INTERNATIONAL TRADE LOGISTICS UNIT III

ROLE OF TRANSPORTATION IN LOGISTICS

ROLE OF TRANSPORTATION IN LOGISTICS

Transportation cost absorb around 40% of total logistics costs An effective and inexpensive transportation system contributes to the following:

Greater competition in marketplace Making goods available at the right time from the right place leading to market penetration Greater economics of scale in production Wider markets can result in lower production cost. It also permits decoupling of market and production sites.

Reduced prices for goods

Inexpensive transportation also contributes to reduced prices.

ROLE OF TRANSPORTATION IN LOGISTICS

inferred that the demand for the commodity is not the same as demand for transport.
per unit distance transportation costs within the country always account for the final node of volume of trade than the same exportable items of other countries (Rauch ,1991)

Service Choices
There are five basic modes of transportation, namely, water, air, rail, road, and pipeline Any one or combination of these can be used for transportation of goods from one place to another Selection of modes of transportation is made based on best balance between quality of service and cost.

Characteristics of Transportation (Alderton, 1994)

Price
Average transit time Time variability Loss and damage

Price
The cost of transportation for shipper includes the following:

Line haul rate

For hire service

The cost of different services

Cost of service varies from one type of transport service to another. The hierarchy of cost for different transport services is as follows: Air > truck > rail >water > pipeline

cost comparison
Cost of movement of goods through trucks is seven times that by rail
Cost of movement of goods through rail is four times that by water or pipeline

cost comparison
Actual cost comparison should be made on actual charges that reflect the following: Commodity being shipped Distance and direction of movement

Any special handling required

TRANSIT TIME and VARIABILITY

Average delivery time and delivery time variability rank at the top as important transportation performance characteristics.
For comparing carrier performance, it is best to measure transit time of door-to-door, even if more than one mode is involved.

Variability refers to the usual differences that occur between shipments by various modes.
Even if transported by same means variability may be due to effects of weather, traffic, congestion, and number of stop-offs and differences in time to consolidate shipments.

Transit time variability is the measures of uncertainty in carrier performance.

The performance of a particular type of carrier is a function of distance, variability and loss and damage.

PERFORMANCE WITH RESPECT TO THE DISTANCE

Distance greater than 600 miles: Air freight is the fastest mode followed by truck load, then less truck load and then comes rail.

Distance less than 600 miles: Air and truck are comparable

Distance less than 50 miles: `Transit time is influenced by pick up and delivery operation than line haul transit time

Variability The variability of different modes of transport is as follows: Rail has the highest delivery time variability Air has the lowest delivery time variability

Loss and damage

This becomes factor for selection of a carrier

MODES OF TRANSPORT
CHARACTERISTICS WITH RESPECT TO:
DISTANCE SPEED QUANTITY and VOLUME OF CARGO

RAIL
Rail: a long hauler, slow mover of refrigerated material, raw materials and low valued bulk commodities, manufactured products like new automobiles etc. A carload quantity refers to predetermined shipment size usually approaching or exceeding average capacity of a rail car to which particular rate is applied.

RAIL
Other services include :

various stop off privileges which permit partial loading and unloading
pick-up and delivery, diversion and re-consignment which allows flexibility in routing and changes in the final destination of a shipment while en-route

RAIL
Fixed Cost is High while Variable Cost is low Variable cost includes loading, unloading, billing, collecting, yard switching and multiple shipment costs The cost per unit is lower for increased shipment volume.

Truck
Best suited for semi finished and finished goods with an average lengths of freight haul of 646 miles for truck load and 274 miles for less truck load. The shipment size smaller than rail. It is advantageous for door-to-door service (less material handling, better availability and frequency of service) Trucking has a service advantage in the small shipment market.

Air
Air freight is twice truck charges and sixteen times rail charges.

The appeal of air transportation is its unmatched origin destination speed, especially over long distances (maximum delay in surface freight handling and movement in door-todoor delivery time) Delivery time variability is low in absolute magnitude, even though air service is quite sensitive to mechanical break down, weather conditions and traffic congestions Compared to water, average delivery time variability is high as a result one can rank air as one of the least reliable modes.
Loss and damages are less

Water
Slowest, can handle liquid and bulk cargoes also high valued cargo in containers, loss and damage in general low

But for valued good substantial packing is needed to protect from rough handling of goods.

Waterways
Waterways are better means of transport following types of goods: Transported across the border i.e. for international trade Low cost, containerizable, non-perishable goods Liquid cargo, in large quantities

Capable of withstanding longer lead times in supply

Distribution and less careful handling.

Waterways
now-a-days almost all types of cargo including cars and vehicles (roll-on - roll-off ships as well as conventional carriers) finished goods, raw materials, small sized or large shaped cargo are transported through waterways.

SPEED VOLUME TRADE-OFF

Speed of flow of goods has been made possible with introduction of concepts of multi-modal transportations and feedermainland shipping routes (Frankel, 1990).

Pipeline
Offers limited range of services and capabilities. It is used for movement of fluids It is slow but tempered by the fact that products move 24 hours a day and 7 days a week It is the most dependable mode of transport
The loss and damage is low

Pipeline
Pipeline parallels the railroad in cost characteristics Fixed cost is high and the variable cost (Power and cost of operation) vary greatly with line throughput and diameter of pipe The cost per ton mile is low.

MULTI-MODAL TRANSPORTATION
(ALSO REFERRED AS INTER-MODAL TRANSPORTATION)
CONCEPT DEFINITION ISSUES POLICIES