2. Transportation Strategy
Transportation is a very key element of the logistics process and
the supply chain which runs from vendors to customers.
It involves the movement of product, service/speed and cost
which are three of the five key issues of effective logistics.
It also impacts with the other two logistics-- movement of
information and integration within and among suppliers,
customers and carriers.
A transportation strategy, to be effective in supply chain
management, is not playing one carrier off against another. It is
not beating down rates. Rather it is a way to respond to the
dynamics of business, its customers, suppliers and operation.
3. Transportation Strategy
The strategy, regardless of whether domestic or international, is much more and
should recognize-
-
Customer requirements. transportation program must reflect and meet the
customers needs. The time and service aspects of transportation are vital.
Shipments must move timely. Customers shipments be delivered as they
require,on the date needed, by the carrier preferred, in the proper shipping
packaging method and complete, both shipped complete and delivered complete
and in good order. A transportation program which can do this provides customer
satisfaction and give a competitive advantage.
Mode selection: the mode, transit time, inventory and service impact vis a vis
freight charges are the consideration.
Carrier relationships. Volume creates carrier/forwarder attention. and
competitive interest .and develop carrier alliances to meet the supply chain
service requirements
4. Transportation Strategy
Measuring/benchmarking Measuring means comparing
performance versus standards. Freight cost data tied with
sales and shipping data makes a great data base for
budgeting and managing costs. . It provides data for
negotiations, , developing good freight costs for sales and
accounting, for studies and other purposes. Benchmarking
means learning what other companies do--the best
practices.
Regulatory impact
Carrier mergers and alliances and closings
Flexibility . Recognize that change will occur. Keep an
open ear and mind to other modes and carriers. The times
they are a changing--and so will your strategy
5. Transportation Strategy
Develop a Holistic, Integrated Approach to Transportation
Management
Centralizing transportation management, particularly planning and
measurement, is key to gaining better understanding and management of
supply chains. Centralization plan should include technology, data,
management, processes and locales
Gain Visibility into your Global Supply Chain
system should allow to track and locate any shipment using reference
points, such as booking number, container number, order number, part
number and shipment references. Also be able to receive proactive alerts on
possible issues, such as delays and deviations, consider visibility as a
starting point towards improving supply chain
System to Drive Integration with Partners
Building a trading partner with connectivity to a global partner network
allows to connect to the network to gain seamless connectivity between
internal systems and extended supply chain.
6. Transportation Strategy
Leverage y Human Resources
Effective transportation management involves people as well as technology
and systems. Recruiting qualified people, retention and education are a
must for developing a best in class transportation management process.
Consider the Financial Implications of your Transportation
Network
Contract and rate management, carrier selection and freight auditing are all
part of the financial supply chain that needs to run in tandem with the
movement of goods.
8. TRANSPORTATION CARRIERS:
Transportation sectors are essentially deregulated, with shippers able to
negotiate rates, terms, services, and routes with service providers.
Common carriers offer transportation service to all shippers at published
rates, in a non-discriminatory basis, between designated points. Under
deregulation, however, common carriers have considerable flexibility in
establishing rates and routes.
A contract carrier is a for-hire carrier that provides service to a limited
number of shippers and operates under specific contractual arrangements that
specify rates and services. Generally, rates for contract carriers are lower
compared to common carriers because volumes are typically predictable.
A private carrier provides transportation for its company’s own products and
the company owns (or leases) all related equipment and facilities. The five
basic modes of transportation are motor, rail, air, water and pipeline.
9. TRANSPORTATION CARRIERS:
Motor Carriers:
Motor carriers or trucks, are the most flexible mode of transportation offers
the advantage of point-to-point service, over any distances, for products
varying weight and size. Services is fast and reliable, with low damage and
loss rates. Motor carriers can be divided into three categories (1) less-than-
truck-load (LTL), (2) truck load (TL) and (3) small parcel, ground.
Rail Carriers and Intermodal:
Rail carriers are relatively inflexible and slow and have higher loss and
damage rates, compared to motor carriers. But has the advantage of lower
variable operating costs, which makes it attractive for hauling large tonnage
over long distances.
Intermodal freight services are divided between containers on flatcars
(COFC) and truck trailers on flatcars (TOFC), sometimes referred to as
piggyback systems.
Air Carriers:
Advantage of airfreight is the speed. Airfreight is costly and also must be
combined with trucks to provide door-to-door service.
low.
10. TRANSPORTATION CARRIERS:
Water Carriers:
Inexpensive compared to other modes, water carriers are slow and inflexible.
Similar to rail, water way transportation is best suited for hauling large
tonnage over long distances and is frequently used for bulk commodities
such as coal, grain and sand. Many waterway shipments involve the use of
containers. Containers also can be transported via truck or rail from the point
of origin and to the final destination.
Pipelines:
Pipelines can only transport products in either a liquid or gaseous state, the
use of this mode of transport is quite limited. However, once the initial
investment in the pipeline is recovered, the variable costs of operation are
relatively
11. Selection of Mode and Carrier:
The factors to be considered when selecting mode of shipment, carrier
and routing are:
Required delivery time
Reliability and service quality
Available Services : like warehousing and inventory management in
addition to transportation services.
Type of item being shipped. Special container requirements may
indicate only certain carriers who have the unique equipment to
handle the job.
Shipment size
Possibility of damage
Cost of transport service
12. Selection of Mode and Carrier:
Carrier financial situation. If any volume of freight is moved, some
damages will be incurred, resulting in claims against the carrier. Should the
carrier get into financial difficulty, or even become insolvent, collection on claims
becomes a problem.
Handing of claims: Prompt and efficient investigation and settlement of claims is
another key factor in carrier selection.
Private Fleets: A private carrier does not offer service to the general public.
Many companies have elected to contract for exclusive use of equipment. The
use of a private fleet is a type of make-or-buy decision. Maintaining a private
fleet gives the firm greater flexibility in scheduling freight services.
13. Rates and Pricing:
Transportation costs increase as distance, quantity and speed increase.
The two categories of carrier rates are line haul rates and accessorial rates.
Line haul rates are charged for moving products to a nonlocal destination and
can be grouped into four categories.
1.Class rates
2. exception rates
3. commodity rates and (
4. miscellaneous rates.
Today, most rates between shippers and carriers are negotiated and the
distinctions between rate classifications have become blurred.
14. Rates and Pricing:
Four basic types of rate discounts have developed; the buyer in some instances
can take advantage of one or more of them and possibly enjoy substantial
savings.
Aggregate tender rates provide a discount if the shipper will group multiple
small shipments for pick up or delivery at one point.
Flat percentage discounts provide a discount to the shipper if a specified total
minimum weight of less-than-truckload shipments is moved per month,
encouraging the shipper to group volume with one carrier.
Increased volume-increased discount percentage is applied if a firm increases
its volume of LTL shipments by a certain amount of over the previous period’s
volume.
Specific origin and destination points provide a specified discount if volume
from a specific point to a specified delivery point reaches a given level.
Demurrage charges (sometimes also called detention charges for motor
carriers) often are incurred by shippers or receivers of merchandise.
