2. Freight Management
ā¢ Freight management includes various strategies for
increasing the efficiency of freight and commercial
transport.
3. Freight Management:
Responsibilities
ā¢ Optimizing the transport cost
ā¢ Improve scheduling and routing to reduce freight
vehicle mile and increase load factor
ā¢ Reduce total freight transport by relying on
nearby supplier
ā¢ Use efficient transport equipment
ā¢ Improve vehicle operator training
5. Factors Affecting
Freight Cost
ā¢ Volumes
With the economies of scale, the cost of operations is
distributed over the large volumes resulting into the
lower per unit cost of cargo movement. For example, a 9
tonne loading capacity truck will have same cost
components of fuel consumption, loading and unloading
charges, employee cost, etc. for the distance covered,
irrespective of whether truck is fully or partially loaded.
ā¢ Distance
The variable cost is directly proportional to the distance
covered by the vehicle irrespective of the load carried. It
includes fuel and maintenance cost.
ā¢ Product density
Th e freight cost depends on the weight per unit volume of the
product. It includes two variables of weight and volume. A 2-axel
9 tonnes capacity truck has a limitation on the volume for low-
density products such as cotton bales, wood, plastics, etc. In
such cases, the freight cost per unit weight assessed is relatively
higher. Similarly for high density products the limitations are on
the weights, which should not exceed the allowable payload of
the vehicle. In such cases, the truck is party loaded with respect
to the available loading space on the vehicle
6. Cont..
ā¢ Product shape
Th e size and shape of a product pose difficulty in handling and aff
ect the speed of its movement. Such products require special
arrangement for loading, unloading and towing. For such heavy
payloads, vehicles with long trailer are deployed for movement. Th
e operating charges for such special vehicles are obviously much
higher because of higher operating cost, slow movement of the
vehicles and in special cases escorts are deployed to accompany
them. Th e large size chemical processing steel vessels, heavy-duty
electrical transformers, long and odd shaped steel products attract
higher transportation charges.
ā¢ Product handling
For handling heavy as well as odd-shaped cargo, special material
handling equipments are deployed. Th ese equipments are not
available at loading or unloading points because of very low
frequency (at the time of project installations only) of usage.
Hence, these equipments have to be specially organized. Th is
adds into the unit transportation charges of the product.
7. Cont..
ā¢ Product type
Products such as fruits, food products, certain pharmaceutical
formulations require special temperature and humidity
condition for storage and transportation.
ā¢ Market dynamics
Goods transportation business is in the hands of transport
agents. Th e rates are fixed by the agents and not by the truck
owners, except in case of very large fleet owners who operate
across the country through their marketing infrastructure.
8. ā¢ Transportation refers to the movement
of product from one location to
another as it makes its way from the
beginning of supply chain to the
customer.
ā¢ Transportation is an important supply
chain driver because products are
rarely produced and consumed in the
same location.
Introduction of Transportation
9. Role of transportation in
supply chain management
ā¢ Demand Fulfillment
ā¢ Critical links between
organizations that allows
flow of goods.
ā¢ Makes supply chain
competitive.
11. ā¢ Shipper:
The party who wants to transport the product from one
place to another place.
ā¢ Carrier:
Carrier is company that moves the goods from one
place to another place.
For example: DHL, Fed Ex. Etc.
Key Drivers
13. ā¢Short lead times, or advanced service levels.
ā¢Best suited for small, high- value items or time
sensitive emergency shipments that have to travel a
long distance.
ā¢Suited for shipments that have high value but light
weight .
Air
14. Advantages
ā¢ Speed
ā¢ Low packaging cost
ā¢ Good security
ā¢ Less risk
Disadvantages
ā¢ High Freight cost
ā¢ Limitation on size
ā¢ Needs airport facility
Air Transport
15. Water
ā¢ Water transport uses ships and large
commercial vessels that carry
billions of tons of cargo.
ā¢ Water transport is used primarily for
the movement of large bulk
commodity shipments and it is the
cheapest mode for carrying such
load.
ā¢ Water transport is particularly
effective for significantly large
quantities of goods that are non-
perishable in nature and for cities or
states that have water access.
16. Advantages
ā¢ Cheapest freight cost
ā¢ No capacity constraints
ā¢ Size and shape no bar
ā¢ No environmental
problems
Disadvantages
ā¢ Strong packing required
ā¢ Weather conditions affect
delivery
ā¢ Slow movement
Water Transportation
(Sea and Inland)
17. ā¢ Trucking industry is divided into two parts i.e.
TL: Truck Load and LTL: Less than Truck load.
ā¢ TL: TL pricing display the economic of scale with respect the distance travel. TL
shipping suited for transportation between manufacturing facilities and
warehouses.
ā¢ LTL: LTL operations are priced to encourage shipments in small lots, usually less
than half a TL. LTL shipping is suites for shipments that are large to be mailed as
small packages.
ā¢ https://www.youtube.com/watch?v=QX9_4h4obFg
0.05-2.5 tons,4 tons, 13.75 tons
TRUCK
20. Advantages
ā¢ Flexibility
ā¢ Door to door service
ā¢ Reliability
ā¢ Cost-comparative
and negotiable
ā¢ Access to remote
places
Disadvantages
ā¢ Environmental
pollution
ā¢ Strong packaging
required
ā¢ Slow speed
Road Transportation
21. ā¢ Rail transport uses freight trains for the delivery of
merchandise. Freight trains are usually powered by
diesel, electricity and steam.
ā¢ Rail is suited for bulk shipment of products like
fertilizer, cement, food grains and coal etc. from the
production plant to the warehouses.
Rail
22. Advantages
ā¢ Any type of commodity
can be moved
ā¢ Low freight cost compared
to road and air
ā¢ Large carrying capacity
Disadvantages
ā¢ Strong packing required
ā¢ Needs loading/unloading
platforms
ā¢ Low delivery reliability
Rail Transportation
The Railways record for about 2.30% of the GDP and
employs approx 1.5 million people directly.
23. ā¢ Pipeline is used primarily for the transport of crude
petroleum, refined petroleum products and natural gas.
ā¢ It include a significant initial fixed cost in setting up the
pipeline and related infrastructure.
ā¢ Unable to transport a variety of materials
Pipeline
24. ā¢ Package carriers are transportation companies which carry
small packages. Examples: First flight, DHL , Bluedart Etc.
ā¢ Package carrier use air, truck and rail to transport the goods.
ā¢ Packages carriers also provide other value added services
that allow shippers to inventory flow and track order status,
shipper can proactively inform the customer about their
packages.
ā¢ Package carrier is suited for e- business.
Package Carrier
25. ā¢ Intermodal Transportation is use of more than one mode of transport for the
movement of shipment from origin to its destination.
ā¢ Intermodal operation is used two or more mode of transport
to take the advantage of inherent
economies of each and thus
provide the integrated service at
lower cost.
For example: truck/water/rail.
Challenge: exchange of information.
Intermodal Transportation
26. Design Options for a
Transportation Network
ā¢ When designing a transportation network
1. Should transportation be direct or through an
intermediate site?
2. Should the intermediate site stock product or only
serve as a cross-docking location?
3. Should each delivery route supply a single destination
or multiple destinations (milk run)?
27. Direct Shipment Network
to Single Destination
It Involves shipping
of products from the
supplier to all the
buying retail stores.
28. Direct Shipping with Milk Runs
A Miik Run is a route in which a truck either delivers a product from a single supplier to
multiple retailers or goes from multiple suppliers to a single retailer.
29. Shipments via Intermediate Distribution Center with Storage
Retail chains / Buyers are divided into common geographical areas and a centrally
located DC is built for each of these regions.
Suppliers then send their shipments to the DC and then the DC transfers the
appropriate shipments to every retailer within its geographical region.
30. All Shipments via
Intermediate
Transit Point with
Cross-Docking
ā¢ Suppliers send their shipments to an intermediate
transit point
ā¢ They are cross-docked and sent to buyer locations
without storing them
31. Shipping via DC Using Milk Runs
Milk runs are used from a DC when
the lot sizes to be delivered to
retailers are small.
Milk runs are most important
because they reduce the outbound
transportation costs by
consolidating small shipments.
32. Tailored Network
Network Structure Pros Cons
Direct shipping No intermediate warehouse
Simple to coordinate
High inventories (due to large lot
size)
Significant receiving expense
Direct shipping with milk
runs
Lower transportation costs for small lots
Lower inventories
Increased coordination
complexity
All shipments via central
DC with inventory
storage
Lower inbound transportation cost
through consolidation
Increased inventory cost
Increased handling at DC
All shipments via central
DC with cross-dock
Low inventory requirement
Lower transportation cost through
consolidation
Increased coordination
complexity
Shipping via DC using
milk runs
Lower outbound transportation cost for
small lots
Further increase in coordination
complexity
Tailored network Transportation choice best matches
needs of individual product and store
Highest coordination complexity
33. Transportation Network
ā¢ Point to point network
A point-to-point network connects
directly a set of locations without
any interruption of services (e.g. pick
up or drop off) even if the route itself
may not be direct.
ā¢ Hub and spoke network-
A (pure) hub-and-spoke network
connects every location through a
single intermediary location called a
hub.
40. Prior to Containerization MULTIPLE HANDLING
All cargoes other than bulk commodities were moved package by package
and piece by piece with multiple handling, resulting in damage, pilferage and
time loss.
41. WHAT IS CONTAINERIZATION?
ā¢ āContainerization is a system of freight transport based on a
range of steel intermodal containers (also 'shipping containers',
'ISO containers' etc).
ā¢ Containers are built to standardized dimensions, and can be
loaded and unloaded, stacked, transported efficiently over long
distances, and transferred from one mode of transport to
anotherācontainer ships, rail and semi-trailer trucksāwithout
being opened.
42. ā¢ ISO Standard for containers:
ā¢ Five common standard lengths: 20-ft, 40-ft, 45-ft, 48-ft and 53-
ft
ā¢ Container capacity of Ships, Yards , Terminals are measured in
TEU = Twenty foot Equivalent Units or FEU = Forty foot Equivalent
Units .
ā¢ Height is not considered for expression (8 feet 6 inches high or 9
feet 6 inches high for high cube containers)
ā¢ Maximum gross mass for 20ft is 24000 kgs and for 40-ft is
30,480 kgs.
Some big names in Container Transport:
NYK Line, Evergreen Marine, CMA-CGM, Maersk Line, MSC,
Hapag-Lloyd, APL, Hanjin, CSCL
In India ā Shipping Corporation of India
44. Containerization: Benefits
ā¢ Inter-modal transportation possible
ā¢ Elimination of cargo trans-shipment leading to
speedier delivery services
ā¢ Door-to door service to customer possible
ā¢ Risk of transit damages and pilferages reduced
ā¢ Substantial reduction in logistical packaging cost
ā¢ Reduction in overall distribution cost
45. CONTAINERIZATION IN INDIA
Some numbers about Sea Transport in India:
ā¢ Sea Transport carries 95% of Indiaās exports by volumes and 70% by value
ā¢ India has 12 major ports and 187 non-major ports along 7517 km coastline
Drivers of Container Traffic
1. INTERNATIONAL TRADE GROWTH
2. PENETRATION OF CONTAINERIZATION
3. HUB AND FEEDER SERVICE STRUCTURE
47. DRY STORAGE CONTAINER
ā¢ Used for shipping dry goods
that do not require
temperature control.
ā¢ They come in different
dimensions standardized by
ISO.
ā¢ Ideal for manufactured
products and some natural
resources
48. ā¢ Especially suitable for heavy
loads and cargo that needs
loading from the top or sides.
ā¢ Manufactured from steel and
come in 20ā² and 40ā² sizes.
ā¢ Ideal for cargo difficult to
handle: heavy machinery, large
industrial parts and construction
materials.
FLAT RACK CONTAINER
49. ā¢ Do not have solid roofs.
They have removable bows
and a weatherproof
tarpaulin roof which can be
secured with ropes
ā¢ Open top containers are
ideal for bulky cargo such as
machinery, wood, etc.
OPEN TOP CONTAINER
50. TANKS
ā¢ Mostly used for
transportation of liquid
materials: toxic, corrosive,
highly combustible, and oils,
milk, beer, wine, mineral
water, chemicals etc.
ā¢ Mostly made of strong steel
or other anti-corrosive
materials providing them with
long life and protection to the
materials.
51. Insulated Containers
ā¢ Rely on their insulation properties to
maintain a steady temperature
ā¢ No power supply
ā¢ Advantage if goods are being
shipped a short distance and power
is not available
ā¢ Pre-cooled cargo from cold storage
can be used with an insulated
shipping container to maintain a cold
chain very successfully on short trips
52. ā¢ Always have a carefully
controlled low temperature.
ā¢ Exclusively used for shipment
of perishable substances like
fruits and vegetables over long
distances.
REFRIGERATED ISO CONTAINERS
