Role of transport as an element in logistics

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This lecture notes takes a look into the specific roles Transport Plays in the movement of goods and services along the supply chain

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Role of transport as an element in logistics

  1. 1. ROLE OF TRANSPORTATION IN THE MOVEMENT OF GOODS AND SERVICES EBO HAMMOND, CMILT International Diploma in Logistics & Transport (GIM PA)
  2. 2. TOPIC OBJECTIVES 1 • It is to help – Appreciate the role and importance of transport in the logistics chain – Understand the general principles underpinning transport in logistics – Identify the various carriers/modes and characteristics – Apply principles and theories in designing own distribution system18/08/10 EBO HAMMOND-CMILT 2
  3. 3. TOPIC OBJECTIVES 2• It is to help – Appreciate the role and importance of packaging as it relates to transportation – Understand the role of unitization and containerization and its importance in transportation – Appreciate the risks in transportation of hazardous goods18/08/10 EBO HAMMOND-CMILT 3
  4. 4. INTRODUCTION 1• Transportation plays a critical role in the entire logistics chain• The chain is set in motion with orders from suppliers for raw materials, semi-finished products, finished products, etc, which are transported from supply sources to production sites• These raw materials are stored or sent directly to the plant to aid production• Finished goods are then sent or transported through distribution centres to intermediaries for redistribution and sale to consumers 18/08/10 EBO HAMMOND-CMILT 4
  5. 5. INTRODUCTION 2 • The management of transport services is an important element in logistics • The interface between transportation and logistics systems could be described as consisting of Nodes and Modes • The Node portion involves activities such as warehousing, goods handling, sorting, processing, etc. The Mode portion deals with transportation services in the movement of goods and services • Transport is the link between nodes18/08/10 EBO HAMMOND-CMILT 5
  6. 6. CONCEPT OF NODES AND MODES 1 Mode Mode Mode Node Node Node Node MODE- For movement or transportation of products/services NODE- For general processing and all handling apart from movement18/08/10 EBO HAMMOND-CMILT 6
  7. 7. CONCEPT OF NODES AND MODES 2 MODE MODE MODE MODESOURCE CONSUM PTION NODE NODE NODE NODE NODE 18/08/10 EBO HAMMOND-CMILT 7
  8. 8. CONCEPT OF NODES AND MODES 3 CASE STUDY- SUPPLY CHAIN OF ELECTRICITY PRODUCTION – MODES AND NODES (INTERFACE BETWEEN TRANSPORT AND OTHER LOGISTICS ELEMENTS Source Point Mode Node Mode Raw materials Generation Node Consumption Point Transportation e Mode d Mo Users Storage18/08/10 EBO HAMMOND-CMILT 8
  9. 9. DEFINITION OF TRANSPORTATION 1 The following synonyms could best provide a clue to what transportation means- Convey, Move, Carry, Bring, Transfer, Ship Transportation simply comprises all the various devices, equipment and related activities such as driving, maintenance, vehicles, etc harnessed in physically moving goods and services from point A to B which represents the nodes. Transport provides spatial mobility which helps to reposition goods and services for consumer accessibility and possession.18/08/10 EBO HAMMOND-CMILT 9
  10. 10. DEFINITION OF TRANSPORTATION 2• It adds value to the logistics function by way of providing time and place utilities. An efficiently managed transport system could reduce the overall cost of products to end-users.• Transport organisations provide the following extra functions/services: – Packaging – Freight forwarding services – Distributors (wholesalers) – Corporate branding on vehicles – Warehousing/Depots – Reverse logistics management – Others 18/08/10 EBO HAMMOND-CMILT 10
  11. 11. DEFINITION OF FREIGHT 1• The following synonyms could best provide a clue to what Freight means- Goods, Cargo, Shipment, Contents, Stowage, luggage, etc• Freight is anything, other than passengers, carried by a transport mode from point a source point to an end point• It is usually carried for a fee; and from a consignor to a consignee 18/08/10 EBO HAMMOND-CMILT 11
  12. 12. DEFINITION OF FREIGHT 2• Freight transportation is sometimes also referred to as- – Cargo transportation – Physical distribution• Freight transportation serves as the threaded needle (mode) that weaves the logistics elements (Nodes) together into a seamless logistics dress 18/08/10 EBO HAMMOND-CMILT 12
  13. 13. STRATEGIC FACTORS IMPACTING ON TRANSPORTATION IN LOGISTICS I• Some of the factors are as follows: – Globalisation; which has lengthened the physical distance covered and also cost – Information, Communication and Technology; which has facilitated the flow of information along the chain; helped shortened the chain – Socio-economic; which has increased demand and the need for convenience thereby affecting choice of mode and speed of flow Final-assembly Product Design A C D Sub-assemblyGLOBAL ISATION BOF PRODUCTION Consumption Raw Material 18/08/10 EBO HAMMOND-CMILT 13
  14. 14. STRATEGIC FACTORS IMPACTING ON TRANSPORTATION IN LOGISTICS I• Some of the factors are as follows: – Political; which has at a point integrated markets but on the other hand created physical barriers to transportation through varying legislations – Environmental- use of green materials, degradation – Competition; driving down margins, promoting innovation18/08/10 EBO HAMMOND-CMILT 14
  15. 15. STRATEGIC FACTORS IMPACTING ON TRANSPORTATION IN LOGISTICS II• Some of the factors are as follows: – Dwindling Natural Resource; which has resulted in seeking alternative sources of supply such as water, fossil fuel – Rise of New Economic Powers blocs; which has switched and realigned economic resources flow and changing the balance of economic power and even impacting on political dynamics. Such economic powers are Asia Tigers, China, Brazil, India, South Africa, others18/08/10 EBO HAMMOND-CMILT 15
  16. 16. STRATEGIC FACTORS IMPACTING ON TRANSPORTATION IN LOGISTICS II• Some of the factors are as follows: – Natural Disasters; such as earth quakes, tsunamis, typhoons, floods , drought,. Etc further worsening depletion and destruction of resources – Population Boom; coupled with economic development driving trade boom and cheap labour – Financial Crisis (Credit Crunch)- dwindling investible funds for logistics and transport activities18/08/10 EBO HAMMOND-CMILT 16
  17. 17. ROLE AND IMPORTANCE OF TRANSPORT IN THE SUPPLY CHAIN• The various roles played by transportation services in freight movement include the following: – Movement of goods and services physically along the logistics chain – helps achieve the following logistics utilities such as Time (When) and Place (Where) and supporting Form Utility – Help build strong brand image through vehicle branding and marketing – Facilitates customer satisfaction through timely delivery of goods and services 18/08/10 EBO HAMMOND-CMILT 17
  18. 18. TRANSPORT PHASES IN THE SUPPLY CHAIN Inbound Freight• Transport movement along the supply chain can be segmented into THREE PHASES such as: – Inbound Phase- which moves mostly raw materials, semi-finished, sub- Internal Freight assemblies, etc to be added to production. This is the input stage. – Internal/Operations Phase- which moves goods and services within the confines of production or operations site Outboard Freight – Outbound Phase- which moves finished goods for packaging, storage or distribution to consumption points18/08/10 EBO HAMMOND-CMILT 18
  19. 19. AVAILABLE MODES AND XTICS 1 There are different types of transport systems available for logistics organisations to choose for the movement of goods and services. The following are the key existing transport modes: ◦ Sea transport (Maritime) ◦ Road Transport ◦ Rail Transport ◦ Air Transport ◦ Inland Water Transport ◦ Pipeline18/08/10 EBO HAMMOND-CMILT 19
  20. 20. General Objectives for Mode Selection It ensures that the goods are delivered safely and on time to the customer. General qualities guiding choice of carrier include: ●Speed of delivery ●Certainty of timing ●Freedom from interruption ●Avoidance of damage ●Avoidance of loss through pilferage ●Quality and/or impact of ancillary services18/08/10 EBO HAMMOND-CMILT 20
  21. 21. AVAILABLE MODES AND XTICS 2 • Sea/Maritime Transport • This refers to movement of goods and services by the sea/ocean. The following are the main characteristics of this mode: • Can move great volume of goods due to the availability of big ocean liners • Generally less expensive in relation to some other modes • Generally less faster in relation to some other modes due to slow turnaround time and actual voyage time • Has high fixed cost but low variable cost • It has high availability but for those countries which are not land-locked • There is generally flexibility in choice due to existence of many ports around the world and number of alternative ships Mostly used for cargo consolidation, high volume, heavy weight and relatively low cost freight.18/08/10 EBO HAMMOND-CMILT 21
  22. 22. Sea transport has the following advantages and weaknesses: Advantages Disadvantages Large volumes of cargo can be Ships are relatively slow transported in one ship on one voyage May be cheapest method of Ports suffer from congestions transport Flexible particularly following Not all ports are well equipped containerisation and some have draught restrictions Similarity in infrastructure and Port practices need improving superstructure18/08/10 EBO HAMMOND-CMILT 22
  23. 23. AVAILABLE MODES AND XTICS 3 • Road Transport • This refers to movement of goods and services by the road. It is the most dominant mode of transportation in the logistics chain. The following are the main characteristics of this mode: – Can move small to medium volume of goods due to capacity constraints – Widely available. It is very ubiquitous – Widely accessible – Has low fixed cost but high variable cost – Moderate to high speed due to fast turnaround time and actual trip time – Faster transit time – High flexibility in choice due to high availability – High throughput and modal integration with other modes Mostly used for break-bulk cargo, small to medium volume, variable weight and cost freight.18/08/10 EBO HAMMOND-CMILT 23
  24. 24. Road transport has the following advantages and weaknesses: Advantages Disadvantages Any dwelling or work place can be Size of the load is restricted by serviced by road. vehicle size and legislation Routes can be changed at short Distance travelled determined by notice driver’s working hours and legislation Terminals are less expensive Speed circumscribed by law Costs less than competing Roads may be congested during transport means peak periods Restrictions on heavy vehicles in certain localities Land severance and emissions18/08/10 EBO HAMMOND-CMILT 24
  25. 25. AVAILABLE MODES AND XTICS 4• Rail Transport• This refers to movement of goods and services by the rail (tracks). The following are the main characteristics of this mode: – Can move great volumes of freight – Generally less expensive in relation to some other modes such as road – Generally less faster in relation to some other modes due to slow turnaround time and actual journey time – It is dependent on other modes for completion of delivery, especially road – High fixed costs, relatively less variable costs – Allows for easy unitization of freight – Low accessibility• Mostly used for cargo consolidation, high volume, heavy weight and low cost freight. 18/08/10 EBO HAMMOND-CMILT 25
  26. 26. Rail transport has the following advantages and weaknesses: Advantages Disadvantages Large volumes of cargo can be Investment in infrastructure and transported on one voyage maintenance is expensive May be cheaper than other modes Is limited in volumes it can (except sea) transport Can carry different loads Network construction has major impact on the environment Can link with other transport Operating practices need modes improving18/08/10 EBO HAMMOND-CMILT 26
  27. 27. AVAILABLE MODES AND XTICS 5• Air Transport – This refers to movement of goods and services by air. The following are the main characteristics of this mode: – Limited in volume and weight it can carry – Highly expensive carrying cost in relation to some other modes such as road – fastest mode in actual journey time – It is dependent on other modes for completion of delivery, especially road – High fixed costs, relatively high variable costs – Medium to high accessibility• Mostly used for cargo consolidation, low volume, low weight, high cost freight. 18/08/10 EBO HAMMOND-CMILT 27
  28. 28. Air transport has the following advantages and weaknesses: Advantages Disadvantages Speed of travel Inflexible as aeroplanes have to land and take off in an airport which may be away from final destinations. Has a good safety record Aeroplanes are noisy Employs highly trained Expensive when compared to professionals other transport types. More effective where the goods Terminals very expensive to are high value and time sensitive construct and maintain18/08/10 EBO HAMMOND-CMILT 28
  29. 29. • Inland Water Transport – This refers to movement of goods and services by inland water bodies. The following are the main characteristics of this mode: – Can move medium to high volume of goods – Low cost alternative to road transport – Low accessibility – No right of way – Long transit times – Allows for roll-on-roll-off (RORO) – Low speed• Mostly used for cargo consolidation, high volume, heavy weight and relatively low cost freight. EBO HAMMOND-CMILT18/08/10 29
  30. 30. • Pipeline Transport – This refers to movement of freight by the pipeline. This mode is primarily used for liquid or gaseous ‘freight’. The following are the main characteristics of this mode: – Can move great volumes of liquid freight – Own right of way – Not suitable for general transport – Less expensive in relation to other modal options – Low fixed costs, relatively less variable costs – Security and safety problems – Low accessibility• Mostly used for cargo consolidation, variable volume and variable cost freight18/08/10 EBO HAMMOND-CMILT 30
  31. 31. OPERATIONAL FACTORS CONSIDERED IN ASSESSING MODE CHOICE• Logisticians need to take into considerations the following factors when selecting the mode(s) to be used for freight haulage. The key factors are as follows: – Type of Product to be transported; solid, liquid, gaseous, living, etc – Value of product to be transported – Weight and volume – Customer expectation and demand – Mode capability; is there enough space to carry product – Distance to be covered – Cost of mode – Terminal and ancillary infrastructure of particular mode – Transit time and reliability – Accessibility – Security and safety – priority18/08/10 EBO HAMMOND-CMILT 31
  32. 32. Modal Choice Matrix Size of order/ 100T Road Road/rail Rail/sea Sea load 20T Road Road Road/rail Rail/sea Pallet Road Road Road/rail Air/sea Parcel Post/roa Post/road/a Post/road/a Post/air d ir ir Short Medium Long Very long Delivery distance18/08/10 EBO HAMMOND-CMILT 32
  33. 33. KEY FREIGHT TRANSPORT CONCEPTS 1• Inter-modal Transport (Modal Split)• This simply refers to where more than one mode or different modes of transport are used to move freight from point A to point B.• ‘The movement of goods in one and the same loading unit or vehicle, which uses successively several modes of transport without handling of the goods themselves in changing modes’- The European Conference of Transport Ministers.• Inter-modal (modal split) transport helps facilitate freight movement globally and over different terrains and environmental conditions.18/08/10 EBO HAMMOND-CMILT 33
  34. 34. KEY FREIGHT TRANSPORT CONCEPTS 1 cont…•Inter-modal Transport (Modal Split)Intermodal or combined transport has increasedbecause of: ● Globalisation ● The extension of market areas ● Concerns on the impact of transport on the environment ● New improved systems of modal interchange ● Increasing road congestion ● Restrictions on vehicle size, weight limits and operating times ● containerization18/08/10 EBO HAMMOND-CMILT 34
  35. 35. KEY FREIGHT TRANSPORT CONCEPTS 1 cont… •Inter-modal Transport (Modal Split) The following modes are possible: ● Containerisation using road, rail, sea and inland waterway ● Sea transport combined with road transport eg. Roll-On Roll-Off ● Sea transport combined with rail transport ● Road and rail combinations eg. Trailer on truck or truck/trailer on train (piggyback) ● Swap body systems for road/rail use18/08/10 EBO HAMMOND-CMILT 35
  36. 36. KEY FREIGHT TRANSPORT CONCEPTS 2 • Modal Shift • This is a current concept being pursued by Japan. This simply refers to a conscious effort to offload freight from one dominant mode (especially road) to other modes (rail/sea). The main factors driving the pursuit of modal shift are: • Environmental; global warming • Cost savings • Energy • Labour shortages and savings • Traffic • Sustainability • Prevention of deterioration of infrastructure of a mode18/08/10 EBO HAMMOND-CMILT 36
  37. 37. KEY TRANSPORT CONCEPTS • Cargo Consolidation • This simply refers to the aggregation of small amounts of cargo (mostly from different points into bulk cargo for movement into mostly a single point or destination). Cargo consolidation facilitates inter-modal transportation and modal shift. • Light trucks move small disaggregated cargo to small depots; a heavy cargo truck moves aggregated cargo (consolidated goods) collected from these depots to a central distribution centre18/08/10 EBO HAMMOND-CMILT 37
  38. 38. KEY TRANSPORT CONCEPTS • Break-Bulk Cargo – This simply is the reverse of cargo consolidation. It is the disagregation of bulk amounts of cargo (mostly from one point, into small different cargo for movement into mostly multiple points or destinations. – A heavy cargo truck moves consolidated goods to distribution centre; light trucks then move in to pick disaggregated goods to different destinations (depots).18/08/10 EBO HAMMOND-CMILT 38
  39. 39. CASE STUDY FORMER CARGO TRANSPORT SYSTEM OF GHS Districts Regional GHS National GHS Store 30 0km GHS 700km GHS GHS GHS 25 GHS 0k 500k m m GHS GHS18/08/10 EBO HAMMOND-CMILT 39
  40. 40. NEW CONSOLIDATED CARGO PHYSICAL HospitalsDELIVERY MODEL Regional Store GHS National Store CONSOLIDATED CARGO BREAK-BULK CARGO GHS GHS GHS 18/08/10 EBO HAMMOND-CMILT 40
  41. 41. PACKAGING AND TRANSPORTATION  This refers to the packaging of goods to facilitate transportation. It is the art, science, and technology of preparing goods for transport and sale and also a means of ensuring safe delivery of a product to the end-user at overall competitive price. Packaging impacts greatly on transportation efficiency and ensures Time, Place and the maintenance of Form Utility.18/08/10 EBO HAMMOND-CMILT 41
  42. 42. PACKAGING AND TRANSPORTATION • Some of the roles packaging plays in facilitating transportation are as follows: – Protection and preservation from physical, chemical and mechanical damage – Easy transportation – Easy stowability (able to fully utilize truck space) – Facilitates ease of handling (loading and unloading) – Facilitates unitization of goods – others18/08/10 EBO HAMMOND-CMILT 42
  43. 43. PACKAGING AND TRANSPORTATION • It must be noted that during transportation of goods through the supply chain, there is the likelihood of breakage, pilferage, deformation, evaporation, which sometimes reduces the quality and quantity of the products. Good packaging helps to prevent and reduce some of the problems mentioned.18/08/10 EBO HAMMOND-CMILT 43
  44. 44. UNITIZATION AND TRANSPORTATION• Unitization refers to where goods are packaged or grouped together, in mostly equal quantities, form/shape, weight, height, length, etc to aid handling (loading and unloading) and facilitate transportation.• Unitization of goods helps achieve the following: – facilitates inventory management (warehousing, stock taking, loading and unloading) – Achieve full stowability of transport space – Facilitates smooth transportation18/08/10 EBO HAMMOND-CMILT 44
  45. 45. UNITIZATION AND TRANSPORTATION• Basic device(s)/technology that support and revolutionized unitization are palletization (e.g. wooden pallets) and containerization (e.g. large shipping containers). These in effect have impacted greatly on logistics systems.• Pallets are load carrying devices which facilitates goods handling. They serve a dual purpose in that they enable goods of similar nature and size to be made up into unit loads and palletized loads can be more easily handled mechanically which reduces the effort required to handle and transport them. The most widely used types are wooden pallets. 18/08/10 EBO HAMMOND-CMILT 45
  46. 46. CONTAINERIZATION AND TRANSPORTATION • Containerization is at the heart of international multi- modal freight transportation • However other modes such as Air use a slightly different type of containers; pipelines transportation are not usually amenable to containerization. Products are moved virtually nakede • Containerisation or the movement of goods in specially designed units commenced in the 1950s. • Containers are usually rectilinear/rectangular boxes constructed of steal. Most common sizes of container available are 20ft, 30ft, 40ft and 45ft in length. • They are produced under International Standards Organisation (ISO) defined specifications.18/08/10 EBO HAMMOND-CMILT 46
  47. 47. CONTAINERIZATION AND TRANSPORTATION- FUNCTIONS • It simplifies the movement of bulk goods across different transport modes. In addition, containers help achieve the following: – Enables goods consolidation – Reduction in goods handling – Reduction in individual packaging requirements depending on the load within the container – Protection of goods from damage – Provides goods security – Ensures safety of goods – Faster throughput during transit due to no or limited handling at terminal points – Door-to-door service possible from factory18/08/10 EBO HAMMOND-CMILT 47
  48. 48. CONTAINERIZATION ADVANTAGES The advantages of containerisation include: ●Less packing is needed for shipments, producing substantial cost savings ●The cargo is able to arrive in a better condition ●As a capital-intensive transport system, rates are more competitive ●Much quicker, more reliable transits are possible ●Faster payments of export invoices is possible Faster transits, usually coupled with more reliable schedules, and ultimately increased service frequency, tend to encourage importers to hold reduce stocks. This results in savings in warehouse costs, lessens risks of obsolescent stocks and reduces importers’ working capital.18/08/10 EBO HAMMOND-CMILT 48
  49. 49. CONTAINER CLASSIFICATION Containers are classified as: ●General cargo containers: o General purpose containers o Specific purpose containers: o Closed ventilated containers o Open top containers o Platform based containers (open sided) o Platform ●Specific cargo containers: o Thermal containers o Tank containers for liquid and gases o Dry bulk containers o Named cargo types18/08/10 EBO HAMMOND-CMILT 49
  50. 50. CONTAINER CLASSIFICATION ● General cargo containers are so called because most types of dry cargo can be carried in these containers. ● Open top containers have a solid removable top or a canvas top and are suitable for cargo that is too large or too awkward to be packed in via the doors of the container. Also used for “overheight” cargo. ● Refrigerated containers are insulated units with refrigeration as well as heating equipment. These are units used for the transport of perishables and any goods that are sensitive to fluctuations in temperatures.18/08/10 EBO HAMMOND-CMILT 50
  51. 51. LECTURE REVIEW• Definition of Transportation• Definition of Freight• Factors impacting on Transportation• Containerization, Unitization and Packaging as relating to Transportation• Freight Transportation and Distribution Concepts• Others18/08/10 EBO HAMMOND-CMILT 51
  52. 52. CONCLUSION• Transportation plays a critical role in facilitating the movement of goods and services from point of origin to point of consumption.• It is also a value-added activity. Its efficient management will greatly increase the competitive advantage of the organisation over competitors18/08/10 EBO HAMMOND-CMILT 52
  53. 53. 18/08/10 EBO HAMMOND-CMILT 53

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