contract carrier Public carrier Exempt carrier

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III. Trade off situations

Cost of transportation and cost of inventory

Cost of transportation and cost of customer

service

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IV. Carrier Selection 1. Constitution of the carriers organization 2. Business turn over 3. Area of operation 4. Network - Branch offices or associates offices 5. Strength of fleet 6. List of clients- current & former, for ascertaining reliability
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7. Nature and volume of business

8. Normal transit time

9. Record of claims settlement

10.Reference from banks, carriers association

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V. Route and network selection

Route is the path the product takes and

network is locations and routes along which a

product can be shipped

A logistics managers options for scheduling

and routing decisions

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DESIGN OPTIONS FOR A TRANSPORTATION NETWORK

Retail stores Supplier Supplie rs Retail stores Retail stores supplier

DIRECT SHIPMENT

DIRECT SHIPMENT WITH MILK RUNS

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DESIGN OPTIONS FOR A TRANSPORTATION NETWORK

Supplier Retail stores

ALL SHIPMENT S VIA DC Retail stores Supplier

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MILK RUNS FROM DC

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Direct shipment network

From shipper directly to retailers.

Features:
1. Warehouses are eliminated

2. Long route, hence low cost

3. Simplicity of operation

4. Time of transportation is short

5. Decision points are quantity and mode
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Direct shipping with milk runs 1. Single supplier to a number of retailers - deliver like a milkman. 2. From a number of suppliers deliver to a single retailer. eg. Toyota plant in US Features: 1. Movement consolidation 2. Truck utilization
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All shipments via Central Distribution Center suppliers to Distribution center and Distribution center to retailers Features: 1. Supply chain costs reduction when distances are large. 2. DC stores inventory and acts like a transfer point
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3. Economies of scale in inbound transportation

to DC. Outbound transportation cost is low as

retailers are close to DC

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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

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Tailored Network
Tailor made to the company needs Features: 1. Matches the needs of the company 2. Coordination is complex

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NETWORK STRUCTURE DIRECT SHIPPING DIRECT SHIPPING WITH MILK RUNS ALL SHIPMENTS VIA DC WITH INVENTORY STORAGE ALL SHIPMENTS VIA DC WITH CROSSDOCK ALL SHIPMENTS VIA DC WITH MILK RUNS TAILORED NETWORK

PROS NO DC COORDINATI ON EASY LOWER TRANSP COSTS SMALLER INVENTORY MOVEMENT COSOLIDATI ON LOW INVENTORY MOVEMENT COSOLIDATI ON LOWER OUTBOUND TRANSORTA TION COSTS TRANSPORT ATON SUITES TO INDIVIDUAL NEEDS

CONS HIGH INVENTORY SIGNIFICANT RECEIVING EXPENSE INCREASED COORDINATION COMPLEXITY INVENTORY COSTS INCREASED HANDLING INCREASED COORDINATION COMPLEXITY INCREASED COORDINATION COMPLEXITY INCREASED COORDINATION COMPLEXITY STILL HIGER COORDINATION COMPLEXITY

Fig.no.22

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Intermodal Transportation VI. Inter-modal transportation

Intermodal movements combine the cost and/or service advantages of two or more modes in a single product movement The more popular combinations are TOFC [Trailer On Flat Car] and COFC [Container On Flat Car]. Benefits of long haul, short time & flexibility are optimized for achieving overall cost reduction91 10/12/2012

 Co-ordination of different modes of transport to avoid wasteful competition Single window service to the customers Encouraging containerization both for internal as well as import/export cargo

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RAIL

COMMON PIGGY BACK

ROAD

COMMON, CONTRACT, EXEMPT, PRIVATE COMMON, CONTRACT, EXEMPT, PRIVATE COMMON, CONTRACT, EXEMPT, PRIVATE

FISHY BACK

WATER

TRAIN SHIP

AIR

AIR TRUCK [BIRDYBACK]

WATER OR AIR
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LAND BRIDGE LAND [RAIL OR ROAD]

WATER OR AIR
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C O F C
COFC
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TOFC
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TOFC
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Roll On/Roll Off ferries [RORO]: the truck rolls on to the and rolls off at the end of the voyage

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Roll On/Roll Off ferries

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LANDBRIDGE

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VII. Transshipment
Transportation goods and materials to the destination using one or more intermediate destinations A technological requirement Air travel to US

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A means of logistical cost reduction

Movement consolidation

Use of public carrier

Inter-modal transportation Cargo meant for third country lands at an Indian port or airport (land bridge)

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Customs duty & transshipment

Cargo cannot be moved without payment of duty

Leads to congestion at gateway ports

Customs Act provides a facility of

transshipment of cargo without payment of duty.

Between a port/airport and other

ports/airports/ICDs/CFSs
Between gateway port and bonded warehouses
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Nodal points
Railways network

Growth of economy is the responsibility of state

Movement of bulk materials for industrial growth

and movement of essential commodities to PDS

outlets is important for a prosperous and peaceful society
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 Hence the responsibility for logistics of those items falls on the state. State owns the net work of railways, net work that is the cheapest mode of transport for bulk. Nodal points in the value chain of such commodities can enable movement consolidation. State owned rail net work can link these nodes to the best advantage of state and thereby to that of
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national economy.

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Some characteristics of nodal points are as

under
1. Nodal points are part of railways logistical

infrastructure
2. Nodal points should be closer to consumption

points.

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3. Terminal and shunting facilities are required

at these places. Facilities for loading,

unloading & inter modal handling

4. Strategic development of such nodal points in the country strengthens the logistical operations for essential commodities and bulk materials
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