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Transportation is an essential factor in Distribution management. Two distinct levels of transportation dealt with in this presentation are Primary and Secondary. Primary transportation involves rail, road, air ship and secondary transportation involves small truck booking etc. This is an in depth presentation about transportation by Welingkar’s Distance Learning Division.

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  1. 1. Welingkar’s Distance Learning Division CHAPTER-7 Transportation We Learn – A Continuous Learning Forum
  2. 2. Transportation 1. Primary Level – Which covers movement to that point in the chain wherefrom the product will be sold to out side parties 2. Secondary level – The transportation there after, which many a times may be borne by the seller e.g. company picks up the transportation charges from the C&FA to the distributor point
  3. 3. Primary Level Transport • Road Transport – Which is by and large the most preferred • Rail – Which even in spite of certain limitations such as fixed terminals, is very economical when it comes to carrying in bulk • Air – Particularly useful for very high value items, of delicate and extremely perishable nature
  4. 4. Primary Level Transport • Ship – Advantage of bulk transportation over long distances particularly across countries at a lower cost • Pipe line – For bulk movement of materials in fluid form or semi fluid slurry form, safe and low variable cost mode of transport..
  5. 5. Secondary level transport • By and large road is the medium • Also uses 4 wheeler vans, 3 wheeler vans, 2 wheelers, cycles, cycle rickshaws, hand carts, bag in hand, couriers • Ropeways are used in hilly areas
  6. 6. Road Transport • The trucking industry is about Rs. 80000 crores per annum. • The Indian roadways network is • National Highways 58112 km • State Highways 137119 km • Major District Roads 470000 km • Village and other roads 2650000 km • Total length 33153231 km
  7. 7. Trucking Industry • By and large not very organized • Total heavy duty commercial vehicles are about 14 lacks of which 55 % having national permit • Ownership pattern is fragmented • 77% of truckers are single vehicle owners, who rely on agents to get them loads
  8. 8. Trucking Industry • Traditional vehicle plying in the market are 18 to 20 feet in length, 7 ft wide. • Rules prohibit loading vehicles beyond 11 ft in height form the road level • Vehicles with tall sides reaching 5 to 6 ft from the platform base are known as Punjab body trucks, and those with shorter sides about 3 to 4 ft from the platform base are known as half body trucks
  9. 9. Trucking Industry • These trucks are allowed to carry 9 metric tons of load • Market is shifting towards vehicles which are 23 ft in length, the breadth and height dimensions remaining more or less same but capable of carrying 16 tons of load
  10. 10. Consignment Note/Lorry Receipt • • • • • • Transporter’s name and address Date of the consignment note Consignment note serial number Name and address of the consignor Total units or number of packages Brief description of materials being carried
  11. 11. Consignment Note/Lorry Receipt • The freight amount, plus any other charges to be paid • Whether the freight is paid, or to be paid, or to be billed • Whether the consignment is consigned to the consignee or ‘selves’ • Whether the consignment is insured by owner or transporter • Whether the cargo is for door delivery or to e cleared by the consignee from the transporter’ godown
  12. 12. Important considerations • From the legal aspect one should not that the carrier responsibility for the goods tendered for dispatch is that of a “bailee” which is like that of a warehouseman. • Being a bailee the transporter cannot claim any ownership rights on the cargo, even in case his freight has not been paid
  13. 13. Important considerations • During the entire period of transit the responsibility of the transporter is of a common carrier, and hence he is fully responsible for loss, deterioration, damage except when such loss or damage or deterioration occurs due to an act of God/nature, an act of public enemy, civil restraint, default on the part of the consignor or consignee or deterioration Ch-07 Transportatio
  14. 14. Important considerations • To protect the cargo against risk while the goods are in transit, insurance covers are taken • At times the goods cab be booked at the carrier’s risk in which case the transporter may charge a little extra
  15. 15. Transport Insurance • At the point of delivery any apparent damages to the cargo, thereafter a claim must be filled on the transporter in writing within seven days • In case of accident carrier must lodge FIR in the police station, who in turn will inform his insures by regd. Post AD
  16. 16. Transport Insurance • Thereafter the insurance company will send it’s surveyor to make an on the spot inspection, and the consignor may be offered compensation on the bases on survey report, and value insured. • If the carrier refuses to entertain the claim, then a suit must be filed in an appropriate court within a reasonable time but not beyond six months from the date of refusal
  17. 17. Self Insurance • Sometimes organizations negotiate with transporters that instead of going in for transit insurance for the consignments they may have an arrangement where under the transporters will settle the consignor’s claims at the above basis, follow-ups, survey formalities etc. this procedure generally goes by the name of self insurance. Ch-07 Transportatio
  18. 18. Selecting transporter contractors • • • • Constitution of the carrier’s firm The carrier’s business turn over The carrier’s area of operation The carrier’s branch offices or associates’ offices • Number of trucks owned by the transporter
  19. 19. Selecting transporter contractors • Existing clients of carrier, experience with transporter • Check with existing customers the track records of the transporter as regards settlement of claims • The transit time quoted by the carrier • Type and load of traffic to be handled
  20. 20. Selecting transporter contractors • Transporters usually tender rates destination wise, depending upon their total business on those sectors • During times of high market rates, transporters resort to delaying tactics to place vehicles, it is advisable to incorporate a clause regarding risk purchase , under which the company can requisition of a truck from the open market and debit the difference to the regular transporter if he fails to place a truck as per requirement
  21. 21. Transshipment • The cargo is transferred from one vehicle to another en route. • It may happen due to mechanical failure of the vehicle, or it may so happen that the truck procured form the market was not having permit to ply from the originating point to the destination, and hence a vehicle shifting is made en route. Ch-07 Transportatio
  22. 22. Service Level Agreement • Under which the user and the provider come to conclusions on the extent of continuity of service, loading and transit times, fulfilling peaks and troughs for truck demand etc. • Appliance companies may have scope to use these concepts to some extent, because in most of the cases the source of materials and components may not match with centers of high demand for the finished goods
  23. 23. Rail Transport • Indian railways network as per 2002-03 figures are 63122 km Corridor Length km 4-landed km Delhi-Kolkata 1453 322 Kolkata-Chennai 1684 146 Chennai-Mumbai 1290 197 Mumbai-Delhi 1419 494
  24. 24. Use of Railways • Metro network comprises only 15% of network, carries about 65% of the network • Caters to the movement of bulk commodity traffic, namely coal, iron ore, minerals, grains, cement, and even oil in tankers
  25. 25. Railways Rates • Wagon Load Rates – Which are a bit lower can be availed of if the commodities are offered in full wagon quantitative. • Small Rates – Which are at a higher level than wagon rates are applicable to bookings in smaller lots Ch-07 Transportatio
  26. 26. Railways Rates • Train Load Rates – For certain commodities which are cheaper than wagon load rates • At times organizations depending upon the volume of traffic can negotiate with the railways for station to station rates Ch-07 Transportatio
  27. 27. Quick Transit Service • At an additional charge railways book consignments whether in wagon loads or in smalls between pairs of stations within a targeted transit time under what is called quick transit service • Disadvantage with railways – Root rigidity Ch-07 Transportatio
  28. 28. Container Service • Initiated in 1967 • Are door to door integrated services and avoid multiple handling • About 5 ton capacity and loaded on flat wagon • Safe & Fast • CONCOR is sole provider of containerized goods transport by rail in the country
  29. 29. Container Service • CONCOR has 31% share of the exim Cargo • Freight Forwarder Scheme – Under which road transporter collects goods from the consignors for the same destination, and then transport the consignments in a wagon load to the common destination, where after clearing from the wagon they deliver the consignments to the consignees as road delivery
  30. 30. Special Cargo Trains • Railways have introduced few cargo trains on selected routes such as Kurla-Guwahati, Kurla -Hyderabad, etc. • This train takes about 4 to 6 days between Kurla and Guwahati, against 18 days for a truck to normally cover that distance.
  31. 31. RORO • Konkan Railways have a service known as RORO-roll on roll off- where in, the train service carries trucks on rail flats. • A daily service between Goa and Mumbai is available • The detention of vehicles at terminals for loading and or unloading is minimal, as trucks have only to roll on or roll off Ch-07 Transportatio
  32. 32. Advantage of RORO • In rail ride, average speed is around 60 to 70 km per hour against 20 to 25 it makes on the road • Saving on fuel • Saving on wear and tear • Win-win for the Konkan Railways, individual truckers, and the consigners. Ch-07 Transportatio
  33. 33. Air Transport • Extremely costly on a rate basis vis a vis other mediums of travel, air transport has a few distinct advantages • Helps in bringing new distant market within reach • In new markets enables servicing without opening storage location with high investments
  34. 34. Air Transport • Helps in tacking sudden demand hike • Security, regularity, reliability and flexibility • Fixed outlays in warehouse inventory etc. may be comparatively much less
  35. 35. Trade Offs between Cost levels Change Point VAR costlier mode Cost > VAR cheaper mode Fixed cheaper mode Fixed costlier mode Tonnages Moved >
  36. 36. Change Point • Fixed and variable costs of distributions of air would be less than by rail or road, where after the air mode would be more costly • This point is known as the change point is calculate as per formulate
  37. 37. Change Point • Change Point = F2-F1/ v1-v2 Where, F1= Transporting by air v1=variable component when transporting by air F2 = Transporting by rail/road v2 =variable component when transporting by rail/road
  38. 38. Major constitutes of the current IATA rates • General Cargo Rates – Normal rates for cargo transportation Mumbai to London Air France Alitalia British Airways Rs. Rs. Rs. 1700 2200 2300 ≤ 45 kg per kg 135 190 176 45-100 kg per 188 kg 180 144 100-250 kg per kg 130 132 Minimum 139 Ch-07 Transportatio
  39. 39. Class Rates • Are surcharged or discounted rates for certain classified items e.g. valuable cargo, live animals, commodities being freighted in bulk etc. Ch-07 Transportatio
  40. 40. Specified Commodity Rates • Heavily discounted rates applicable in particular route between two points • Market oriented rate, take into account actual demand requirements, as well as the user’ freight cost threshold i.e. ability to pay
  41. 41. Freight All Kind • Is an extension to the specified commodity rates in as much as under these rates the restriction to a particular commodity is waived, and the consigner can send any commodity specially approved by IATA carriers under the same rate between those stations • Government may influence rates
  42. 42. Sea Transport • International trade through the sea route is governed by LINEAR CONFERENCES which is an agreement between tow or more vessel operators plying on a particular or specified routes to provide uniform rates and other conditions for transportation on those routes
  43. 43. Conference rates factors • • • • • • • • Character of the cargo Volume of cargo Susceptibility to damage Susceptibility to pilferage Packing and store requirements Ratio of weight to measurements Heavy lifts or extra length Competition with goods from other sources
  44. 44. Conference rates factors • • • • • • • • Cargo via competitive ports Competition from other carriers Actual cost of operations Distances Cost of handlings at ports Port facilities Port charges Possibility of return loads
  45. 45. Important terms in Sea Route • Tramp vessels – Individual ships may be chartered on time/voyage or demise basis • Voyage charter – Ships are chartered for a particular voyage • Time charter – Ships are chartered for a particular period of time
  46. 46. Important terms in Sea Route • Demise Charter – Bare ship is chartered for a particular period of time i.e. without any floating personnel, fuel, or provisions. – The charterer has to equip the ship with every thing necessary for operating the ship
  47. 47. Types of Cargo • General cargoes are materials packed in some form of packaging and are normally finished goods • Dry bulk cargoes would be raw materials such as ore, food grains, or other commodities that can be transported in loose condition • Liquid bulk cargoes such as crude, oil, etc are another set of cargoes
  48. 48. Containers • General cargoes are mainly transported by containers Container Size Dimensions 20 ft Length 5830 mm x width 2347 mm x height 2380 mm 40 ft Length 11975mm x width 2352mm x height 2380mm 20 ft refrigerated Length 5385mm x width 2159 mm x height 1956 mm 40 ft refrigerated Length 12040mm x width 2235 mm x height 2311 mm
  49. 49. TEU • TEUs are twenty foot equivalent units of containers. • As for instance in 2003 the total TEUs handled in the country was 5 lakh TEUs. • Concor handled about 90% of this volume • Many ships are totally containerized
  50. 50. Freight Brokers & Clearing and forwarding agents • Freight brokers who are normally formed in association , operate at ports, keep a track of shipping space, obtain requirements of shippers and assist in booking shipping space. Normally the freight broker get his commission from shipping company
  51. 51. Activities of Clearing and forwarding agents • Assisting in customs documents processing • Paying the export/import duties on behalf of the customer • Obtaining carting order • Deliver goods to the shipping company and obtain mate’s receipt, which after payment of port charges he exchanges for a Bill of Lading
  52. 52. Bill of Lading • Similar to lorry receipt, it is the document of title to the cargo, it has – – – – – – – – – The name of the ship The name of the shipping company The shipper's name The destination port To whom shipped Marks on packages Description of goods Freight The bill of lading has number and date
  53. 53. Pipe Line • It is the ideal mode of transporting large quantities of liquid, gaseous, or slurry types of cargoes of long distances • In the case of pipelines it is the cargo that does the movement the medium remaining stationary • Used in water supply and savage disposal
  54. 54. Advantages of Pipeline • • • • • All weather means of transport Low energy consumption, may work on gravity Low operating cost Easier to run through difficult terrain Transit losses unless deliberate sabotage, is minimal • However, pipeline is a costly option
  55. 55. Rope Ways • The advantages of ropeways in certain terrains is its ability to connect two places with large altitudinal differentials with relative ease • Eco friendly • Movement of products over locations separated by hills and valleys or other difficult to navigate terrain, to vantage points where they can link up with regular road ways
  56. 56. Inland Waterways • In the eastern, parts of over country, as well as in the Kerala back water inland waterways do exist but the same can be developed substantially • Cost wise this medium is extremely cheap • Country has 14500 km of navigable waterways
  57. 57. Inland Waterways Government Declaration • The Ganges from Haldia to Allahabad as National Waterway No.1 • The Brahmaputra from Dhubri to Sadiya as National waterway no 2 • The west coast canal from Kottapuram to Kollam along with the Udyogmadnal and Chanpakara canal as N.W. No.3 • Planning to develop three more national waterways
  58. 58. Other modes of transport • Hand carts, cycles, cycle rickshaws, cycle vans, head loads, to animal driven • There can be several mediums which can be used depending upon – Type of cargo – Specific terrain condition – Cost/delivery option
  59. 59. Summary • We have to look at transportation at tow distinct levels 1. Primary 2. Secondary • Primary level transport used are rail, road, air, ship and pipeline • At the secondary level small truck booking etc. are used • Railways caters to the movement of bulk commodity traffic, namely coal, iron ore, minerals, grains, cement, and even oil in tankers
  60. 60. Summary • Air transport helps in bringing new distant market within reach • Sea Cargo provides economic option for international transportation • Pipe line is the ideal mode of transporting large quantities of liquid, gaseous, or slurry types of cargoes of long distances
  61. 61. Summary • In the eastern, parts of over country, as well as in the Kerala back water inland waterways do exist but the same can be developed substantially • Movement of products over locations separated by hills and valleys or other difficult to navigate terrain is possible with ropeways