CTDP Program.pdf -Training Material Copy

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Table of Contents
Units Contents Page
Contents’ Table 2
The Programme 6
Abbreviations and Glossary of Terms 7
A Introduction to the IRU & the IRU Academy 11
1. IRU 1948 – Today 11
2. IRU Academy 11
3. Programme Outlines 12
B Introduction to Road Transport in Logistics 14
1. Definition and Evolution of Logistics 14
1.1. Definition of Logistics 14
1.2. Evolution of Logistics 14
2. Logistics and Wealth in Society 17
3. Historical Evolution of Transport 19
4. Concept of Transport 20
5. Significance of Road Transport 21
6. Advantages and Boundaries of Road Transport 22
6.1. Advantages of Road Transportation 23
6.2.Disadvantages of Road Transportation 23
7. The Motives, Challenges and Impact of the Development of Road
Transport Infrastructure on the Socio-Economic and Political Life of the
People
24
C Trucks, Trailers and Loads 26
1. Types and Characteristics of Commercial Trucks 26
2. Truck Dimensions and Weights – KSA 28
3. Components and Systems of a Commercial Truck 29
3.1. Components of a Commercial Truck 29
3.2. Systems of a Commercial Truck 30
4. Transport Units, Types and Capabilities of Cargo Trailers 31
5. Types, Dimensions and Operations of ISO/Freight Containers 33
6. Fitting Euro Pallets and Standard Pallets in a Curtainsider Trailer 34
7. FCL vs LCL 36
8. Load Calculations 37
9. Securing Loads 38
10. UN Orange Book, ADR and DGs Movement by Road 39
D Distribution Operations (Physical Distribution) 43
1. Significance of Distribution in Logistics 43
2. Physical Distribution 43
3. Channels of Distribution 46
4. Warehousing (inbound and outbound operations) 47
4.1. The Changing Role of Warehouses 50
4.2. Facilities Acting like Warehouses 50
5. Material Handling 51
6. Value-added Services 53
7. Order Fulfilment 55
8. Inventory, Concepts and Tools for Inventory Management and Control 58
9. Forecasting the Demand 61
10. Last-mile Delivery 62

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11. Reverse Logistics 63
12. Customer Service 65
13. Key Technologies in Distribution Operations 66
E Freight Forwarding 70
1. Importance of Freight Forwarding 70
2. Multi-model, Omni-model and Intermodal Operations 70
3. EXIM Documentation for Freight Forwarding 73
3.1. Commercial Documents 74
3.2. Official Documents 77
3.3. Insurance Documents 78
3.4. Shipping Documents 79
3.5. Financial Documents 79
3.6.Other Doc's 81
4. The Elements of an Invoice, Commercial and Legal Implications of
Different Payment Methods
81
4.1. The Elements of an Invoice 81
4.2. Commercial and Legal Implications of Different Payment Methods 82
5. Freight Forwarding Office and Field Activities 83
6. Cargo Movement – Planning, Arranging and Transshipment 86
6.1. Key Components of Cargo Movement 86
6.2.Challenges in Cargo Movement 87
7. Principles of Insurance and their Applications to the Movement of
Goods
88
7.1. Maintaining Public Trust and Confidence 89
7.2. Types of Cargo Insurance and Coverage Categories 90
8. Methods for Identifying, Labelling and Transporting Sensitive, Urgent,
and Hazardous Goods
92
8.1. Dangerous Goods 93
8.2.Compliance to Health, Safety and Security Norms with MSDS 95
8.3.The Challenges of Transporting Sensitive Goods 97
9. INCOTERMS 2020®
97
F Managing Workshop and Maintenance 106
1. Workshop Design/Layout 106
2. Workshop Productivity 107
3. Fleet Safety Management 109
4. Road Accident Types 112
4.1. Causes of Road Accidents 114
4.2. Safety Rules to Prevent Road Accidents 115
5. Accident Prevention, Reporting and Recordkeeping 116
6. Scope of Fleet Maintenance 117
7. Fleet Maintenance Programs 119
8. Cost of Maintenance 121
9. Vendor vs. In-house Maintenance 122
9.1. In-house Fleet Maintenance 122
9.2.Outsourced Fleet Maintenance 122
9.3.Outsourcing both Maintenance and Servicing 123
10. Fueling Fleet Vehicles 124
11. Insurance 126
12. Road Calls 127

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13. Tire Selection and Management 128
14. Parts and Supply Management 132
G Vehicle and Driver Selection and Replacement 134
1. Vehicle Selection and Replacement 134
2. Factors to Consider when Choosing a Fleet Vehicle 135
3. Buy or Lease a Fleet Vehicle 138
4. Vehicle Replacement 139
4.1. Fleet Vehicle Replacement Strategy 140
4.2. Optimal Vehicle Replacement Point 142
5. Finance a Fleet Vehicle 143
6. Manage the Fleet Life Cycle 144
7. Driver Selection and Placement 145
8. Commercial Truck Driver Orientation and Training (CPC) 146
9. Reduce Collisions by Improving Driver Performance 147
10. Driver Supervision 148
H Truck Operating Costs, Finance and Cash Flows 150
1. Truck Operating Costs 150
2. Fixed/Variable Costs 150
3. Cost of Transport 151
4. Cash Flow Simulation 152
5. The Importance of the Driver 154
6. Fleet in Finance 154
6.1. Fleet Financial Management 154
6.2.Common Types of Truck and Trailer Financing 155
7. Managing Cash Flow 156
8. Depreciation 158
I Customer Charging Options 161
1. Freight Charges 161
2. Type of Truck Freight Charges 161
3. Factors Contribute to Freight Costs in Road Logistics 162
4. Strategies for Road Freight Pricing 162
5. CBM Calculation for Road Freight LTL Shipments 163
6. Calculating Charges for Weight/Volume 164
7. Ways to Reduce Road Freight Costs 168
J Health, Safety and Environment in Transport Operations 170
1. Road Freight Safety 170
2. Safety Equipment 170
3. Safety Signs 172
4. Need for Training 172
5. First Aid Training and Equipment 172
6. Incidents and Injuries in the Supply Chain 173
7. Employees’ Responsibilities 174
8. Employers’ Responsibilities 174
9. Driver Fatigue 175
10. Food Hygiene and Load Contamination 175
11. Safety in Supply Chain – CTU Code 176
12. Actions against Carbon and GHG Emissions, Environmental Impact
Assessment, Ecological Footprint, Air Pollution and Climate Change
177
12.1.Actions against Carbon and GHG Emissions 177

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12.2. Environmental Impact Assessment (EIA) 179
12.3. Air Pollution and Climate Change 179
K Measuring and Controlling the Fleet Performance 181
1. Performance Management and KPIs 181
2. Fleet Performance Measurement System 182
3. Transportation Costs 182
4. Cost Ratios 183
5. Transportation Asset Productivity 184
6. Financial and Quality Indicators 184
7. Cycle-time Indicators 185
8. Measuring and Improving Fleet Utilization 185
9. Operational Analytics for Fleet Management 187
Assessment Scheme 190
References 190

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The Programme1, 2
The IRU Academy Certified Transport and Distribution Professional Programme provides holistic
understanding of the role of road transport within the supply chain and equips with the necessary
knowledge required to operate safe and efficient transport operations.
The programme is aimed at those professionals working in the road transport supply chain who
need greater insight into how logistics chains’ function. The programme has been scheduled to be
delivered over 5 full days F2F or 10 days (3 hours) online and incorporates various case studies and
assignments to enable participants to be fully involved in real life challenges with 11 units.
With this cohort, it aimed that you obtain your international CTDP IRU Academy Certificate. This IRU
Academy training program:
 integrates best practice,
 complies with international industry standards,
 helps harmonize industry professional qualification standards at the global level,
 is designed by industry experts,
 guarantees the highest level of quality, consistency and accuracy,
 is regularly updated to reflect new and amended legislation and latest technical
developments.
19 May 2025
Dr. Turhan Bilgili
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A. Though the information contained in this publication has been elaborated with the greatest care, the IRU does not
guarantee that there are no errors, omissions nor does it provide any other warranty or make any representations as to the
accuracy, reliability, exhaustiveness or up-to-date of the contents of the publication. The IRU hereby disclaims any liability or
responsibility arising from the use of the information or data contained in this publication.
Consequently:
1. the user hereby is aware and agrees that neither the IRU, nor any other party or anyone cooperating with the IRU on
a voluntary or paid basis, shall be liable for the contents of this publication and its use and shall not in any way be
liable for any loss or damage whatsoever, including the inappropriate, improper or fraudulent use of this
publication,
2. no user should act on the basis of this publication without referring to the relevant international and national
regulations in force.
B. The mention of companies or partners in this publication does not imply that they are endorsed or recommended by the
IRU in preference to others.
C. The designation of countries, territories, cities and the presentation of related material in the present studies shall not be
considered as implying any standpoint whatsoever on the part of the IRU concerning the political or legal status of any
country, territory or city, or of its authorities, or concerning the delimitation of its frontiers or boundaries.
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A. This document has been produced on the basis of International Agreements and EC regulations, directives along with
KSA industrial practices/applications. It has been compiled by Dr. Turhan Bilgili and market best practices. It also
encapsulates some information of other publications when deemed appropriate.
B. This material to be used for “Certified Transport and Distribution Professional” training is subject to copyright protection.
Material may include, but are not limited to documents, slides, images, audio, and video. Material in this training/ programme
are only for the use of trainees/participants enrolled in this particular Certified Transport and Distribution Professional
programme for purposes associated with this training, and may be retained for longer than the class term however
unauthorized retention, duplication, distribution, or modification of copyrighted materials without consent of Dr. Turhan
Bilgili and thusly is strictly prohibited by existing and international laws.
C. Therefore, any translation, representation, copy, reproduction, dissemination or use of all or part of this publication, in any
form by any means, without prior written permission of the IRU Academy of the International Road Transport Union (IRU)
and the editor Dr. Turhan Bilgili, is illegal. Offenders make themselves liable to legal proceedings and sanctions.

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Abbreviations and Glossary of Terms
3PL: Stands for Third-Party Logistics. A company providing outsourced logistics services,
warehousing and transportation, which can be adjusted based on clients’ needs.
4PL: A large logistics service provider who coordinates 3PL provider activity and service on behalf of
a major client(s) ACCESSORIALS: Additional charges for performing services that are beyond
normal pick-up and delivery, such as inside delivery, residential delivery, liftgate service or
storage charges.
BACKHAUL: Cargo carried on a return journey; either the second half of a round-trip or freight
secured to profit on carriers’ return to base.
BID BOARD/PORTAL: Technology connecting clients to providers, typically offering multiple quotes
per shipment.
BOL: The Bill of Lading is legal document that establishes a contract between the client and the
carrier. It includes the details of the shipment and is often used as a receipt. Two common
bills of lading types are the house and master. The house bill of lading (HBL) is a receipt or
contract between an importer and their NVOCC/freight forwarder. The master bill of lading
(MBL) is the contract between the NVOCC/freight forwarder and the actual carrier.
BOX TRUCK or STRAIGHT TRUCK: A truck with a large, rectangular cargo area sitting on the chassis.
Also known as Cube Trucks.
CARRIER: An individual or company that transports goods using their own assets: trucks, trains, ships
or airplanes.
CHARTER AIRLINE: An unscheduled airline/flights that are not part of a regular airline routing that
operates on the bases of rented or leased flights (either for cargo or passenger) from point A to
point B.
CARGO CONTAINER: A truck trailer that can be detached and loaded onto a ship or rail car.
CARGO VAN/SPRINTER: A small one-piece transport vehicle where the driver cab typically has direct
access to the cargo.
CARTAGE: Short hauls moving freight between locations in the same town or city.
CHASSIS: A frame with wheels and a locking system that secures an ocean or rail container during
over-the-road shipping.
CLAIM: A claim is filed to request payment from a carrier due to loss or damage alleged to have
occurred during transportation.
CLASSIFICATION: The system used to assign rates to shipments. Classifications are created by the
NMFC board and are based on density, size and value of the freight.
COMMODITY: Any article of commerce. Goods shipped.
CONSIGNEE: A consignee is an entity that the shipper is sending the goods to, typically the
importer, although there are exceptions. (A consignee could be someone that acts in your
name, for example.) Typically, you’ll see consignee along with the word consignor and
consignment. The “consignor” is the shipper of your goods; the “consignment” is the actual
goods being shipped. The individual or business to whom the goods are addressed. The final
destination.
CONSIGNOR: The consignor is the party to a contract that dispatches goods to another party on
consignment. In a contract of carriage, is the party sending a shipment to be delivered
whether by land, sea or air.
CONSOLIDATION: When several shipments are combined to save on shipping costs.
CRATE: A large container with walls and a bottom, with or without a top, used for
transporting/storing heavy or fragile items.
CROSS-DOCK: A midpoint location where freight can be transferred from one unit to another/held
short-term.
CURTAIN SIDED TRAILER: A trailer with a hard top and roll up curtain sides. Used for side loading
cargo that needs weather protectant. Also called a Conestoga (these are quite often soft the
whole way around and push back).
CUSTOMS BROKER: Licensed person or company responsible for clearing goods through customs
on behalf of importers and exporters.
DANGEROUS MATERIALS TRANSPORT DRIVER CARD: A document issued by the authority or any
other authorized entity to the dangerous material truck driver after passing the competency
test in transporting dangerous materials.
DIMENSIONS: The freight shipment’s length, width and height.

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DISPATCH: The act of sending drivers on their assigned routes with specific instructions and
required paperwork.
DOCK: A platform where trucks are loaded and unloaded. Generally, the same height as the trailer
floor.
DRAYAGE: The transport of goods over a short distance, often part of a longer overall move. For
example, transporting a container from a ship to a warehouse. Drayage is a truck service that
moves containers to and from a port.
DRIVER: The person who is authorized to drive the truck.
DRIVING LICENSE: An official document issued by the general department of traffic, or a foreign
entity recognized for similar documents, proving that its holder is qualified to drive one or
more types of vehicles.
DRY VAN: An enclosed cargo trailer used to transport goods. Can be heated or refrigerated if
necessary.
DROP DECK: A platform trailer with two deck levels but no roof, sides or doors. The lower deck
allows for hauling taller loads. This is a single drop deck description - also called a step deck.
Alternately, there are Lowboy or Double drop deck trailers (even lower), which typically have a
deck on the front and back and are low in the middle.
EDI: Electronic Data Interchange of business documents such as purchase orders, invoices and bills
of lading between computers in a standard format.
EMBARGO: Any uncontrollable event which prevents freight from being accepted or handled;
typical reference relates to international conflict, but can also be used for situations like
weather events that complicate or exclude transit opportunity.
EXCEPTIONAL LOAD: The truck plus its load, which its weight and/or dimensions exceed the
allowed weights and dimensions, given that the material transported cannot be divided or
disassembled for any reason.
EXPEDITED: Time-sensitive freight that utilizes guaranteed and time-critical services to meet short
delivery windows.
FCL: Full Container Load shipping. When freight fills up a full ocean shipping container to capacity,
or fills up most of the container at a better price than LCL. FCL stands for a full container load.
This means only your cargo occupies the container (rather than sharing space, as is the case
with LCL). It’s usually cheaper (from a landed cost perspective) and faster to ship via FCL, and
the risk of damages or loss is decreased since your goods aren’t handled as LCL.
FINAL MILE: A service including inside delivery and debris removal.
FLAT DECK (FLAT BED): A platform trailer with no roof, sides or doors. Allows for quick and easy
loading of heavy or over-dimensional freight.
FREIGHT: The obligations of the carrier or freight broker, under the carriage contract, that shall be
fulfilled to transport from the consignor to consignee of materials, equipment, goods, animals
or other things that are not prohibited in the Kingdom of Saudi Arabia. Goods transported by
truck, train, ship or aircraft.
FREIGHT FORWARDING: A logistics company acting as an intermediary between a shipper and
various transportation services such as ocean shipping on cargo ships, trucking, expedited
shipping by air freight and moving goods by rail.
FTL (or TL): Full Truckload shipping. Transport of goods that fill an entire trailer, or a partial load
shipment occupying an entire trailer. FTL is contracted to one client. Faster and more
expensive.
FUEL EFFICIENCY: The ratio of distance traveled per unit of fuel consumed.
GVW: Gross Vehicle Weight is the total weight of the vehicle (tractor and trailers) and its goods.
HAZARDOUS MATERIAL (HAZMAT): Any simple, compound or mixed material or waste, whether
natural or manufactured, that poses a danger to the environment or any of its elements and
the living organisms due to its toxicity or its ability to ignite, explode or corrode, or any of the
solid, liquid or gaseous materials that classified as hazardous materials as per the provisions of
international agreements. Items classed as dangerous goods that require a carrier to have a
hazardous material certification to transport.
INCOTERMS: The term “INCOTERMS” is short for International Commercial Terms. Specifically, they
are trade terms published by the International Chamber of Commerce (ICC) and are
internationally recognized by the shipping industry. As an importer, you and your supplier use
INCOTERMS to define responsibilities and risks in a transaction. Two very common

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INCOTERMS used by importers and exporters are Free on Board (FOB) and Cost Insurance and
Freight (CIF).
INTERLINING: Process that occurs when the initial carrier of the freight transfers shipment to
another carrier and advances to final destination. Typically requires an agreement be entered
between the two carriers.
INTERMODAL: Shipping freight using more than one mode of transportation. The intermodal
process commonly begins with a container moving by truck to rail, then back to truck to
complete the delivery.
LANDED COST: Landed cost is the total cost of a product to the point it’s ready to be delivered to
your customer. That includes not only the base cost to purchase your products from your
supplier overseas but also costs associated with transportation, duties and taxes, insurance,
handling fees, etc. Knowing the landed cost helps you price your product correctly to cover
your costs adequately and better understand profitability. Working closely with your
international freight forwarder helps predict and minimize negative impacts on your landed
cost.
LCL: Less than Container Load shipping. Transport of small ocean freight shipments not requiring
the full capacity of an ocean container. If you ship LCL, your shipment shares the container
with cargo from other importers. Transit time is longer for LCL due to the consolidation and
deconsolidation before and after ocean transit, but is more economical for smaller shipments.
LINE HAUL: Equipment and people who work together to move freight from one terminal to
another.
LOAD DATA: A list of goods loaded on a truck for a single trip, which contains descriptions, numbers,
weights, dimensions of the goods in addition to addresses of consignors and consignees.
LOCOMOTIVE: A Truck head (with a towing tray), designed to tow a semi-trailer and not intended to
carry weights other than the part of the semi-trailer located on it.
LTL: Less-than-Truckload shipping. Transport of goods that do not take up the entire available space
on the truck. Combines shipments from multiple clients.
MANIFEST: A document that describes the shipment or the contents of a vehicle, container or ship.
MARINE INSURANCE: Marine insurance is insurance for ocean freight. As discussed in a previous
blog, marine insurance can cover damage or loss to your cargo while in transit. For most
commodities, marine insurance is relatively cost-effective and helps mitigate the risk of
common losses or even a general average situation.
NVOCC: NVOCC stands for non-vessel operating common carrier and is a type of Ocean
Transportation Intermediary (OTI). Although “NVOCC” is often used synonymously with the
term “freight forwarder,” there are some technical distinctions. NVOCCs act as “virtual” carriers
and issue their own bills of lading. Per Federal Maritime Commission (FMC) requirements, an
NVOCC must also publish and maintain a regulated tariff.
OVER-DIMENSIONAL/HEAVY HAUL LOAD: Each state and province have regulations about the
dimensions and weight that can be shipped on flat deck trailers. If a shipment exceeds the
legal size or weight limit, it may require additional permits, escort cars, special signs and may
only be allowed to travel during specific times of the day.
P&D: Pickup and Delivery. Local movement of goods between the shipper and origin terminal, or
between the destination terminal and the consignee.
PALLET: A wooden (or sometimes plastic) platform on which boxes or cargo are stacked and shrink-
wrapped. Also commonly called a skid, the small difference is that a skid only has a top deck,
while pallets have a bottom deck as well. Pallets are used for transport, while skids are mainly
used for storing heavy objects.
PERIODIC INSPECTION CENTRE: A technical inspection center licensed by the traffic department to
periodically conduct a comprehensive technical inspection on the transport vehicle.
PERIODIC TECHNICAL INSPECTION CERTIFICATE: A document issued by the periodic inspection
center after passing the inspection requirements.
POD: Proof of Delivery, also known as the delivery receipt. A document signed by the recipient or
consignee confirming the time, date and condition of delivery.
PROFESSIONAL COMPETENCY TEST: A test given to the driver to assure his ability of driving a truck
with high efficiency and dealing with materials in a safe manner.
PROFESSIONAL DRIVER CARD: A document issued by the Authority or any other authorized entity
to the driver after passing the professional competency test.

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PROFICIENCY TEST IN TRANSPORTING HAZARDOUS MATERIALS: A test given to the driver to
assure his ability of driving a dangerous material truck with high efficiency and deal with
dangerous materials in safe manner.
PRO NUMBER: An acronym for Progressive Rotating Order. A sequential numbering system used to
identify freight bills. Each number is unique to each shipment.
ROADSIDE TECHNICAL INSPECTION: A sudden technical inspection conducted by a service-
monitoring officer in a safe area on the side of the road.
REEFER: A refrigerated truck, railroad car or ship.
SEMI-TRAILER: A transport vehicle designed to be paired with a locomotive by a (towing tray), with a
part rest on the locomotive.
SHIPPER: A person or company like a manufacturer, retailer or distributor that needs to ship goods.
Also known as the consignor.
SHIPPING ORDER: Instructions to a carrier regarding the transportation of a shipment. Usually, a
copy of the bill of lading.
SINGLE FREIGHT VEHICLE: A single motorized vehicle intended for the transport of freight on the
roads.
STEAMSHIP LINE/CARRIER: These two terms are often used interchangeably in ocean freight and
refer to the operator of the vessel itself. When you see an ocean container that says Maersk,
Evergreen, OOCL, etc. – those are names of steamship lines (or ocean carriers). Large volume
importers typically sign contracts directly with steamship lines to take advantage of their
buying power. Smaller and mid-sized shippers typically are best served by freight forwarders
to provide the best mix of competitive rates, value-added services and flexibility.
SUPPLY CHAIN: A network of organizations, people, activities, information and resources involved in
moving a product from the supplier to the client.
TAILGATE/LIFTGATE: A platform at the end of the truck, used for loading and unloading freight at
locations without docks or forklifts.
TARIFF: A document outlining rules, rates and charges to move goods.
TERMINAL: A building that handles and stores freight temporarily as it’s transferred between trucks.
TEU: A TEU (twenty-foot equivalent unit) is a measure of volume in units of twenty-foot-long
containers. For example, large container ships are able to transport more than 18,000 TEU (a
few can even carry more than 21,000 TEU). One 20-foot container equals one TEU. Two TEUs
equal one FEU.
TOWING TRAY: A loop or horizontal section, consisting of two straps that slide over each other,
attaching the trailer to the semi-trailer and designed to support the front side of the semi-
trailer while allowing it to move freely in a horizontal plane.
TRACTOR: The power unit that pulls trailers.
TRAILER: The unit that is used to carry goods. A transport vehicle designed with no essential part of
it is dependent on a locomotive nor single freight vehicle.
TRANSIT TIME: Total time of transit from pick up to delivery.
TRANSPORT VEHICLE: A single freight vehicle, locomotive, trailer or semi-trailer.
TRUCK: Every single freight vehicle or a single freight vehicle towing a trailer, locomotive and semi-
trailer, or any other shape permitted on the road and used to transport freight.
WAREHOUSING: Storage facility to store freight short or long term.
WAYBILL: A document prepared by or on behalf of the carrier at origin. The document shows origin
point, destination, route, consignor, consignee, shipment description and amount charged.

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UNIT A – Introduction to the IRU & the IRU Academy
1. IRU 1948 – Today
As the activity of logistics impacts on all of modern life it is quite difficult to state where it starts and
ends since logistics is “The planning, execution and control of the movements and placement of
people and/or goods, and the supporting activities related to such movement and placement
within a system organized to achieve specific objectives”. It is therefore impossible to think of any
employment activity which does not have an impact on logistics.
Logistics and road freight transport are major job creators. Road transport alone provides jobs to 6.5
million people in the EU and to nearly 9 million in the USA. Many others earn their living in trucking
related industries, such as truck manufacturing, repairs, retail, leasing, insurance, public utility,
construction, service, mining or agriculture. Likewise, transportation and storage services employed
10.2 million persons in the EU and generated a net turnover of €1.5 trillion in 2021. The United States
Freight and Logistics Market size is estimated at 1.38 trillion USD in 2025, and is expected to reach
1.67 trillion USD by 2030, growing at a CAGR of 3.84% during the forecast period (2025-2030)
translating to nearly 570,000 new jobs.
Every item on every store shelf, in every office or in every home has been on a truck, at one point of
its production or distribution, as well as on their way to waste or recycling. Whilst all transport
modes have a role to play in logistics operations road transport accounts for 75% of all transport
undertaken in the EU. Furthermore, this programme aims to demonstrate how nearly everyone
connected to logistics can make a direct contribution to maximizing the efficiency of road
transport.
International Road Transport Union (IRU) was founded in Geneva on 23 March 1948, one year after
the United Nations Economic Commission for Europe (UNECE), to expedite the reconstruction of
war-torn Europe through facilitated international trade by road transport.
The IRU started as a group of national road transport associations from eight western European
countries: Belgium, Denmark, France, the Netherlands, Norway, Sweden, Switzerland and the
United Kingdom. The IRU is the global body promoting the road transport sector in respect of both
passenger and goods transport.
IRU represents the interest of the road transport industry worldwide through more than 100
members in over 70 countries representing buses/coaches, trucks and taxis operators. IRU is
constituted of National Member Associations and other global companies that all play a significant
role in ensuring sustainability in road transport.
1948 – IRU founded in Geneva
1973 – IRU Permanent Delegation to the European Union in Brussels
1998 – IRU Permanent Delegation to Eurasia in Moscow
2005 – IRU Permanent Delegation to the Middle East and Region in Istanbul
2012 – IRU Secretariat for Africa in Geneva
2013 – IRU Permanent Delegation to the United Nations in New-York
IRU is present globally through its permanent delegation to facilitate transport and trade and to
establish recommendations and best practices to ensure the industry contributes to a sustainable
development of the economies and societies.
2. IRU Academy
Road transport is the backbone of economies and societies, on both local and global levels.
Upholding the road transport industry’s priorities - sustainable development, facilitation, safety and
security of road transport - is a responsibility shared by all stakeholders, from road transport
operators to policy-makers. With today’s increasing awareness of security and environmental
challenges, road transport operators must comply with existing and anticipated regulations, and be
familiar with the latest technologies that address these key issues.

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In the face of these challenges, the road transport training industry needs an exemplary framework
for capacity-building to enhance its professionalism, efficiency, effectiveness and accountability.
The IRU Academy is the training arm of the International Road Transport Union (IRU), acting as a
global body that works with its partners and panels of experts to provide this framework to the
benefit of the road transport industry and society as a whole. The IRU Academy offers its portfolio of
training programmes to road transport professionals through its global network of Accredited
Training Institutes (ATIs). The IRU Academy offers its graduates highly professional training by
providing ATIs with the following key benefits:
 internationally recognized diplomas,
 state-of-the-art training programmes,
 “Train the Trainer” courses delivered by international industry experts,
 free online instructor support,
 networking opportunities with more than 60 training institutes worldwide.
The IRU Academy is ideally positioned
at the heart of the road transport
industry’s activities, incorporating into
its programmes the latest legislative
and technical developments impacting
road transport operations worldwide.
The IRU Academy Accreditation
Committee (AAC) is a think tank which
discusses upcoming training challenges
and proposes proactive approaches to
the IRU Academy. International
recognition of IRU Academy
Programmes and certificates/diplomas
is provided by the road transport
industry and through the IRU Academy
Advisory Committee (ADC).
Figure 1. IRU Academy organizational chart
3. Programme Outlines
The IRU Academy Certified Transport and Distribution Professional Programme provides a holistic
approach in understanding the role of road transport within the supply chain and equips with the
necessary knowledge required to operate safe and efficient transport operations. The programme is
aimed at those professional working in the road transport supply chain who need greater insight
into how logistics chains’ function. The course is offered globally through the IRU Academy network
of Associate Training Institutes. CTDP programme has 11 units which encompasses all managerial
aspects and skills for road transport operators.

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UNIT B – Introduction to Road Transport in Logistics
1. Definition and Evolution of Logistics
The general objective of logistics, as frequently known, is to ensure of all necessary things in order to
fulfill different missions, plans or actions. This section aims to show the evolution of logistics when
passing from planned economy to the new market-based economy in the last two decades.
Logistics activity is common in many fields of activity (economic, cultural or military), but the main
field where it was consecrated was the economical one. Logistics is the main element of any
economic strategy and is the link between many activities.
1.1. Definition of Logistics
As commonly stated, logistics was created by the Roman and ancient Greek militaries. Rome, in
particular, had a complex logistics system that they used to support their troops and transport food,
weapons, and other equipment during wars and military campaigns. Logistics is the management
of the flow of goods, information and other resources between the point of origin and the point of
consumption in order to meet the requirements of consumers (originally, military organizations).
Logistics involves the integration of information, transportation, inventory, warehousing, material
handling, and packaging, and occasionally security. Logistics is a channel of the supply chain which
adds the value of time and place utility. The term logistics comes from the Greek logos (λόγος),
meaning "speech, reason, ratio, rationality, language, phrase", and more specifically from the Greek
word logistiki (λογιστική), meaning “accounting and financial organization”.
CSCMP’s definition of logistics management is that part of supply chain management that plans,
implements, and controls the efficient, effective forward and reverse flow and storage of goods,
services and related information between the point of origin and the point of consumption in order
to meet customers' requirements.
More definitions for logistics are;
Logistics is the overall process of managing the way resources are obtained, stored, and moved to
the locations where they are required.
Logistics is the process of planning and executing the efficient transportation and storage of goods
from the point of origin to the point of consumption.
Logistics – the transfer of personnel and materiel from one location to another, as well as the
maintenance of that materiel – is essential for a military to be able to support an ongoing
deployment or respond effectively to emergent threats.
1.2. Evolution of Logistics
Logistics, as we know it today, has come a long way since its inception and it goes back a long way.
The invention of the wheel allowed people to transport items between communities. Initially those
communities will have grown and eaten their own food. From humble beginnings, it has grown to
become a crucial component of modern-day business and an essential contributor to the global
economy. With the introduction of transport, villages were able to trade with other villages and this
is how global trade started. To understand the importance of logistics in the present day, it is
essential to recognize its historical origins and its role in shaping the global economy.
Logistics, in its most basic form, refers to the movement of goods or resources from one place to
another. However, over time, it has evolved to encompass much more than simple transportation.
Today, logistics encompasses inventory management, warehousing, distribution, and supply chain
coordination. It plays a vital role in ensuring the seamless flow of goods, timely delivery, and cost-
efficient operations.

15
Additionally, logistics enables businesses to expand their reach and tap into global markets by
providing efficient and reliable supply chain solutions. It facilitates the movement of goods across
borders, linking manufacturers, suppliers, and retailers worldwide. Without logistics, businesses
would face significant challenges in managing their operations, meeting customer demands, and
achieving sustainable growth.
The early 1900s marked a turning point in the evolution of logistics. It was during this time that
assembly line production and mass transportation emerged, revolutionizing the manufacturing
industry and paving the way for efficient logistics operations. The introduction of assembly line
production by Henry Ford in 1913 enabled the mass production of automobiles and brought about a
significant shift in logistics management. Assembly lines increased production volumes, resulting in
a growing demand for transportation and streamlined distribution networks. This development
propelled the growth of logistics, requiring more sophisticated planning, coordination, and delivery
systems. Timely delivery of goods became essential for maintaining production schedules and
meeting customer demands.
In addition to assembly line production, the early 1900s also saw advancements in mass
transportation. The rise of railroads, improved roads, and the introduction of trucks allowed goods to
be transported over longer distances in a more efficient manner. This expansion of transportation
infrastructure provided the necessary means to move goods between manufacturing plants,
warehouses, distribution centers, and ultimately, to consumers.
Figure 1. Evolution of logistics
The Cold War era, spanning roughly from the late 1940s to the early 1990s, indeed brought about
significant advancements and evolution in logistics, primarily driven by military needs. As the global
superpowers engaged in an arms race, the logistical requirements to equip and supply troops in
various regions became a critical aspect of warfare. The lessons learned during this time would later
be applied to civilian logistics, reshaping the entire field.
One of the most notable developments during the Cold War era was the use of advanced
technologies, with the Global Positioning System (GPS) being a particularly prominent example.
Originally developed by the US military for accurate positioning and navigation, GPS revolutionized
military logistics by providing real-time and highly precise location data. This technology allowed for
improved coordination of military operations, enhanced supply chain management, and more
efficient delivery of supplies and equipment to troops on the ground.
The successful application of GPS in military logistics had far-reaching implications beyond the
battlefield. Its adoption in civilian sectors transformed supply chain management and
transportation systems. The availability of accurate and reliable positioning information facilitated
improved tracking and tracing of goods throughout the supply chain. Logistics providers could now

16
monitor the movement of goods in real-time, optimize transportation routes, and ensure timely and
efficient delivery.
The integration of GPS into civilian logistics operations brought about increased efficiency, reduced
costs, and improved customer service. By leveraging GPS technology, logistics companies could
enhance their fleet management systems, leading to better asset utilization, optimized routes, and
reduced fuel consumption. The ability to provide accurate estimated arrival times and supply chain
visibility became key differentiators in meeting customer expectations for fast and reliable delivery.
The 1980s and 1990s witnessed a significant shift in logistics management as companies began to
outsource their logistics operations to third-party providers. This trend emerged as businesses
sought to focus on their core competencies while entrusting the management of their supply
chains to specialists.
Outsourcing logistics offered several benefits. Firstly, it allowed companies to reduce costs by
leveraging the expertise and economies of scale of logistics service providers. By outsourcing,
businesses could avoid investments in extensive infrastructure, warehouses, and transportation
fleets. Secondly, logistics outsourcing improved efficiency by utilizing advanced technologies,
enhancing supply chain visibility, and enabling proactive decision-making. Finally, third-party
logistics providers offered enhanced customer service through improved order fulfillment and
timely delivery.
The dawn of the internet and the rise of e-commerce in 2000 revolutionized logistics once again. As
consumers embraced online shopping, logistics companies had to adapt to meet the challenges
posed by changes in consumer behavior, rapid delivery expectations, and the increased demand for
last-mile delivery.
E-commerce logistics involves intricate coordination of multiple components, including inventory
management, order processing, packaging, and transportation. To cope with the e-commerce
boom, logistics providers implemented advanced technologies, such as warehouse automation,
real-time tracking systems, and route management, and timely deliveries. Additionally, the rise of e-
commerce necessitated innovative last-mile delivery solutions, such as locker systems, drone
deliveries, and partnerships with local courier services. Logistics companies had to develop robust
and agile networks to meet the demands of customers ordering products online, often with same-
day or next-day delivery expectations.
Figure 2. Innovations led by Industry 4.0 in logistics and supply chain

17
The present-day logistics industry is undergoing a digital transformation. The adoption of new
technologies like blockchain, artificial intelligence (AI), and the Internet of Things (IoT) is
revolutionizing logistics operations, enhancing efficiency, and improving supply chain visibility.
Blockchain technology, with its decentralized and immutable nature, is being explored for secure
and transparent supply chain management. It can provide end-to-end traceability, prevent
counterfeits, and streamline processes like customs clearance, reducing paperwork and delays.
AI-powered analytics and predictive modeling are helping logistics companies optimize routes,
predict demand patterns, and enhance resource allocation. This leads to improved cost-efficiency,
reduced fuel consumption, and minimized environmental impact. The Internet of Things (IoT)
enables real-time tracking of goods and assets, allowing for better visibility throughout the supply
chain. IoT devices like sensors and RFID tags monitor conditions such as temperature, humidity, and
location, ensuring the integrity of products during transport and storage.
Looking ahead, the logistics industry holds tremendous potential for further advancements and
innovations. Greater automation, widespread use of robotics, and increased adoption of sustainable
and eco-friendly supply chains can be expected. Automation technologies, such as autonomous
vehicles, robotic pickers, and automated warehouses, will continue to reshape the industry. These
advancements will lead to increased operational efficiency, reduced costs, and improved safety. The
integration of sustainable practices into logistics operations will become a critical focus. Renewable
energy sources, electric vehicles, and eco-friendly packaging materials will play a crucial role in
creating a more sustainable and environmentally friendly supply chain.
Furthermore, advancements in data analytics, AI, and autonomous decision-making systems will
elevate supply chain management to new heights. Logistics will become more adaptive, responsive,
and resilient to disruptions, ensuring efficient and seamless operations even in challenging
circumstances.
2. Logistics and Wealth in Society
Logistics has evolved from a mere classic transport function to a strategic, cross-functional, and
global discipline (Grant et al., 2006). Supplying production material to factories and distributing
finished goods to warehouses and shops are prerequisites of highly fragmented value chains in
global economies today. The increasing impact of logistics on a company’s success and economic
growth underlines the importance of future planning in this field.
Figure 3. Map of mean wealthiness per adult (2021)
Supplying the world’s population with food, daily goods, books, educational material, and medicine
has become one of the key issues in fostering economic prosperity in developing and emerging

18
countries, especially in rural areas. Additionally, the professionalization of logistics management, as
well as the strong conviction that logistics contributes to economic wealth and costs savings, have
changed the way logistics-related aspects are viewed. Disaster relief, humanitarian aid, and refugee
camp supplies are some important areas which are handled by professional logistics nowadays.
Consequently, the overall importance of logistics is increasing. Thus, innovative and up-to-date
methods are needed to cope with new challenges in the field. Thusly, the logistics environment of
the new millennium will have to contend with:
 turbulent markets that change rapidly and unpredictably,
 highly fragmented “niche” markets instead of mass markets,
 ever greater rates of technological innovation in products and processes,
 shorter product life-cycles,
 growing demand for tailored products – “mass customization”,
 the delivery of complete “solutions” to customers, comprising products and services.
The map above clearly shows the wealth of different countries and regions of the world. The nations
marked in red can trace much of their wealth to geographical location and to the existence of
natural resources – minerals, climate and access to the sea. However, their ongoing wealth is due to
their transport and logistics links with the world as a whole and the logistics links within their
countries and with their bordering neighbours.
There are wooden vessels in the Comoros and this way merely emphasises the challenges faced if
the poorer countries are to make real improvements to their infrastructure, providing both better
internal links as well as to the world. The following figures provide examples of different situations
and the influences of modern technology on supply and demand.
Figure 4. A TEU shipped by 7 seamen (left) and Ever Ace (largest container ship carrying almost
24,000 TEU) operated by 25 crew (right).
By 2050, emerging Asian economies will become the world’s major players, first under the impulse
of well-known giants: China and India, which are expected to account for $41.9 trillion and $22.2
trillion of the world’s GDP, respectively. However, the real shift to happen by 2050 will be in the role
played by the rise of smaller economies, driven by their young population, urbanization, consumer
demand, and rising infrastructure. Indonesia, Bangladesh, and the Philippines are expected to
benefit the most from this impulse.
Another factor behind the forecasted prominence of emerging economies is the already booming
intra-Asia trade, which accounts for more than 60% of the region’s exports. This interconnectedness
is particularly significant for SMEs looking to tap into neighboring markets while benefitting from
reduced barriers and lower costs. Moreover, Asia’s predominance in the global supply chain as a
manufacturing hub is unlikely to fade, especially given the region’s interconnectedness. China and
Vietnam, for example, have become essential choices for manufacturing and assembly, with supply
chains that reach across the globe. Vietnam, in particular, emerged as a manufacturing powerhouse
and dynamic market, making it a prime destination for FDI.

19
When commenting on the relative efficiency of logistics operations it is often based on the
percentage relationship between the country’s/region’s logistics costs and their GDP. Suggesting
that the higher the logistics costs the less efficient are the logistics and infrastructure of the country.
However, for some countries the activity of logistics operations can be a major source of
employment, revenue and related business. An excellent example is shown on the next slide
relating to the Netherlands where logistics accounts for 13% of the country’s GDP. For the
Netherlands logistics services are a major contributor to the countries international trade. Similarly,
the percentages can be much distorted by the different elements of the GDP, a country with a large
services sector such as financial services will inevitably have a low percentage of logistics costs.
Correspondingly, the higher the population the higher are the logistics costs.
As a conclusion; The evolution of logistics from its early beginnings to the present day highlights its
pivotal role in modern-day business and the global economy. From the emergence of modern
logistics in the early 1900s to the digital transformation happening today, logistics has continuously
adapted to meet the changing needs and demands of businesses and consumers. As we move
forward, it is crucial for the logistics industry to continue embracing innovation and evolving to stay
ahead of emerging challenges and opportunities. The future of logistics holds immense potential
for automation, robotics, and sustainable practices, creating a more efficient, cost-effective, and
environmentally conscious global economy. By actively pursuing innovation, collaboration, and
strategic planning, the logistics industry can continue to shape the future of business and drive
economic growth.
3. Historical Evolution of Transport
The history of transportation begins from the human era and continued to change over a period of
time. The first means of transportation was the human foot. People used to walk large distances to
reach places. The first improvement made to this kind of transportation was adapting to different
geographies. The wheel was invented in the 4th
century BC in Lower Mesopotamia (modern-day
Iraq), where the Sumerian people inserted rotating axles into solid discs of wood. Around 3500 BC,
the first wheeled vehicles were used. As a means of transporting small loads, wheels were attached
to carts and chariots. Around the same
time constituting to transportation
history, people developed simple logs
into controllable riverboats with oars to
direct the vehicle. From here people
went on to tame animals like horses as
a means of transportation.
Domesticating animals to use them as
a means of transporting people and
small goods then started following a
trend.
Transportation history took a drastic
change with the introduction of
wheels. Because of the discovery of the
wheel and axle other smaller devices
like wheelbarrows came into use.
Existing means of transportation were
continuously improved thereafter. For
example, the use of iron horseshoes
became a common practice. Clubbing
different modes of transportation was
then a possibility. For example, horse-
drawn vehicles (carts or carriages). Figure 5. Mankind invented the wheel in the 4th
century BC
The history of transport is largely one of technological innovation. Advances in technology have
allowed people to travel farther, explore more territory, and expand their influence over increasingly
larger areas. Even in ancient times, new tools such as foot coverings, skis, and snowshoes

20
lengthened the distances that could be traveled. As new inventions and discoveries were applied to
transport problems, travel time decreased while the ability to move more and larger loads
increased. Innovation continues as transport researchers are working to find new ways to reduce
costs and increase transport efficiency.
International trade was the driving motivator behind advancements in global transportation in the
pre-Modern world. ‘‘...there was a single global world economy with a worldwide division of labor
and multilateral trade from 1500 onward.’’ The sale and transportation of textiles, silver and gold,
spices, slaves, and luxury goods throughout Afro-Eurasia and later the New World would see an
evolution in overland and sea trade routes and travel.
During Industrial Revolution, John Loudon McAdam (1756–1836) designed the first modern
highways, using inexpensive paving material of soil and stone aggregate (macadam), and the
embanked roads a few centimeters higher than the surrounding terrain to cause water to drain
away from the surface.
With the development of motor transport, starting in 1886 in Germany and in the US. in 1908 with
the production of Ford's first Model T, there was an increased need for hard-topped roads to reduce
washaways, bogging and dust on both urban and rural roads, originally using cobblestones and
wooden paving in major western cities and in the early 20th century tar-bound macadam (tarmac)
and concrete paving. In 1902, Nottingham's Radcliffe Road became the first tarmac road in the
world.
4. Concept of Transport
Logistics and transportation are intertwined, though they aren’t the same thing. Whilst logistics
refers to the entire process of the supply chain, transportation is just a part of that of process, though
it’s crucial to the process. Without efficient transportation from A to B, the supply chain would break
down, so pretty much all logistics planning involves the consideration of transportation.
Transportation concept involves the movement of people or goods between the point of origin to
the point of destination through infrastructural networks such as road, air or marine whose objective
is to meet the market expectation.
The starting point for a concept of transportation theory are the functions of transportation fulfilled
within a national economy. The spectrum of the functions of transportation may be described by
the following triad:
 Consumptive function, i.e., the preparation of services in satisfaction of consumer needs.
 Productive function, i.e., transportation services are components of every division of labor and
every market.
 Integrative function, i.e., transportation supports the integration of state and society.
Moreover, transportation concept has been applied interconnected with modal practices; namely
intermodalism, multimodalism and transmodalism.34
Intermodalism involves the organization of a sequence of modes between an origin and
destination, including the transfer between the modes. Its main goal is to connect transportation
systems that could not be connected otherwise because they are not servicing the same market
areas due to their technical characteristics. However, each segment is subject to a separate ticket
(for passengers) or a contract (for freight) that must be negotiated and settled. Mutimodalism is
simply an extension of intermodalism where all the transport and terminal sequences are subject to
a single ticket or contract (bill of lading) that can be assumed by a single integrated carrier.
The differences between intermodalism and multimodalism appear to be subtle, but they are
fundamental. Although multimodalism may look more efficient at first glance since less
transactional costs are involved for the user, it is not necessary the most efficient and sustainable. A
3
This section will be provided in detail within Unit E.
4
Jean-Paul Rodrigue, “The Geography of Transport Systems”, 6th
ed., Routledge, 2024.

21
multimodal transport service provider will be inclined to use its routes and facilities during the
transport process, which are not always the most convenient. The main purpose of a 3PL is to
maximize the use of its assets, which could be at odds with the benefits of its users.
Transmodalism involves connecting different segments of the same mode between an origin and a
destination. It tries to reconcile different modal services on the same network. There is no specific
term if transmodalism takes place as a single or separate ticket or contract. Transmodalism is
common for air transportation since passengers can easily book a ticket between two locations,
even if it involves transiting through an intermediary airport and using separate carriers. The
strategies of air carriers particularly relied on transmodalism with the setting of major hubs that
maximize the number of city
pairs serviced and code-
sharing. For freight
transportation,
transmodalism is more
challenging since it is
conventionally complex to
switch load units within the
same mode because of the
large amount of handling
required. Paradoxically, it is
the development of
intermodalism that has
favored the setting of
transmodalism since it
incited the development of
long-distance transportation
services and an increase in
container volumes to be
handled across the same
mode. Figure 6. Intermodalism, multimodalism and transmodalism
5. Significance of Road Transport
Today, more than 2.14 billion people shop online, a substantial rise compared to just a few years ago.
Considering the current global population of 8.1 billion, this signifies that 27% are now digital
shoppers. As a business owner from a bustling city with a vast number of stores, factories, and
warehouses that are all engaged in the production and distribution of goods, to efficiently deliver
these goods to the intended locations, you need a trustworthy mode of transportation. As the
foundation of logistics, road freight transportation fills that role.
Freight transportation by road also referred to as transporting goods by road, is essential for moving
goods not only within cities but also across borders. Here, we will delve into the world of road freight
transportation, looking at its significance, the dynamics of international and intercity road freight
transportation, and even the special difficulties associated with moving oversized objects on public
highways. Intercity and international road freight by road is not just for local deliveries. It broadens
its scope to include intercity and international logistics, enabling the movement of goods across
cities and even nations.
Road transportation plays a crucial role in modern society for several reasons:
Accessibility: Roads connect urban and rural areas, providing access to essential services such as
healthcare, education, and employment opportunities.
Economic Growth: It facilitates trade and commerce by enabling the movement of goods and
services efficiently. This is vital for local, national, and international economies.

22
Flexibility: Road transport offers flexibility in terms of routes and schedules, allowing for direct
delivery to various destinations without the need for transfers.
Cost-Effectiveness: For many businesses, road transport can be more affordable compared to other
modes of transport, especially for short to medium distances.
Job Creation: The road transportation sector creates numerous jobs, from driving and logistics to
vehicle manufacturing and maintenance.
Integration with Other Transport Modes: Roads serve as essential links in multimodal transport
systems, connecting rail, air, and maritime transport.
Emergency Services: Roads are vital for emergency response services, enabling quick access to areas
in need of assistance during disasters or medical emergencies.
Social Connectivity: They facilitate social interactions by allowing people to travel for leisure, family
visits, and cultural exchanges.
In summary, road transportation is integral to the functioning of economies, societies, and individual
lives, making it a fundamental component of infrastructure development and urban planning.
6. Advantages and Boundaries of Road Transport
Shipment by truck, ship, train, and plane are the four primary means of transportation in logistics.
Even though each of these transportation options has particular advantages, choosing the one that
is the best for your company requires considerable thought.
The profitability of your company, your goods’ safety, and your consumers’ satisfaction depends on
the logistics transportation you choose. In a world where quick delivery is not only a luxury but an
expectation, consider the following factors before selecting a logistics transportation mode.
 The product,
 Location,
 Origin of shipment,
 Borders,
 Final destination,
 The client.
Figure 7. Pros and cons of road transportation
Road transportation is often the most preferred means of transportation for sellers and businesses in
the supply chain. The roads are used to transport a wide variety of goods, both containerized and
non-containerized. Even sea or air cargo modes use road transportation for first and last mile

23
transportation. Road transportation provides both scheduled and unscheduled delivery services
depending on the customer’s needs.
6.1. Advantages of Road Transportation
Door-to-Door Service: The products are transported by road from the source to the destination. The
consumer need not be concerned about their shipment being handled more than once.
Full Truck Load Service (FTL): It is one of the fastest and safest methods of transportation for high
volumes of freight. Costs are lower, and damages are minimized due to the direct transit from the
loading point to the unloading site.
Less than Truckload Service: Less than Truck Load (LTL) cargo service through parcel carriers and LTL
specialists is an excellent alternative to moving expensive items in a time-bound and cost-effective
manner.
Speedy Delivery: Road transport is most suited for on-time, hassle-free and offers flexible delivery
options.
Flexibility: The routes and timings can be modified to meet the unique transportation needs of the
customer.
Reduced Danger of Damage in Transit: The chance of damage to the goods is reduced when
multiple cargo handlings are minimized or eliminated.
Rural Area Coverage: Since road transportation is more flexible for delivery to outlying locations, it is
possible to ship goods to even the tiniest settlements.
Cost-Saving Packaging: Overpacking cargo goods for road shipment is not necessary. Thus, it lowers
the direct cost of packaging.
Less Cost: Road transportation is cost-effective since it requires less capital investment and
operating and maintenance expenses.
Best Logistics: The most exemplary network is used by service providers to assist clients in more
effectively managing their goods along the supply chain.
6.2. Disadvantages of Road Transportation
Weather Impacts: Road transport is extremely vulnerable due to weather changes and seasons. For
example; during the rainy season, the roads become extremely unfit and unsafe to drive on.
Therefore, water transportation proves to be less reliable than rail transportation in volatile weather
situations.
Accidents & Breakdowns: There is a high risk of accidents and breakdowns when using road
transport for logistics. So, this makes motor transport not a very reliable option in comparison to rail
transportation.
Not the Best Option for Heavy Cargo: Road transport is not recommended for transporting heavy
cargo for long distances as it will be extremely costly and time-consuming.
Slow Speed: Road transport cannot be as fast as air or rail transport, and hence slow speed is one of
the biggest disadvantages.
Lack of Organization & Structure: As an industry, road transport is much less organized or structured
than other transport industries such as air, rail and water which are way more organized and
structured. Road transport is irregular and undependable. The price of transportation via road also
keeps on fluctuating.

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7. The Motives, Challenges and Impact of the Development of Road Transport Infrastructure on
the Socio-Economic and Political Life of the People
Transport is vital to the well-functioning of economic activities and a key to ensuring social well-
being and cohesion of populations. Transport ensures everyday mobility of people and is crucial to
the production and distribution of goods. Adequate infrastructure is a fundamental precondition for
transport systems. In their endeavor to facilitate transport, however, decision-makers in
governments and international organizations face difficult challenges. These include the existence
of physical barriers or hindrances, such as insufficient or inadequate transport infrastructures,
bottlenecks and missing links, as well as lack of funds to remove them. Solving these problems is
not an easy task. It requires action on the part of the governments concerned, actions that are
coordinated with other governments at international level.
The modes of transport have accelerated regional development in recent centuries by linking
regions and centers. Road transportation has an advantage over other modes of transport due to its
flexibility which can offer door to door service as it covers 42% of global mobility. Roads provides
cheap access to markets in rural areas allowing distribution of farm produce to urban areas in
exchange for inputs. In addition, well connected rural areas are resilient to natural shocks,
empowered, socially integrated and they have a reliable supply chain of food and farm inputs.
Figure 8. Transportation infrastructures and their constraints
The concept of road infrastructure therefore includes all basic facilities and governance structures
required for proper functioning of national or a region’s economy. Road transport has become key
element of physical infrastructure that creates conducive environment for thriving national socio-
economic development. Regional planners advocate for a system that will support economic
growth and welfare advancement of the entire community. The role of transport infrastructure in
national development arena is determined by the services it provides. An improvement on road
transport infrastructure reduces transport cost which is a major factor in production and distribution
chain.

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UNIT C – Trucks, Trailers and Loads
1. Types and Characteristics of Commercial Trucks
The definition of freight is ‘‘cargo or goods transported by truck or other means of transportation,
and the amount you are charged to transport goods’’. Freight trucks are the backbone of the
transportation industry, responsible for delivering goods across vast distances. For business and
logistics professionals, understanding the various types of freight trucks is essential. In this section,
we will delve into the world of freight trucks – from dry van and flatbed trucks to specialized options
like refrigerated and tanker trucks, each type serves a unique purpose in the transportation
ecosystem. Let's take a look at how each truck type has a different functionality and application in
the industry.
Freight trucks are versatile vehicles designed to transport goods efficiently and securely. They are
essential for businesses involved in logistics, distribution, and supply chain operations. A freight
truck, also known as a commercial truck or a semi-truck, is a heavy-duty vehicle specifically
designed for the transportation of goods over long distances. These trucks are the workhorses of the
transportation industry, playing a vital role in the movement of goods and materials across various
sectors. They are equipped with powerful engines, large cargo beds or trailers, and sturdy chassis to
withstand the demands of hauling heavy loads. Freight trucks come in various types and
configurations,
each tailored to
specific cargo
requirements.
With their ability
to cover vast
distances
efficiently, freight
trucks are
essential for
facilitating
commerce and
ensuring goods
reach their
destinations in a
timely and secure
manner.
Figure 1. Two types of commercial trucks
In spite of the fact that there are considerable number of trucks due to design, number of axles,
type of load carried, etc. we will discuss the most common types of freight trucks. Understanding
the different types of freight trucks is
crucial for any trucking business. Each
truck type serves a specific purpose,
catering to the diverse needs of varying
transportation businesses. By
recognizing the advantages and
features of each type, businesses can
make informed decisions when it
comes to selecting the appropriate
freight truck for their specific
requirement in order to optimize their
operations. Figure 2. Dry van freight truck
Dry van freight truck: The dry van truck is the most common type of freight truck. It features an
enclosed trailer with no temperature control, making it ideal for transporting non-perishable goods
such as electronics, clothing, and consumer packaged goods. Dry van trucks provide protection

27
from weather elements and ensure the security of the cargo. They are versatile and widely used in
various industries.
Flatbed freight truck: Flatbed trucks have an open, flat trailer bed without any sides or roof. This
design allows for easy loading and unloading of cargo from the sides or the rear. Flatbed trucks are
ideal for hauling large,
oversized, or irregularly
shaped cargo, such as
construction materials,
machinery, or vehicles.
They offer flexibility and
are commonly used in
construction,
manufacturing, and freight
industries.
Figure 3. Flatbed freight truck
Refrigerated (reefer) truck: Refrigerated trucks, often referred to as reefer trucks, are equipped with a
cooling system. They
maintain a controlled
temperature inside the
trailer, making them
suitable for transporting
perishable goods like food,
pharmaceuticals, or other
temperature-sensitive
items. Reefer trucks are
essential for ensuring the
freshness and quality of
goods throughout the
transportation process. Figure 4. Refrigerated truck
Tanker freight truck (tank truck): Tankers are designed to transport liquids, such as petroleum,
chemicals, or milk. These specialized trucks have cylindrical tanks that are built to withstand the
unique requirements of
liquid cargo transportation.
Tanker trucks ensure safe
and efficient delivery by
preventing spills and
maintaining stability. They
play a critical role in
industries such as oil and
gas, chemical
manufacturing, and food
processing.
Figure 5. Tank truck
Step-deck (drop-deck) freight truck: Step-deck trucks,
also known as drop-deck trucks, have a lower deck
height compared to standard flatbed trucks. They
feature a lower deck in the front and an upper deck at
the rear, allowing for the transportation of taller cargo.
Step-deck trucks are often used to transport machinery,
construction equipment, or other tall freight that
cannot be accommodated on standard flatbeds. They
provide versatility and increased cargo capacity for
specific types of shipments. Figure 6. Drop-deck freight truck

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Double (tandem) trailer: Double
trailers consist of two connected
trailers pulled by a single truck.
They offer increased cargo capacity
and are commonly used for long-
haul transportation of lightweight
goods. Double trailers are especially
useful for industries like retail, e-
commerce, and parcel delivery,
where high volumes of goods need
to be transported efficiently.
However, operating double trailers
requires expertise and compliance
with specific regulations and
restrictions. Figure 7. Tandem trailer
Car carrier (auto transport) truck:
Car carrier trucks, also known as
auto transporters, are designed to
transport multiple vehicles. They
feature specialized ramps or
hydraulic lifts for easy loading and
unloading of cars. Car carrier
trucks are widely used by car
manufacturers, dealerships, and
vehicle transport companies. They
ensure safe and secure
transportation of automobiles,
optimizing efficiency in the
automotive industry. Figure 8. Car carrier truck
Cube freight truck: Cube trucks,
also known as box trucks or cube
vans, have a cargo area shaped like
a box. They are commonly used for
local deliveries, furniture
transportation, or moving services.
Cube trucks provide a
weatherproof and secure
environment for cargo, with easy
access through rear doors. They are
versatile and well-suited for urban
deliveries or operations with
frequent stops and starts. Figure 9. Cube truck
Understanding the different types of freight trucks is crucial for any trucking business. Each truck
type serves a specific purpose, catering to the diverse needs of varying transportation businesses. By
recognizing the advantages and features of each type, businesses can make informed decisions
when it comes to selecting the appropriate freight truck for their specific requirement in order to
optimize their operations.
2. Truck Dimensions and Weights – KSA
Transport General Authority (TGA) sets the guidelines introducing regulations and technical skills
alongside with some important road safety information for the safety of road operations on roads.
Any conflict with any other laws or regulations, then the provisions set forth in those laws and
regulations are to be applied. Adhering to these limits is crucial for preserving the road network and
enhancing safety, as roads are among the most important assets to maintain.

29
 The total length of a single truck shall not exceed (12,50 meters);
• For a locomotive and semi-trailer not more than (23 meters),
• For a truck and trailer not more than (20 meters),
 The total width of any vehicle shall not exceed (2,6 meters) and the total height should not
exceed (4,5 meters) without loads, and (4,8 meters) with loads in accordance to the traffic
regulations,
 The gross weight of a single truck, a truck with trailer, a locomotive, a semi-trailer, or any other
allowed shape shall not exceed (45 tons),
 The maximum weight on a one wheel-single steering axle shall not exceed (8 tons) and not
more than (10) tons for a double wheeled axle and not more than (13) tons for a single non-
steerable axle,
 The maximum weight on the tip of any non-steerable axle shall not exceed (6.5) tons.
3. Components and Systems of a Commercial Truck
Trucks come in different sizes, ranging from vans and pick-ups to the heavy commercial ones that
we will be discussing today. From the engine and transmission to the braking and electrical
systems, each component plays a vital role in the overall operation of the truck.
3.1. Components of a Commercial Truck
While each truck is built differently, according to their manufacturer and the purpose of the vehicle,
these machines generally share common features. They all have a chassis, a cab, a body, axles,
suspensions, tires, an engine and a drivetrain.
Chassis: The chassis is the structural skeleton of the truck and it is the part that the rest of the truck
is laid on. It consists of two parallel beams and many crossmembers. It supports the axles, engine,
cab, fuel tank and the batteries (if any) of the truck.
Function: It is important to choose the right size chassis because it has an effect on the size and
shape of the truck and ultimately, the fuel economy. If you choose a truck that is larger than you
require, it will waste fuel. On the other hand, a chassis that is too small will increase chances of
overloading and require more trips, plus expenses. The size and load of your cargo will also
determine the axle placements, and the type of cargo body you can use.
Cab: The cab is the closed space in which the driver is seated and can sometimes have a built-in
sleeping compartment for long-distance truckers. There are a couple of designs that are used for
these cabs:
Cab Over Engine (COE): Otherwise known as flat nose, in this design, the driver is seated on top of
the front axle and the engine. These are most commonly found in Europe, where the dimensions of
the truck are strictly regulated. These cabs allow for better turning capabilities, and are well suited
to roads that are older. However, these trucks have certain challenges and are considered to not be
as safe as conventional cabs.
Conventional Cabs: In this design, the driver is seated behind the engine, like in regular trucks.
These conventional cabs can come in two designs, a large car and aerodynamic. The large car (or
long nose) has a long nose and is squarish in shape. They experience a lot of wind resistance,
typically use more fuel and provide less visibility than the aerodynamic designs. These aerodynamic
cabs have sloped hoods and are very streamlined to reduce drag.
Engine: Engines can be equipped with a variety of engines, but the trick is to choose the engine
horsepower and torque that is best suited to the job. If you choose an engine that matches your
style of driving and the loads that you are carrying, you will have the best fuel economy. In the
functioning; the general rule is that the slower your engine speed, the longer it will last over time
and better its fuel efficiency. This will depend on the condition of roads, the driving capabilities as
well as the loads that you carry. If you are going to be driving long distances regularly, choose a

30
higher-powered engine. If you are transporting within the city, choose engines with less power and
fewer gear ratios.
Body: Choosing the right body will have a big impact on your fuel economy. So, while making your
decision, think about the weight and shape of the load that you will carry. By choosing an
appropriate height, you will be able to minimize drag during travel. The material of the body is
important as well: aluminum is light and easy to repair, but not advisable for heavy loads; fiberglass-
reinforced plastic (FRP) is strong, and cheaper than aluminum, but very heavy; curtain sliders are
light, but not so secure and can be easily damaged. Also, make sure to think about your loading and
unloading process during selection because they will make your driver’s job easier!
Tires: The right kind of tires will ensure that your truck works at its maximum design capacity. They
should give you little to no rolling resistance, be recyclable and easy to change. Low resistance tires,
otherwise known as ‘‘super singles’’ are helpful if you are travelling long distances on high-speed
roads (80 km/h and above) like highways. Aluminum wheels and low-loss tires are also useful in
improving fuel efficiency. Most trucks use tubeless, or nitrogen tires. They are safer, and require less
maintenance compared to pneumatic tires. These nitrogen tires hold their air pressure for longer,
limiting damage and reducing drag. We should also remember, tire maintenance is just as
important as tire choice, so keep an eye on those wheels.
Figure 10. Different types of tires
Drivetrain: The drivetrain, often the most misunderstood part of the truck, works with the engine to
move the wheels. It includes the transmission, the driveshaft, the axles and the wheels. It is
important to differentiate between the transmission- which keeps the engine turning at the same
time as the wheels- and the drivetrain, which refers to the whole system that is involved in moving
the truck forward. The main function of the drivetrain is to transfer power from the engine to the
wheels and control the torque of the vehicle.
3.2. Systems of a Commercial Truck
The operation of a truck is mainly carried out by the engine and the chassis, where the chassis
includes the transmission system, driving system, steering system, fuel system and brake system.
Transmission system: Transmission system transmits the power of the engine to the drive wheels,
mainly including clutches, gearboxes, drive shafts, and drive axles.
Driving system: It connects the various assemblies and components of the car into a whole and
supports the whole car to ensure the normal running of the car. Mainly including frame, front axle,
wheels, suspension.
Steering system: Steering system ensures that the truck can travel in the direction selected by the
driver during driving, mainly including the steering control mechanism, steering gear, and steering
transmission.

31
Braking system: Since safety is a priority for trucks, many of them use air brake systems. These
systems utilize compressed air to apply force to the brake pads, offering strong stopping power and
the ability to handle the braking demands that come with heavy loads. Modern semi-trucks may
come with anti-lock braking systems (ABS) and electronic stability control (ESC) for added safety.
Fuel system: The fuel system of a semi-truck consists of the fuel tank, fuel pump, and injectors. The
fuel tank stores diesel fuel, while the fuel pump delivers it to the engine as needed. With the rising
fuel costs and environmental concerns, fuel efficiency is an increasing focus for semi-truck owners
and drivers alike. Manufacturers are beginning to implement aerodynamic designs, advanced
engine technologies, and weight-reduction strategies to improve fuel economy.
Electrical System: A semi-truck’s electrical system includes the battery, alternator, and wiring
harness and impacts the lights, communication devices, and any safety features. A reliable electrical
system is essential for safe operation, especially when driving at night or in negative weather
conditions.
Suspension System: A truck uses advanced suspension systems, such as air suspension or leaf spring
systems. These ensure a smooth ride and can effectively handle the load of a truck. Air suspension
systems are favored for the ability to automatically adjust based on the load.
4. Transport Units, Types and Capabilities of Cargo Trailers
Transport unit(s) means containers, trailers, planes, ships or any other individual device of cargo
especially designed for the goods transport by land, sea or air. Relatively, transport vehicle means a
motor vehicle or rail car used for the transportation of cargo by any mode. Each cargo-carrying body
(trailer, railroad freight car, etc.) is a separate transport vehicle.
Commercial trucks are classified by the Gross Vehicle Weight Rating (GVWR) of the vehicle. The
GVWR is a safety standard that’s designed to maintain the safe operating weight of a vehicle. This
weight rating includes the net weight of the vehicle itself, drivers, passengers, fuel and cargo.
Vehicle manufacturers determine the GVWR by including components such as axles, frame,
suspension, tires and more. There are a variety of commercial truck types that are on the road, each
built with a specific purpose. Depending on the unique needs of each business, the type of
commercial truck they operate can differ. The most common commercial road transport units are
included in following figure.
In road haulage, semi-trailers predominate over full trailers because of their flexibility. The trailers
can be coupled and uncoupled quickly, allowing them to be shunted for loading and to be trucked
between depots. If a power unit fails, another tractor can replace it without disturbing the cargo.
Compared with a full trailer, a semi-trailer attached to a tractor unit is easier to reverse, since it has
only one turning point (the coupling), whereas a full trailer has two turning points (the coupling and
the drawbar attachment). Special tractors are known as shunt trucks or shuttle trucks can easily
maneuver semi-trailers at a depot or loading and unloading ferries. These tractors may lift the
coupling so the trailer legs clear the ground.
A semi-trailer is a trailer without a front axle. The combination of a semi-trailer and a tractor truck is
called a semi-trailer truck (also known simply as a ‘‘semi-trailer’’, ‘‘tractor trailer’’, or ‘‘semi’’ in the
United States).
A large proportion of a semi-trailer's weight is supported by a tractor unit, or a detachable front-axle
assembly known as a dolly, or the tail of another trailer. The semi-trailer's weight is semi-supported
(half-supported) by its own wheels, at the rear of the semi-trailer. A semi-trailer is normally equipped
with landing gear (legs which can be lowered) to support it when it is uncoupled. Many semi-trailers
have wheels that are capable of being totally dismounted and are also relocatable (repositionable)
to better distribute load to bearing wheel weight factors. Semi-trailers are more popular for
transport than full trailers, which have both front and rear axles.

32
Figure 11. Most common commercial road transport units

33
Compared with a full trailer, a semi-trailer attached to a tractor unit is easier to reverse, since it has
only one turning point (the coupling), whereas a full trailer has two turning points (the coupling and
the drawbar attachment). Special tractors are known as shunt trucks or shuttle trucks can easily
maneuver semi-trailers at a depot or loading and unloading ferries. These tractors may lift the
coupling so the trailer legs clear the ground.
Table 1. Typical load unit lengths and volumes for freight vehicles with general road access
5. Types, Dimensions and Operations of ISO/Freight Containers
No symbol is more representative of global trade than the ocean shipping container. An estimated
849 million containers are shipped globally (Statista, 2023), accounting for about 80% of the goods
being shipped. But containers come in different shapes and sizes. It’s wise to be familiar with the
different options so you can choose the one that makes the most operational and financial sense for
your company.
Container units are the most integral part of the shipping industry, trade, and transport. These
containers store various kinds of products that need to be shipped from one part of the world to
another via different container ships.
Moving containers protect contents on their long journeys and ensure they return to you in one
piece. Container units may vary in dimension, structure, materials, construction, etc., depending on
the type of products to be shipped or the particular services needed. Various shipping containers
are being used today to meet the requirements of all kinds of cargo shipping. Understanding the
different container types is crucial if you want to ship cargo safely. In this section, we’ll cover
container types, as well as their sizes and uses, in the presentation.
ISO shipping containers are cargo containers you can use to ship products via trucks, boats or trains.
ISO containers are international intermodal containers that meet the standards specified by the
International Organization for Standardization (ISO). Most often, people use ISO containers for
hauling heavy loads and palletized products. Because certain methods of transporting ISO
containers — specifically trucks and boats — will leave them exposed to the elements, they’re built to
withstand environments that may experience harsh weather and other extreme conditions.
Key benefits of using shipping containers:
 They are extremely strong and durable, able to withstand heavy weather and rough
conditions.
 They are easy to transport and can be stacked on top of each other, meaning they take up less
space.
 They are simple to modify and can be adapted to suit various storage needs
 They are sustainable, made from eco-friendly materials, and can be recycled when no longer
needed.
 They are available in various sizes, meaning there is a perfect option for every project.

34
Widely used freight (intermodal)
containers are:
 Dry container,
 High cube container,
 Reefer container,
 Double door container,
 Open top container,
 Pallet wide container,
 Flat rack container,
 Side door container,
 Hard top container,
 Tank container,
 Insulated container,
 Half height container.
It is also important how to choose the
right type of container for shipping needs
and there are some factors to decide
which one is suitable for cargo transport.
Here are a few things to keep in mind
when making a selection:
Figure 12. Common types of freight containers
Type of cargo: Freight operator should determine if the cargo is general (dry), perishable, hazardous,
or oversized. For dry cargo, choosing a standard shipping container would a good match. And if
you’re shipping perishable or temperature-sensitive cargo, opt for a reefer.
Capacity: Once the type of equipment needed has been determined, freight operator should also
pay attention to the container size. If the shipment is small, then a 10ft or 20ft container is all
needed. However, if you have large or oversized items, you may need high cubes, open tops or flat
rack containers for your shipments.
Cost: The most important factor to consider is the cost of a shipping container. New containers are
more expensive than used ones. And specialized containers cost more than standard dry containers.
A 20-foot container has half the ocean container capacity of a 40-foot unit; but it costs about 80-
90% as much. 20-ft containers are suitable for heavy cargo because such cargo may hit a max
weight limit in a 40-ft container long before the container is even close to full. You can still save a
little by shipping in a smaller box, so you’ll need to evaluate your specific needs. Let’s take an
example. If you have a shipment of auto parts that weighs 74,000 lbs, (33565.83kg) you may be able
to fit the entire shipment with 40ft container dimensions, but weight restrictions prevent you from
doing so. In this case shipping two 20-ft containers – each loaded with 37,000 lbs (16.782,92kg) of
cargo – would be your cheapest option.
6. Fitting Euro Pallets and Standard Pallets in a Curtainsider Trailer
Before you ship something using a pallet, it’s helpful to know a bit more about the process itself and
what the key components of your shipment are – clearly, one of the main ones is going to be the
pallet itself!
There are six types of pallets recognized around the world by the International Organization for
Standardization (ISO). When shipping items to or from the UK and Europe, there are two different
pallets that you will have the option to use. These are either Standard Pallets or Euro Pallets.
However, there is also a pallet type that cannot be handled through our services, and it’s called an
American pallet. Please make sure you don’t use this pallet type, and if you are new to the pallet
shipping process, you can always consider this section to make sure you have chosen a suitable
pallet base.

35
The key difference between a Standard Pallet and a Euro Pallet is size. A Standard Pallet has larger
dimensions when compared to a Euro Pallet, measuring 120cm by 100cm instead of 120cm by
80cm for a Euro. The Standard size pallet is most commonly used throughout the UK for
transportation and delivery within the UK.
One of the most important things when it comes to shipping pallets is declaring the correct
dimensions. If the goods/boxes are smaller than the pallet base, you must always include the pallet
in your measurements, and not only the goods placed on it.
When measuring the length and width of your pallet, please make sure the accurate dimensions
are provided, including the pallet base. When it comes to the height of your consignment, it is also
important to include the pallet base as well. Furthermore, please start measuring the height of the
consignment from the ground all the way up, to the top. Regarding the weight of your
consignment, please make sure the pallet base is also included.
Figure 13. Three types of common pallets
Example: How many Euro Pallets Fit in a Curtainsider Trailer?
There are always different opinions and findings in deciding exact numbers of Euro pallets fit in a
curtainsider trailer. Here is the calculation:
Curtainsider trailer width and length: 2480mm x 13600mm
Euro pallet width and length: 800mm x 1200mm
Layout 1: 33 pieces of Euro pallets fit in a curtainsider trailer
If the question is to find the number of standard pallets fit in a curtainsider trailer;
Curtainsider trailer width and length: 2480mm x 13600mm

36
Standard pallet width and length: 1000mm x 1200mm
Layout 2: 26 pieces of Euro pallets fit in a curtainsider trailer
In case we need to plan number of different pallets stacked into freight containers we can refer the
figure below:
Figure 14. Standard and Euro pallet layout in different freight containers
7. FCL vs LCL
There are two main methods of shipping freight: trucks and ships. When it comes to trucks, the two
key terms are full truckloads (FTL) and less-than-truckloads (LTL). Full container load (FCL) and less
than container load (LCL) are simply the ocean container versions of the same concepts. Deciding
between a full-container load (FCL) or less-than-container load (LCL) for your ocean shipment
involves understanding your specific needs and priorities. Here’s a breakdown to help you choose
the right option.
When you ship an FCL, it means you have enough cargo to fill or nearly fill a container. Here are the
pros:
 Faster transit times due to direct port-to-port delivery.
 Lower risk of damage from fewer handling points.
 No customs delays caused by other shipments in the container.
 Greater control over packing and security.
Here are the cons:
 Higher overall cost, even if you don’t fill the entire container.
 Less suitable for smaller shipments.
When you ship a LCL, it means your shipment is small and you may be able to reduce your shipping
costs by using a freight forwarder to consolidate your cargo with other shippers. Here’s why it’s
advantageous:

37
 Lower cost per unit shipped due to shared container costs.
 Flexibility ideal for smaller businesses or occasional shipments.
Figure 15. FCL vs. LCL
While LCL shipping has advantages for small-volume shippers, here are some downsides you should
be aware of:
 Longer ship times. FCL loads can move direct to the port at origin and direct to the consignee
at destination. LCL loads must go through a container freight station at each side for
consolidation/ deconsolidation. How much time can this add to the trip? As an example, from
LA to Shanghai LCL service adds around 9 days versus FCL.
 Increased chance for damage. More touches mean more opportunity for damage. Also, you
are sharing the container with other products, so shifting cargo in transit could cause
problems.
 Customs delays. With an LCL shipment, if just one of the partial shipments on the container
experiences issues, it delays the whole shipment.
LCL will cost you less per unit of freight shipped, you save by sharing the shipping costs with other
small-volume shippers. There is a breakeven point at which a large LCL load equals the price of a
dedicated 20-ft container. An experienced global freight forwarder can advise what that point is
based on your commodity, shipping lane, and other current market rates.
8. Load Calculations5
In transportation, some of the cargoes are very heavy compared to their volume, and some are very
light compared to their volumes. Carriers performing the transportation want to carry the loads with
high specific gravity over their gross weight and the loads with low specific gravity over their
volumetric weights. These companies have developed the volumetric weight constant to
consolidate this variability.
For instance, tank containers used for transporting liquids are normally only 20 foot as larger
containers would exceed most transport weight limits. 10 cubic metres of marble would fill a
maximum capacity truck to its maximum weight limit, since 1 cubic metre marble weighs 2,600 kg!
Likely, 1 cubic metre steel weighs 7,850 kg which applies to solid bars etc. and obviously not to
hollow steel such as pipes. For solid steel items only 3.5 cubic metres would be a maximum
capacity trucks maximum payload! Paper rolls are heavily compacted. A paper roll weighs up to
1,200kg whereas waste bales are around 400kg. for sure, waste paper bales cannot be compacted
to same compression as new paper. For loading considerations, apples in bulk can weighs 640
kg/m3
and potatoes may reach to 770 kg/m3
.
5
More details are provided in Unit I – CBM calculations

38
Weights/volumes will vary and depend on product and types of packaging. As an example, washing
machines are made of thin steel and have large amounts of air inside. Typically, a full 13.6 metre
trailer load of appliances weighs about 8000 kg.
9. Securing Loads
Safe and secure cargo is recognized to be necessary to avoid accidents that may lead to fatalities
and important cargo damage. Often people will believe that heavy goods will not move. But if a
truck is travelling at 90 kph and stops, unless it is properly secured, the load will continue to move at
90 kph and will lead to severe damages. Any transported cargo (or person) obeys to law of physics
when in movement and thus without proper restraining devices (e.g., Lashings for cargo and
seatbelts for passengers) the consequences may be disastrous.
When transport operators have regular transports of similar goods, they are able to invest in
specialist equipment which maximises safety in transit. Increasing ever more goods are loaded onto
pallets in order to speed up loading and unloading and to avoid manual handling. However, in is
important that when stowing goods on pallets they should be stable and that lower packaging is
not overloaded. Finally in order to prevent the goods moving on the pallets adequate “shrink-
wrapping” plastic film or banding should be employed.
Figure 16. Loading key elements restraint methods
Methods used to increase the stability of a stack of cartons on a pallet include.
Stretch Wrap: Stretch wrap is a polythene film that is wound tightly around the cartons on the
pallet holding them in place. The stretch wrap can be applied by hand or using a stretch wrap
machine.
Banding: Metal or plastic bands can be placed around the pallet and columns of cartons. They can
also be used around wooden boxes and crates. Some types of bands can hook onto the pallet and
be reused. The bands need to be placed with a strong tension (tightly) to keep the cartons in place.
Edge protectors may need to be placed on the upper layer of cartons so they are not damaged by
the bands.
Shrink Wrap: Shrink wrap is a type of plastic that when heated shrinks by up to 40% of its size. A
layer or bag of shrink wrap is placed over the pallet of cartons, the shrink wrap is then heated with a
hot air gun or in a hot air tunnel to shrink the plastic tightly over the pallet.
Interlayer Sheets: Layers of cardboard or rubber can be placed between layers of cartons or goods.
This sheet provides interlock between the columns and prevents the columns from falling over. This

39
is a simple and cheap way of providing stability. A disadvantage however is the cartons or goods are
still separate from each other and may move if the stack is bumped.
Picture below is an example of a modern semi-trailer with flexible securing options and loaded with
different types of cargo. Whilst the image shows the ultimate best practice it is a very unlikely
situation and one should note all the “empty”/unoccupied space!
Technical specification of the trailer pictured: Kässbohrer engineers developed the multipoint load
security system, K-Fix, to enable you to fasten the loads from 236 different strapping points, with
each point 2.5-ton load securing capacity. Furthermore, K-Fix System is offered with 34 lashing rings
embedded to floor. Depending on your needs and load type, K-Fix is also provided with bolted and
corrosion resistant accessories, such as K-Pillar and K-Ring to provide you flexibility in your
operations. Whereas K-Fix multipoint load security system is compatible with standard load
fastening equipment, K-Fix is also operational with curtain sider semi-trailers with side boards.
Figure 17. Examples of professional loading/securing the loads
Please refer to the IRU Academy Safe Loading and Cargo Securing Programme for more
information (www.iru.org/academy).6
10.UN Orange Book, ADR and DGs Movement by Road
The UN Orange Book7
which means The UN Recommendations on the Transport of Dangerous
Goods Model Regulations (TDG Model Regulations) is a guidance document developed by the
United Nations to uniform the development of national and international regulations governing the
various modes of transport of dangerous goods (by air, by road and by sea). Most of dangerous
goods regulations such as IMDG Code, IATA and other national regulations are developed based on
this Model Regulations.
ADR ensures that any dangerous goods transported by road can cross international borders freely if
the goods, vehicles and drivers comply with its rules. ADR has been in force since 1968 and is
administered by the United Nations Economic Commission for Europe (UNECE). The ADR is a
regulatory instrument that applies to international transport in 53 countries. The ADR lays down
requirements for transport operations, driver training and the construction and approval of vehicles.
ADR 2025 entered into force on 1 Jan. 2025, after acceptance by the Contracting Parties bringing
key changes to how dangerous goods are classified, packaged, marked, and documented.
6
https://www.iru.org/sites/default/files/2016-01/en-safe-load-securing-8th.pdf
7
The nickname “Orange Book” relates to the color commonly associated with the color of risk and the orange-colored cover
of the printed book.

40
Figure 18. Classification and labels of dangerous goods

41
Figure 19. Structure of UN recommendations
Key features which contain various new and revised provisions
concerning:
 Electric storage systems (including modification of the
lithium battery mark and provisions for transport of
assembled batteries not equipped with overcharge
protection),
 Requirements for the design, construction, inspection
and testing of portable tanks with shells made of fiber
reinforced plastics materials,
 The protection of tanks and certain FL vehicles against
the risk of fire,
 Use of battery electric vehicles for category AT,
 The use of recycled plastic materials for rigid and
composite IBCs,
 The approval of inspection bodies for conformity
assessment, type approval certificate issue and
inspections of tanks and pressure receptacles. Figure 20. Caged IBC
The adoption of the new provisions that will allow the use of battery electric vehicles for category AT
for the transport of dangerous goods and the development of provisions related to the use of
recycled plastic materials for rigid and composite IBCs8
are in line with the logic of the energy
transition and the development of renewable energy sources.
Dangerous goods, in general, make up a relatively small proportion of all goods transported, though
the proportion varies by mode and location. For example, DGs transported by truck represent
approximately 1.9% of all trucks operating in the Lower Mainland/Canada. To that end, the
importance of providing visibility on the movement of DGs does not necessarily relate to the
impacts in terms of volume to capacity, but is more concerned with providing visibility in terms of
what, where and how much DGs are transported and accordingly how to allocate resources to
manage the risks posed by these movements.
8
Intermediate bulk containers (also known as IBCs, IBC totes, or pallet tanks) are industrial-grade containers engineered for
the mass handling, transport, and storage of liquids, partial solids, pastes, granular solids or other fluids. There are several
types of IBCs with the two main categories being flexible IBCs and rigid IBCs.

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43
UNIT D – Distribution Operations (Physical Distribution)
1. Significance of Distribution in Logistics
Distribution operations (also known as transport logistics, distribution logistics or sales logistics) is
the link between production and the market. The area comprises all processes involved in the
distribution of goods - from manufacturing companies to customers. Customers are either final
customers, distributors or processors. In concrete terms, distribution logistics includes goods
handling, transport and interim storage. This makes the subject a central component of extra
logistics and closely links it with packaging technology (after all, packaging must be adapted to
transport requirements in order to be able to deliver the product safely). Sustainably structured
information, decision-making and control processes are essential for implementing successful
distribution operations.
Logistics is coordinating the flow of goods, services, and information among members of the supply
chain. A major focus of logistics is physical distribution or marketing logistics, the tasks involved in
planning, implementing, and controlling the physical flow of materials, final goods, and related
information from points of origin to points of consumption to meet customer requirements at a
profit.
Planned and integrated management of all physical distribution activities (particularly transport,
storage, inventory control and order processing) has assumed unique importance in the process of
marketing since 1960. It can offer a feasible solution striking an optimum balance between physical
distribution costs (costs of transport, storage, inventory and order processing) and the customer
service level that will be satisfactory to the buyer and also profitable to the seller.
2. Physical Distribution
Physical distribution is the set of activities concerned with efficient movement of finished goods
from the end of the production operation to the consumer. Physical distribution takes place within
numerous wholesaling and retailing distribution channels, and includes such important decision
areas as customer service, inventory control, materials handling, protective packaging, order
procession, transportation, warehouse site selection, and warehousing. Physical distribution is part of
a larger process called “distribution”, which includes wholesale and retail marketing, as well the
physical movement of products.
It should also be noted that logistics and the supply chain are concerned not only with physical
flows and storage from raw material through to the final distribution of the finished product, but
also with information flows and storage. Indeed, major emphasis is now placed on the importance
of information as well as physical flows and storage. An additional and very relevant factor is that of
reverse logistics – the flow of used products and returnable packaging back through the system.
Figure below illustrates these different elements and flows, as well as indicating how some of the
associated logistics terminology can be applied.
It has been defined as a term employed in manufacturing and commerce to describe the broad
range of activities concerned with efficient movement of finished products from the end of
production line to the consumer. In short physical distribution refers to the physical flow of the
product from producer to consumers. Physical distribution management consists of the design and
administration of systems to control the flow of products.
Distribution in logistics management is a critical company function. Professionals in this field play a
key role in fulfilling customer demands, ordering and managing inventory, controlling inbound and
outbound shipments, reducing costs, saving time, and meeting company objectives. It is often said
that people are a company’s most important asset. Yet how many companies pay homage to that
belief? Not many. Excellence in distribution in logistics depends on companies recognizing workers
as an extremely valuable piece of the corporate puzzle. After all, distribution processes are labor
intensive; hence the importance of workforce.

44
Figure 1. Flows in physical distribution
According to Wendell M. Smith – “Physical distribution is the science of Business Logistics where by
the proper amount of the right kind of product is made available at the place where demand for its
exists. Viewed in this light, physical distribution is key link between manufacturing and demand
creation.”
According to W.J. Stanton – “Physical distribution involves the management of the physical flow of
products and the establishment and operation of flow system”.
According to Cundiff and Still – “Physical distribution involves the actual movement and storage of
goods after they are produced and before they are consumed”.
According to Mc Carthy – “Physical distribution is the actual handling and moving of goods within
individual firms and along channel system”.
Philip Kotler has defined physical distribution as, “Physical distribution involves planning,
implementing and controlling the physical flow of materials and final goods from the point of
origin of use to meet consumer needs at a profit.”
Strategically, there are three approaches to distribution where outbound transport is the key:
Mass distribution (also known as intensive distribution): When products are destined for amass
market, the marketer will seek out intermediaries that appeal to a broad market base. For example,
snack foods and drinks are sold via a wide variety of outlets including supermarkets, convenience
stores, vending machines, cafeterias and others. The choice of distribution outlet is skewed towards
those than can deliver mass markets in a cost-efficient manner.
Selective distribution: A manufacturer may choose to restrict the number of outlets handling a
product. For example, a manufacturer of premium electrical goods may choose to deal with
department stores and independent outlets that can provide added value service level required to
support the product. Dr Scholl orthopedic sandals, for example, only sell their product through
pharmacies because this type of intermediary supports the desired therapeutic positioning of the
product. Some of the prestige brands of cosmetics and skincare, such as Estee Lauder, Jurlique and
Clinique, insist that sales staff are trained to use the product range. The manufacturer will only allow
trained clinicians to sell their products.

45
Exclusive distribution: In an exclusive distribution approach, a manufacturer chooses to deal with
one intermediary or one type of intermediary. The advantage of an exclusive approach is that the
manufacturer retains greater control over the distribution process. In exclusive arrangements, the
distributor is expected to work closely with the manufacturer and add value to the product through
service level, after sales care or client support services. Another definition of exclusive arrangement is
an agreement between a supplier and a retailer granting the retailer exclusive rights within a
specific geographic area to carry the supplier’s product.
The fundamental characteristics of a physical distribution structure, illustrated in the first part of
following figure, could be considered as the flow of material or product, interspersed at various
points by periods when the material or product is stationary. This flow is usually some form of
transportation of the product. The stationary periods are usually for storage or to allow some change
to the product to take place – manufacture, assembly, packing, break-bulk, etc. This simple physical
flow consists of the different types of transport (primary, local delivery, etc.) and stationary functions
(production, finished goods inventory, etc.).
Figure 2. Sequential phases in a physical distribution
Physical distribution has two broad objectives viz. consumer satisfaction and profit maximization.
Apart from these two broad objectives, physical distribution has other objectives as follows:
 To make available the right goods in right quantity at right time and right place at least cost.
 To achieve minimum inventory level and speedier transportation.
 To establish price of products by effective management of physical distribution activities.
 To gain competitive advantage over rivals by performing customer service more effectively.

46
3. Channels of Distribution
Distribution channels are the means businesses employ to deliver their products to end consumers.
They’re the routes or pathways through which merchandise travels from the company to the
customer. As such, they’re essential for the success of any organization. In a constantly changing
market, distribution channels have become a vital part of business strategy. They determine not
only how products reach customers but also how relationships with trading partners are managed
along the supply chain.
These channels can take various forms, from direct-to-consumer sales to partnerships with
wholesalers and retailers. Product availability — a decisive factor for customer satisfaction — depends
largely on the effectiveness of distribution channels. While the main function of these channels is to
ensure streamlined deliveries, their configuration can vary according to the industry and the types of
items being marketed.
Distribution channels can be classified into 2 categories: direct or indirect. The choice between
them hinges on several factors, e.g., industry, product type, target market, available resources and
business strategies. Some companies even use a combination of both channels to maximize their
reach and distribution efficiency.
Direct channels: Manufacturers sell products directly to end consumers without the intermediation
of third parties. The advantage is that organizations can have full control over how their brand is
presented and what kind of customer experience they offer.
Indirect channels: A network of intermediaries collaborates to bridge the gap between
manufacturers or suppliers to consumers, facilitating the movement of products. Intermediaries like
wholesalers, retailers or other trade partners help sell and distribute goods without the
manufacturers directly engaging with the end consumers.
When it comes to choosing a suitable distribution channel, manufacturers have a wide range of
options:
Direct sales are suitable for expensive and products with a strong need of explanation.
Retail trade is suitable for the sale of goods requiring intensive consultancy. In addition, a
particularly broad audience can be addressed. The only drawback is: The company's own products
are launched on the market at the same time and place as those of its competitors.
The mail order business is declining more and more and is increasingly being replaced by the
online trade. This development is the reason why many formerly important mail order companies
have recently gone out of business.
Wholesale is ideally suited for the sale of large quantities. In this sector, manufacturers usually
generate significantly higher sales volumes than in the retail sector, but also with significantly lower
profit margins.
In times of increasing digitalization, sales via online shops are becoming increasingly attractive. E-
commerce is growing rapidly and presents the industry with completely new challenges, such as
same-day delivery.
There are several practices in physical distribution that should be understood in order to develop
the best physical distribution system for a firm. In terms of customer service, the major factors that
are affected by physical distribution are:
 The length of time from the placement of an order to the delivery date,
 The percent of “out-of-stock” orders,
 The quantities of merchandise stocked to cover special promotions or emergency needs of
the customer,
 The availability of parts and/or installation services of the manufacturer,

47
 The condition and care with which merchandise is delivered to the customer,
 The manufacturer's willingness and promptness in replacing defective merchandise.
Distribution channels have a significant effect on warehouses and logistics operations. A company’s
choice of strategy will impact how products are managed, stored and delivered to customers. It can
also affect supply chain efficiency and costs.
Distribution channels establish the quantity of goods to be stored. In short channels, products are
transported quickly from the manufacturer to the consumer, which may require lower inventory
levels. In long channels, on the other hand, where goods pass through several intermediaries,
inventory levels may be higher. This calls for meticulous inventory control.
Figure 3. Segmented channels of distribution
Distribution channels are paramount for the success of any business, as they determine how
products reach end consumers. The different types of distribution channels can include direct sales
to agreements with intermediaries. Choosing the optimal distribution strategy depends on factors
such as the type of product you handle, your target market and your available resources.
4. Warehousing (Inbound and Outbound Operations)
Warehouses are an integral part of the supply chains in which they operate, and therefore recent
trends, such as increasing market volatility, product range proliferation and shortening customer
lead times, all have an impact on the roles that warehouses are required to perform. Warehouses
need to be designed and operated in line with the specific requirements of the supply chain as a
whole. They are therefore justified where they are part of the least-cost supply chain that can be
designed to meet the service levels that need to be provided to the customers. Owing to the nature
of the facilities, staff and equipment required, warehouses are often one of the most costly elements
of the supply chain and therefore their successful management is critical in terms of both cost and
service.

48
The most crucial part for any distribution system to become more successful is “Inbound and
Outbound process” in warehousing. Initially accurate reporting Inventory is necessary after receiving
it in order to maintain accurate record. Likewise outbound process has same importance for
completing shipment otherwise it might not arrive on time or received by wrong recipient.
Inbound Process:
1. Pre-Receipt Notification, Recording and Tracking: Receipts have name of item, their quantity, Its
UOM (Unit of Measurement) and all the information related to that specific item. Serial no, Lot no,
manufacturing and expiration dates, statuses of various inventory statuses, rules of default receipt
status these elements should be tracked. For getting speedy inbound process we need to reduce
entering the information manually. Pre receipt process is regarding automation.
2. Load Arrival: Most of the companies working in supply chain management plans preliminary
inbound in order to complete every Logistics Service. There is no possibility for error as the
information of all receipts is entered automatically within few minutes like reserving docks, area to
stag, advance appointments.
3. Bar Coded Information: Barcoding is specifically concatenation of store and register id, date,
transaction incrementor for that specific store or register. With the help of all the data mentioned
hash function has been
applied to it and it
appears in the same
pattern so that all the
data regarding date,
store and register name
kept secret.
4. Tracking: This includes
tracking of License Plates
of the trucks. RFID Insider
is used for this tracking
purposes.
5. Put Away: Put away is
finally moving the goods
to their destination. It
includes serial no and lot
no information. Figure 4. Key warehouse processes
Outbound Process:
1. Quality Check: This is one of the most important processes in inbound as well as outbound. Some
products have their expiry dates. Hence this is one of the crucial parts of outbound process so that
customer would be able to get best product in case of its quality.
2. Sales Order: Sales order is an indication for the customer that he is ready to purchase products.
3. Pick and Pack: Discrete order picking, batch picking, wave picking, zone picking, forward picking
process for TL & LTL shipments, cluster pick, paper-based pick and pack these are some picking
methods used for outbound. However, in packing items are prepared for shipment by gathering
them and packaging.
4. Basically outbound process is related to downloading the order, its release, pick, pack and
shipping.
The nature of warehouses within supply chains may vary tremendously, and there are many
different types of classification that can be adopted, as displayed on the following table:

49
Table 1. The nature of warehouses
The holding of inventory is just one of a variety of roles that a warehouse may perform. Thus, with
the increasing emphasis on the movement of goods through the supply chain, many of the roles
may be related to the speed of movement as well as to inventory holding. The following list
highlights some of the common roles performed:
Inventory holding point. This is commonly associated with the decoupling point concept and, as
explained, may involve the holding of substantial inventory. Other reasons may include the holding
of critical parts in case of breakdown or acting as a repository (e.g. for archive records or personal
effects).
Consolidation center. Customers often order a number of product lines rather than just one, and
would normally prefer these to be delivered together. The warehouse may perform the function of
bringing these together, either from its own inventory holdings or from elsewhere in the supply
chain.
Cross-dock center. If goods are brought from elsewhere in the supply chain (e.g. Directly from
manufacturers or from other warehouses) specifically to fulfil a customer order, then they are likely
to be cross-docked. This means that the goods are transferred directly from the incoming vehicle to
the outgoing vehicle via the goods-in and -out bays, without being placed into storage.
Sortation center. This is basically a cross-dock center, but this term tends to be used for parcel
carrier depots, where goods are brought to the warehouse specifically for the purposes of sorting
the goods to a specific region or customer. A similar operation occurs in the case of fashion goods
being ‘pushed’ out to stores, whereby goods are brought to a warehouse solely for the purpose of
sorting into vehicle loads.
Assembly facility. This is often useful in postponing production as far as possible down the supply
chain in order to minimize inventories. The warehouse may thus be used as the final assembly point
for the product, involving activities such as kitting, testing, cutting and labelling.
Trans-shipment point. These are particularly common to serve outlying regions of a country. In a
typical scenario, orders would be picked at a national distribution center and transported to a
‘stockless’ trans-shipment depot, where the goods are sorted to smaller vehicle loads for immediate
delivery to customers. These trans-shipment depots may be small warehouses that are used just for
sortation purposes, or this operation may even be performed on a concreted area by using draw-bar
trailers carrying swap-bodies that have already been loaded for the local delivery vehicle route. The
local vehicles would just pick up each swap-body and deliver directly to the customers.

50
Returned goods center. The handling of returned goods is becoming increasingly important. This is
being driven both by environmental legislation (e.g., on packaging and on the recovery of materials
from electrical/electronic items) and by the growing use of internet shopping (which tends to be
associated with higher percentages of returned goods than in the case of store shopping).
4.1. The Changing Role of Warehouses
Warehouses evolved, first into distribution centers (DCs) and then into full-line fulfillment centers
(FCs). Exhibit depicts the historical progression of warehousing.
The prime objective of most warehouses is to facilitate the movement of goods through the
supply chain to the end consumer. There are many techniques used to reduce the need to hold
inventory, such as flexible manufacturing systems, supply chain visibility and express delivery, and
many of these have been encompassed in a range of supply chain initiatives, for example just-in-
time (JIT), efficient consumer response (ECR) and collaborative planning, forecasting and
replenishment (CPFR). However, as part of this movement, it is often necessary to hold inventory,
particularly where the following two conditions apply:
 The demand for the product is continual.
 The supply lead time is greater than the demand lead-time.
Figure 5. The changing role of warehouses
4.2. Facilities Acting like Warehouses
There are three major types of intermodal terminals, each having their own locational and
equipment requirements:
Port terminals. They are the most substantial intermodal terminals in terms of traffic, space
consumption and capital requirements. A container sea terminal provides an interface between the
maritime and inland systems of circulation. The growth of long-distance maritime container
shipping has also favored the emergence of intermediate hub terminals, some having an offshore
location.
Rail terminals. For inland intermodal chains rail terminals are linked with port terminals. The
fundamental difference between an on-dock and a near-dock rail facility is not necessary the
distance from the terminal facilities, but terminal clearance. While for an on-dock rail terminal
containers can be moved directly from the dock (or the storage areas) to a railcar using the
terminal’s own equipment, accessing a near-dock facility requires clearing the terminal’s gate

51
(delays), using the local road system (congestion) and clearing the gate of the near-dock rail
terminal (delays).
Distribution centers. Represent a distinct category of intermodal terminals performing an array of
value-added functions, with transmodal operations dominantly supported by trucking. Distribution
centers can
perform three
major functions. A
transloading
facility mainly
transfers the
contents of
maritime
containers into
domestic
containers or
truckloads.
Warehousing is a
standard function
still performed by
a majority of
distribution
centers that act as
buffers and points
of consolidation or
deconsolidation
within supply
chains.
Figure 6. Facilities acting like warehouses
5. Material Handling
Another important activity for distribution operations is Materials Handling. Material handling is a
very expensive process as it can involve sophisticated equipment; however, other elements,
including labor resources, time and losses of inventory owing to damage, are also crucial. During the
physical movement of products, you must keep the number of handling operations down to the
absolute minimum, whilst considering simultaneously that customer service levels and the speed of
picking and retrieval are fundamental. The main factors among distribution operations mainly in
warehouses or DCs to be considered are:
 The overall size of the warehouse “cube” height/length/width,
 Type, size, quantities of products,
 Storage environmental requirements, i.e., ambient/chilled/frozen,
 Mezzanine floors,
 Location of the warehouse, i.e., access to transport links,
 Purpose of the warehouse, i.e., national/regional/local,
 External planning constraints,
 Office and parking requirements.
Material handling is the art and science of moving, storing, protecting, and controlling material. It
involves short-distance movement within the confines of a building or between a building and a
transportation vehicle. It uses a wide range of manual, semi-automated, and automated equipment
and includes consideration of the protection, storage, and control of materials throughout their
manufacturing, warehousing, distribution, consumption, and disposal.

52
 Moving: Required to create time and place utility. The value of having the material at the right
time and the right place.
 Storing: Provides a buffer between operations, facilitates the efficient use of people and
machines.
 Protecting: Includes the packaging, packing against damage and theft.
 Controlling: Requires physical and status material control. Physical control is control of the
orientation of, sequence of, and space between material. Status control is the real-time
awareness of the location, amount, destination, origin, ownership, and schedule of material.
 Physical: Orientation, sequence and space between material.
 Status: Real-time awareness of the location, amount, destination, origin, ownership, and
schedule of material.
Material Handling accounts for:
 25% of all employees,
 55% of all factory space,
 87% of production time,
 15-70% of the total cost of a manufactured product
During the activities in any warehouse some 3-5% of all material handled becomes damaged, and
these must be “totally eliminated”, however, handling less is not the answer.
Material handling is a means by which total manufacturing costs are reduced through reduced
inventory, improved safety, reduced pilferage and improved material control. Manufacturing quality
is enhanced by reducing inventories and reducing damage.
While warehouses are known to be busy work environments with constant movement, they don’t
have to be chaotic or labor-intensive, as long as the proper systems are in place and MH principles
are adopted. With an organized material handling system and specialized equipment, warehouse
operators can increase productivity and efficiency while keeping employees safe from potential
accidents and streamlining the movement of goods from one stage to the next.
Figure 7. Principles to be considered for material handling
During the movement processes in warehouses, we utilize material handling equipment which is
any machine or tool that is used to transport, process, store, or package materials. For example,

53
forklifts, conveyors, shelves, and even autonomous mobile robots (AMRs). Material handling systems
require different amounts of labor and capital investments:
 Manual sorting,
 Mechanized,
 Semi-automated,
 Automated,
 Information-directed.
Common uses for material handling equipment include processing agricultural products like grain,
organizing and storing inventories in a warehouse, and loading and unloading the goods. Besides
the operating systems, often, material handling systems are categorized into four classes due to the
usage. The four main categories of material handling equipment are storage and handling
equipment, industrial trucks, bulk material handling equipment, and engineered systems.
Table 2. Common uses and tools of MHE
6. Value-added Services
Ideally, value is added to goods along each step of the supply chain through activities like superior
product design, quality manufacturing, customer service, and efficient delivery. If managed
effectively, physical distribution can increase customer satisfaction by ensuring reliable, cost-
efficient movement of goods through the supply chain. Physical distribution involves the handling
and moving of raw materials and finished products from producer to consumer often via an
intermediary.
Figure 8. VAS in logistics and SC
There is also, of course, a cost incurred to enable the distribution operation to take place. The
importance of this distribution or logistical cost to the final cost of the product has already been

54
highlighted. As has been noted, it can vary according to the sophistication of the distribution system
used and the intrinsic value of the product itself. One idea that has been put forward in recent years
is that these different elements of logistics are providing an ‘‘added value’’ to a product as it is made
available to the final user – rather than just imposing an additional cost. This is a more positive view
of logistics, and is a useful way of assessing the real contribution and importance of logistics and
distribution services.
In a warehouse, value-added services are highly customized by:
 Paperless pick-n-pack,
 Tagging & labelling,
 Kitting & dispatch,
 Quality check & control,
 Cycle count,
 Refurbishment.
By separating the price of products from the cost of services, distributors add value to their offerings,
improving their customer service and increasing their revenue. The problem with this distribution
strategy is that unbundling is a major stumbling block for distributors. Distributors traditionally find
it difficult to charge an additional fee for services as their customers complain that those services
used to be a package deal that came free with the product. Before adding value-added services as
differentiators, we should consider following points and actions:
 Make sure customer requirements are well understood.
 Establish a clear distinction between product-attached and optional services, and make sure
both types are priced correctly.
 Develop and use a menu (or family of) service offering.
 See that additional organizational burdens are considered-and defined processes in place-to
manage new service offerings and opportunities. These could include, activities, labor and
asset utilization, equipment and technology, billing and receivables, inventory, and
distraction/risk factors.
 Have confidence that your organization can sell new services and negotiate any new
relationships these services may entail.
 Ensure that the service team puts processes in place to assure ongoing service improvement
through standardization and the application of automation, tracking, and analytic
technologies.
 Remember that not all "value-added" opportunities are worth pursuing, and assure that those
pursued are.
To create value for the customer, the distributor’s services must help the customer achieve their
company goals or, better yet, exceed them. Customers’ goals range from lowering labor costs,
reducing asset investment or avoiding stock outs. To start, document the value created for your
customers. If you cannot do so, your customer’s perceived value is limited to just time and space
utility — in other words, you got the right product to the right place at the right time. Sure, that’s a
good start, but how much is time and space utility worth to the customer when all the other
vendors are doing the same thing?
Value-added services are a great way to compete with “big box” distributors. Smaller distributors
can offer product education, onsite training and demonstrations that large companies such as
Amazon simply can’t provide. There’s big opportunity to compete on customer intimacy. There are
several key areas where distributors can add fee-related services:
 Product kitting,
 Repackaging,
 Labeling,
 Just-in-time, same-day or next-day delivery,
 Quality inspection,
 Vending machine distribution,

55
 Onsite inventory,
 Field or shop equipment repairs,
 Preventative maintenance training.
To be effective, value-add services must be supported by sufficient processes and technologies to
make them profitable and deliverable. Some examples include:
 Accurate costing,
 Effective pricing,
 Service message development,
 Focused services selling,
 Custom performance,
 Contained flexibility,
 Learning curve improvement,
 Cost tracking,
 Risk management,
 Reporting value contribution,
 Automated support processes.
7. Order Fulfilment
Order fulfillment is a key process in managing the supply chain. It is the customers’ orders that put
the supply chain in motion and filling them efficiently and effectively is the first step in providing
customer service. However, the order fulfillment process involves more than just filling orders. It is
about designing a network and a process that permits a firm to meet customer requests while
minimizing the total delivered cost. This is more than a logistics function, and it needs to be
implemented cross-functionally and with the coordination of key suppliers and customers.
Order fulfillment involves generating, filling, delivering and servicing customer orders. In some cases,
it is only through this process that the customer interacts with the firm, and therefore, the order
fulfillment process can determine the customer’s experience. To accomplish these tasks,
management must design a network and a fulfillment process that permits a firm to meet
customer requests while minimizing the total delivered cost.
Figure below shows the seven sub-processes and activities that comprise the operational order
fulfillment process. At the operational level, order fulfillment is very transactional. It is focused on
managing the customer order cycle and the specific activities are executed primarily within the
logistics function. In fact, a customer order is said to serve “as the communications message that
sets the logistics process in motion”.
The growth in e-commerce has transformed warehouse and distribution centers to mega
fulfillment centers. The global shift toward e-commerce is changing how the retail and logistics
industries operate. This trend affects all aspects of the retail industry including the strategic location
of fulfillment centers and total real estate footprint. E-commerce sales are growing 15% annually
and are expected to reach $750B globally this year. This growth is an important new driver of
demand for logistics real estate as traditional distribution activities (to store) transition to fulfillment
centers (direct to customer). As e-commerce retailers seek to drive profitability, to differentiate their
offerings and to improve time to market, logistics facilities are increasingly viewed as revenue
drivers.
Because order fulfillment begins with the customer’s order, it is natural to integrate with key
customers to streamline the order-to-cash cycle and make it as cost-effective for the supply chain as
possible. The growth of technology in the supply chain environment has had significant impact on
the order fulfillment process. Much of what used to be very manual steps has been automated by
the advent and adoption of technology such as electronic data interchange (EDI), the Internet,
available-to-promise (ATP) and capable-to promise (CTP) systems, and enterprise resource planning
(ERP) and advanced planning and scheduling (APS) systems. These technologies, along with others
such as transportation management systems (TMS) and inventory visibility tools, can provide

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managers information that can be used throughout the supply chain to streamline the order
fulfillment process.
Figure 9. Operational order fulfillment process
Order cycle time contains the basic elements of customer service where logistics customer service is
defined as the time elapsed between when a customer order, purchase order, or service request is
placed by a customer and when it is received by that customer. Order cycle elements are:
 Transport time,
 Order transmittal time,
 Order processing and assembly time,
 Production time,
 Stock availability.
Constraints on order cycle time are order processing priorities, order condition standards (e.g.,
damage and filling accuracy) and order constraints (e.g., size minimum and placement schedule).
Order cycle time is expressed as a bimodal frequency distribution.
The operational requirements behind a successful fulfillment center are also different than for a
distribution center, it is the business and operations strategy that drives the order fulfillment
network. The capabilities needed for each company’s e-commerce strategy are customized and
include developing flexible solutions for shorter time horizons, understanding the balance between
automation and constraints, and properly sizing the packing operation. Peak shipping times are
more intense in fulfillment centers, orders sizes are smaller, but volume is very high.

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Developing a functional system design for goods-to-person order fulfillment systems can be a
complex undertaking, but proper planning results in a full understanding of the justification and a
solid business case for their implementation. Goods-to-person order fulfillment systems have
evolved over the years and will continue to change with customer expectations and developing
markets. With picking labor requirement reductions up to 50%, the popularity of these systems is
dramatically increasing. This is also due to improved space utilization and flexible designs.
Figure 10. Person-to-goods vs goods-to-person
So, what were some of the top issues typically encountered in previous goods-to-person fulfillment
systems? And how do they apply to fulfillment operations today? Consider these limitations on order
fulfillment systems in the past:
Space Requirements: While storage capacities were more efficient than static systems, the
utilization of facilities’ full clear heights (the space from the floor to the ceiling) often required
additional capital and space for mezzanines and order routing conveyance in a pick-and-pass
process environment
Fixed Throughput: The systems were often limited by the capacity of the picker, which meant the
storage capacity needed to be designed so that demand from the system would not exceed
throughput
Lack of Staffing Flexibility: Systems either required constant staffing (regardless of volumes) or
required operators to float between systems. This increased cycle time and created operational
bottlenecks
System Balancing: Product placement or “slotting” was a constant consideration to ensure that
systems were being maximized but not overloading capacity during peaks. The systems provided
little to no opportunity to increase system throughput for periods as needed.
Replenishment: The process of replenishment utilized the same station as picking, either reducing
the pick rate or pushing replenishment to off-shift hours.
To track your order's arrival, simply use the parcel/shipment number or booking reference. These
details allow you to access the shipping trace features, offering real-time updates on the location of
your shipment. With a reliable shipment/cargo tracking tool, shippers can easily monitor their cargo
and stay informed throughout the entire shipping process. Here comes the revolution in security
through GPS e-lock solutions that allow for advanced tracking and remote access to trucks and
logistics operations.

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Figure 11. Electronic cargo tracking system by e-lock
An Electronic Cargo Tracking System (ECTS) is a technology-based solution designed to track and
monitor the movement of cargo or goods import/transit or export through customs border. It
provides real-time visibility and control over the location, status, and condition of the cargo during
transportation. Customs authorities play a crucial role in international trade by ensuring the
compliance of goods with various regulations, collecting duties and taxes, and protecting national
security and public safety. The purpose of customs using an Electronic Cargo Tracking System
(ECTS) is to enhance their ability to enforce customs regulations and streamline their operations.
8. Inventory, Concepts and Tools for Inventory Management and Control
Inventory is of often overlooked as being the most expensive and important assets to a company. In
an analysis of working capital such as a Du Pont analysis, inventory can make up as much as 50% of
the total invested capital. As the levels of inventory increases, so to do the costs associated with
holding this inventory. Examples of associated costs are; holding costs, ordering costs, cost of
potential damage to goods and cost of stock-outs. For this reason, effective and efficient control and
management of inventory is essential and often this means finding a satisfactory position that
between holding sufficient levels of inventory to satisfy customer demand, and not holding so much
inventory that a focal firm’s cost spiral out of control due to the expense concerned with holding it.
Costs incurred during the management of inventories are:
Direct costs – directly traceable to unit produced (e.g., labor).
Indirect costs – cannot be traced directly to the unit produced (e.g., overhead).
Fixed costs – independent of the output quantity (e.g., buildings, equipment, & plant security).
Variable costs – vary with output level (e.g., materials.
Order costs – direct variable costs for making an order. In manufacturing, setup costs are related to
machine setups.
Holding or carrying costs – incurred for holding inventory in storage.
Inventory can be one of the most expensive assets of an organization. Inventory may account for
more than 10% of total revenue or 20% of total assets. Management must reduce inventory levels
yet avoid stockouts and other problems.

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This section will discuss:
 Dependent & independent demand,
 Tools for managing inventory,
 Basic types of inventories,
 Various inventory management approaches.
All organizations keep inventory. “Inventory” includes a company’s raw materials, work in process,
supplies used in operations, and finished goods. Inventory can be something as simple as a bottle of
glass cleaner used as part of a building’s custodial program or something complex such as a mix of
raw materials and subassemblies used as part of a manufacturing process. In order to match supply
and demand:
 Suppliers must accurately forecast demand so they can produce & deliver the right quantities
at the right time at the right cost.
 Suppliers must find ways to better match supply & demand to achieve optimal levels of cost,
quality, & customer service to enable them to compete with other supply chains.
 Problems that affect product & delivery will have ramifications throughout the chain.
The inventory means and includes the goods and services being sold by the firm and the raw
materials or other components being used in the manufacturing of such goods and services. A retail
shopkeeper keeps an inventory of finished goods to be offered to customers whenever demanded
by them. On the other hand, a manufacturing concern has to keep a stockpile of not only the
finished goods it is producing, but also of all physical ingredients being used in the production
process.
Four common types of inventories (there are more types found in some references) for most of the
business firms may be classified as raw materials, work-in-progress, finished goods and
Maintenance, Repair, Operations (MRO). These four main categories help businesses classify and
track items that are in stock or that they might need in the future. However, the main categories
can be broken down even further to help companies manage their inventory more accurately and
efficiently. While each type of inventory serves a specific purpose within the production process,
they all contribute to the overall value chain and the financial health of the business. All are
classified as current assets on the balance sheet, meaning they will ideally be converted into cash
within a year, and all generally incur costs beyond the purchase price, including for storage,
management, and financing.
Raw Materials: Raw materials are unprocessed or minimally processed materials that are used in the
production of finished products. A manufacturer should keep sufficient levels of raw materials in
stock to maintain uninterrupted production flows. When a product is completed, its raw materials—
such as the oils used in the manufacture of shampoo—are often unrecognizable from their original
form. Other examples of raw materials include steel, plastics, minerals, and lumber. It’s worth noting
that some raw materials, like perishable ingredients, have shorter shelf lives than others and must
be managed tightly to ensure they’re used before they expire or become obsolete.
Work-in-Progress or Process (WIP): When the “P” in WIP inventory refers to “process,” it represents
items with a relatively short production cycle—partially finished goods that are still in the
manufacturing stream. For a bicycle maker, WIP inventory might include frames that have been
built but not yet been painted or assembled with the rest of the bike components. For a women’s
clothing designer, it might include fabric that has been cut for dresses but not yet sewn or
embellished with buttons and zippers.
Finished Goods: These are the goods which are either being purchased by the firm or are being
produced or processed in the firm. These are just ready for sale to customers. Inventories of finished
goods arise because of the time involved in production process and the need to meet customer’s
demand promptly. If the firms do not maintain a sufficient finished goods inventory, they run the
risk of losing sales, as the customers who are unwilling to wait may turn to competitors. The purpose
of finished goods inventory is to uncouple the production and sales function so that it is not

60
necessary to produce the goods before a sales can occur and therefore sales can be made directly
out of inventory.
Maintenance, Repair, Operations (MRO): MRO inventory refers to the materials, equipment, and
other supplies a business uses to support maintenance, repair, or operations. This category includes
a wide range of products, from spare parts to fix a malfunctioning machine on the production line
to supplies for cleaning the break room to basic office supplies. These items are essential to keeping
the business up and running, so maintaining the right levels of MRO inventory is important.
However, this can also be one of the more complex and time-consuming categories of inventory to
manage because it can comprise hundreds or thousands of different items from a wide range of
sources.
Figure 12. Types of inventories
Additional types of inventories are:
Components: Components are similar to raw materials in that they are used to create and finish
products; however, these semi-finished goods generally remain recognizable when the product is
completed. An example is a screw holding a bicycle together or a decorative clasp on a garment.
Packing and Packaging Materials: There are three types of packing materials. Primary packing
protects the product and makes it usable. Secondary packing is the packaging of the finished good
and can include labels or SKU information. Tertiary packing is bulk packaging for transport.
Safety Stock and Anticipation Stock: Safety stock is the extra inventory a company buys and stores
to cover unexpected events. Safety stock has carrying costs, but it supports customer satisfaction.
Similarly, anticipation stock comprises the raw materials or finished items that a business purchases
based on sales and production trends. If a raw material’s price is rising or peak sales time is
approaching, a business may purchase safety stock.
Decoupling Inventory: Decoupling inventory is the term used for extra items or WIP kept at each
production line station to prevent work stoppages. Whereas all companies may have safety stock,
decoupling inventory is useful if parts of the line work at different speeds and applies only to
companies that manufacture goods.
Cycle Inventory: Companies order cycle inventory, sometimes referred to as working inventory, in
sufficient quantities to meet typical expected demand. The key is to have enough stock to serve
customers and keep production moving without incurring excess storage costs.
Service Inventory: Service inventory is a management accounting concept that refers to how much
service a business can provide in a given period. A hotel with 10 rooms, for example, has a service
inventory of 70 one-night stays in each week.
Transit Inventory: Also known as pipeline inventory, transit inventory is stock that’s moving between
the manufacturer, warehouses, and distribution centers. Transit inventory may take weeks to move
between facilities.
Theoretical Inventory: Also called book inventory, theoretical inventory is the least amount of stock a
company needs to complete a process without delays. Theoretical inventory is used mostly in
production and the food industry. It’s measured using the actual versus theoretical formula.

61
Excess Inventory: Also known as obsolete inventory, excess inventory is unsold or unused goods or
raw materials that a company doesn’t expect to use or sell but must still pay to store.
Inventory management is a vital aspect of operational excellence, and a key part of it lies in
understanding the fundamental difference between independent demand and dependent
demand. Properly distinguishing between these demand types enables supply chain professionals
to accurately forecast, plan, and optimize inventory, ensuring that materials are readily available to
meet production needs without excess stock. Independent demand refers to the demand for
finished goods or products that customers purchase directly. This demand is influenced by market
forces, customer preferences, seasonal trends, and economic conditions. Unlike dependent
demand, independent demand requires forecasting because it is unpredictable and varies based
on external factors. Dependent demand pertains to components, parts, or raw materials required to
produce a finished product. Unlike independent demand, dependent demand is calculated based
on the bill of materials (BOM) for the end product. The BOM lists all the materials and quantities
needed to assemble each unit of the finished product.
Firms should diligently measure inventory investment to ensure that it does not adversely affect
competitiveness. Measures include:
 Absolute value of inventory (found on balance sheet),
 Inventory turnover or turnover ratio- how many times inventory “turns” in an accounting
period. More is better because its faster!
Another tool for inventory management is ABC Inventory Control System which determines which
inventories should be counted & managed more closely than others. A items are given the highest
priority with larger safety stocks. A items, which account for approximately 20% of the total items,
are about 80% of the total inventory cost B & C items account for the other 80% of total items &
only 20% of costs. The B items require closer management since they are relatively more expensive
(per unit), require more effort to purchase/make may be more prone to obsolescence. C items have
the lowest value and hence lowest priority
9. Forecasting the Demand
In order to have an effective inventory management system and to gain an insight into future sales
demand, it is advisable to have an effective and reliable sales forecasting system. Using this
forecasting system can help with avoiding stock-outs, over-production, under-production etc.
However, an important note to remember is that a forecast will never be 100% reliable. There will
always be an element of uncertainty with any prediction on future demand and therefore it will
never give completely accurate predictions on future demand.
Demand forecasting is the process of predicting the quantity of goods and services that consumers
will require at a future date. It involves analyzing past sales data, market trends, and other relevant
information to make informed guesses about future demand.
A forecast of market demand won’t guarantee a successful strategy. But without it, decisions on
investment, marketing support, and other resource allocations will be based on hidden,
unconscious assumptions about industrywide requirements, and they’ll often be wrong. By gauging
the demand explicitly, you have a better chance of controlling your company’s goals. Merely going
through the process has merit for a management team. Instead of just coming out with pat
answers, numbers, and targets, the team is forced to rethink the competitive environment.
Running a business successfully is only possible by understanding the market dynamics for a
particular product or service. Planners cannot make well-informed, data-driven decisions, which is
essential to drive profit from the businesses. The accuracy of forecasts, while only 100% in some
cases, can help planners understand the markets, improve the production schedule, and reduce
information latency. Here are some reasons why the importance of demand forecasting cannot be
undermined.

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Figure 13. Demand patterns throughout PLC
There are many demand forecasting techniques a business can implement which can use both
quantitative forecasting and (using historical demand data) and qualitative forecasting (based on
more subjective opinions and insights) methods. Here are phases to be followed for demand
forecasting:
 Use demand types,
 Identify trends,
 Adjust forecasts for seasonality,
 Include qualitative inputs,
 Remove ‘real’ demand outliers,
 Account for forecasting accuracy,
 Understand your demand forecasting periods,
 Consider demand forecasting software.
Understanding the different types of demand forecasting methods is essential for choosing the
right approach for your business. These methods can be broadly categorized into qualitative and
quantitative techniques, each with its unique strengths and applications.
Figure 14. Demand forecasting methods
10. Last-mile Delivery
The prime objective of the last mile delivery is to deliver the package to the customers as quickly as
possible. Last-mile is considered the most important element in the logistics and supply chain

63
business. It’s also the key to customer satisfaction. The last-mile is the most time consuming and
expensive part of the whole shipping process.
Last-mile delivery is not an easy task. It can easily go out of hand and escalate into a catastrophe
with missed delivery schedules, higher fuel costs, and incorrect deliveries. Let’s see what are the
other challenges involved with the last-mile delivery.
Limited visibility: One of the major issues related to last-mile delivery is limited visibility. It’s because
the fleet owners in most of the countries hail from an unorganized sector which causes the lack of
visibility.
Figure 15. Last-mile delivery
Ensuring seamless deliveries: As discussed earlier, the demand for next-day and same-day delivery is
rapidly increasing. On top of that, customers, especially millennials also demand flexibility and
customization along with real-time tracking. It often becomes a challenge to ensure seamless
delivery when you have to fulfil a variety of customers’ demands.
Cooperation between the customer and the delivery person: This might seem like a trivial issue;
however, it’s a serious challenge that all companies face. Many times, it happens that the customer
is not present at the delivery location or he is out of reach. This undesirable situation causes a waste
of time and money. Moreover, it also exposes the package to the risks of damage and theft.
Route optimization: Another major challenge is to ensure the productivity of your drivers/delivery
executives and to continuously optimizing routes. Failing on either of the aspects can adversely
affect your customer experience and inflate your operating costs.
Assembly, skilled unpacking, and installation: Many packages require skilled unpacking and
assembly on delivery. This arises a challenge for shippers to ensure that the final product is exactly
the true reflection of what was sold and promised. Moreover, there are also some products that
require skilled technicians for their installation. With more and more bulky items migrating from
traditional retail to eCommerce, shippers must hire more technicians to fulfil the void. Last-mile
delivery encounters a plethora of challenges and roadblocks of which few are mentioned above.
11. Reverse Logistics
Reverse logistics refers to the movement of goods from customer to vendor. And, reverse logistics is
the process of planning, implementing and controlling the efficient and effective inbound flow and
storage of secondary goods and related information for the purpose of recovering value or proper
disposal. Typical examples of reverse supply chain include:
 Product returns and management of their deposition.
 Remanufacturing and refurbishing activities.
 Management and sale of surplus, as well as returned equipment and machines from the
hardware leasing business.

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There are various types of reverse supply chains, and they arise at different stages of the product
cycle in return; however, most return operations are organized to carry out five key processes:
 Product acquisition: Obtaining the used product from the user by the reseller or
manufacturer.
 Reverse logistics: Transporting products to a facility for inspecting, sorting and disposition.
 Inspection and disposition: Assessing the condition of the return and making the most
profitable decision for reuse.
 Remanufacturing or refurbishing: Returning the product to its original specifications.
 Marketing: Creating secondary markets for the recovered products.
Following figure demonstrates a simplified schematic of generic reverse processes for commercial
product returns. The customer returns the products to the reseller (product acquisition), from where
they are shipped to the returns’ evaluation location (reverse logistics) for issuing credit and product
disposition (inspection and disposition). Diagnostic tests are performed to determine the
commercially optimal disposal action for the returned product.
Figure 16. Reverse processes
Most companies now look at reverse logistics as holding an important strategic role, but this
function has yet to gain the status of a strategic variable. The importance of reverse logistics is
increasing for a number of reasons:
 Companies are seeing tangible benefits from the value that can be recaptured from
unproductive assets resulting from returned merchandise, such as significant reductions in
inventories, improvement in cash flow, reduced labor and improved customer satisfaction.
 There is an increase in competitive pressure to provide an effective, efficient returned goods
process. The increase in catalog and e-business shopping has resulted in a liberalization of
return policies in order to gain customer trust and reduce risk.
 Product lifecycle compression and an increased emphasis on introducing new products and
product “freshness” has created a need to clear the distribution channel more frequently,
requiring an efficient means to bring back obsolete, outdated or clearance items.
 Increased regulatory requirements regarding recycling and product disposition — especially
around products having environmental hazards — has increased the need for precision record
keeping and tracking.
Challenges persist across the value chain for managing the reverse logistics process. Chief among
them:

65
Meeting consumer needs: Customers want the best price and completely flexible and hassle-free
returns policies.
Volume management: Retail returns are around $60B+ annually, and total returns across the U.S.
high-tech service industry are forecast at $818B+ through 2008. Especially during peak seasons,
most of these returns are time-sensitive to process and restock for resale.
Management of costs: Expense management can represent up to 7% to 8% of the cost of goods.
The process is labor intensive with very little automation.
Data management: Having accurate data is important, but it is very difficult to obtain and manage
relevant information. An organization should understand the data source, know how to analyze it
and should use third-party experts if possible.
Disposition of product: Knowing the best location to handle, destroy, salvage and even where to
donate products is critical. So is the ability to handle a supplier return, whether it is defective or
working with overstock balancing.
Regulatory compliance: Organizations require complete understanding of waste management
laws, regulations and processes, including the company’s corporate social responsibility.
Partnership throughout the product lifecycle: Having the right partner throughout the product
lifecycle is key. Creating a strong and cohesive supplier agreement, jointly determining the best
approach, cost sharing and having a positive relationship will help improve the bottom line for
everyone.
12. Customer Service
Customer service (CS) is the measure of how logistics is creating the time and place utility for a
product. The meaning of customer service varies with the organization, the product it is marketing,
and the transaction phase it is undergoing. The buyer looks for value for the money he is spending,
while the seller, in delivering superior customer service, looks for trade-off between cost and
customer
satisfaction.
Hence, customer
service depends
on the phase of
the transaction it
is passing
through. There
are three phases
associated with
the exchange
process. The
degree of
importance of
each phase
varies with the
organization and
depends on the
product and
customer
requirements.
Figure 17. Customer service elements in three phases

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Customer service is generally presumed to be a means by which
companies attempt to differentiate their product, keep customers
loyal, increase sales, and improve profits. Its elements are:
 Price,
 Product quality,
 Service.
It is an integral part of the marketing mix of:
 Price,
 Product,
 Promotion, Figure 18. Most important
 Physical Distribution. customer service elements
Relative importance of service elements:
 Physical distribution variables dominate price, product, and promotional considerations as
customer service considerations.
 Product availability and order cycle time are dominant physical distribution variables
Failures and observations on CS:
 The dominant customer service elements are logistical in nature.
 Late delivery is the most common service complaint and speed of delivery is the most
important service element.
 The penalty for service failure is primarily reduced patronage, i.e., lost sales.
 The logistics customer service effect on sales is difficult to determine.
Customer service is the determined factor to customer satisfaction. Good customer service can
make a shopper feel happy. Based on another point of view, customer concerns about four
important elements with a close relationship to the customer value: time, dependability,
communication and flexibility. Those four elements indicate the requirements and wish from
customers: they hope to gain the dreamed products without being damaged and as less time as
possible; they hope to have a flexible ordering system facing the uncertainty and changing needs
and an efficient communication way to have a real-time support for problems during the
transaction process.
13. Key Technologies in Distribution Operations
Advancements in technology have had a profound affect on the efficiency and operations of
product distribution. By introducing technical systems and technology-based processes into
product distribution models, order fulfillment companies can benefit from significant
improvements to efficiency, workflow, and at the end of the day, the bottom line.
Technology has affected modern product distribution in the following ways:
 Integrating flows of information between sales, marketing, distribution and logistics.
 Improving flexibility and balance with product demand and inventory levels.
 Optimizing warehouse management.
 Maximizing distribution efficiency.
With technology automatically transforming sales into orders, and systematizing the order
fulfillment process, orders enter the supply chain and proceed toward fulfillment with minimal
human intervention. Information about inventory levels, product demand, and partner offerings can
be transmitted as needed to facilitate more efficient inventory management. These immediate
notifications allow for far more accurate projections about order volumes and more efficient
inventory management to reduce costs, mistakes, and delays in product distribution.

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Additionally, supply chain partners and inventory distributors can have access to real-time
transmission of order volumes into the distribution network to facilitate better planning for
production quantities and delivery timelines. Technology and technical systems improve flexibility
and timeliness, while reducing waste in the product distribution process.
Before automated systems and modern equipment advances, warehouse workers wasted
considerable amounts of time traveling throughout the warehouse to move product. Today, most of
the product movement is facilitated by machines and warehouse management software to reduce
lag time, improve accuracy with order fulfillment, and optimize warehouse floor space.
Modern warehouses can be smaller with more efficient inventory management and movement,
since they are no longer limited by the access capabilities of forklifts or restricted by aisle widths
that must accommodate two forklifts operating at the same time. Contemporary equipment such
as conveyors, rails and elevators can be integrated with a centralized computer network to improve
efficiency while reducing errors. Pallets and units can be placed randomly and then called up when
needed without concern of misplacement because the centralized network is more accurate at
records than a human with a clipboard.
Since it’s far faster and more accurate than human analysis, technology helps attain the most cost-
effective and fast product distribution process. Today’s product distribution traffic managers can
optimize distribution by using software that analyzes the best route for the lowest cost and/or
fastest fulfillment. With warehouse workflow optimized for best use of floor space and movement of
goods from storage to loading bays for shipment, the product distribution process can be made far
more efficient.
The technological advantage continues from the warehouse to loading bays as well. Using
specialized shipment analysis software, shipment trucks can be loaded according to the most
efficient route if/when they are making multiple deliveries. Goods that are planned for the last
delivery would be loaded in first, so that products don’t have to be unloaded and re-loaded multiple
times along the route to their destination. This not only improves delivery speed, but also reduces
risk of damage during shipping.
The enhancements to communication that technology offers have impacted information flow in
amazing ways. From the moment an order is received and throughout the product distribution
process to shipment, information can be seamlessly integrated across all departments.
While improved team communication tools provide the opportunity for immediate contact
anywhere in the world (with a Wi-Fi connection), specialized programs can now convert sales into
orders automatically in real-time, moving them directly into the supply chain for fulfillment. With
modern equipment and technology, the product distribution process essentially becomes a
constantly moving mechanism of almost fully automated operation supported by human labor and
management.
Today we are experiencing new connected technologies which are the focus of shippers and
carriers. The Internet of Things (IoT) has been discussed at length in terms of how it impacts visibility
and communication in the supply chain. However, stresses on today’s distributors are making
carriers and shippers refocus their efforts to use the IoT. As a result, more companies are deploying
radio frequency identification (RFID), Bluetooth monitoring and machine-to-machine connected
devices to monitor and manage their shipments more accurately.
Another fact is that the workforce is aging. Millennials are looking for jobs involving technology, and
days of manual labor as the sole workforce are ending. Furthermore, government regulations on
occupational safety and hazards are forcing today’s distributors to use robotics wherever possible. In
addition, the speed and accuracy of robotics in picking, packaging and loading of shipments is
helping a stressed supply chain meet the needs of a growing customer base around the globe. Of
all the distribution technology trends, Robotics is one that is already gaining much traction in
several distribution centers across the world.

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Figure 19. Logistics 4.0 as an integrated platform with recent technologies
Besides, effective distribution management is not simply knowing where a product is in a
warehouse and sending it out. Companies need to know where orders are derived from, where the
shipments are going, when it is expected to arrive, how many consumers are leaving websites with
items in the cart and beyond. Each of these factors contributes to information about why and why
not customers are choosing to purchase goods from a given company.
For example, a customer who leaves items on a wish list or in the cart may have found better
shipping options or pricing on Amazon, or he may have simply changed analytics play a vital role in
keeping the supply chain thriving with more competition and options available to consumers.
Distribution is changing, and suppliers or carriers or fail to think about how technology is impacting
their current operations will fail. Fortunately, the top distribution technology trends are easy to
understand and leverage. However, you still must take the steps to embrace the technologies by
renegotiating your shipper-carrier relationships or even working with a 3PL today. Since it is all
about data as the backbone of operations management, data analytics is becoming a fundamental
part the distribution technology toolbox.

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UNIT E – Freight Forwarding
1. Importance of Freight Forwarding
International Freight Forwarding is a constant changing environment. Understanding how it all
works can be confusing. This unit covers all aspects of the process involved in moving goods
internationally. Let’s learn what is required, what documents you need, where to get them from, and
what to expect, risks and avoiding them through sensible forward management. Importers and
exporters will benefit by understanding all requirements and will be in a position to save money on
forwarding services, whilst those engaged in international freight forwarding will be better informed.
A freight forwarder is a person or company that organizes shipments for individuals or corporations
to market original point of distribution. A typical day for a freight forwarder would primarily consist
of talking with clients and warehouses around the world, taking this information and passing it
along to the appropriate party to action.
Figure 1. Freight forwarding process
Along with making sure that the freight the client is importing or exporting gains entry into the
country of destination, a freight forwarder will (depending on the contract arranged), arrange for
said freight to be picked up and delivered to the final consignee’s place of business. This requires
contacting airlines/shipping lines, rail lines and even sometimes moving the goods to a different
country for final delivery.
International freight forwarders have the expertise that allows them to prepare and process the
documentation and perform related activities pertaining to international shipments. Some of the
typical information reviewed by a freight forwarder is the commercial invoice, shipper’s export
declaration, bill of lading, and other documents required by the carrier or country of export, import,
or transshipment.
2. Multi-model, Omni-model and Intermodal Operations
It’s not easy to know where your inventory is at any given moment. Your products could be
manufactured thousands of miles away, requiring an expansive delivery operation to get them into
your customers’ hands. Plus, as your business scales, you may need to bring on multiple shipping
partners via different modes of transportation. That’s where a multimodal distribution model
becomes a valuable option. Multimodal distribution enables businesses to get their products in
customers’ hands more efficiently. In this section, we’ll cover everything you need to know about a
multimodal distribution model and how you can implement one.
Multimodal distribution is the process of using multiple shipping modes such as land, air, sea, or rail
to get your product where it needs to go. One of the main differentiators that distinguishes a
multimodal distribution operation is the fact that all the carriers will be under one contract — no
matter the mode of transportation.
For example, companies providing both sea and air shipping capabilities all fall under the same
agreement. Businesses often opt for multimodal distribution chains due to the many benefits the
system provides to customers and businesses alike. Plus, in many instances, businesses need to use
multimodal distribution channels to move their products around the world and get them into their
customers’ hands.

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Multiple shipping modes may be needed across various terrains, making multimodal distribution a
necessary option. By working with a variety of carriers under one contract, businesses can effectively
ship their products and manage their supply chain appropriately.
Multimodal distribution can have a quantifiable impact on business operations. It’s tough to find
another distribution strategy that improves efficiency and reduces costs at the same time. Every
business is always trying to achieve this and optimizing shipping operations is one way to do it.
Those aren’t the only benefits, though. Let’s take a deeper look at why so many businesses use
multimodal distribution methods.
Figure 2. A multimodal example
There are so many ways to set up a supply chain and ship products around the world efficiently.
Why do so many businesses choose multimodal distribution? There are a handful of reasons
businesses and customers alike approve of multimodal distribution channels.
Some of the most significant benefits of multimodal distribution include:
Flexibility: Businesses can adapt on the fly depending on market conditions. If one carrier can’t
complete its leg, there are multiple other modes of transportation available to take its spot.
Cost: Businesses will have more options to ship their products, providing them with the ability to
evaluate each mode by its cost-efficiency. Plus, there are multiple modes that they can consider to
get the job done safely, efficiently, and cost-effectively.
Scalability: If one distribution channel is overloaded, a business can expand into another. Also, the
business can quickly ramp up with alternative distribution channels based on market dynamics
(e.g., geographic, geopolitical, and more)
Speed: Freight can move around the world at a faster rate with multimodal shipping. You can work
with a wider network of shipping options instead of relying on one mode.
Customer Satisfaction: Businesses have multiple ways to move their products around the world,
improving delivery rates and decreasing shipping delays for their customers. Also,
businesses will have more visibility over their shipments when using multimodal distribution.
Global Reach: The company can expand into international markets with sea and freight options.
Ground-only delivery shipments will no longer restrict a company from doing business with a
country or continent overseas.
Collectively, all of these reasons are strong arguments for why businesses should consider
multimodal distribution.
But there are other shipping methods that are similar to multimodal distribution that you should
also look at depending on your business’s needs. Intermodal distribution is a similar shipping

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method with a few unique differences. Let’s take a look at how those two methods compare to
each other.
In the logistics and transportation industry, the concepts of intermodal and multimodal transport
often surface, each representing unique approaches to moving goods across various modes of
transportation. Businesses must comprehend these distinctions to streamline their supply chain
operations and improve efficiency.
Intermodal transportation involves utilizing various modes of transport during a single journey to
transport goods. The cargo is transferred between modes of transportation, like trucks, trains, ships,
or planes, using standardized containers or trailers. This approach allows seamless transitions
between various transportation networks, optimizing efficiency and reducing costs. Intermodal
transportation is commonly used for long-distance freight movements, offering flexibility, reliability,
and sustainability in supply chain operations.
Figure 3. Multimodal vs intermodal transport
Intermodal transportation encompasses two primary methods: Container-On-Flat-Car (COFC) and
Trailer-On-Flat-Car (TOFC).
Figure 4. Container-On-Flat-Car (COFC) & Trailer-On-Flat-Car (TOFC)

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Container-On-Flat-Car (COFC): In COFC transport, goods are packed into standardized containers,
which are then loaded onto flat railway cars for transportation. These containers are designed to fit
securely onto the railcars, ensuring stability and ease of handling. COFC transport various cargo,
including consumer goods, perishables, and industrial materials.
Trailer-On-Flat-Car (TOFC): TOFC involves loading entire trailers or semi-trailers onto specially
designed flat railway cars for transport. Unlike COFC, which uses standardized containers, TOFC
allows for the direct loading of trailers onto railcars. This method is particularly suitable for
transporting oversized or irregularly shaped cargo that may not fit into standard containers. TOFC is
common for transporting goods over long distances, offering flexibility and convenience for
shippers.
Intermodal transport integrates multiple modes like rail, road, sea, and air to move goods efficiently.
Initially, goods are loaded onto trucks or trains, then transferred at intermodal terminals, often onto
trains for long-distance haulage. Finally, trucks complete the delivery to the destination. This
approach optimizes each mode’s strengths, leading to streamlined logistics and improved
supply chain performance.
In contrast to multi-model and intermodal operations, omni-modal transportation differs from
traditional transportation approaches that rely on a single mode of transportation, such as trucking
or rail. Instead, it combines the advantages of multiple modes to overcome limitations and deliver
enhanced efficiency, flexibility, and cost-effectiveness.
Omni-modal transportation refers to the practice of seamlessly integrating multiple transportation
modes within a single logistics operation. It involves the use of different modes such as road, rail, air,
and sea to transport goods from their origin to their destination. The concept of omni-modal
logistics emphasizes the efficient and coordinated movement of goods, leveraging the strengths of
each mode to optimize the supply chain.
The key principle behind omni-modal transportation is to select the most suitable mode of
transportation for each leg of the journey based on factors such as cost, transit time, cargo type,
distance, and geographical considerations. This approach allows shippers to leverage the strengths
of different modes to achieve optimal results throughout the supply chain.
3. EXIM Documentation for Freight Forwarding
Documentation and procedures, though complex and
cumbersome, are integral part of international marketing
operations. Full knowledge and accurate compliance of
procedures and documentation formalities ant as essential as
looking into areas of marketing mix to ensure success in
international marketing. Inadequate understanding of the various
formalities on the part of the managers results in protracted
correspondence, adversely affecting the business and cash flow
due to delays in realization of export proceeds as also the various
incentives.
Export-Import Documentations play a crucial role in facilitating
international trade and ensuring smooth movement of goods
across borders. The documentation process involves several legal
and regulatory requirements that are mandatory to meet for both
exporters and importers.
The importance of correct documentation cannot be
underestimated. Missing, inaccurate, or incorrect documents
could result in fines, as well as costly & lengthy delay at both
exporting and importing countries. Figure 5. Classification of
documentation for int’l trade

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Role of exporter:
 Check the validity of export license,
 Check that the company has customs code number,
 Well studying of LC terms & conditions concerning documentation,
 Issuance of the commercial invoice according to terms of LC,
 Issuance of detailed packing list,
 Arrange for inspection certificate via Surveyors (if applicable),
 Asking the freight forwarder to prepare any other documents (if any).
Documents required for an international sale can vary significantly from transaction to transaction,
depending on the destination and the product being shipped. At a minimum, there will be two
documents: the invoice and the transport document. The buyer will usually provide the seller with a
list of documents needed to get the goods into his country as expeditiously and inexpensively as
possible. Some documentary requirements are not open to negotiation, as they are needed by the
importer to clear customs at the port of destination.
For example, Saudi Arabia follows international rules and regulations for labeling in order to ensure
proper handling and to assist the foreign importer in identifying shipments. Labeling requirements
for food products include providing information relating to the contents, manufacture and
expiration dates, as well as all contact information of the manufacturer, clearly displayed in Arabic. It
is strongly recommended that outer-cartons be clearly marked with the trade name, the type of
product, and the manufacture and expiration dates. Labeling Requirements in the KSA must
contain:
 Shipper's mark,
 Importer's mark as
mentioned in the letter of
credit,
 Destination and port of
entry,
 Order number,
 Country of origin,
 Port of shipment and places
of dispatch,
 Gross and net weight, cubic
measurement,
 Number of packages, and
size of cases,
 Handling instructions
conveying special
precautions including
symbols thereof.
Figure 6. Properly labeled DGs on a Euro pallet
3.1. Commercial Documents
Commercial documentation commonly refers to a wide range of business documents reflecting
commercial activity of a business or corporation, including invoices, product specifications,
certificates of compliance, manufacturer’s declaration, packing lists, consignment notes,
commercial correspondence, contracts, etc. Some of the commercial documents have multiple
uses; BoL is both a shipping and a commercial document as well as a legal deed for financial value
of loads to the carrier.
Proforma Invoice: When the importer receives a shipment and no commercial invoice is available, it
can prepare its own invoice, known as a pro forma invoice, and submit it to Customs for entry of the
merchandise, provided it supplies a bond for its production. This is merely the representation by the
buyer as to the price that it paid or that is payable for purchase of the goods. The commercial

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invoice signed by the exporter must be furnished to Customs within fifty days or the bond will be
forfeited.
Invoice: Commercial invoice is a document used in foreign trade also as a customs declaration
provided by the person or corporation that is exporting an item across international borders.
Although there is no standard format, the document must include a few specific pieces of
information such as the parties involved in the shipping transaction, the goods being transported,
the country of manufacture, and the harmonized system codes for those goods. A commercial
invoice must also include a
statement certifying that
the invoice is true, and a
signature.
The Commercial Invoice is
a bill for the goods from
the seller to the buyer. It
should be submitted on
the exporting company’s
letterhead in the name of
the buyer, whose name
should also appear on the
letter of credit. The buyer
needs the invoice to prove
ownership and to arrange
payment. Copies of the
invoice should be
submitted to the bank.
The amount of the invoice
should be the same as the
amount mentioned in the
terms of credit. Figure 7. Principal and auxiliary commercial documents
Inspection Certificate: Required usually for import of industrial equipment, meat products, and
perishable merchandise, it certifies that the item meets the required specifications and was in good
condition and correct quantity when it left the port of departure. Also called certificate of inspection
or inspection report.
Certificate of Origin: Certificate of Origin is a document used in int’l trade. It is a printed form,
completed by the exporter or its agent and certified by an issuing body, attesting that the goods in
a particular export shipment have been wholly produced, manufactured or processed in a particular
country. The “origin” does not refer to the country where the goods were shipped from but to the
country where they were made. In the event the products were produced in two or more countries,
origin is obtained in the country where the last substantial economically justified working or
processing is carried out.
To confirm the origin of goods destined for other parts of the world, producers must have officially-
certified certificates of origin. These can be obtained from the Directorate of Supplies at the Ministry
of Commerce and Industry, or from branches of the Ministry in the major cities of the Kingdom.
During public holidays, local Chambers of Commerce and Industry are authorized to sign
certificates of origin. There are three types of certificates of origin:
 Agricultural and animal products,
 Industrial products, and
 Natural resources.
The certificate of origin must include the following:
 Exporter's name, address, and full contact information,

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 Importer's name, address, and full contact information,
 Type of goods to be exported,
 All identifying marks (which should preferably be registered with the Ministry of Commerce
and Industry),
 Full invoice information; namely, gross and net weights, number and type of packages, invoice
number, value, and date,
 A copy of the invoice should also be attached.
Bill of Lading (BoL): The bill of lading originated around the 14th century as a non-negotiable receipt
issued by a shipowner, for cargo received, to a merchant who did not intend to travel with his
goods. It would contain statements as to the type and quantity of goods shipped and the condition
in which they were received. Subsequent experience led to the incorporation into the document of
the terms of the contract of carriage in order to resolve the disputes which inevitably arose between
cargo owners and carrier. Finally, by the 18th century the bill of lading had acquired its third
characteristic, that of being negotiable by indorsement in order to meet the needs of those
merchants who wished to dispose of their goods before the vessel reached its destination.
BoL is a legal document between the shipper of a particular good and the carrier detailing the type,
quantity and destination of the good being carried. The bill of lading also serves as a receipt of
shipment when the good is delivered to the predetermined destination. This document must
accompany the shipped goods, no matter the form of transportation, and must be signed by an
authorized representative from the carrier, shipper and receiver.
An individual wishing to ship a consignment of goods overseas approaches a shipping line, either
directly or more often through a forwarding agent, with a view to reserving space on a vessel. He is
then instructed by the carrier when and where to deliver the goods and, having done so, is issued
with a receipt indicating the type and quantity of goods handed over and the condition in which
they were received by the carrier’s agent. From that point the carrier normally has control of the
goods and is ultimately responsible for loading aboard.
In the meantime, the shipper will normally acquire a copy of the carrier’s bill of lading form which is
obtainable either direct from the carrier’s agents or from stationers throughout the country. On the
form he will enter details of the type and quantity of goods shipped, together with any relevant
marks, and inter alia will specify the port of destination and the name of the consignee.
On receipt of the completed bill, the carrier’s agent will check the cargo details against the tallies at
the time of loading and, if correct, will acknowledge them if so requested. After calculating the
freight and entering it on the bill, the master or his agent will sign the bill and release it to the
shipper in return for delivery of the mate’s receipt or equivalent and payment of any advance freight
due. The shipper is then free either to dispatch the bill directly to the consignee or to deliver it to a
bank if the shipment forms part of an international sales transaction involving a documentary credit.
In either case, the consignee may decide to sell the cargo while in transit, in which case he may
indorse the bill of lading in favor of the purchaser. Eventually the ultimate consignee or endorsee of
the bill will surrender it at the port of discharge in return for delivery of the goods.
Air Waybill (AWB): An air waybill, also known as a consignment note, dispatch note or waybill, is a
contract between the shipper and the carrier. It provides key information for the shipper and is also
used for tracking the shipment and contains barcodes to identify the shipment electronically. It
accompanies goods shipped by an international courier, which allow for tracking. It serves as a
receipt of goods by an airline, as well as a contract of carriage between the shipper and the carrier.
It's a legal agreement that's enforceable by law.
 It is not negotiable document (AWBs are always consigned to a particular company or person),
 In case of FOB terms, it will be on collect basis (payable at destination),
 In case of C&F or CIF basis it will be prepaid.
Air waybills are identified by 11-digit numbers. The AWB number consists of three parts.

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 The three-digit prefix,
 The seven-digit serial number or "the running number",
 The last "check digit".
Each airline has been assigned a three-digit number by IATA, which determines the airline's AWB
prefix. The check digit is derived by dividing the seven-digit serial number by 7 and then taking the
remainder as the Check Digit.
Shipment Advice: Letter or form sent by an exporter to a foreign buyer informing that the shipment
of the ordered goods is on its way. A copy of the invoice and the packing slip (and sometimes a copy
of bill of lading) may also be attached. Also called advice note.
Packing List: A shipping list, (packing list, waybill, packing slip; also known as a bill of parcel,
unpacking note, packaging slip, (delivery) docket, delivery list, manifest or customer receipt), is a
shipping document that accompanies delivery packages, usually inside an attached shipping
pouch or inside the package itself. It commonly includes an itemized detail of the package
contents and does not include customer pricing. It serves to inform all parties, including transport
agencies, government authorities, and customers, about the contents of the package. It helps them
deal with the package accordingly.
 Includes its reference number, issuing date, and number of LC,
 To be addressed to the proper name & address of importer as shown in LC,
 To show serial number of containers,
 To show in detail the contents of each parcel inside the container,
 The parcels have to be numbered as follows: 1/20, 2 /20, 3/20, ……., 20/20,
 To show the total number of parcels in the container.
It is also important considerations in loading:
 Maximum space utilization,
 Secure stowage so goods arrive in good condition,
 Rules of stowage:
 Even distribution,
 Lighter, weaker packages on top,
 Brick-laying style,
 Lash cargo securely especially near the doors,
 Don’t mix dry cargo with cargo liable to spill or leak,
 Cargo subject to customs examination should be placed near the doors.
Bill of Exchange: An unconditional order issued by a person, bank or business which directs the
recipient to pay a fixed sum of money to a third party at a future date. The future date may be either
fixed or negotiable. A bill of exchange must be in writing and signed and dated. Also called draft.
3.2. Official Documents
These documents necessary mostly at national scale serve as the foundation for transparent and
compliant cross-border transactions, playing an integral role in facilitating the movement of goods,
mitigating risks, and ensuring that all parties involved are on the same page.
Customs Declaration Form: The Customs Declaration Form is a critical document submitted to
customs authorities. It declares the type, quantity, and value of goods being imported or exported,
serving as the basis for calculating customs duties. This is one of the most commonly used foreign
trade documents.
ATA Carnet: The ATA Carnet (Admission Temporaire/Temporary Admission) is an int’l customs
document that allows the holder to temporarily (up to one year) import goods without payment of
normally applicable duties and taxes, including value-added taxes. The Carnet eliminates the need
to purchase temporary import bonds. So long as the goods are re-exported within the allotted time
frame, no duties or taxes are due. Failure to re-export all goods listed on the Carnet results in the

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need to pay the applicable duties. Failure to remit those duties results in a claim from the foreign
customs service to the importer's home country.
EUR.1: EUR.1 is the name for a form, which is used in international commodity traffic. The application
of this form is based on application of various bi- and multilateral agreements within the Pan-
European preference system (the European Union Association Agreement). In the free trade
agreements goods are defined, which apply to cheaper rates of duty or to be completely duty-free
introduced, on the condition that they were completely manufactured in a member country or in
such were so far worked on that they become on an equal footing in accordance with the
agreements of the origin of the products.
TIR Carnet: The TIR Convention establishes an international customs transit system with maximum
facility to move goods:
 in sealed vehicles or containers;
 from a customs office of departure in one country to a customs office of destination in
another country;
 without requiring extensive and time-consuming border checks at intermediate borders;
 at a cost-effective price;
 while, at the same time, providing customs authorities with the required security and
guarantees.
Consular Invoice: A document certifying a shipment of goods and shows information such as the
consignor, consignee and value of the shipment. A consular invoice can be obtained through a
consular representative of the country you're shipping to. The consular invoice is required by some
countries to facilitate customs and collection of taxes. A consular invoice also has a copy of the
commercial invoice in the language of the country, giving full details of the merchandise shipped. In
general, the purpose is to provide the foreign customs authority with a complete, detailed
description of the goods so that the correct import duty can be levied.
Legalized Invoice: Occasionally, customs in the Middle East, require invoices to be both certified and
legalized. After certification, invoices have to be presented to the embassy of the destination
country for legalization. This involves presentation of the certified invoices to the embassy that then
attach their stamp to the documents.
Inspection Certificate: An inspection certificate serves as official documentation confirming that
goods have been inspected and meet specified standards or requirements. This document is
typically issued by an independent inspection company and provides assurance to buyers and
regulatory authorities regarding the quality and compliance of the goods. In international trade, an
inspection certificate helps facilitate smooth customs clearance and ensures that the imported
goods meet the necessary standards and regulations.
Blacklist Certificate: Blacklist Certificates provide evidence that the goods did neither originate in,
nor were transported via, blacklisted countries or by blacklisted vessels.
Veterinary Certificate: A certificate by a veterinarian relating to matters within the scope of
veterinary medicine. Include certificates of soundness, more commonly these days a presale
certificate, of freedom of products from diseased tissue, of vaccination or surgical alteration.
Halal Certificate: Halal is a term designating any object or an action which is permissible to use or
engage in, according to Islamic law. The term is used to designate food seen as permissible
according to Islamic law. Halal foods are foods that Muslims are allowed to eat under Islamic dietary
guidelines. The criteria specify both what foods are allowed, and how the food must be prepared.
The foods addressed are mostly types of meat/animal tissue.
3.3. Insurance Documents
As a business owner dealing with international shipments, you want your goods to arrive safely and
on time. Insurance documents in international trade are essential for ensuring that everything goes

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smoothly. Depending on the Incoterm used and the agreed-upon risk and responsibility, insurance
documents such as the Certificate of Insurance or the Insurance Policy play a critical role in
mitigating risks associated with cargo loss or damage during transit.
Letter of Insurance: It is normally issued by a broker to provide notice that an insurance has been
placed pending the production of a policy or a certificate. Sometimes this takes the form of a cover
note. The above documents do not contain details of the insurance being affected and therefore are
not considered satisfactory by banks which normally require evidence of an insurance contract in
documents required under a documentary credit. Broker's certificates, and cover notes are issued by
a third party and not the insurer so that in the event of any claim, it would be made against the
broker.
Insurance Certificate: Most businesses will at some time have to provide a certificate of insurance to
another party or require a certificate of insurance from a third party. Certificates are generally
required by one party of another party to verify that the party being required to provide the
certificate has appropriate insurance. Often, as in a situation between a contractor and a
subcontractor, insurance requirements are spelled out in a written agreement. Unfortunately,
certificates of insurance have several drawbacks.
3.4. Shipping Documents
While most of these documents are mandatory, some of them depend on the type of cargo you are
shipping as well as your origin and destination locations. Getting your goods across the world's stage
requires more than a shipping label. There's a suite of documents, each critical to clear customs and
ensure your delivery reaches its destination without delay. So, it is important to know which
documents are required for your shipment before you start shipping.
Air Waybill (AWB): As previously explained; an air waybill (AWB) or air consignment note is a receipt
issued by an international airline for goods and an evidence of the contract of carriage. It is not a
document of title to the goods. The air waybill is non-negotiable. Air waybills are issued in eight sets
of different colors. The first three copies are classified as originals. The first original, green in color, is
the issuing carrier's copy. The second, colored pink, is the consignee's copy. The third, colored blue, is
the shipper's copy. A fourth yellow copy acts as the Delivery Receipt or proof of delivery. The other
four copies are white.
HAWB (House Airway Bill): HAWB can be issued by a freight forwarder on receipt of goods from
shipper agreeing to deliver goods at destination.
Combined Transport BoL: Combined Transport Bill of Lading is a document that gives information
about goods being transported in large containers by sea and land: The combined transport bill of
lading covers whatever means of transport is used when the majority will be by sea.
Rail Consignment Note: Rail consignment note is a document which identifies the goods in a
shipment to be transported by railroad and certifies that these goods have arrived at the railroad in
an undamaged condition.
Road Waybill: Road waybill (CMR) is a standardized document for cross-border transport of cargo by
road, based on UN recommendations for uniform international rules and in force in the European
Union.
Mate's Receipt: Mate's receipt is a document signed by an officer of a vessel evidencing receipt of a
shipment onboard the vessel. It is not a document of title and is issued as an interim measure until
a proper bill of lading can be issued.
3.5. Financial Documents
Understanding the key documents involved in trade finance transactions is essential for businesses
engaged in international trade. These documents ensure transparency, compliance, and efficient
transactions, ultimately contributing to the growth and success of global trade. By familiarizing

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themselves with these documents and their importance, businesses can effectively navigate the
complexities of international trade and build strong, trusted relationships with their trading
partners. Trade finance documentation plays a crucial role in international trade by:
 Ensuring the smooth flow of goods from the seller to the buyer,
 Mitigating risks for both parties, such as non-payment or disputes,
 Facilitating customs clearance and compliance with import/export regulations,
 Providing a basis for payment under letters of credit or other payment mechanisms.
Bill of Exchange: A bill of exchange, a short-term negotiable instrument, is a signed, unconditional,
written order binding one party to pay a fixed sum of money to another party on demand or at a
predetermined date. A bill of exchange is sometimes called draft or draught, but draft usually
applies to domestic transactions only.
Inspection and Sampling Order: Sampling is an important part of a random inspection, proper
quality inspection sampling method to help achieve accurate shipment inspections. The sampling
phase is often overlooked by many importers trying to cut back on inspection costs. However, the
little money you save in forgoing some steps in inspection can result in your shipment incorrectly
passing the requirement for a pass and you receiving a faulty inspection report you receive prior.
Warehouse Receipt: A warehouse receipt is a document that serves to guarantee the quantity and
quality of a given commodity availability in an approved facility. These receipts serve as proof that
the commodity is in the warehouse and that the necessary documentation has been received. In a
situation where a seller forms a contract with a producer to purchase certain goods that are not in
stock, they would purchase the goods in advance and receive warehouse receipts, which they
would then use to claim their product at the warehouse once it is in stock. Thus, the warehouse
receipt guarantees that the product will be reserved for the buyer in the warehouse.
Promissory Note: A promissory note is a financial instrument used in lending transactions. It is a
written promise from a borrower to repay a specified amount to a lender within a defined
timeframe. The note outlines key terms, including the principal amount borrowed, any interest rate,
and the repayment schedule.
Letter of Credit (L/C): A
letter of credit (L/C) is a
bank’s conditional
promise to pay issued
by a bank at the request
of an importer, in which
the bank promises to
pay an exporter upon
presentation of
documents specified in
the L/C. An L/C reduces
the risk of
noncompletion
because the bank
agrees to pay against
documents rather than
actual merchandise.
The following exhibit
shows the relationship
between the three parties. Figure 8. Parties to a letter of credit
Delivery Order: A delivery order (abbreviated D/O) is a document from a consignee, or an owner or
his agent of freight carrier which orders the release of the transportation of cargo to another party.
Trust Receipt: A trust receipt is a notice of the release of merchandise to a buyer from a bank, with
the bank retaining the ownership title of the released assets. In an arrangement involving a trust

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receipt, the bank remains the owner of the merchandise, but the buyer is allowed to hold the
merchandise in trust for the bank, for manufacturing or sales purposes.
3.6. Other Doc's
Arrival Notices: The transportation carrier (steamship company or airline) will send an arrival notice
to the customs broker or to the importer (the consignee or notify party in the bill of lading) upon
arrival of the merchandise in the port. The party who is notified will be in accordance with the
instructions that the transportation carrier received from the seller/exporter or the seller’s freight
forwarder in the foreign country, which is usually based on the instructions of the buyer to the seller.
After receiving an arrival notice, the importer or its customs broker will ordinarily have five days
within which to supply the necessary documents to Customs and Border Protection to make entry
and obtain release and delivery of the merchandise.
Equipment Interchange Receipt: An Equipment Interchange Receipt (EIR) is a document that is
issued by a carrier, or its respective agent, to the cargo owner, when a container is moved from one
location to another. These locations are often referred to as interchange points and can be between
vessels, depots, yards or terminals.
4. The Elements of an Invoice, Commercial and Legal Implications of Different Payment Methods
Invoices make a record of all your sales and so are helpful for bookkeeping purposes. Invoices are
legal documents that provide documentation of your business's financial history. They track all the
revenue from your business through sales and can help you gauge your profits and cash flow.
4.1. The Elements of an Invoice
Companies need to deliver invoices in order to demand payments. An invoice is a legally binding
agreement showing both parties' consent to the quoted price and payment conditions. However,
there are other benefits to using invoices:
Maintaining records: The most important benefit of an invoice is the ability to keep a legal record of
the sale. This makes it possible to find out when a good was sold, who bought it, and who sold it.
Payment tracking: An invoice is an invaluable tool for accounting. It helps both the seller and the
buyer to keep track of their payments and amounts owed.
Legal protection: A proper invoice is legal proof of an agreement between the buyer and seller on a
set price. It protects the merchant from fraudulent lawsuits.
Easy tax filing: Recording and maintaining all sale invoices helps the company report its income and
ensure that it's paid the proper amount of taxes.
Business analytics: Analyzing invoices can help businesses gather information from their customers'
buying patterns and identify trends, popular products, peak buying times, and more. This helps to
develop effective marketing strategies.
To create effective and professional invoices, it’s crucial to include all the essential components. So,
what essential information should be included on an invoice?
 Company logo,
 Company information,
 Customer information,
 Invoice number,
 Date,
 Payment method,
 Product list,
 Price and quantity,
 Tax information,

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 Price summary,
 Terms & conditions,
 Personal notes.
4.2. Commercial and Legal Implications of Different Payment Methods
To succeed in today’s global marketplace and win sales against foreign competitors, exporters must
offer their customers attractive sales terms supported by the appropriate payment methods.
Because getting paid in full and on time is the ultimate goal for each export sale, an appropriate
payment method must be
chosen carefully to minimize
the payment risk while also
accommodating the needs
of the buyer. As shown in
figure, there are five primary
methods of payment for
international transactions.
During or before contract
negotiations, you should
consider which method in
the figure is mutually
desirable for you and your
customer. Figure 9. Trade payment risk pyramid
Key points for different payment methods:
 International trade presents a spectrum of risk, which causes uncertainty over the timing of
payments between the exporter (seller) and importer (foreign buyer).
 For exporters, any sale is a gift until payment is received.
 Therefore, exporters want to receive payment as soon as possible, preferably as soon as an
order is placed or before the goods are sent to the importer.
 For importers, any payment is a donation until the goods are received.
 Therefore, importers want to receive the goods as soon as possible but to delay payment as
long as possible, preferably until after the goods are resold to generate enough income to pay
the exporter.
Cash-in-Advance: With cash-in-advance payment terms, an exporter can avoid credit risk because
payment is received before the ownership of the goods is transferred. For international sales, wire
transfers and credit cards are the most commonly used cash-in-advance options available to
exporters. With the advancement of the Internet, escrow services are becoming another cash-in-
advance option for small export transactions. However, requiring payment in advance is the least
attractive option for the buyer, because it creates unfavorable cash flow. Foreign buyers are also
concerned that the goods may not be sent if payment is made in advance. Thus, exporters who
insist on this payment method as their sole manner of doing business may lose to competitors who
offer more attractive payment terms.
Letters of Credit: Letters of credit (LCs) are one of the most secure instruments available to
international traders. An LC is a commitment by a bank on behalf of the buyer that payment will be
made to the exporter, provided that the terms and conditions stated in the LC have been met, as
verified through the presentation of all required documents. The buyer establishes credit and pays
his or her bank to render this service. An LC is useful when reliable credit information about a
foreign buyer is difficult to obtain, but the exporter is satisfied with the creditworthiness of the
buyer’s foreign bank. An LC also protects the buyer since no payment obligation arises until the
goods have been shipped as promised.
Documentary Collections: A documentary collection (D/C) is a transaction whereby the exporter
entrusts the collection of the payment for a sale to its bank (remitting bank), which sends the
documents that its buyer needs to the importer’s bank (collecting bank), with instructions to release
the documents to the buyer for payment. Funds are received from the importer and remitted to the

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exporter through the banks involved in the collection in exchange for those documents. D/Cs
involve using a draft that requires the importer to pay the face amount either at sight (document
against payment) or on a specified date (document against acceptance). The collection letter gives
instructions that specify the documents required for the transfer of title to the goods. Although
banks do act as facilitators for their clients, D/Cs offer no verification process and limited recourse in
the event of non-payment. D/Cs are generally less expensive than LCs.
Open Account: An open account transaction is a sale where the goods are shipped and delivered
before payment is due, which in international sales is typically in 30, 60 or 90 days. Obviously, this is
one of the most advantageous options to the importer in terms of cash flow and cost, but it is
consequently one of the highest risk options for an exporter. Because of intense competition in
export markets, foreign buyers often press exporters for open account terms since the extension of
credit by the seller to the buyer is more common abroad. Therefore, exporters who are reluctant to
extend credit may lose a sale to their competitors. Exporters can offer competitive open account
terms while substantially mitigating the risk of non-payment by using one or more of the
appropriate trade finance techniques. When offering open account terms, the exporter can seek
extra protection using export credit insurance.
Consignment: Consignment in international trade is a variation of open account in which payment
is sent to the exporter only after the goods have been sold by the foreign distributor to the end
customer. An international consignment transaction is based on a contractual arrangement in
which the foreign distributor receives, manages, and sells the goods for the exporter who retains
title to the goods until they are sold. Clearly, exporting on consignment is very risky as the exporter is
not guaranteed any payment and its goods are in a foreign country in the hands of an independent
distributor or agent. Consignment helps exporters become more competitive on the basis of better
availability and faster delivery of goods. Selling on consignment can also help exporters reduce the
direct costs of storing and managing inventory. The key to success in exporting on consignment is
to partner with a reputable and trustworthy foreign distributor or a third-party logistics provider.
Appropriate insurance should be in place to cover consigned goods in transit or in possession of a
foreign distributor as well as to mitigate the risk of non-payment.
5. Freight Forwarding Office and Field Activities
Many people confuse the freight forwarder with a transport company, a distribution manager, an
import and export person. In fact, the specialist person assumes some of these responsibilities, but
in fact he can be specifically designated as the intermediary between the carrier and the transport.
So, it does not actually carry out the transfer itself, but rather arranges for the process to be carried
out from one destination to another – for import and export.
Freight forwarders take care of arranging the smooth international transport of each shipment.
Such professionals need both the business and the average consumer when making orders or
sending on their own behalf. Shipping companies coordinate goods from one side to the other,
finding the most appropriate and cost-effective transportation by volume – air, freight, ocean and,
more rarely, rail.
Each freight forwarding company has a different number of freight forwarders who are closely
specialized in organizing the whole process. It involves mediation between the main carrier and the
transport, negotiating the best price, determining a reliable but also financially economical route. Of
course, it is important to know the contents of the shipment so that it is clear whether the goods
are of short duration, whether something is fragile, etc. Only then does it become clear whether
some of the costs involved in arranging transportation can be reduced.
Among the main responsibilities of the freight forwarder a major role is that the whole
organizational process of coordinating the cargo from point A to point B, the preparation of
accurate and specific documentation, in accordance with all laws and regulations for international
trade, is the responsibility of the freight forwarders. It may be intimidating and justifiable for you, so
it is best to trust a specialist company. It will bring you security and peace of mind as you manage
the rest of your business.

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Figure 10. Freight consolidation
Here are the main benefits of using freight forwarding services. Their activities include the following:
 Coordination of international shipments,
 Inland transport tracking,
 Preparation of customs and other documentation (transport and export) imposed by
regulatory authorities in specific countries,
 Cargo insurance and insurance claims,
 Conservation of cargo space according to the volume of the consignment,
 Warehousing,
 Risk assessment and management,
 Handling the weight of the shipment,
 Warehousing,
 Negotiating freight charges and international payment methods and more.
Forwarder, as it has already become clear, is the organizational side of the process, which can
sometimes cause you a lot of trouble. The best part of all activities is that you do not have to be
familiar with local legislation on the import and export of goods, because freight forwarders are
constantly trained and up-to-date with the latest updates to laws and regulations. This is a great
convenience for all customers – they get a high guarantee of trouble-free transportation and
reduced likelihood of solid fines due to lack of documentation or incorrect due to incompetence.
The relationships built with the freight forwarders provide a quick and secure solution for
transporting your shipment. Whether it is ocean liners, rail freight or an express delivery flight, freight
forwarders will draw the shortest route and negotiate the best price for the volume of goods.
By choosing a freight forwarding company, you receive a specific offer and you are relieved of any
obligation to arrange transportation, especially the preparation of country-specific documentation.
This is a serious burden, which is why most clients use a professional service. Whether you are in the
small, medium or large business category and have a minimal load or a large volume, freight
forwarders will assist you in docking at the door.
Forwarders face different problems on a daily basis and know how to solve even the most complex
tasks in order for delivery to arrive on time. They can claim insurance when needed and negotiate
reasonable financial fees. Most importantly, they are aware of the regulations that must be followed
in each country. Otherwise, you are not immune to sanctions, shipment privatization and monetary
fines, which entails considerable financial loss.
Finding a safe and responsible person can be difficult, but not so much if you study the different
companies well. It is advisable to look at what Internet marketing is all about, once you already
know the basic definition and specific responsibilities of the freight forwarder. It is not in vain that
proven businesses have a rich content website. This way you can get to know the company and
their work better.

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Figure 11. Int’l shipping process

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6. Cargo Movement – Planning, Arranging and Transshipment
Whether it’s fresh produce, high-tech gadgets, or bulk materials, the journey behind the scenes
helps facilitate global trade. This process is known as cargo movement, the art and science of
shipping goods from point A to point B across cities, countries, and continents.
From flying through the skies to crossing oceans or travelling down highways, cargo movement is
the backbone of global business. In this section, we will explore the essential cargo movement
process, various types, key components, and challenges involved in moving cargo worldwide.
Cargo movement refers to the process of transporting goods from one place to another, including
shipping goods across cities, countries, or continents. The process consists of different transport
stages, such as picking up the goods, preparing them for shipping, handling them during
transportation, and delivering them to their final destination. Depending on the type of goods,
urgency, and distance, you can have your cargo moved through different modes like air, sea, road,
and rail.
Cargo movement makes global trade possible by ensuring that products, goods, raw materials, etc.,
reach their destination, customers, markets, or factories. Careful planning, coordination, and
execution are necessary to ensure that cargo reaches its destination on time and in good condition.
Different transportation methods are used in cargo movement depending on the various needs of
goods to be carried from one place to another. The four major types of cargo movement include:
Air Cargo Movement: Air cargo primarily caters to urgent deliveries. It is the go-to option when there
is less time to deliver goods like high-value electronics, medical supplies, perishable goods, etc. Air
cargo includes shipping goods through aero planes, as it is the fastest way to get products across
continents or countries. However, air cargo also has higher costs. So, air cargo is usually reserved for
urgent shipments.
Sea Cargo Movement: Sea cargo is ideal for shipping bulk goods across long distances. Large
container ships can carry thousands of containers at a time, making it a cost-effective method for
transporting machinery, vehicles, and consumer goods. However, it is slower compared to other
methods. Sea cargo is appropriate for transporting bulky items like machinery, large volumes of
consumer goods, or vehicles.
Land Cargo Movement: Land cargo includes road transportation through trucks and vehicles. It is
the most common method of transporting goods within a country or across neighboring countries
or regions. Road transport provides you with flexibility, allowing goods to be delivered directly to
warehouses, stores, or homes. Land cargo plays an important role in door-to-door delivery, whether
for small packages or full truckloads. This cargo movement helps connect remote areas to large
urban areas, making it easier to communicate and grow business.
Rail Cargo Movement: Rail cargo is a middle-ground solution based on cost and speed. The goods
are transported by trains, which makes it an ideal option for bulk shipments that don’t want
airspeed delivery but want to deliver faster than sea or road transport. Rail is helpful for transporting
heavy goods like steel, coal, grain, etc., over long distances. It is also an environmentally friendly
option for moving cargo over land.
6.1. Key Components of Cargo Movement
Cargo movement is more than the loading and unloading of goods. It includes several critical
components that must work together to make sure that cargo gets from one point to another. The
critical components of cargo movement include:
Logistical planning: Effective logistics planning is essential to smoothing the cargo movement
process. It includes identifying the best routes and most efficient mode of transportation and
coordinating with other shippers, carriers, customs, warehouses, etc. If you don’t plan your logistics
effectively, cargo movement can face many delays, get lost, or cost more than expected.

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Packaging and labelling of goods: Packaging and labelling are important for protecting cargo
during transportation while ensuring that it gets safely to the right destination. You must pack the
goods carefully and label them properly, including shipping details, handling instructions, and
barcodes. Without proper packaging and labelling, the best logistical plans and companies can fail
to deliver.
Documentation: Documents like lading bills, custom forms, insurance documents, invoices,
insurance documents, etc., help to keep the cargo moving legally and smoothly across the borders.
Every document is important as it details the cargo, its values, and the responsibilities of each party
involved in the shipment. These documents in cargo movement act as proof of ownership and
ensure that the cargo complies with international regulations and laws.
Customs clearance: Whenever cargo passes international borders, it goes through customs. Customs
clearance is a process in which the authorities of other countries check the documents, inspect
goods, and determine whether any taxes or duties apply.
Warehousing: Warehousing is a temporary stop for cargo, where the goods are stored before, during,
or after transportation. Depending on the type of cargo being transported, cargo may need to be
stored in climate-controlled environments or different locations. Warehousing is important for
managing inventory, ensuring that products are available when needed, and organizing shipments
efficiently.
Tracking and monitoring: Tracking and monitoring cargo provides real-time updates on where the
cargo is at that particular moment. Shipments use barcodes, GPS systems, RFID tags, etc., to track
their progress and respond to any delays or issues. Tracking technology is also helpful for customers
to know when their goods will arrive, maintaining trust with customers.
Handling and loading: Proper handling and loading make sure that cargo is safely transported to
the transport vehicle (ship, plane, truck, or train). Different types of cargo require different handling
methods; heavy machinery needs cranes, and perishable goods need refrigerated units. Proper
handling minimizes the risk of damage to the cargo, which can be costly for both you and the
receiver.
6.2. Challenges in Cargo Movement
Cargo movement can be seen as a simple process, but it has a few challenges. From unexpected
delays to rising costs, there are many challenges that you have to overcome to keep the goods
moving smoothly. Some of the most common challenges include:
Delays because of weather: Weather is a serious challenge, whether it’s a storm at sea or heavy fog
grounding all flights. Ships can get stuck in ports, trucks can be delayed by snow, or planes cannot
take off. Weather is one of the biggest reasons for delayed deliveries, unhappy customers, and high
transport costs.
The rising cost of fuel and transportation: Fuel prices impact the costs of moving cargo. As fuel
prices go up, the cost of shipping goods also increases. Driver shortages, increased tolls, or increased
shipping fees also make transporting suddenly more expensive than expected.
Customs and regulations: Different countries have rules, and going through them can be tricky.
Incomplete paperwork, unexpected tariffs, and strict import or export restrictions can cause delays.
Sometimes, cargo can also get held up at customs, adding further delays.
Damage to goods: Rough handling, bad weather, or just bad luck can lead to broken, spoilt, or
damaged goods, no matter how careful you are throughout the transportation. This issue is
especially critical for perishable and fragile items, such as fresh produce or electronics. Delivery of
damaged or spoilt goods leads to loss and unhappy customers, declining business and profit.
Inconsistent delivery timings: Making every delivery on time can be difficult at times. One delay in
the cargo movement process can delay the entire process and lead to late deliveries. Late deliveries

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can be challenging for businesses with tight delivery schedules or deals with just-in-time supply
chains. Slight delays in delivery in multiple cases can lead to lost sales or disappointed customers.
Increase in fleet maintenance cost: The rising costs of maintaining transportation fleets can strain
budgets.
7. Principles of Insurance and their Applications to the Movement of Goods
The insurance industry is built upon seven principles. We examine the principles of insurance and
why they are crucial for a robust and reliable insurance sector. The seven principles of insurance
govern the relationship between insurers and policyholders. These guidelines ensure fairness,
transparency, and the proper functioning of the insurance market. The seven core principles
underpinning the insurance industry are:
 Utmost good faith,
 Insurable interest,
 Proximate cause,
 Indemnity,
 Subrogation,
 Contribution,
 Loss minimization.
These seven principles have evolved over the years, with some dating back centuries. However, they
were formalized and codified into modern insurance law through various legal developments. Many
of these principles were established through English common law case precedents dating back to
the 18th
and 19th
centuries.
However, more recently, specific legislation – such as the UK Insurance Act 2015 - codified and
updated these principles to reflect contemporary legal and market conditions. They have become
integral to the insurance industry and are now considered fundamental to the operation of
insurance contracts. Let us learn more about each of them in more detail below:
Utmost good faith: A mandate of the highest degree of honesty and fair dealing between the
insurer and the insured. Both parties are expected to disclose all material facts relevant to the
insurance contract. Any misrepresentation or concealment of information can lead to the voiding of
the policy. This principle ensures that the insurer has a clear understanding of the risks involved and
can accurately assess the appropriate premium.
Insurable interest: The insured party must have a financial stake in the property or life being insured.
This means that the insured would suffer a direct financial loss if the property were damaged or the
life was lost. Insurable interest prevents fraudulent claims and ensures that the insurance is being
used for its intended purpose.
Proximate cause: This establishes the direct link between the insured event and the loss suffered.
The loss must be a natural and foreseeable consequence of the insured event. If there are
intervening factors that break the chain of causation, the insurer may not be liable for the loss.
Indemnity: Indemnity aims to put the insured in the same financial position as they were before the
loss occurred. This means that the insurer will compensate the insured for the actual loss suffered
up to the policy limit. The insurer will not make a profit from the loss, and the insured will not be
overcompensated.
Subrogation: This allows the insurer to step into the shoes of the insured and pursue legal action
against a third party who caused the loss. This helps to recover the amount paid out to the insured
and prevents the insured from receiving double compensation.
Contribution: If an insured item is covered by multiple policies, each insurer is liable for a
proportionate share of the loss based on the coverage amount they provided. This prevents the

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insured from profiting from their loss by claiming more than the actual value of the damaged
property.
Loss minimization: The insured party must take reasonable steps to prevent or minimize the loss
after an insured event occurs. This includes actions like contacting emergency services, securing the
property, and preventing further damage. Failure to do so may result in reduced coverage or denied
claims by the insurer.
7.1. Maintaining Public Trust and Confidence
The principles of insurance play a vital role in ensuring the stability and fairness of the insurance
market. They provide a framework for the relationship between insurers and policyholders,
protecting the rights of both parties. By adhering to these principles, the insurance industry can
maintain public trust and confidence. This knowledge is essential for:
Fair and transparent insurance contracts - The principles of insurance ensure that contracts are
clear,
unambiguous, and
free from unfair
terms.
Accurate risk
assessment - By
understanding the
principles of
insurable interest
and duty of
disclosure, insurers
can accurately
assess the risks
involved and set
appropriate
premiums.
Prevention of
fraudulent claims -
The principles of
utmost good faith
and insurable
interest help to
prevent fraudulent
claims and ensure
that insurance is
used for its
intended purpose.
Figure 12. Carrier’s limited liability vs full value cargo insurance
Effective dispute resolution - In the event of a dispute, the principles of insurance provide a clear
framework for resolving claims and ensuring that both parties are treated fairly.
Freight and Transportation Insurance provides coverage against physical damage caused by an
accident or incident during the transportation of goods from one point to another by a means of
transportation (truck, ship, plane or train), in accordance with the clauses and conditions set forth in
the policy.
Goods in Transit (GIT) refers to inventory or goods that are being transported from one location to
another. They're typically in transit between suppliers, warehouses, distribution centers, or retail

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stores, and are considered part of the company's assets until they reach their final destination.
Goods in Transit insurance covers items from theft, loss or damage while they are being transported
by vehicle from one place to another in the course of business. Examples include furniture removal
and couriers or haulers working for online retailers.
7.2. Types of Cargo Insurance and Coverage Categories
Shipping valuable goods, whether across town or halfway around the world, always comes with a
degree of risk. From accidents on the road to turbulent seas and delays in the air, there’s always the
chance that something could go wrong. That’s where cargo insurance steps in—providing peace of
mind and protection for your shipments, no matter the distance or mode of transport. Whether
you’re a business owner, logistics manager, or someone curious about how these processes work,
understanding cargo insurance is crucial. In this guide, we’ll break down the three main types of
cargo insurance, Land/Hauler, Marine, and Air, and highlight the specific coverage options that help
keep your goods safe from unexpected events.
Land/Hauler Cargo Insurance: Land or hauler cargo insurance is designed to protect goods
transported via road or rail. It is particularly relevant for companies that rely on trucking services to
move their cargo within a country or across borders. Since land/hauler cargo insurance is designed
to cover the journey by road or rail, it often includes provisions for vehicle accidents, theft, and
mishandling. However, companies should always assess whether the hauler's liability coverage will
be enough to meet their needs, or if they should invest in a more robust cargo insurance policy.
Coverage categories for land/hauler cargo insurance:
All-Risks Coverage: This is the most comprehensive form of coverage, providing protection against
all types of risks except for those explicitly excluded in the policy. Events like accidents, theft, fire,
and even vandalism are typically included.
Named Perils Coverage: Unlike all-risks coverage, named perils coverage only protects against
specific risks listed in the policy. For example, you might have coverage for fire, collision, or theft, but
if damage occurs due to an unlisted peril like flooding, you won’t be covered.
Carrier Liability: It’s essential to understand that haulers or carriers may also offer a form of liability
coverage, but this typically covers only a fraction of the cargo’s total value. Carrier liability protects
against the hauler's negligence but won’t provide compensation for natural disasters or other
unexpected events.
Marine Cargo Insurance: Marine cargo insurance protects goods traveling by sea and has been a
cornerstone of global trade for centuries. As international commerce continues to expand, this type
of insurance is more vital than ever for businesses shipping goods over long distances. Marine
insurance doesn’t stop at the ocean—it can also cover your cargo as it travels from the port to its final
destination. For businesses relying on global shipping routes, knowing how this insurance works is
essential to protect your shipments from potential risks at every stage of the journey.
When choosing marine cargo insurance, companies must assess the route their goods will take and
consider the additional risks like piracy or extreme weather conditions. Furthermore, since coverage
varies significantly across clauses A, B, and C, it’s important to understand the limitations and
advantages of each. Coverage categories for marine cargo insurance:
Institute Cargo Clauses (A, B, C): Marine Cargo Insurance is typically broken down into three primary
types of clauses (A, B, and C) each offering varying levels of coverage.
Institute Cargo Clauses (A): This is the most comprehensive form of marine insurance and provides
all-risk coverage. It covers a wide range of incidents, including natural disasters, accidents, and theft.
However, it still excludes specific events such as strikes and civil unrest unless added by an
extension.

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Institute Cargo Clauses (B): This offers intermediate coverage, protecting against named perils like
fire, explosion, vessel sinking, or being stranded, but excluding more common incidents such as
theft.
Institute Cargo Clauses (C): The most basic type of coverage, protecting against only major
catastrophes like vessel sinking or stranding. It does not cover incidents like theft, piracy, or
accidental damage during loading and unloading.
War Risks and Strikes Insurance: Many marine insurance policies exclude coverage for risks related
to war, strikes, or terrorism. However, businesses can opt to add these as extensions for more
comprehensive protection. This is particularly relevant for cargo traveling through politically
unstable regions.
General Average: A unique aspect of marine cargo insurance is the principle of “General Average,”
which involves shared financial responsibility for any loss. If, for example, a portion of the cargo
needs to be sacrificed to save the rest of the shipment, the losses are shared proportionally among
all cargo owners. Marine cargo insurance helps to cover these shared costs.
Air Cargo Insurance: Air cargo insurance provides coverage for goods transported by air, which is
often the fastest but most expensive mode of transportation. Air cargo is frequently used for high-
value, time-sensitive shipments, making insurance critical for protecting these valuable goods. While
air transport is generally safer and faster than sea or road transport, it comes with its own unique
risks. Delays caused by adverse weather or mechanical issues can severely impact a business’s
supply chain. Companies shipping perishable goods like pharmaceuticals or fresh produce should
ensure they have coverage for delays or damage due to extended time in transit. Coverage
categories for air cargo insurance:
All-Risks Coverage: Similar to land and marine cargo, all-risks coverage for air cargo provides
comprehensive protection against most perils, including damage, theft, and loss during the journey.
However, events like war, civil unrest, and natural disasters might not be included without
additional coverage.
Named Perils Coverage: Businesses that are looking to reduce insurance costs might opt for a
named perils policy, which will cover specific risks like fire, collision, and crashes but may exclude
other events like mishandling during loading or unloading.
Delay Coverage: One of the key concerns with air cargo is the risk of delays, which can be costly for
businesses relying on just-in-time inventory. Air cargo insurance policies sometimes offer delay
coverage as an add-on, compensating for losses incurred due to missed deadlines or spoiled
perishable goods.
Additional Considerations for Cargo Insurance: While the three main types of cargo insurance each
have their own set of risks and coverage options, it’s important for businesses to carefully evaluate
their specific needs when choosing a policy. Factors such as the value of the cargo, the likelihood of
theft or damage, and the transportation route all play a role in determining the right level of
insurance coverage. Below are a few additional considerations that apply to all types of cargo
insurance:
Exclusions: Every cargo insurance policy will come with exclusions, such as damage due to
inadequate packaging, inherent vice (natural deterioration of goods), or delays caused by customs.
Businesses need to fully understand what is and isn’t covered to avoid unpleasant surprises later.
Extensions: Many insurance providers offer optional extensions to enhance the scope of coverage.
These can include coverage for high-risk areas, protection against strikes, and war risks.
Claims Process: The claims process is another important factor to consider. Some insurers may have
lengthy or complicated claims procedures, which can delay compensation. Companies should opt
for insurers with straightforward claims processes and good reputations for quick settlements.

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8. Methods for Identifying, Labelling and Transporting Sensitive, Urgent, and Hazardous Goods
The transportation of sensitive goods poses particular challenges for companies. Whether
biopharmaceutical products, high-precision electronic components or temperature-sensitive foods
– the slightest error in the supply chain can result in a loss of quality and, in a worst-case scenario,
safety-critical consequences. Given the increasingly stringent regulatory requirements and rising
customer expectations, your company must be able to guarantee the integrity of the products while
ensuring complete transparency and traceability.
Figure 13. Example of handling labels
The transportation of sensitive goods requires systematic thinking: every component – from
temperature control to packaging – must be precisely interlinked. It is therefore not a question of
individual measures, but of a consistent overall architecture that anticipates, controls and
documents risks.
Precision temperature control: Maintaining stable temperatures is essential for the transportation of
your sensitive goods. Advanced logistics solutions therefore often combine active cooling systems
such as IoT-controlled reefer containers with passive technologies such as phase change materials,
which ensure a constant temperature over a longer period of time.
Temperature-sensitive goods from the pharmaceutical industry are particularly sensitive and often
require defined temperature ranges (such as 2-80
Celsius or 15-250
Celsius) that must be maintained.
Tools using intelligent data loggers which record and document the temperature profile
throughout the entire transportation process are effective gadgets. The use of smart technologies

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ensures an uninterrupted cold chain that meets both regulatory requirements and the highest
safety standards.
Intelligent sensor technology and real-time monitoring: Specialized transport solutions rely on real-
time monitoring using IoT sensor technology in order to continuously measure humidity, air
pressure, vibrations and temperature. This data is processed in cloud-based systems and analyzed
using artificial intelligence. That way anomalies can be detected at an early stage and
countermeasures initiated. Such systems are particularly indispensable in the pharmaceutical and
food industries in order to comply with regulatory standards such as GDP.
Special packaging as a protective barrier: The packaging of your sensitive goods must absorb
mechanical stresses, regulate temperature fluctuations and, in some cases, provide protection
against electromagnetic interference. Antistatic packaging for semiconductors, vacuum-sealed
protective films for pharmaceutical goods or gas-tight containers for chemical substances support
the safe loading and transportation process.
Innovative shock-absorbing materials and nano-coatings offer additional protection against
moisture and oxidation. Packaging with integrated sensors records transport conditions in real time
and enables precise traceability of your entire supply chain. By combining these packaging
technologies with digital monitoring systems, risks can be minimized and the highest safety
standards maintained.
8.1. Dangerous Goods
As discussed earlier, dangerous goods (hazardous materials) are subject to transport, workplace,
storage, consumer and environment protection regulations, to prevent accidents to persons,
property or the environment, to other goods or to the means of transport employed. To ensure
consistency between all these regulatory systems, the United Nations has developed mechanisms
for the harmonization of hazard classification criteria and communication tools, and for transport
conditions for all modes for transport. UNECE also administers regional agreements for effective
implementation of these mechanisms for road, rail and inland waterways transport of dangerous
goods.
The 2025 edition of the Agreement concerning the International Carriage of Dangerous Goods by
Road (ADR) entered into force on 1 January 2025. ADR is intended to increase the safety of
international transport of dangerous goods by road. ADR aims to improve safety and security and to
remove or reduce obstacles to the international carriage of dangerous goods by road between
countries that are parties to the to the agreement. Its annexes are regularly amended and updated.
They contain the conditions under which dangerous goods may be carried internationally. This
revised version contains new or revised provisions, including new provisions for: the use of battery
electric vehicles in vehicle category FL and the use of vehicles powered by hydrogen fuel cell and
hydrogen powered vehicles as AT and FL vehicles; the carriage in bulk of molten aluminum; the
carriage of waste in packagings; and the carriage in bulk of waste containing asbestos.
This guidance is only concerned with the carriage of dangerous goods by road, i.e., ADR. Other
modes of transport such as air, sea and rail are also governed by international rules and national
legislation. When engaging in any dangerous goods transport which crosses between different
modes of transport you must seek out advice from a competent person specializing in multi-modal
transport. A DGSA will be competent in providing advice on the safe transport of dangerous goods
by road, but may also be trained in relation to other modes of transport. It is recommended that you
check with your DGSA as to his/her areas of competency.
Addressing all participants, ADR states: “The participants (main duty holders) in the carriage of
dangerous goods shall take appropriate measures according to the nature and the extent of
foreseeable dangers, so as to avoid damage or injury and, if necessary, to minimize their effects. They
shall, in all events, comply with the requirements of ADR in their respective fields. When there is an
immediate risk that public safety may be jeopardized, the participants shall immediately notify the
emergency services and shall make available to them the information they require to take action.”

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Figure 14. Modal regulations on carriage of dangerous goods

95
There are generally several participants/duty holders in a particular transport chain. ADR specifically
states that regulations apply to any person or company can be one, or may assume the
responsibility of several duty holders, depending on the activity. For example, a paint company
which mixes/produces flammable ingredients is a producer or manufacturer of the paint products.
This means that when the dangerous goods are handed over for transportation to a customer, the
company is the “consignor”. If they also employ a driver and use a company lorry, then they are also
a “carrier” and the employee is the “driver”. These participant responsibilities may equally be carried
out by different companies (e.g., the paint company hands product to a courier, who then takes on
the responsibility of “carrier”).
8.2. Compliance to Health, Safety and Security Norms with MSDS
A Material Safety Data Sheet (MSDS) is a document that gives detailed information about the nature
of a chemical, such as physical and chemical properties, health, safety, fire, and environmental
hazards of a chemical product. In addition to giving information about the nature of a chemical, an
MSDS also tells how to work safely with a chemical and what to do if there is an accidental spill.
The Federal Occupational Safety and Health Administration (OSHA) Hazard Communication
Standard (29 CFR 1910.1200) requires manufacturers or distributors of chemicals to issue Material
Safety Data Sheets (MSDSs) with the first shipment of any hazardous chemical product, and the
employer is responsible for having them available for you.
MSDS are designed for:
 workers who may be exposed to hazardous materials
 emergency personnel (for example, firefighters), who may have to clean up a spill or release.
An MSDS is a document which discusses all the information of the material related to its,
 Identification,
 Hazards,
 Handling/storage requirement,
 First aid measures,
 Disposal information etc.
An MSDS also gives necessary details of the material including its Chemical/Physical Properties and
Reactivity.
MSDSs must contain the same basic kinds of information, such as;
Chemical Identity: Name of the product.
Manufacturer’s Information: Name, address, phone number and emergency phone number of the
manufacturer.
Hazardous Ingredients/Identity Information: List of hazardous chemicals.
Depending on the state, the list may contain all chemicals even if they are not hazardous, or only
those chemicals which have OSHA standards. Since chemicals are often known by different names,
all common (trade) names should be listed. The OSHA Permissible Exposure Limit (PEL) for each
hazardous ingredient must be listed.
Physical/Chemical Characteristics: Boiling point, vapor pressure and density, melting point,
evaporation rate, etc.
Fire and Explosion Hazard Data: Flash point, flammability limits, ways to extinguish, special
firefighting procedures, unusual fire and explosion hazards.
Reactivity Data: How certain materials react with others when mixed or stored together.

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Health Hazard Data: Health effects (acute= immediate; chronic= long-term), ways the hazard can
enter the body (lungs, skin or mouth), symptoms of exposure, emergency and first aid procedures.
Precautions of Safe Handling and Use: What to do in case materials spill or leak, how to dispose of
waste safely, how to handle and store materials in a safe manner.
Control Measures: Ventilation (local, general, etc.), type of respirator/filter to use, protective gloves,
clothing and equipment, etc.
While the format can
vary, there is an
Occupational Safety &
Health Administration
(OSHA) recommended
format that is
commonly used. This
format includes 16
standard sections:
 Chemical
product and
company
identification,
 Composition,
information and
ingredients,
 Hazard
identification,
 First aid
measures,
 Fire-fighting
measures,
 Accidental
release measures,
 Handling and
storage,
 Exposure control
and personal
protection,
 Physical and
chemical
properties,
 Stability and
reactivity,
 Toxicological
information,
 Ecological
information,
 Disposal
considerations,
 Transport
information,
 Regulatory
information,
 Other information. Figure 15. Reading MSDS

97
Each of the four sessions is a different color and are used to indicate different types of hazards. Each
section (except “Special Notes”) is filled in with a number between 0 and 4 which indicates the level
of hazard that exists. The lower the number, the lower the hazard.
8.3. The Challenges of Transporting Sensitive Goods
Sensitive products are particularly susceptible to environmental influences and mechanical stress.
The challenge for logistics experts lies in systematically identifying risks and eliminating them
through targeted technological and organizational measures. Typical sources of danger in the
transportation chain include:
Temperature deviations: Active pharmaceutical ingredients, mRNA vaccines or fresh food require
precise cold chain management systems. Even the smallest temperature fluctuations can lead to
the decomposition of the molecular structure.
Mechanical loads: Highly sensitive microchips, laboratory instruments or optical lenses must be
protected from shocks and vibrations. Inadequately protected goods can be irreparably damaged
by microfractures or solder joint fractures.
Contamination risks: Sterile medical products, chemical substances or cleanroom components
require airtight packaging and specialized storage and transport conditions.
Delays or logistics failures: Time-critical shipments, such as just-in-time deliveries for the
semiconductor industry, require maximum planning precision. Any delay can cause production
downtime.
Tampering and theft risks: High-value goods, especially pharmaceuticals, luxury articles and
electronic goods, are the preferred targets of organized crime. Tamper-proof packaging and GPS
tracking prevent unauthorized access.
9. INCOTERMS 2020®
Selling goods outside the domestic market can be intimidating for many businesses, especially first-
time exporters. Many run into challenges trying to get their goods across borders. One of the most
common mistakes is importers that do not fully understand the implications of prepaid
INCOTERMS. For instance, many importers don’t understand that freight prepaid doesn’t necessarily
include the terminal handling charges.
Unless a transaction uses the Delivered at Place (DAP), Delivered at Place Unloaded (DPU), and
Delivered Duty Paid (DDP) INCOTERMS, the importer will be responsible for paying any terminal
handling charges. These can reach up to £2000 in the UK, even for Less than Container Load (LCL)
shipments. Often, they will only become aware of the charges when the ship has docked and the
goods are released to the importer by the cargo broker – an unpleasant surprise that can decimate
profit margins.
Many importers will seek for their supplier to handle as many of the responsibilities as possible in
the exporting country. A clear understanding of Incoterms can help ensure a business is not left
with any surprise invoices. Another significant challenge new exporters often need help
understanding is how and when freight charges apply and which party pays for each part of the
journey.
For instance, while it may seem favorable to transact on an Incoterm where your counterparty bears
all transport costs, risks, and responsibilities until the goods arrive at your warehouse, this term may
turn out to be more expensive. It also leaves you relying on the counterpart for several other
periphery activities.
INCOTERMS 2020®
are aimed at consolidating the rules relating to the carriage of goods from a
professional seller to a professional purchaser. It is worth remembering that due to their
development, they are obligatory only for the above-mentioned two entities of commercial trading

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in a specific commercial relationship. The optionality of INCOTERMS 2020®
is further reflected in the
fact that they are replaced by regulations that govern a contract made between parties in a given
legal system.
The INCOTERMS rules (INternational COmmerce TERMS) are a total of eleven terms published by
the International Chamber of Commerce (ICC) based in Paris, which define the conditions of supply
of goods in international sales transactions. The first edition was published in 1936 and subsequently
there have been continuous revisions and updates (usually every ten years) to that currently in force
which is the INCOTERMS 2020®
. This edition will probably be in effect for a decade, until 2030.
The INCOTERMS are private law rules and are not underpinned by the laws of any country or by a
supranational organization. They are a set of rules by businesses (exporters and importers) within the
International Chamber of Commerce (ICC) to regulate some aspects of foreign trade operations.
The INCOTERMS do not have the force of law and therefore there is no obligation to use these
terms in international trade operations; their use will be conditioned on the acceptance of the
parties (seller and buyer) in the sale contract. The effectiveness of the INCOTERMS is that its rules are
widely known and used by different parties in foreign trade (exporters, importers, carriers, freight
forwarders, customs brokers, banks and insurance companies, etc.). Therefore, the INCOTERMS rules
are very useful for sellers and buyers to agree on terms of delivery of the goods and that the
agreement corresponds to rules that are universally known.
The INCOTERMS can be classified according to three criteria that all have to do with transport:
mode of transport used, payment for the main (international) transport and transfer of risks in
transport. In the classification of the INCOTERMS 2020, the prevailing approach is the mode of
transport used.
Figure 16. Liability for transportation, risk and cost transfers
INCOTERMS come in four groups and are used by many freight transport professionals moving
goods on behalf of clients who need clear instructions as to what is required and who is responsible
for organizing elements of the journey such as insurance for the goods, as well as who is responsible
for payment of freight charges. INCOTERMS lay out the responsibilities of both the buyer and seller
of the goods in question. Whilst some of the terms apply to all modes, others only apply to specific
modes. Let’s now look at the terms in more detail, although full explanations have been avoided in
order to concentrate on the main points of each term.
Group E – Departure – the seller makes the goods available to the buyer at the delivery point
indicated before. The seller is not obliged either to customs or export clearance and does not bear
the costs or risks of loading.
Group F – Main Carriage Unpaid – the seller is obliged to perform export customs clearance,
however does not pay transport and insurance costs.
Group C – Main Carriage Paid – the seller covers costs of transport and is responsible for conducting
export clearance. In this formula, the risk is transferred at the time of posting the goods to the buyer.
Other additional costs related to transporting and arising after loading are the buyer’s responsibility.

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Group D – Arrival – The seller is obliged to deliver the goods to a specific place or the port of
destination.
Figure 17. Key activities and role players thru the process of a shipment
Mode of transport used (INCOTERMS for any mode of transport and sea INCOTERMS): The first
criterion is the mode of transport used. In the version of the INCOTERMS 2020, there are seven
Incoterms that can be used with any mode of transport (surface, air or sea) or multiple modes
(multimodal). Conversely, there are four INCOTERMS that can only be used with sea transport and
inland waterways (canals, rivers, lakes).
 INCOTERMS for any mode of transport and multimodal transport: EXW, FCA, CPT, CIP, DAP,
DPU and DDP.
 INCOTERMS, only for sea and inland waterways transport: FAS, FOB, CFR and CIF.
Payment for the main transport (seller or buyer): The second criterion of classification is the
payment of main transport which is the international transport between the country of origin and
the country of destination. The INCOTERMS distinguish between those terms in which the main
transport payment is made by the buyer (importer) and those where it is made by the seller
(exporter).
 INCOTERMS in which the main transport is paid by the buyer: EXW, FCA, FAS and FOB.
 INCOTERMS in which the main transport is paid by the seller (exporter): CPT, CFR, CIP, CIF,
DAP, DPU and DDP.
Transfer of risks in transporting the goods (at origin or destination):9
Finally, we should distinguish
between those INCOTERMS in which the obligation to deliver the goods by the seller and, therefore,
the transfer of risks in transport occurs in the country of origin, while in other INCOTERMS the
obligation of delivery occurs in the country of destination.
 INCOTERMS with transfer of risks in the country of origin: EXW, FCA, FAS, FOB, CPT, CFR, CIP
and CIP.
 INCOTERMS with transfer of risks in the country of destination: DAP, DPU and DDP.
In the case of INCOTERMS in “C” (CPT, CFR, CIP and CIF) should be noted that, although the seller
will be paying international transport to the country of destination, the risks of transport are
transferred in the country of origin when the goods are loaded onto the means of transport. Hence
in the INCOTERMS CIF and CIP, which incorporate a compulsory insurance transport, it is the seller
who takes out and pays the insurance. Although, the beneficiary of insurance is the buyer who bears
the risks of transport.
9
Always check for delivery terms (or Incoterms) on supplier quotes These terms dictate which party, sender or receiver, (i.e.,
Exporter/Importer of Record) is responsible for insuring the shipment and payment of Customs clearance fees, duty/tax etc. If
the terms dictate Receiver (Importer) is responsible for customs clearance the department should be prepared to pay any/all
Customs and duty/tax charges that are assessed when their shipment is cleared. Warehousing/storage fees may also be
assessed if the shipment is delayed for any reason during the Customs clearance process. No amount is guaranteed and is at
Custom’s discretion.

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Figure 18. INCOTERMS 2020®
- point of delivery and transfer of risk

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Goods in containers only with multi-modal INCOTERMS: This change which was one of the most
significant changes to the INCOTERMS 2010 version is retained in the INCOTERMS 2020. If the
goods are transported in containers, the INCOTERMS 2020 rules clearly state that maritime terms
must not be used, although the delivery is conducted in a port. The justification is that the
containers are delivered to port terminals, that is, prior to loading on board the ship; in these cases,
FOB, CFR or CIF must not be used, in lieu thereof their counterparts for multimodal transport which
are, FCA, CPT and CIP respectively.
The relationship between INCOTERMS and international commercial contracts: The relationship
between INCOTERMS and international commercial contracts is likewise clarified: international sale
contract, transport contract, insurance contract and letter of credit contract. The new version of
INCOTERMS 2020®
explains that the INCOTERMS are not part of those contracts and do not require
the use thereof by the parties, nor bind same upon execution thereof.
EXW – EX Works (... named place)
EXW puts the most responsibility on the buyer. The buyer will have to pick up the cargo from the
seller’s premises and handle everything from that point on, including arranging for pre-carriage,
export Customs clearance, arranging for main carriage, etc. Some traders like EXW because they
believe it allows them to recognize revenue at the earliest possible instance. However, INCOTERMS
do not define revenue recognition rules. This is the best INCOTERM to use if the buyer wants to
handle everything for a shipment without seller’s interference or support.
Figure 19. EXW
FCA – Free CArrier (... named place)
FCA requires the seller to do a little more work than EXW. Delivery can be at the seller’s warehouse
or another chosen point. If the point of delivery is at the seller’s warehouse, the seller will have to
load the cargo onto the buyer’s collecting vehicle. However, the buyer will still have to make most of
the other arrangements like main carriage and import Customs clearance. The seller will be the
exporter of record at origin. Hence, this is a good Incoterm to use when the buyer wants to arrange
main carriage and requires the seller to be the exporter of record. Under the 2020 version of the
terms, FCA specifies that if required, the buyer must request the carrier to issue an on-board B/L to
the seller.
Figure 20. FCA

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CPT – Carriage Paid To (named place of destination)
CPT requires the buyer to pay for carriage to the first carrier or agreed delivery point. Seller will clear
Customs at origin as the exporter. This rule is suitable if the seller has access to cheaper
transportation rates. The point of delivery must be specifically tied down in the sales contracts. This
rule is a favorite among traders since it generally allows earlier revenue recognition since delivery is
made early. However, it must be mentioned (again) that INCOTERMS DO NOT specifically define
revenue recognition principles.
Figure 21. CPT
CIP – Carriage and Insurance Paid to (... named place of destination)
This rule is similar to CPT, but in this case the seller must also purchase insurance. This rule is
suitable if mandating sufficient insurance of the cargo is a concern. Many traders use CIF instead of
CIP. However, CIF is a maritime transport only term while CIP can be used for any mode of
transportation. The level of insurance cover under CIP is more comprehensive than CIF. Like CPT,
many businesses like CIP since it supports an argument for early revenue recognition.
Figure 22. CIP
DAP – Delivered At Place (...named place of destination)
This rule requires the seller to arrange for pre-carriage, main carriage and sometimes on-carriage.
The seller however, will not be importer of record in the destination. The seller is not responsible for
unloading the cargo at the named place. This term is suitable if the seller has access to better
transportation rates than the buyer.
Figure 23. DAP
DPU – Delivered at Port Unloaded
This term is similar to DAP. However, when DPU is used, the seller must also ensure that the cargo is
properly unloaded as the place of delivery. This rule is suitable when the cargo is of a nature that
requires special handling for unloading that the seller is better equipped to manage. Under DPU
terms, the seller is responsible for transporting the goods to a specified destination and unloading
them from the conveyance, placing them at the buyer's disposal. This destination can be any place
agreed upon, such as a port, airport, or other transportation hub.

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Figure 24. DPU
DDP – Delivered Duty Paid (...named place of destination)
DDP is effectively a door-step delivery arrangement and the only Incoterm that requires the seller to
be the importer of record in the destination. However, it does not require the seller to unload the
goods at the destination. This term is suitable when the seller prefers to handle everything up to the
door of the buyer and when the buyer has the necessary equipment to unload the cargo at his/her
facility.
Figure 25. DDP
FAS – Free Alongside Ship (..named port of shipment)
In FAS, delivery is made when the cargo is placed on the wharf alongside the vessel. Use of this term
is uncommon, although it may still be relevant when the cargo consists of large and heavy
machines or automobiles. The seller must carry out export clearance procedures while the buyer is
responsible for import clearance activities. This rule is applicable only to ocean or waterway
transport, under which the seller is responsible for clearing the goods for export and placing them
alongside the vessel at the named port of delivery.
FOB – Free On Board (..named port of shipment)
FOB considers delivery to be made when cargo is loaded onto the vessel. However, since the
condition of containerized cargo cannot be ascertained at the time of vessel loading this
INCOTERM should not be used for containerized cargo. Buyers should use FOB when they want to
arrange for their own main carriage and on-carriage. FOB (Free On Board) means the seller's
responsibilities end once the goods reach the ship's rail, so the buyer takes over.
CFR - Cost and FReight (named port of destination)
Similar to FOB terms, CFR considers delivery to be made when cargo is loaded onto the vessel. On
that note, this term should not be used for cargo that is shipped in containers. This term may be
suitable for bulk non-containerized cargo that the seller wants to arrange main freight for. It is
applicable only to ocean or waterway transport, under which the seller pays the costs to export and
ship the freight to the named port of destination.
CIF – Cost, Insurance and Freight (...named port of destination)
Similar to CFR, CIF considers delivery to be made when cargo is loaded onto the vessel which
makes this term also unsuitable for containerized shipments. Traders may find this term suitable
when they are dealing with non-containerized bulk commodities. In this term the seller has to
arrange for freight. CIF is an international shipping agreement, which represents the charges paid by
a seller to cover the costs, insurance, and freight of a buyer's order while the cargo is in transit. Cost,
insurance, and freight only applies to goods transported via a waterway, sea, or ocean. The goods are
exported to the buyer's port named in the sales contract. Once the goods are loaded onto the

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vessel, the risk of loss or damage is transferred from the seller to the buyer. However, insuring the
cargo and paying for freight remains the seller's responsibility.
Figure 26. FAS, FOB, CFR and CIF terms applicable for sea and inland waterway transport, only
As can be seen from the INCOTERMS 2020, the EXW term represents the minimum obligation for
the seller, whilst DDP represents the maximum obligation. What is also obvious is that these terms
represent “rules of engagement” for freight transport stakeholders and, as such, provide clarity when
issues relating to the carriage of goods arise. Having examined some of the control mechanisms
and trading terms, we shall now go on to look at how the goods and any accompanying crew
members are also monitored and controlled at critical points along the route, especially when at
national frontiers.

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UNIT F – Managing Workshop and Maintenance
1. Workshop Design/Layout
Once you start managing a commercial fleet, it can be overwhelming knowing where to start, since
fleet managers are responsible for so many aspects of fleet operations. Regardless of whether you’re
with a sizeable nationally-operating truck corporation or a small local delivery company, you’ll need
to know the basic framework of managing and operating a fleet. In this section, we’ll go over the
primary considerations of a fleet workshop, how to manage, how to hire and train drivers, and how
to create a safe driving culture. But before we do so, let’s look at the term commercial fleet
management.
“At its core, fleet management covers the practices of overseeing, organizing, and recording all
aspects of a company’s fleet.”
A fleet manager’s duties range from managing fleet and asset information to the acquisition and
disposal of fleet vehicles. Managing fleets effectively results in reduced risks, increased productivity,
minimization of costs, and legal compliance. This also amplifies the importance of operating an
effective and efficient workshop.
A non-functioning asset can seriously hamper activities in areas of transportation and slow down
the delivery of products/materials. The surface conditions whether on road or at sea that
vehicles/ships in many areas might be truly difficult. In addition to vehicles, assets such as
generators may be required any time. The wear and tear experienced in the use of these assets
means that a dependable and experienced team must always be on hand to keep these resources
running with minimal downtime.
For vehicles and machinery that require repair and maintenance, fleet workshops are equipped to
keep these running at optimal levels to ensure seamless running of activities in the areas of
operation. Besides, spare part management is a critical element in your workshops. Given the
generally hard operating conditions in many areas of transport operation, maintenance in the field
for vehicles and other assets such as welding machines and generators pose greater challenges
than in commercial premises.
The workshop is the focal point in the preventive maintenance and servicing of fleet vehicles,
generators and equipment's in a transport company. This department consist of various facilities:
mechanical, body, welder, electrician workshop, spare parts store and offices. The main
responsibility of the workshop is to guarantee a proper maintenance of the fleet and equipment's
by following a proper maintenance according to the company service schedules and guidelines on
vehicles maintenance.
Unless otherwise directed, staff are not permitted to repair or maintain any rented or third party
(accident) vehicles. This is not allowed because of complicated problems with regard to claims,
liability, customs, etc. must be prevented.
Proper shop design and layout increases flow and efficiency of spare parts, consumables as well as
maintaining high level of vehicle readiness. The right design lets you get vehicles in and out of the
repair bays faster.
Lift companies often find themselves involved with architects and shop designers early in the design
process to accommodate large equipment such as lifts up to 48’ (~15 meters) long. Planning and
designing in advance are critical, taking into consideration details such as the turning radius of the
vehicles the shop will service. Here are some parameters:
The longest vehicle being serviced: What vehicles might the shop be responsible for servicing in the
future? It is important to account for the centerline of the wheelbase, and the fact that some
vehicles have a 6’ or 10’ rear that extends past the rear axle or a 3’ to 5’ protrusion ahead of the
center of the front tires’ centerline. Maneuverability in the shop is critical.

107
The tallest vehicle being serviced: If the shop services 12’ tall trucks and expects to someday have a
lift in the shop, it would be a good idea to add the height of the truck plus an additional 6' of lifting
height. Architects or designers sometimes forget this and technicians are forced to stoop down,
which may lead to discomfort.
Two-post lifts are the most common lift type and most have an overhead cable cover. Make sure the
cable cover is not set too low to raise a box van, for example, that is 9’ or 11’ tall. Some lift companies
offer height extensions, but those extensions may not be high enough for taller box trucks. Some
two-post lifts offer a clear work area overhead by routing the hydraulic lines in the floor.
The slope of the floor: Virtually every shop is required to have an oil-water separator in the floor.
Some designers and architects do not consider the floor slope of the oil-water separator relative to
what lifts are being used in the bays. Most floor slopes with an oil-water separator are designed with
a 0.75 to 10 floor slope. Some mobile lift brands require a perfectly flat floor, some have a maximum
allowable floor slope of six-tenths of a degree, and some can be used on a floor with up to a 30
slope. If mobile lifts will be used in the new facility, check with the designer and the lift company to
make sure the oil-water separator slope and the maximum slope the mobile lifts can be operated
on are compatible. Some lifts offer a slope indicator or inclinometer.
The technology being used to design the shop: Just as there is software to visualize a new kitchen
redesign, there is a number of software available to design a workshop. Some lifts offer an
inclinometer to determine if the slope of the floor is too great for the lift to safely operate.
Tools in such software allow users to design separate bays, show lifts and vehicles in the bays,
identify vehicles' turning radius, and even add workbenches, tire changers, wheel balancers, aligners,
and brake lathes in the facility. Lubrication reels can be positioned to drop down into the bays and
an exhaust evacuation system can be shown in the building.
A software can even offer specific brands of equipment to insert into the facility for accurate
dimensional measurements and makes it possible to essentially see the new shop from the top
down, or walkthrough the virtual shop at an eye-level view. By adding a virtual reality headset, such
shop design software allows users to design separate bays, show lifts and vehicles in the bays,
identify vehicles' turning radius, and even add workbenches, tire changers, wheel balancers, aligners,
and brake lathes in the facility.
A software can provide the opportunity to walkthrough the virtual garage before construction
begins. Lift manufacturers and their respective representatives can offer shop layouts and designs, a
task they are familiar with given that lifts can often be the largest equipment in the garage.
Consider having experienced garage equipment personnel, who will take the above considerations
into account, use software to design an efficient shop.
2. Workshop Productivity
If your company views an in-house fleet workshop as a necessary business cost, it may be time to re-
think that approach. A well-run workshop not only supports your fleet operation though servicing
and maintenance, it could also be a revenue generator. Some organizations use their workshops to
provide contract maintenance services to external customers. But if you already run a workshop
there are a number of potential gains to be made by taking steps to improve its efficiency –
including reduced costs and downtime. Let us learn how exactly workshop efficiency can be
improved.
When the figures are known, the calculation is simple; Productivity % = Hours Charged / Hours
Clocked x 100. Example: Technician charged out 36hrs, but has worked 40hrs. Hours Charged =36.
Thusly, Productivity % = 36 / 40 x 100 = 90
Improve scheduling: Make sure your workshop runs as close to full utilization as possible. While it’s
important to ensure that you aren’t left waiting for stock to come in; having excess or obsolete stock
can prove very costly. Understanding how your assets are used and replenished is the first step in
creating more appropriate scheduling for your operation and helping ensure your workshop is well-

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utilized both now and in the future. It is also important to take a range of factors into account, such
as:
 Inventory turnover,
 Real-time parts availability,
 Usage trends and forecasts,
 Replenishment time and more…
Make sure that these factors are assessed on a regular basis, as this will help you identify any new
trends or issues as soon as they occur. The need for effective scheduling also applies to staff
utilization, which brings us to our next point.
Figure 1. Workshop productivity guidance
Improve staff planning: It’s a somewhat clichéd phrase, but your staff are probably the most
expensive resource in your workshop, so it’s vital that you make sure your technicians are managed
effectively. This means having procedures in place for sick days, holidays and other absences to
minimize disruption. You should also understand your team’s availability and training levels and
plan well ahead by cross-referencing staffing against forecast requirements. Fleet operators should
look carefully at their fleet’s maintenance needs too – it could be that some works are seasonal, or
they are affected by recalls and campaigns, so take steps to increase your knowledge of such trends.
Improve job card management: Technicians will perform more efficiently if they know exactly what
they should be doing to which vehicle and when. Industry standard repair times can also be utilized
to support job creation and implementation. When creating job cards, you should also take steps to

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ensure that all the information required is easily available. If a technician is not able to easily view or
understand job requirements, it could result in increased job times and costs, and reduced
compliance.
Improve visibility: Another most important tip is to make sure that fleet manager understands what
is available in his/her operation at all times. If you can’t measure it, you can’t manage it, so take steps
to improve the visibility of your assets. This is a process that starts from the bottom up: you need to
have a solid overview of everything from service histories, maintenance schedules, parts inventory
and warranty coverage through to workshop equipment, technicians (and their capabilities) and
vehicles.
3. Fleet Safety Management
Transportation plays a vital role in all economic activities in any SC organization, contributing to
economic growth via quicker mobility of goods, services and people. In some countries road
transport so far accounts for 90% of all local transportation. The increase in the motor vehicle
population has brought about challenges such as road traffic crashes and their consequences
which calls for improved fleet management. Governments through the transport and safety
agencies realize the need to provide guidance for vehicle operators.
Figure 2. Steps for a fleet safety program
For instance, road traffic crashes, injuries and fatalities have become a public health and
development problem and these crashes are a huge burden to the organization as well as nation’s
economy and their resultant effects culminate into unquantifiable loss of human life and leave the
injured with permanent injuries which have since affected their productive life.

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As in any comprehensive safety and loss-control program, there are several key factors that can best
control losses. Fleet safety management is no exception. The following elements are critical for the
success of your fleet safety program.
 Management direction and leadership,
 Driver selection and qualification,
 Driver training,
 Accident reporting and recordkeeping,
 Determining the effectiveness of the fleet safety program process.
Let us discuss these elements in detail:
Management Direction and Leadership: Plainly stated, without management’s commitment and
leadership, there is little chance of controlling losses related to fleet operations. It is imperative that
management provides guidance on fleet safety in the same manner it does for its other business
functions. A written policy statement is one way to reflect your company’s safety commitment to
those employees who drive company vehicles.
The policy statement should clearly:
 Communicate to your employees that management believes in the safety of its drivers.
 Communicate to your employees the importance of adhering to safety guidelines and
regulations.
 Show that management is leading by example.
 Communicate how the company plans to control fleet-related losses.
 Assign responsibilities and accountability by stating all employees are required to adhere to
fleet safety guidelines.
Driver Selection and Qualification: In every company, employees are its most valuable assets. As a
result, selecting personnel responsible for operating company vehicles should, at a minimum,
include consideration to the following:
 Confirm that your employee’s license is valid and issued in the state of residence, is the
appropriate class for the specific company vehicle(s) and is endorsed where applicable.
 Evaluate the employee’s qualifications to operate the type of motor vehicle for which that
person will be assigned.
 Follow up initial qualifications with a practical driving test.
 All driver applicants being considered for employment should have their motor vehicle
records reviewed. Once employed, driver MVRs should be checked annually and compared to
established criteria.
 Check prospective employee’s references.
 Clearly communicate your company’s discipline policy and what your employees can expect if
their safety performance falls below company expectations.
 Post-employment offer of a functional capacity evaluation or physical.
Driver Training: To ensure success in curtailing vehicular accidents, a driver training program should
be established to provide all drivers/operators with appropriate ongoing training to increase skills
and promote defensive driving behaviors. It is suggested that a basic driver training curriculum
include, but not be limited to:
 A policy statement reflecting your commitment to ensuring the safety of employees who drive
company vehicles.
 Operational overview of your company’s vehicles.
 The completion of a defensive driving course.
 The company policy on use of cellphones and other digital/electronic devices, and distracted
driving.
 An overview of accident reporting procedures.
 Federal, state and local regulations.

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 The organization’s drug and alcohol policy.
 Safety procedures related to individual types of vehicles to include:
• Pre-trip inspections.
• Acceptable use of electronic communication devices.
• Emergency procedures.
• Annual vehicle inspections.
Accident Reporting and Recordkeeping: It is recommended that each of company vehicle be
equipped with an accident reporting kit. The kit should include reporting instructions and accident
report forms. Inform employees that all accidents should be investigated using standard accident
investigation protocols. The protocol at the scene of an accident involves dealing with immediate
problems and accumulating pertinent accident information. If an accident occurs, your employee
will:
 Stop immediately and remain at the scene.
 Take precautions to avoid another accident, i.e., park safely and turn on warning signals.
 If trained, offer appropriate assistance to anyone who may have been injured.
 Notify law enforcement.
 Give other drivers his/her name, address and driver’s license number as well as his/her
company’s name and address and the vehicle’s license plate number. And get same from the
other drivers.
 Document the incident by completing the accident report form enclosed in the accident
report kit.
 Take pictures of the scene from numerous angles, make notes for an accurate statement, if
possible.
 Obtain names, addresses and phone numbers of witnesses.
 Cooperate fully with law enforcement. Do not apologize or admit fault to anyone at the scene.
 Report the incident to the company. The information collected at the scene should be given
to the employee’s immediate supervisor.
It is recommended that all accident investigation documentation be maintained by the company’s
human resources office and at minimum include the following information:
 The driver’s accident report.
 Accident facts and results of the accident investigation.
 Police reports.
 Copies of all documentation related to an accident investigation. As part of that
documentation there may be things such as police reports, OSHA records, insurance carrier
paperwork, etc. The required items will vary depending upon many factors such as industry,
type and nature of incident, regulatory/compliance oversight, etc.
 Other related information as determined by the company.
Determining the Effectiveness of the Fleet Safety Program Process: A fleet safety program audit
process is not dissimilar from any other safety programming audit process. Periodic audits will
ensure that key elements are being followed and are still appropriate for your organization and its
ever-changing environment. It is critical that documentation is retained for your company to correct
any deficiencies – or items that need updating – in your fleet safety program.
For many companies, a passenger car fleet and light-truck operation can be difficult to manage
because of various factors common to this type of fleet situation. Below are some points fleet
managers need to address when developing a comprehensive fleet safety management program.
 Many employees are hired for a set of job skills and then later have opportunities to operate
company vehicles. However, the skills they were hired for initially do not automatically mean
they have the skills and knowledge to be a safety-conscious driver.
 Some companies are faced with personal use of company vehicles. A statement by
management must outline specifically under what conditions personal use of the company
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 If a company operates in several locations, management of vehicles in those locations may
require additional attention.
4. Road Accident Types
The open road and highways promise freedom, adventure, and, unfortunately, a degree of risk. Every
time we turn the ignition, we expose ourselves to potential danger, largely due to the unpredictable
nature of road traffic and the myriad factors that can lead to accidents. The threats are numerous,
from the momentary lapse in concentration to adverse weather conditions, or mechanical failures
to unpredicted actions of other road users. Our safety, and that of others, relies heavily on our
understanding of these hazards and how we can best navigate or avoid them.
This section will comprehensively delve into the most common types of road accidents, laying bare
the causes, implications, and, most importantly, preventative measures associated with each. As we
journey together through this crucial topic, we aim not to instill fear but to arm you with knowledge.
The knowledge that can potentially save lives – your life and the lives of those you share the road
with. So, let us buckle up and explore the road safety world, one accident type at a time.
Road accidents can occur for many reasons, resulting in varying damage and injury. Here are the
most common types of road accidents:
Figure 3. Types of common road accident
Rear-End Collisions: Rear-end collisions occur when a vehicle hits the one in front of it. These are
commonly caused by distracted driving, where the driver is not paying adequate attention to the
road, and tailgating, where there’s insufficient distance left between vehicles for safe stopping. Panic
stops, where a vehicle suddenly brakes, can also lead to rear-end collisions, especially in reduced
traction like wet or icy roads. Although the driver in the rear is typically considered at fault in these
scenarios, certain situations can complicate fault assignment, such as if the leading vehicle reverses
suddenly or its brake lights are not functional.
Side-Impact Collisions: Side-impact collisions, also known as “T-bone” collisions, transpire when the
front or rear of a vehicle crashes into the side of another. They commonly occur at intersections,
parking lots, or multi-lane roads due to failure to yield, disregarding traffic signals, or simple
distraction. The peril of such incidents is heightened because the vehicle sides provide less
structural protection than the front or rear, exposing occupants to more severe injuries. The design
of modern trucks has attempted to mitigate these risks with safety features like side airbags and
reinforced doors, but the danger remains significant.
Head-On Collisions: Head-on collisions, characterized by the frontal impact between two vehicles,
are among the most dangerous road accidents due to their potential for severe injury or fatality,
especially at high speeds. Causes typically involve one driver mistakenly or recklessly entering a lane
of oncoming traffic, which can result from factors like distraction, fatigue, impaired driving, or
confusion in navigation. The suddenness and force of head-on collisions often leave little time for
reaction, intensifying the impact and the potential for devastating outcomes. Safety measures like

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divided highways, clear road signage, and seatbelts, airbags in vehicles can mitigate but not
eliminate the risks.
Single Vehicle Accidents: Single-vehicle accidents involve only one vehicle, which may collide with a
fixed object, pedestrian, or animal or veer off the road. Causes can range from driver distractions like
mobile devices, speeding, impairment due to substances, fatigue, or unfavorable weather
conditions such as rain, snow, or fog. These accidents can lead to substantial damage to the vehicle
and serious injuries, especially in vehicle rollovers or if the occupants are thrown from the vehicle.
Multi-Vehicle Pile-Ups: Multi-vehicle pile-ups, often occurring on highways or freeways, involve three
or more vehicles and are among the deadliest types of road accidents. The complex nature of these
incidents, involving numerous vehicles often moving at high speeds, can lead to catastrophic
damage and significant loss of life. They typically occur due to chain reactions triggered by an initial
collision, with following vehicles unable to stop in time. Adverse weather conditions such as fog,
smoke, or ice are frequent contributors, as they can severely hamper visibility and road traction.
Additionally, high-speed roads, traffic density, and driver behaviors like distraction or tailgating can
exacerbate the risk and severity of these pile-ups.
Hit And Run Accidents: Hit-and-run accidents are incidents where a driver involved in a collision
with another vehicle, pedestrian, or fixed object chooses to flee the scene without stopping to
identify themselves, offer aid to injured parties, or fulfill their legal obligations. This illegal act can
exacerbate the accident’s aftermath by leaving victims without immediate assistance. The
motivations for such actions often stem from fear of legal consequences, especially if the fleeing
driver is uninsured, intoxicated, or engaging in illegal activities. These accidents add a layer of
complexity to insurance claims and legal proceedings and can significantly hinder victims’ physical
and emotional recovery.
Vehicle Rollover: Vehicle rollover accidents are incidents where a vehicle, particularly those with a
high center of gravity, such as SUVs and large vans, tips over onto its side or roof. These accidents
can be precipitated by a variety of factors. Sharp turns at high speeds can cause a vehicle to lose
balance, while abrupt swerving maneuvers, often in response to an unexpected obstacle, can
similarly result in a rollover. ‘‘Tripping’’, where a vehicle’s tire hits a curb, bump, or uneven surface,
can cause the vehicle to flip. Rollovers are particularly dangerous due to the risk of occupants being
ejected from the vehicle or crushed, making them one of the most fatal types of car accidents.
Ensuring seatbelt use and careful driving, particularly in top-heavy vehicles, can help mitigate such
risks.
Intersection Accidents: Intersection or cross-traffic accidents occur when two or more vehicles
moving across each other’s paths at intersections collide. These accidents can be particularly
dangerous and are often a result of drivers failing to observe traffic signals, like running a red light or
not yielding when required. Distracted driving, such as using a phone or other devices while driving,
can also contribute to these incidents, as drivers may not notice changes in traffic lights or the
movement of other vehicles. Additionally, illegal maneuvers, such as making prohibited turns, or
aggressive driving behaviors, like speeding through an intersection, increase the likelihood of
intersection accidents. Therefore, attentiveness, patience, and strict adherence to traffic rules are
essential when navigating intersections.
Pedestrian Accidents: Pedestrian accidents occur when a vehicle collides with someone walking on
the road or roadside. These accidents can be severely detrimental to pedestrians due to a person’s
vulnerability against a moving vehicle. High vehicle speeds can exacerbate the impact and severity
of these incidents, giving both the driver and pedestrian less time to react. Both driver and
pedestrian distractions, such as phone use or inattention to surroundings, are common contributing
factors to these accidents. Additionally, poor visibility conditions, such as night-time or adverse
weather, can make pedestrians harder to spot. Pedestrian accidents highlight the need for diligent
attention to road safety rules by drivers and pedestrians and the importance of appropriate
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Motorcycle Accidents: Motorcycle accidents encompass a range of incidents involving a motorcycle
involving a collision, whether with another vehicle, pedestrian, or object. The factors leading to these
accidents can be unique due to the specific vulnerabilities of motorcyclists. Visibility issues are a
leading cause, with other drivers often failing to spot motorcycles due to their smaller size or blind
spots. Due to instability, road hazards such as potholes, debris, or wet leaves can pose more serious
threats to motorcycles than to trucks. Furthermore, motorcyclists lack the protective shell a car
provides its occupants, resulting in typically more severe injuries during accidents. Despite
protective measures like helmets and protective clothing, motorcyclists are at high risk,
emphasizing the need for increased awareness among all road users.
Bicycle Accidents: Bicycle accidents occur when a motor vehicle collides with a bicycle, often
resulting in serious harm to cyclists due to their lack of protection compared to vehicle occupants.
These accidents can be caused by various factors, including distractions for drivers and cyclists, such
as using mobile devices, and failure to observe road rules, like not yielding to the right of way or
running red lights. The act of ‘‘dooring’’, which happens when a vehicle occupant opens a car door
in the path of an oncoming cyclist, is another significant cause. Furthermore, a lack of safe cycling
infrastructure like dedicated bike lanes or poorly designed intersections can increase the risk of
these accidents. These incidents underscore the importance of attentive driving, cyclist visibility, and
the need for adequate cycling infrastructure.
Large Truck Accidents: Large truck accidents involve commercial vehicles like semi-trucks and big
rigs, which can result in serious consequences due to their size and weight. These accidents can be
caused by driver fatigue, improper cargo loading, mechanical failures, or misunderstandings by
other road users about truck maneuvering limits. These incidents underscore the need for proper
truck maintenance, proper cargo loading, adherence to driver rest schedules, and increased public
understanding of how trucks move and stop.
Bus Accidents: Bus accidents refer to incidents involving public or private buses and can result in
numerous injuries or fatalities, given the vehicle size and the number of passengers onboard. Bus
accidents can occur for various reasons, including driver error, speeding, distraction, or failure to
adhere to traffic rules. Inadequate training of bus drivers may also lead to accidents, especially in
challenging driving conditions or emergencies. Vehicle rollovers, often resulting from sharp turns or
collisions, are particularly dangerous given the number of unrestrained passengers. Collisions with
other vehicles or stationary objects can also lead to serious bus accidents. The high-capacity nature
of buses underscores the importance of stringent safety standards, including regular vehicle
maintenance, comprehensive driver training, and effective safety regulations.
Off-Road Accidents: Off-road accidents occur when a vehicle leaves the designated roadway,
leading to possible rollovers or collisions with objects such as trees or rocks. These accidents can be
caused by driver error, distractions, impairment, or poor environmental conditions. Due to the
unpredictable nature of off-road environments, they can lead to serious injuries or fatalities.
Practicing safe driving habits, using seat belts, and adjusting speed to match conditions can help
reduce these risks.
Animal Collisions: Animal collisions occur when vehicles strike large animals like deer or kangaroos,
causing significant vehicle damage and potential personal injury. These accidents are common
during certain periods, such as the mating season, and in certain areas like forests or wildlife
habitats. The likelihood of these incidents emphasizes the need for drivers to be vigilant, especially
at dawn and dusk and in known animal crossing areas, and to use high-beam headlights for
improved visibility.
4.1. Causes of Road Accidents
While each type of road accident has specific contributing factors, there are several common
underlying causes:
Distracted Driving: This is one of the leading causes of road accidents. Activities such as texting,
eating, or using a GPS can divert attention away from the road.

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Speeding: Driving above the speed limit can reduce the driver’s ability to steer safely around curves
or objects in the roadway, extend the distance necessary to stop a vehicle, and increase the distance
a vehicle travels. In contrast, the driver reacts to a dangerous situation.
Drunk Driving: Consumption of alcohol or other intoxicants reduces the function of the brain,
impairing thinking, reasoning, and muscle coordination, all of which are essential to operating a
vehicle safely.
Reckless Driving: This refers to a disregard for the rules of the road and can include changing lanes
without signaling, tailgating, and other aggressive driving tactics.
Weather Conditions: Rain, fog, sleet, or ice can make roads slippery and vision unclear, leading to
accidents.
Running Red Lights or Stop Signs: Drivers who run red lights or stop signs can cause severe
accidents as they can hit a vehicle with the right of way.
Night Driving: Reduced visibility and increased difficulty in judging distances in the dark can lead to
accidents.
Teenage Drivers: Teenagers lack experience and are often overconfident in their driving abilities,
making them more likely to be involved in accidents.
Design Defects: Sometimes accidents occur due to a defect in the vehicle, such as brake failure or
tire blowouts.
Wrong-Way Driving/Improper Turns: Drivers who turn onto a street in the wrong direction or make
prohibited turns can cause accidents.
Animal Crossings: Especially in rural areas, wild animals can unexpectedly enter the road, leading to
accidents.
Driver Fatigue: Drowsiness can slow reaction time, decrease awareness, impair judgment, and
increase the risk of crashing.
Improper Loading: Overloading or not properly securing the load of commercial or personal-use
pickup trucks can cause accidents.
These causes underscore the importance of safe driving habits, adherence to traffic laws, vehicle
maintenance, and an understanding of current driving conditions.
4.2. Safety Rules to Prevent Road Accidents
Road safety is paramount for all road users. Here are some basic safety rules that can help road
operators to prevent accidents:
Stay Focused: Distracted driving is a leading cause of accidents. Always keep your full attention on
the road. Avoid using your phone or other activities that might distract you while driving.
Don’t Speed: Respect the speed limits and adjust your speed according to road and traffic
conditions. Remember, the faster you drive, the less time you have to react.
Don’t Drive under the Influence: Never drive after consuming alcohol, drugs, or other substances
impairing your driving ability. If you’re going out and plan on drinking, arrange for a designated
driver or use public transportation or a taxi.
Use Seatbelts: Always wear your seatbelt and ensure all your passengers are buckled up. Seatbelts
can dramatically increase your chances of survival in an accident.

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Follow Traffic Rules: Observe and obey all traffic signs, signals, and markings. Never run red lights or
stop signs.
Maintain Safe Distance: Keep a safe following distance between you and the vehicle ahead to give
yourself enough time to react.
Drive Defensively: Anticipate the actions of other road users and adjust your driving accordingly. Be
especially cautious around pedestrians, cyclists, and motorcyclists.
Keep Your Vehicle in Good Condition: Regular maintenance, including checking tire pressure, brake
functionality, and lights, can prevent accidents caused by vehicle failure.
Be Extra Careful in Adverse Conditions: Slow down and maintain a larger following distance in rain,
fog, snow, or other challenging weather conditions.
Rest If Tired: Fatigue significantly increases the risk of accidents. If you’re tired, stop in a safe place
and rest or switch drivers.
Use Indicators: Always use your vehicle’s indicators when turning or changing lanes to alert other
road users of your intentions.
5. Accident Prevention, Reporting and Recordkeeping
In the dynamic world of fleet management, understanding the causes of accidents is more than
necessary. It’s a pivotal aspect of ensuring safety and efficiency. This comprehensive section delves
into all of the factors contributing to fleet accidents. We’ll explore their complex nature and their
significant impact on operations. A fleet manager who understands these causes has the insights to
implement preventative strategies. The result is a net positive: a safer and more reliable fleet
environment.
A fleet accident describes any unintentional incident involving a vehicle within a company's fleet
that results in property damage, injury, or both. These accidents range from simple fender benders
to significant collisions. They impact not just the vehicles involved but also the overall operations of
the fleet.
Recent statistics highlight the concerning prevalence of such incidents. For instance, studies show
that commercial fleets are involved in accidents at a rate of around 20% annually. This alarming
figure emphasizes the risks inherent in fleet operations. It also highlights the importance of
understanding the causes of fleet accidents. By identifying and analyzing fleet accident causes, fleet
managers can develop targeted strategies to reduce the frequency and severity of accidents.
There’s a wide range of reasons a fleet accident can occur. These are just some risk factors to
consider:
 Driver error,
 Mechanical failure,
 Environmental factors,
 Infrastructural challenges.
We must understand these fleet accident causes to properly implement strategies to avoid them.
Fleet managers who prioritize this understanding can significantly enhance their fleet operations'
safety, efficiency, and reliability. Implementing comprehensive driver training, robust insurance
coverage, and leveraging technologies like telematics systems can further enhance fleet safety. By
prioritizing safety, fleet managers can protect their drivers, minimize liability, and maintain a positive
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Training of all drivers in the procedures to be followed in the event a crash occurs should be
incorporated in your company’s new-employee orientation as well as in periodic refresher trainings.
It is recommended that each vehicle be equipped with an accident reporting kit. The kit should
include reporting instructions and accident report forms. Telephone numbers and/or names of key
company and insurance personnel should also be included.
Reporting: In the event of an accident, it is suggested that your employee driver follow a procedure
like the following:
 Stop, stay calm and pull your vehicle as far off the roadway as safely possible.
 Note the make, model, year, license number and description of the other vehicle(s) involved in
the crash/accident and the people involved. You will need this information when you report
the incident to your company.
 Enable your four-way flashers as an immediate warning signal.
 If injuries occur and you are trained in first aid, provide services to the injured party and
arrange for someone to call for medical assistance.
 Contact local law enforcement.
 Follow other procedures as described in your company’s accident reporting protocols.
 Do not admit fault to anyone at the scene.
If your employee is injured in the accident, your company will investigate and file a First Report of
Injury form (or your workers’ comp insurer if elsewhere), according to reporting protocols.
Recordkeeping: An accident file should be maintained at your company for each accident/crash.
The following information should be included in each file:
 Driver’s name.
 Date of the accident.
 Location where the accident occurred.
 Copies of all reports required by federal and/or state agencies, or insurers.
 The names and telephone numbers of the other people involved in the crash.
 Names, telephone numbers and addresses of any witnesses.
 A detailed description of how the crash occurred.
 If possible, complete sketches and take photographs of the accident scene. Take pictures
from numerous angles and directions, such as up/down the roadway, intersections, blind
spots, etc. Do not photograph injured people.
As part of a typical management accident investigation process, direction for completion of reports,
handling accident documentation, completing the management review process for accidents and
overall follow-up should be completed at the earliest opportunity. This process also includes
coordination with insurance companies, repair facilities and other interested parties to the accident.
As a conclusion, navigating on roads/air or at sea should not be a game of chance. Understanding
the most common types of road accidents (especially) we’ve discussed educates us on the dangers
present. It sheds light on effective preventative measures that we can take to reduce the likelihood
of these unfortunate incidents.
The common thread woven through each accident type is the importance of attentiveness, respect
for traffic laws, and responsible driving habits. From the perils of rear-end collisions due to distracted
driving to the tragic outcomes of head-on collisions caused by impairment, the implications of our
actions behind the wheel are far-reaching and can have life-altering consequences.
6. Scope of Fleet Maintenance
Modern vehicles are extremely complex but they are also far more mechanically reliable than those
produced even a decade ago. Service intervals have increased, and apart from routine inspections
the driver needs to have very little input to ensure their vehicle’s continued safe operation. Despite
these advances every fleet manager must remember that vehicles are potentially dangerous, and

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should always be kept in good working order as there is very important safety, as well as cost and
commercial issues at stake.
At its core, fleet maintenance refers to the systematic and proactive management of vehicles to
keep them in optimal operating condition. It involves a series of scheduled tasks, inspections, and
repairs that collectively aim to minimize downtime, reduce operating costs, and extend the useful
life of each vehicle within the fleet. Fleet maintenance goes beyond mere repairs; it encompasses a
strategic approach to vehicle management that emphasizes prevention, safety, and efficiency.
Maintenance for fleet vehicles should not only be a safety consideration but should be viewed as
more than simply keeping vehicles and assets fit for purpose. A properly maintained car will be
more fuel-efficient, achieve a higher resale value, cost less in repairs and ultimately make your
drivers more productive.
It is important that the rules drivers need to follow concerning maintenance are clearly laid out in
the employer’s procedures. So, what does maintenance cover?
Routine inspections: Regardless of how technology and engineering advances, trucks and vans
need to be inspected for damage and to ensure issues such as tire pressure and fluid levels are
correct. Making sure your drivers understand these obligations and carry them out is very important.
Servicing: This is the routine work scheduled by the vehicle manufacturer in line with the service
booklet which comes with every vehicle. Many new trucks have automated servicing intervals. An
on-board computer monitors the car’s condition and will indicate through a dashboard message
when the driver should book a service. Other vehicles are set so that work is required on some form
of time/mileage combination.
Repairs: These can result from accidents, general wear and tear or driver abuse, and range from a
small windscreen chip or a blown bulb, to a failed engine or broken gearbox. Most minor problems
will not incapacitate the vehicle, but major issues could either bring it to an immediate halt, or
make it obvious that urgent attention is needed.
Tires: Clear tread-depth and inflation pressure regulations exist to ensure that, as the only contact
between the vehicle and the road, tires are kept in good condition. Keeping robust records of tire
replacements is an integral part of demonstrating that an employer is meeting its duty of care.
Downtime: Any days off the road for mechanical failure should be monitored – for costs (especially
of a rental car is provided at an extra charge). Useful to record as a trend for overall vehicle reliability.
Relief vehicles: Related to the downtime issue above, but with much more important cost
implications.
Splitting out elements of the invoice costs to allocate the right cost code takes administrative time
and effort. In some fleets, this could not be justified, especially if it is likely that no use will ever be
made of this information. But it does represent good practice. And once collected, the data might
be useful in all sorts of interesting and productive ways, especially in larger fleets. For example, it
could show persistently high costs for one model, against another. It might “prove” driver abuse - or
the fact that vehicles had been serviced according to requirements. So, there could be quite
significant financial gains from negotiations with manufacturers and other suppliers, simply
because you have a clear record.
Another important point within the scope of fleet maintenance is to focus on duty of care. The duty
of care owed by employers to employees, and the general public, should form the cornerstone of
any fleet policy. This means that the person responsible for the business’ vehicle fleet must ensure
that maintenance is undertaken regularly and in accordance with the manufacturer’s service
schedule. In addition, drivers must be made fully aware that they are directly responsible for
understanding the maintenance requirements of the vehicle they drive, and ensuring that service
schedules are properly observed.

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There are a number of ways that companies can tackle duty of care for their drivers from educating
them with risk assessments, further training and leaflets and manuals. Companies can also carry out
safety checks on the vehicles themselves, making sure they are serviced regularly and maintained
and also carry out checks on drivers including license checks and effective accident management.
It is important to implement a risk management solution so companies are both compliant and are
not liable in the event of a claim. Duty of care is something all businesses must enforce for their
employees within the workplace and can be overlooked when it comes to the vehicles the
employees drive on business.
7. Fleet Maintenance Programs
As discussed before, having an established maintenance program for your fleet is an excellent way
to manage risks, ensure safety, and minimize spending. The topic of maintenance as a whole can
generally be broken down into three primary categories, regardless of the type of fleet vehicle or
company.
Preventive Maintenance (PM): Much like preventive medicine, this type of maintenance focuses on
maintaining the overall “health” of the vehicle while keeping an eye out for any potential problems
developing. “Most of the work in getting started on a PM plan is figuring out where your vehicles
stand in their state of maintenance…The last chunk of the plan is practicing ongoing PM – a process
that will save your fleet money over the long run.” Examples of preventive maintenance include tire
tread and tire pressure checks on a weekly basis, and employee awareness and reporting of any
sounds, lights, or gauges that may indicate an issue.
Preventive maintenance in fleet requires the vehicle operator to follow the manufacturer’s service
recommendations. Most truck fleets consist of new vehicles that are periodically replaced before
neglected maintenance might become a problem. A vehicle inspection and preventive
maintenance program should be established to ensure that all vehicles are always maintained at a
high degree of mechanical fitness and safety.
It is suggested that basic vehicle inspection and preventive maintenance programs include at least
the following items. Depending on the vehicles in operation, it may be necessary to add to this list.
 Daily and/or pre-trip inspection by the vehicle driver, with documented results.
 Frequent inspections by someone with mechanical knowledge to cover the following basic
vehicle equipment:
• Condition of safety equipment – including emergency flagging, flares, first aid equipment
and seat belts.
• Condition of all braking systems, including those on trailers.
• Condition of all lighting and signaling systems, including those on trailers.
• Condition of the vehicle’s body, including glass, mirrors, door latches, etc.
• Condition of the vehicle’s frame, springs and suspension systems.
• Condition of the vehicle’s tires and wheels, including spares.
• Condition of other critical vehicle accessories, including drive train components and their
fluid levels.
 A system of regularly checking fluid levels and prompting regular fluid changes, lubrication,
vehicle washing and replacement of parts as recommended by the vehicle manufacturer
based on mileage and/or operating hours.
 A system of reporting vehicle repair needs that can be submitted by drivers. If necessary, this
system should also be the basis for pulling vehicles out of service.
 A system of maintaining accurate repair and maintenance shop records of the work done on
vehicles.
Keeping maintenance and repair records in a searchable, sortable computer database will help
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Routine Maintenance: Similar to preventive maintenance, this type focuses on work that necessarily
occurs on a regular basis for every type of vehicle. These services include oil changes, tire rotations,
engine fluid checks, engine cleanings, and more. The frequency at which these services must be
performed is dependent on the type of vehicle and its travel schedule. While consistent preventive
and routine maintenance is crucial to keeping your fleet up and running smoothly, it’s important to
remember that there is such a thing as too much maintenance. If, for example, unnecessary engine
work is being done on a truck, the company is losing money in the service itself and in lost on-the-
road time. “Vehicle servicing is a compromise between inadequate attention, resulting in
progressive deterioration in condition and the ensuring serious consequences, and too much
attention, which is costly and unnecessary.”
Emergency Maintenance: As its name suggests, emergency maintenance is unscheduled and
generally cannot be planned or anticipated. Ideally, with an excellent preventive and routine
maintenance policy, a company can avoid any major emergency maintenance issues. However,
certain scenarios, such as tire blowouts caused by objects on the road, cannot be foreseen or
prevented. For that reason, your company should have an established mechanic (in-house or not) as
well as a plan for how to arrange transportation of fleet vehicles in the case of a breakdown while
on-the-road. You can’t predict when a vehicle incident will occur, but one of the best ways to plan
for unexpected emergency maintenance is by investing in a comprehensive fleet roadside
assistance program.
It’s important to pick a roadside assistance program that has options to make your coverage
customizable to the exact specifications of your fleet and that the coverage is available wherever
your fleet travels.
Planning for fleet maintenance management systems begins with analyzing the requirements of
the company (the operational requirements of the vehicles and the needs of the organization)
about fleet maintenance. These requirements further translate into technical objectives to be met
by the planned system. Several different characteristics are analyzed: the organization, the vehicles,
and operation conditions. While assessing the needs of the company, the following parameters
need to be considered: environmental demand, commitments to punctuality, supply chain,
quantity demand, security requirement, and human resource management.
Figure 4. A screenshot of a fleet management system
After analyzing the requirements of the facility, the fleet manager establishes a general idea of the
functions and functional flow necessary for fleet maintenance involving, for example, inventory and
parts ordering, scheduling for preventive maintenance, etc. Furthermore, each function is analyzed
based upon available solution alternatives: manual or computerized management system, basic

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category of maintenance (regular inspections, corrective maintenance or preventive maintenance)
and the basic repair functions (from non-repair to complete repair of the vehicle).
Finally, a fleet management solution is designed or chosen based on manual or computerized
management options. Some aspects that need to be considered while choosing a computerized
management solution are:
 Functional requirements that need to be met
 Cost effectiveness
 System flexibility
 Ease of use; and
 Training requirements and flexibility.
8. Cost of Maintenance
Despite longer service intervals and more efficient vehicles, maintenance is still a significant
component of fleet cost and possibly the area where money can most easily be misspent.
Suppliers: As fleet customers account for around a half of all new vehicle sales; many companies
invest heavily in making sure servicing and repair needs are met. Choosing the right supplier is a
balance between price, safety and efficiency.
Records: Understanding each truck’s operating costs is a vital part of a fleet decision maker’s role.
Good record keeping allows an accurate record to be built, showing the performance of the vehicle
and the driver. For example, it could
show persistently high costs for one
model, against another. Or it might
highlight driver abuse, or that a
vehicle has not been serviced
according to requirements. Storing
information in one location will help
identify many important factors – for
instance, have all trucks been
serviced – and enable more effective
cost control. Quite significant
financial savings might arise from
negotiations with manufacturers
and suppliers simply because the
fleet manager has maintained
robust records. Figure 5. Cost of maintenance
Authorization: A fleet manager has to make many decisions that involve balancing the safety and
efficiency of fleet vehicles. Knowledge of vehicles and suppliers should allow the fleet manager to
make informed decisions but what happens when the fleet manager is away, or trucks are
maintained by drivers and unauthorized costs are incurred? An authorization procedure must be in
place to prevent costs escalating. Authorizing maintenance expenditure and clearly defining the
drivers’ obligations must form part of the employer’s fleet policy.
Downtime: The fleet manager should monitor any days when a vehicle is off the road for
mechanical failure and record the costs, especially when a relief vehicle is provided at an extra
charge. Downtime refers to all costs associated with an item out of operation for repairs or
maintenance, other than the repair cost. There are two major components of downtime costs: the
hire of replacement machine and the fixed costs related to the loss of an operational machine.
Warranties: Another important issue is the warranty available on fleet trucks. Many different limits
and thresholds are applied to warranties so details should be checked in case there are any onerous
conditions. A characteristic of fleet trucks is that they may be based – and therefore need to be
serviced – in a different part of the country from where they were acquired. To take full advantage of

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the warranty, the repairing dealer must be told that the warranty does (or at least might) apply to
the vehicle. Otherwise, the company may pay for work which is actually covered by the warranty.
Where vehicles are looked after by a third-party supplier, they will normally ensure terms are fully
understood by the garage before work begins.
9. Vendor vs. In-house Maintenance
Effective and regular maintenance is crucial for the efficiency and reliability of businesses and
institutions in every sector. Ensuring you have an optimal maintenance system and routine in place
ensures the longevity and condition of your business’s assets, therefore providing benefits such as
cost-effectiveness, improved safety and asset uptime. However, this raises the question — should you
in-house or outsource maintenance tasks — or perhaps adopt a hybrid of the two? It’s a question
that many business owners ponder over while they weigh up the advantages of each maintenance
solution.
Outsourced fleet maintenance involves hiring a third-party provider to manage these tasks and is
often favored by companies with multiple OEM’s, a multi-location footprint, or those leasing their
equipment prefer outsourcing.
In-house fleet maintenance refers to a company’s decision to handle 90% or more of their vehicle
maintenance and repairs internally. Outsourced fleet maintenance involves hiring a third-party
provider to manage these tasks. Companies with longer trade cycles (or larger fleets) tend to prefer
in-house fleet maintenance, while companies with multiple OEM’s, a multi-location footprint, or
those leasing equipment prefer outsourcing.
9.1. In-house Fleet Maintenance
There are benefits and challenges to fleets doing their own maintenance. There are, however, three
main benefits to keeping maintenance in-house.
Control: In-house maintenance gives the fleet complete control over the maintenance process
(including scheduling), quality of work and cost.
Familiarity: The in-house maintenance team knows the company’s equipment and maintenance
history, which can help them identify issues more quickly and accurately.
Cost-effective: In some cases, in-house maintenance can be more cost-effective than outsourcing,
especially if the company has a large fleet of vehicles.
There are also three main challenges to keeping maintenance in-house.
Labor cost: Hiring and retaining skilled technicians can be expensive and can require significant
investment in both tools and equipment.
Downtime: When equipment is being repaired or maintained it is not available for use, which can
lead to downtime and lost productivity.
Expertise: In-house technicians may lack specialized knowledge or experience to diagnose and
repair certain problems.
9.2. Outsourced Fleet Maintenance
Obviously, there are benefits for fleets to turn maintenance over to an outside service provider.
Reduced Costs: Outsourcing fleet maintenance can reduce labor costs because companies can
avoid the need to hire and train in-house technicians.

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Flexibility: Outsourcing provides more flexibility in scheduling maintenance and repairs, as
companies can work with service providers to ensure equipment is serviced at the most convenient
times.
Expertise: Outsourced service providers typically have a deeper level of expertise in fleet
maintenance and can provide more specialized services.
Too, there are drawbacks.
Loss of control: Outsourcing fleet maintenance means giving up some control over the
maintenance process, including scheduling, quality of work, and cost.
Communication: There can be communication issues between the service provider and the
company, which can lead to delays and miscommunications.
Quality of work: Companies must rely on the service provider to deliver quality work, which can be a
concern if the provider is not up to par.
When you look at the way organizations approach fleet maintenance, it’s not a simple decision.
Twenty percent of fleets do maintenance in-house, 46% use outsourced service providers, and 34%
use a combination of both.
Ultimately, the decision to use in-house maintenance, outsourced maintenance, or a combination
of the two, depends on a company’s specific need, budget and expertise. Both approaches have
their advantages and disadvantages, and companies must carefully evaluate these factors before
making a decision.
9.3. Outsourcing both Maintenance and Servicing
Where the fleet operation has been outsourced under contract hire with maintenance, or uses an
external agency to manage the maintenance, these should be doing exactly the same kind of
analysis for their own purposes. One thing that is important is to ensure that reports on key aspects
of the underlying data about the fleet maintenance performance should be fully available to the
fleet operator on demand. This is particularly important as one part of the audit trail of
maintenance, making sure that vehicles are being serviced and kept fully roadworthy.
Something like half of all fleet vehicles have their maintenance controlled through an outside
agency - either within a contract hire arrangement, or through some form of “fleet management”
contract. Fleets in the UK have easy access to a wide choice of service providers, and so should be
able to source a highly professional, ethical and safe service on a cost-effective basis.
The big difference between the two types of maintenance outsourcing lies in where the cost risk
lies. Under a contract hire agreement, the external specialist will make their own projection of the
amount of maintenance spend likely to be needed to keep the truck or trailer on the road, for the
full period and mileage of the contract. This sum is then “fixed”, and is usually charged in equal
amounts across the full period of the agreement.
Fleet maintenance management gives the same service - but without any cost guarantee from the
supplier. Instead, they use their professional expertise to manage each maintenance event as it
arises. So far as costing is concerned, the fleet customer is recharged for every maintenance item as
it is incurred, together with a fixed management fee for doing the work and maintaining the
records. Under this system, it is normal for the costings on a new vehicle to be very low, but get
progressively higher month on month as the vehicle ages.
These different outsourcing arrangements are valuable, because they put the onus on some of the
highly technical issues on to maintenance controllers who are trained to handle it properly. This
saves the fleet manager dealing with high volumes of relatively low value work - and avoids the
need to understand the mechanical intricacies of today’s trucks and vans.

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For a small fleet looking after vehicle maintenance and building a strong working relationship with
a local dealer can be a great idea. But as fleet sizes increase the need for specialist knowledge
becomes apparent. While many fleets successfully handle their maintenance issues internally, many
turn to one of the growing numbers of service providers offering to take over some or all fleet
activities. Before making this decision, it is worth considering:
Your fleet is unique: A fleet manager should ask if a third party would be able to understand their
needs and whether they could introduce new ideas to reduce cost and vehicle downtime. Most
third-party suppliers should be able to demonstrate the delivery of quantifiable benefits to other
fleets of a similar size, and discuss the various service level agreements available.
Price: Asking whether a third-party supplier might bring economies of scale to purchasing seems
fairly obvious, but could they also offer systems and processes that enhance efficiency and reduce
costs? The fleet manager must fully understand exactly what services are offered by the outsourced
supplier and whether each of the components included in the overall package are really essential.
Figure 6. Economies of scale
Services: The range of outsourced services needed by fleets will differ widely but must they all be
acquired from the same source? Services such mileage tracking and driver training are increasingly
becoming part of the package offered by many suppliers, but should these be purchased from, say,
an accident management specialist? A fleet manager should not be afraid to shop around, not only
to compare costs but to ensure that services are provided by the supplier best equipped to
complete the job safely and efficiently.
Communication: Who, talks to whom, about what, and when? Outsourcing often means drivers will
be speaking directly to third parties. While this might seem great in theory, is the supplier able to
respond in line with the fleet manager’s required service levels. Ensuring lines of communication are
agreed, documented and understood are vital before any contract is finalized.
10. Fueling Fleet Vehicles
For several years increased global demand and political instability has led to rapidly increasing
crude oil prices. When taken together with increased direct and indirect taxation fleets have faced
significant increases in fuel costs. Unfortunately, despite the abatement of fuel duty rises, this trend
looks set to continue.
As fuel is one of the most significant fleet costs careful attentions should be given to the how fuel is
bought and used. However, by implementing some basic data collection, analysis and planning,
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Being green: The taxation of company trucks according to their CO2 emissions has encouraged
many manufacturers to develop more environmentally friendly engines, which, in turn, aim to be
more fuel-efficient.
Progressive businesses are also addressing their own response to the threat of climate change by
replacing physical meetings with new technology such as web conferences in an effort to reduce
business mileage. Where business journeys are, however necessary, fleet managers should consider
how they can be made as environmentally friendly as possible by choosing more economical
vehicles and advising on how driving styles and duration of journeys impact on fuel efficiency.
Each business’ approach might differ, but the trend is clear – it makes great sense for fleets to
control their fuel budget. Government led initiatives, such as those run by the Energy Savings Trust,
can be incorporated in to fleet management to encourage more responsible and environmentally
friendly fleet vehicle use.
Figure 7. Functional architecture at fuel station with fleet control
Capturing fuel cost data: There are just a few basic elements to good fuel management. Most of
these are directly related to the fuel use itself; the volume purchased, the distance covered and the
cost. In a perfect system all of these would be recorded and everything needed to manage fuel
could be calculated. Additionally, whilst knowing the total cost to the business is an obvious
advantage, checking fuel consumption on an individual vehicle basis would help to identify areas of
poor performance and possible mechanical problems with a vehicle.
Unfortunately, in many cases fuel management is often seen as a “nuisance” or as “unnecessary”.
Part of the problem is that there are so many “minor” transactions. For example, a typical fleet car
could generate one or two forecourt bills every week and, for many fleets monitoring numerous, low
value costs is simply too onerous. But as fuel costs rise monitoring fuel expenses becomes
increasingly necessary but could prove extremely cost-effective.
The key to managing fuel costs is collecting the right data. By capturing all three data items every
time the tank is filled a fleet manager will have a complete picture of the fuel performance of the
individual vehicle. Using a fuel card is the easiest way to achieve this. It provides the quickest,
cleanest, cheapest and most accurate method to capture, manipulate and report on fuel
performance. A good fuel card system is one which is widely accepted, needs both forecourt and
driver input of relevant data on each visit, and provides periodic reports on the performance of the
fleet by individual vehicle, cost center or other grouped levels.
Understanding and using fuel data: Regardless of whether a fleet manager runs a fuel data
recording system in-house or uses a third-party supplier the incentive is that, armed with the right
data, they can start making efficiency savings; without the data, cost control is lost.

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Research suggests that more than a quarter of drivers do not think that inflating their business
mileage to disguise private mileage, or simply exaggerating their expenses, is wrong. Drivers also
make mistakes and often don’t care about buying fuel at the best prices, especially if they have a
fully expensed fuel card.
Good data capture can help to reduce fraud and can be used to educate drivers and encourage
them to seek out garages selling cheaper fuel.
Finally, the data collected may be useful elsewhere in the business; for instance, it could assist the
finance department to deal with a national enquiry, or it could be used by the HR department to
encourage drivers to opt out of heavily taxed free fuel schemes.
Potential alternatives: As all parties try to reduce the impact of transport on the environment
alternatives to petrol and diesel have been developed. These can offer a range of advantages, but
like any new technology an understanding of the potential pitfalls is essential:
Bio-fuels and LPG: These technologies have not been as widely adopted in the UK as in some parts
of Europe. A combination of lack of experience and uncertainty about infrastructure has made
many fleets wary of adopting these alternative fuels, despite the advertised benefits in cost
reduction.
Hydrogen: Potentially the primary fuel of the future, without a refueling infrastructure it is hard to
predict when hydrogen will become a mainstream option.
Electric: Supported by government grants and tax incentives arguments in favor of electric trucks
can look quite compelling but, until range can be extended and the cost of production addressed,
electric vehicles are only really suited to a few special applications.
Hybrids: These trucks use a combination of a smaller, high-efficiency combustion engine and a
battery-powered electric motor. The on-board batteries are charged when the engine is idling and
when the brakes are applied, and smart electronics balance the use of each power-source to suit
roads and conditions. Performance is good in urban motoring but can be less attractive if the car is
used mostly on faster open roads.
Other technologies: As manufacturers try to stay ahead of the market other technologies and
blended solutions have started to appear, ranging from simple changes in production techniques
that reduce weight and air resistance to plug-in hybrids and range extenders, where charging
points are used to provide an external energy source for an electric battery that works in tandem
with a conventional engine to overcome the range anxiety typically associated with pure electric
vehicles.
Reimbursing the cost of business fuel: In practice, employers use many different ways to reimburse
the cost of business fuel used by their drivers in company trucks. While it is possible to repay the
exact cost this can be both time consuming and complex for a fleet operator. Employers who pay
mileage rates of any kind must ensure that drivers do not see them as a way of increasing their
income by driving unnecessary miles.
11. Insurance
Insurance, in general, is a complicated and involved industry, and fleet insurance policies are no
exception. “Fleet insurance gives you room to cover all your vehicles under one policy, even if you
have a few different models. The upside of this is that you don’t have to spend time pulling together
figures for every vehicle you look after.” While it’s difficult to give specific advice for which insurance
plan will be best for your fleet, there are a number of best practices to follow to ensure that you are
getting the right coverage for the most affordable price.
Shop Around: As with many other types of insurance, it’s a good idea to get a wide range of quotes
from a variety of different insurance providers before deciding. This will give you an idea of the
different offerings and pricing tiers in your operating sphere. Additionally, you will want to make

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sure that your plan provides the right coverage for your specific fleet. Consulting with others in your
industry and business connections with similar fleets can also help you to understand your
insurance needs and the insurance providers in the industry space.
Conduct Annual Reviews: Your fleet and your company as a whole will probably change from year
to year. Remember that your insurance policy may need to change as well. Annual reviews give you
the opportunity to evaluate the company’s insurance needs and whether your current policy is
meeting those needs. These reviews can also help you to analyze claims and identify steps you can
take to minimize insurance costs in the future.
Plan for the Future: It’s important to make sure that the fleet insurance you acquire is flexible
enough to account for any fluctuations that may occur over the course of the year. For example,
make sure you know how your plan will change if you add five new drivers or purchase five new
delivery trucks in a calendar year. Additionally, many insurance companies offer significant
discounts to companies whose fleets use fleet management software, specialized training
programs, and enhanced security measures. If your company doesn’t already have these programs
upon initial insurance purchase, it may be worth considering adding these aspects to your fleet
management in the future to take advantage of these discounts.
12. Road Calls
Roadcall means a count of the "in-service" interruptions caused by failure of some mechanical
element of the vehicle. In other words; a mechanical failure of a vehicle in revenue service that
causes a delay to service, and which necessitates removing the vehicle from service until repairs are
made.
Roadcalls, or service runs as they are sometimes referred to, are defined in different ways depending
on who is responding to them. A roadcall occurs when a truck breaks down in service, requiring
immediate service. It’s the mechanic’s equivalent of a doctor’s house call.
For mechanics, road calls can be a welcome outing from the shop, especially if they interrupt a
difficult task. For supervisors and managers, roadcalls can be a nightmare. On especially busy days,
roadcalls take mechanics from the shop and most always require extra equipment. Retrieval of
trucks on the road can be very expensive since some coaches have planetary rear axles and cannot
be towed. These vehicles require loading on flatbed trucks for retrieval. From the mechanic’s point
of view, the definition I would use for road calls would be “the costly endeavor of retrieving or
repairing broken down equipment.”
Roadcalls should not be used to measure shop efficiency unless negligence is evident. Sometimes,
intermittent problems can almost be impossible to find and you will have repeated road calls for
the same problem on the same truck. This tends to drive everyone crazy. The mechanics can’t
identify the problem because by the time the bus gets back to the shop, everything is working.
Where do you look and what do you look for? One thing that might help is to get more than one set
of eyes looking for the same problem. Maybe other mechanics have experienced the same problem
in the past. Product reliability can be measured somewhat by the number of road calls.
If you have recurring roadcalls for the same problem but on different trucks, it might be cost
effective to check each vehicle for this problem before putting it in service. If this can’t be done
because of limited equipment, then try checking a few each day until the whole fleet has been
evaluated. Bus availability is the lifeblood of the transit industry, and trucks cannot always be taken
out of service with an intermittent problem. Often, 10 different roadcall categories have been used:
air conditioning, body, wheelchair lift/ramp, dirty coach, engine, electrical, transmission, radio, tires
and transportation.
Drivers play key role: Roadcalls are charged to the maintenance department in these categories.
However, if the specific road call problem is not found when checked by the mechanic, the call is
charged to the transportation department as driver error. For example, let’s say the trouble reported
is “tailgate stuck out and will not retract.” The mechanic goes out and finds the lift stuck out on the

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curb. This road call would be charged to the transportation department as driver error. Another
example of driver error that would be charged to the maintenance department is a truck that won’t
move because it has been running with the parking brakes set up, causing the disks to get hot and
not release the rear brakes. While these examples are not the only ones that will cause driver error
problems charged to the maintenance department, they seem to be the most common.
Weather also plays role. Miles between roadcalls are significantly affected by the type of weather in
your area. Extremely hot or cold weather usually shortens the miles between roadcalls. For instance,
February 2003 was an extremely cold month in Louisville causing abnormal number of roadcalls.
13. Tire Selection and Management
An effective tire maintenance and replacement strategy will save time and money, while decreasing
downtime and increasing productivity. For the fleet manager of a large collection of varied
equipment, each with different tire needs, managing a replacement schedule for tires can be a
challenge. With a well-informed and well-defined tire maintenance and replacement strategy in
place, however, a fleet manager will be able to save time and money, while decreasing downtime
and increasing productivity.
Tire wear assessment: Porterfield recommends that fleet managers engage their local tire dealer to
begin the process of identifying current and past trends in tire wear. Some of the most common tire
problems are uneven wear, damage to the sidewall, separations in the tire, and damage to the
beads or lining — each of which is a telltale sign that the tire maintenance regimen could be better
managed.
Inflation pressure is often the culprit. Separations in the tire are generally a sign that it has been
overloaded or underinflated. Continuously running a tire that has insufficient air pressure to carry
the load can generate enough heat to cause a breakdown between the materials and the
adhesions.
Similarly, he explains that running an overloaded or underinflated tire can cause excessive wear to
the shoulders, diagonal breaks inside of the tire and increased deflection, which makes the tire
more susceptible to cuts in the sidewall. On the other hand, an overinflated tire can lead to impact
damage.
While faults in the tire maintenance regimen can result in shortened tire life, operator use can have
an equally profound impact. So, after establishing a baseline of tire performance, the next step in
identifying problems is to have the dealer out to the jobsite for an operational assessment.
Operational assessment: There are a number of different operator tendencies that can negatively
affect tire longevity. Also recommended that you record everything from average haul distances,
peak speeds and cycle times, to number of shifts, days worked, cycles completed and type of
materials being moved. Doing so helps to forecast expected lifespan under ideal conditions, and
thus, identify problems.
No matter which type of machine we're talking about, there are a few generalities we can make
when talking about operator use and its effect on tires. Things like rapid stops and starts and sharp
turns can put unnecessary stress on the casing, leading to premature wear. Excessive speed
generates heat, which can degrade the tire. Additionally, it's important to remember that the
heavier the load, the more drastic the impact to the tires will be with all three of these operator
tendencies.
For fleets that include larger equipment, such as haul trucks, Porterfield stresses the importance of
calculating the operators' ton-mile-per-hour (TMPH) ratings, which utilizes a formula to calculate
the heat a tire will generate based on the way it is being operated. TMPH is calculated as the
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Haul truck tires come with a TMPH rating, and exceeding that rating will cause damage to the tire.
So, it's very important... to conduct an operational assessment in order to determine if the fleet's tires
have a sufficient TMPH rating or if the operators are putting those tires through too much abuse.
Site assessment: The final step in identifying problems and developing a tire management program
is to conduct a site assessment. The condition of the jobsite and assessment of the natural terrain
will not only help your dealer recommend the appropriate tire for the application, but also help
identify any obstacles that are causing tire damage.
Things like sharp curves and steep grades can affect load capacity. When an operator takes a sharp
right turn, additional weight is shifted to the driver's side tires. Similarly, going down a steep slope
shifts the weight to the front tires, and going up a steep slope shifts the weight to the rear tires.
Another thing fleet managers tend to forget is that mud adds weight to a vehicle. So, these are all
things the fleet manager needs to be cognizant of, because they may necessitate adjusting tire
inflation pressures and/or reducing the maximum allowable load.
Maintaining a clean jobsite is critical in reducing damage to tires. Standing water is one of the
primary ingredients needed to cut and puncture a tire, so it's important to remove standing water
whenever possible. And of course, keeping the jobsite clear from any spillage of materials will
undoubtedly help to extend tire life.
With these three assessments on hand, your tire dealer should be prepared to recommend a tire
management program, including everything from tire maintenance, operations and ultimately, tire
replacement and selection.
Tire selection: The tire industry has come up with nomenclature that makes the selection process
for tires easier for buyers: E is for earthmover; L is for loader and G is for grader. However, there is
more that must be considered in the selection process.
The two major things you want to consider beyond tire type are compound and tread design.
Choosing the right compound and tread design will mean better performance and longer tire life.
The tire dealer should make recommendations on each, based on the operational and site
assessments.
Figure 8. Diagram of tire position codes
A cut-resistant compound would be good for rough applications where the machines are traveling
at low speeds and short distances. Conversely, a high-speed haul application that is traveling longer
distances would be better off with a heat-resistant compound. Tread design is also critical to
performance and tire longevity. Along with the E, L and G nomenclature, comes a number from 1
through 5 that describes the tread depth, with 5 being the deepest.

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The deeper the treads, the more resistant those tires will be to punctures from sharp objects. So, for
a loader running in an extremely rocky, harsh terrain, an L-5 would offer the most protection. An L-5
may be overkill for less harsh settings, however, which is why it is important for the tire dealer to
conduct a site assessment and determine what is most appropriate.
Furthermore, proper tire selection is based on operational factors such as distance, speed and load
to determine adequate load capacities and ton-mile-per-hour (TMPH) ratings. The tire dealer will
often suggest changes in operations in order to avoid premature tire fatigue. These
recommendations, however, may require some compromise from the fleet manager.
After the operational assessment, the tire dealer may conclude that the fleet's TMPH exceeds the
limitations of the tire. When this happens, the tire dealer will often recommend traveling at lower
speeds, running fewer cycles or carrying smaller loads. Such a suggestion is often hard to swallow
for fleet managers, however. In the end, the tire dealer can consult with the fleet manager to decide
which provides a greater cost savings — increased tire life or increased production.
Maintenance: In terms of regular maintenance, monitoring inflation pressures is the most important
task in prolonging tire life. Paying proper attention to inflation pressure can extend tire life by
anywhere from 5% to 30%. So, I would recommend checking inflation pressures daily, before the
machine has been started and is still cold. Problems with operator abuse can be diminished with
the installation of pressure sensors. With today's in-cab monitors, it's getting easier for operators to
spot problems before they escalate. If an operator realizes that a tire is even just 10 psi below where
it should be, that should be cause for concern. Catching a problem early on could mean the
difference between replacing a $40 valve and replacing the whole tire.
The strategy for tire rotation will depend on the individual machine. For a three-axle haul truck,
about 55% to 65% of gross vehicle weight is carried by the front tires when empty, so it's important
to rotate the fronts to the rear at about one-third of the tires' expected life spans. When loaded,
however, approximately one-third of the weight is distributed to each axle, so it's also important to
look at how operational and site conditions affect tire wear in order to make a rotation
recommendation. On a loader, you have to keep in mind that the front tires usually bear 65% of the
load with a bucket attached. So, it's really important to rotate front to rear in order to give the front
tires a rest for the remaining 50% of their projected life.
It's also important to know when to replace vs. repair. A good rule of thumb is to consult your tire
dealer on all repairs. Tire punctures aren't always straight, so pressing a plug straight into the tire
could cause additional damage. If a tire is running low on tread, but is still holding air and is
structurally sound, it may be a good candidate for retreading. The important thing to remember,
however, is to pull that tire off with about 15% of the tread remaining. If it goes much further than
that, and any of the under-tread compound is exposed, it's too late.
Successful implementation: Ultimately, successful implementation of a tire management program
takes buy-in from both the fleet manager and the operators. It's important for the fleet manager to
train the operators to use the equipment within its limits and to report any changes in inflation
pressure or job site conditions that could lead to potential problems.
Ongoing consultation from the tire dealer is also essential to a successful long-term program. It's
important to consult with the tire dealer as changes occur that could potentially affect the tire
management program. As an operation expands, haul distances, speeds, loads, site conditions, cycle
times and equipment configurations can all change. Each of these factors necessitates a change to
the tire management program. As such, the fleet manager should work closely with his or her tire
dealer for recommendations whenever major changes occur.

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Figure 8. How to read tire markings

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14. Parts and Supply Management
Working with the right providers, managing inventory to meet maintenance and repair needs, and
making effective purchasing decisions leads to cost effective parts procurement practices.
Considering the wide range of parts from a variety of suppliers that a typical fleet uses on a daily
basis, it shouldn’t be a surprise that providers and parts experts generally agree that effective
management practices are a worthwhile and cost-effective investment.
In the fleet industry, supply chain management involves managing the flow of goods and services
from suppliers to customers, including the procurement of vehicles, parts, fuel, and maintenance
services. Effective supply chain management in the fleet industry can help to minimize
costs, improve efficiency, and ensure that vehicles are available when needed. Let's discuss some
measures to take to keep supply chain productive in the fleet industry:
Develop a robust procurement strategy: Develop a procurement strategy that focuses on selecting
suppliers that provide high-quality vehicles, parts, fuel, and maintenance services at competitive
prices.
Implement effective inventory management: Managing inventory levels is crucial in the fleet
industry to ensure that you have the right number of vehicles, parts, and fuel on hand to meet
demand without tying up too much capital in excess inventory.
Optimize transportation routes: Optimizing transportation routes can help to reduce fuel
consumption and improve delivery times, thereby minimizing costs and improving efficiency.
Regularly maintain and service vehicles: Regular maintenance and servicing of vehicles can help to
extend their lifespan, reduce breakdowns, and ensure that they are available when needed.
Use telematics technology: Telematics technology can help to optimize vehicle performance,
reduce fuel consumption, and improve driver safety by providing real-time data on vehicle location,
speed, and fuel consumption.
Continuously measure and analyze performance: Regularly measuring and analyzing supply chain
performance can help to identify areas for improvement and implement corrective actions.

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UNIT G – Vehicle and Driver Selection and Replacement
1. Vehicle Selection and Replacement
Acquiring a fleet of vehicles is arguably one of the major investment decisions that a business takes.
If you own a fleet of vehicles, you need to invest time and effort in managing it. Effective fleet
management holds the key to getting the most out of your fleet. Businesses that fail to adopt best
fleet management practices often have to go through the difficulties of watching their fleet dwindle
one vehicle at a time.
Fleet vehicles play a critical role in many industries, facilitating efficient transportation, deliveries,
and services. In this blog post, we will explore what is a fleet vehicle and provide guidelines for
selecting the right one. Whether you are a small business owner or a fleet manager responsible for a
large operation, understanding the key factors in choosing vehicles for your fleet is crucial for
optimizing operations, cost-effectiveness, and overall success.
A ‘‘fleet vehicle’’ refers to any automobile, truck, van, or specialized vehicle owned, leased, or rented
by a business or organization for commercial purposes. Unlike personal vehicles, these vehicles are
dedicated to supporting the operational needs of the organization, whether it’s transportation,
deliveries, services, or other business functions. These vehicles are managed as a group or ‘‘fleet’’,
which involves maintenance, tracking, scheduling, and often optimizing the vehicles for cost
efficiency and productivity.
Knowing what is a fleet vehicle and choosing the right one is a critical decision that directly impacts
a business's operational efficiency, cost-effectiveness, and overall success. By considering factors
such as specific use requirements, total cost of ownership, reliability, safety features, fuel efficiency,
resale value, technology integration, and environmental impact, businesses can make informed
decisions. Conducting thorough research, consulting industry professionals, and leveraging fleet
management resources to select vehicles will align with your organization's needs, budget, and
long-term goals. Investing time and effort into choosing vehicles will also result in a productive and
successful fleet that meets your business requirements and helps drive growth.
Vehicles can be purchased from various sources, depending on the preferences and needs of the
business or organization. Here are some common sources to obtain vehicles for your fleet:
 Dealerships,
 Manufacturers,
 Online marketplaces,
 Vehicle auctions,
 Fleet management companies,
 Leasing companies,
 Rental companies,
 Government surplus.
2. Factors to Consider when Choosing a Fleet Vehicle
The selection of a fleet of vehicles for tasks is one of the stages in fleet management in transport
companies. In the literature on the subject, there are many publications on the issues of supporting
vehicle fleet management in terms of selecting a given vehicle for the implementation of
commissioned tasks. Selecting a fleet of vehicles for tasks in transport companies is a complex
decision-making process. On the one hand, customers’ requirements covering a wide range of
outsourced transport tasks should be taken into account. On the other hand, the technical potential
of operators performing various transport processes and thus having a different fleet of vehicles
should be considered. The selection of a fleet of vehicles for the tasks depends primarily on the
business profile of a given company and current transport needs.
Specific Use Requirements: Before choosing the right vehicles, clearly define your organization's
specific use requirements. Consider factors such as payload capacity, cargo space, towing capacity,

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passenger capacity, fuel efficiency, and compatibility with specialized equipment or tools if
applicable. This assessment will help narrow down vehicle options that align with your business
needs.
The Costs of Operating an Older Fleet: How much does it cost to perform yearly maintenance on
each of the vehicles in your fleet? This is an important stat to keep track of, as it can reveal when
some of your vehicles have gone ‘‘over the hill’’ in terms of maintenance efficiency. As trucks get
older, the internal parts age and need a more rapid pace of replacements and repairs. Ten-year-old
vehicles can cost anywhere from double to ten times more than they did in their third year of
performance. At some point, you would save more on a new vehicle than maintaining the old.
There are also fleet-wide costs to consider when one of your older vehicles is down for repairs. If you
were relying on that vehicle to complete a route, the entire fleet is short and customers may even
see delays and cancellations as a result. While your mechanic team may be ace at getting those old
trucks back on the road, you still lose time and money with each repair.
Total Cost of Ownership: Understanding the total cost of ownership (TCO) is crucial in selecting
vehicles. TCO goes beyond the initial purchase price and encompasses factors like fuel
consumption, maintenance and repair costs, insurance, financing, and resale value. Consider the
projected lifespan of the vehicle, average annual mileage, fuel efficiency ratings, and maintenance
schedules to estimate the long-term cost implications of each vehicle option.
Figure 1. A survey on TCO
The overall cost of ownership must be considered when choosing fleet equipment. Cost of
ownership calculations include;
 Purchase or lease cost,
 Overhead costs (exclusive of facility replacement),
 Acquisition, installation, and removal of aftermarket components,
 Fuel consumption,
 Warranty,
 Maintenance and repairs,
 Anticipated residual value,

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 Disposal costs,
 Opportunity costs.
Figure 2. True TCO
Vehicle Reliability and Maintenance: Reliability is a crucial factor in vehicle selection. Choose
vehicles known for their durability, reliability, and minimal maintenance requirements. Research
manufacturer reputation, read reviews, and consult fleet management professionals to gain insights
into the vehicle’s performance history, maintenance costs, and availability of spare parts. Opting for
vehicles with a strong track record of reliability can reduce downtime and minimize unexpected
repair costs.
Safety Features and Crash Test Ratings: Prioritize safety by selecting vehicles equipped with
advanced safety features. Look for features like antilock braking systems (ABS), stability control,
airbags, lane departure warning, adaptive cruise control, and forward collision warning. Additionally,
consider crash test ratings provided by competent authorities such as the national traffic safety
administration and the insurance institutes to assess the vehicle's safety performance.
Available safety features may increase the purchase price and/or reduce potential costs of workers’
compensation or liability claims. Selection of safety features must be based on current laws,
experience, or recommendation from the Risk Management Department.
Fuel Efficiency and Environmental Impact: Given the environmental impact of vehicles, prioritize
fuel efficiency and consider vehicles with low emissions or alternative fuel options. Evaluate vehicles
based on their EPA-estimated fuel economy ratings, explore hybrid or electric options, and assess
the availability and cost of fuel or charging infrastructure. Fuel-efficient vehicles not only contribute
to environmental sustainability but can also result in significant cost savings over the lifespan of the
fleet.
Fleet equipment selection may be influenced by the County’s energy and environmental policies
and goals. The consideration of environmental impact may increase or decrease fleet equipment
savings/costs within the total cost of ownership model. The acquisition of fleet equipment may
include a consideration of the total environmental impact (mpg, emission factors, fuel type, etc.).
Equipment may be selected for purchase with the lowest environmental impact in alignment with
the total cost of ownership and the requirements of the given fleet equipment classification.
Resale Value and Depreciation: Anticipate the future value of the vehicles by assessing their
depreciation and resale value. Some vehicles retain value better than others, and considering their
depreciation rates can help estimate their resale potential. Resale value can impact the overall cost

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of ownership and assist in financing future vehicle purchases. Research historical resale values of
similar vehicles and consult industry experts to make informed decisions.
Technology: Evaluate the vehicle's technology integration capabilities to ensure compatibility with
your business needs. Features like GPS navigation, telematics systems, connectivity options, and
compatibility with fleet management software can enhance operational efficiency, vehicle tracking,
and data analysis. Consider the availability and ease of integration of technology solutions that
support your fleet management requirements.
The Vehicles' Intended Purpose: Before you can consider choosing vehicles, you should consider the
vehicles' intended purpose. When determining which vehicles would be best to buy, rent or lease,
consider their size, style, purpose, and loading capacity. High-inflation countries’ markets are
becoming price sensitive with increasing fuel and vehicle prices. Hence, businesses and vehicle
owners are now more open to choosing smaller vehicle brands if they can save costs and still have
reliable vehicles. Think about it this way: it doesn’t make sense to buy bigger vehicles if they will be
used for office-based employees.
Making a Strong Impression with an Impressive Fleet: Next, there's the good impression factor. If
your fleet needs to look sharp and professional - as most fleets do - then older vehicles are
eventually doing you a disservice. Even well-maintained, eventually repairs begin to show through
and customers can tell you're rolling out in older vehicles. A vehicle that looks like its seen better
days, unfortunately, does not effectively reflect the repairability and tenacity of a team. To
customers, it can appear more than your fleet can't afford to stay current. While this may be a
symptom of the disposable product economy, impressing customers is still a top priority for your
brand's reputation and customer confidence in your team.
Maintaining Budget Predictability: Then there's keeping your budget clean and predictable. Fleet
managers like a budget that stays the same every year, and nearly the same every month. You can
optimize your fuel costs by knowing almost exactly how much gas is needed for each route. You
can predict the general monthly and annual maintenance cost of each vehicle down to the oil
change and filter replacement. But older trucks throw off the balance.
As vehicles age and parts need replacing, these repairs can go outside your calculations. On the
other hand, budgeting for a new vehicle and trade-in is a predictable financial choice you can make
in both the long- and medium-term. With a vehicle replacement schedule, you can both predict
the reliable maintenance needs of new and moderately new trucks along with the predictable
periodic cost of replacing an older model before it becomes costly.
Replaced Vehicles are never Wasted: Last but not least, it's important to remember that a replaced
vehicle is never wasted. We know you take pride in keeping good vehicles running for as long as
possible. But you're not sending your replaced vehicles to the landfill. In most cases, you will be
trading them into a dealer or fleet broker. From there, older vehicles can be resold or recycled.
Vehicles in good condition are resold as used to new owners who benefit from your meticulous fleet
maintenance and care. Vehicles beyond practical maintenance are recycled. The rarest and best-
maintained parts can be saved for future repairs of similar models while the mass of plastic and
metal are used again to manufacture new products.
Rebalancing Fleet Costs with a Strategic Vehicle Replacement Schedule: If you've been holding on
to older vehicles in your fleet, it's time to recalculate and rebalance your costs. The right fleet
replacement schedule (specific to each make and model) can ensure that you never keep a vehicle
longer than its balanced affordability to replace. In other words, vehicles will stay in your fleet until it
becomes more cost-effective to replace than to maintain. Your finances stay predictable and your
fleet stays up-to-date with the latest models and features.
Consider Buying vs. Leasing: Are you buying outright or leasing your vehicles? If you buy outright, you
want a vehicle you can sell later and still achieve a good resale value. It's more expensive to buy
vehicles upfront, but it can increase the overall worth of your fleet.

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If you lease, this is not as important, as the risk of resale is born by the lessor. A substantial resale
value benefits the lessee or driver in a reduced rental. Leasing is a great option; your working capital
can help you invest in maintenance, parts, and the overall upkeep and administration of your
vehicles. Strong brands have more significant after-service footprints and a higher chance of finding
parts available if the vehicle breaks down or needs repairing. Well-maintained vehicles also retain
value in the long run.
Determining Optimal Fleet Size: Utilization is a key component to determining optimal overall fleet
size. Fleets utilization studies generally have one of two outcomes: The results will either help a
company right-size its fleet, or it will validate that the fleet already operates with an optimal number
of vehicles. At the core of utilization studies are the fundamental questions:
 Do you have too many or too few vehicles to meet the demands of your business?
 How many miles should a vehicle be driven for it to be considered properly utilized?
One way many fleets determine a mileage minimum is by using their current utilization data to
determine a baseline. Often there is pushback from user departments who want to retain under-
utilized assets “just in case they are needed.” On the other end of the pendulum, some
management teams simply reduce the number of vehicles on the road and require the remaining
vehicles do more. This isn’t the best strategy when you have various kinds of vehicles, different kinds
of services or deliveries, and a diversity of territories or routes that your vehicles travel.
3. Buy or Lease a Fleet Vehicle
In service industries, fleet vehicles are often the face of the company. They portray a company’s
image to customers and to potential clients. If ownership means keeping vehicles longer, newer
leased assets can showcase your success.
Newer vehicles also send a positive message to your employees. Being assigned latest model units
with the newest safety, communications, navigation and other systems and technologies can help
improve morale, productivity, efficiency and even attract and retain drivers.
To lease or to buy is a decision every fleet manager may face and there is no right or wrong answer
to this question. Ultimately, the decision depends on what is best for your company at any point in
time, so it’s crucial to base your choice on current needs and weigh the pros and cons accordingly.
Pros of buying:
Ownership: When you buy a vehicle, you have complete ownership and control over its use,
customization, and disposal.
Long-term Cost Savings: Once you pay off the loan, you no longer have monthly payments, resulting
in potential cost savings over time.
Asset Value: The vehicle becomes a valuable asset for your business, and you have the option to sell
or trade it in the future.
Customization: Buying allows you to modify and customize the vehicle to meet your specific
business needs.
Cons of buying:
Higher Upfront Costs: Purchasing a vehicle typically requires a larger upfront payment, which can
strain your business's finances.
Depreciation: Vehicles depreciate over time, and their resale value may decrease, impacting the
potential return on investment when you sell or trade them.

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Maintenance and Repairs: As the owner, you're responsible for the costs of maintenance, repairs,
and any unexpected breakdowns.
Technological Obsolescence: Owning a vehicle means you'll have to bear the cost of upgrading to
newer models with advanced features and technologies.
Pros of leasing:
Lower Initial Costs: Leasing generally involves lower upfront costs, making it more accessible for
businesses with limited capital.
Predictable Expenses: Lease agreements come with fixed monthly payments, allowing for easier
budgeting and forecasting.
Flexibility: Leasing provides the flexibility to upgrade to newer models every few years, ensuring
access to the latest features and technologies.
Reduced Administrative Burden: The leasing company often handles paperwork, vehicle
registration, and sometimes even maintenance, reducing administrative tasks for your business.
Cons of leasing:
No Ownership: With a lease, you don't own the vehicle, and you have to return it at the end of the
lease term.
Long-term Cost: Leasing can be more expensive over the long run due to the cumulative cost of
monthly payments.
Mileage Restrictions: Lease agreements usually come with mileage limits, and exceeding them can
result in additional fees.
Limited Customization: Lease agreements often restrict or prohibit significant modifications or
customization to the vehicle's appearance or equipment.
4. Vehicle Replacement
Fleet management is the optimization of existing fleet asset and infrastructure to achieve a very
high level of efficiency, performance, safety, sustainability, and output. The pressure to deliver faster
and cheaper has made vehicle utilization an important aspect of fleet management. Better vehicle
utilization lowers operating cost through better planning. argued that “transport administration is
concerned with the management of all factors with a view to obtaining optimum efficiency with
minimum delays and cost”. This idea is that a prerequisite for efficient transport administration is
the administration of vehicles.
The choice of the type and size of investment on transport vehicles, the maintenance and control of
their use are therefore, dependent on the efficiency of their service, which by and large depends on
the administrative machinery. Fleet management is a function which allows companies which rely
on transportation in business and commerce to remove or minimize the risks associated with
vehicle investment, improving efficiency, productivity and reducing their overall transportation and
staff costs, providing a great compliance with government legislation (duty of care) and many more.
These functions can be dealt with by either an in-house fleet-management department or an
outsourced fleet-management provider.
Fleet management is central to the activities of the land transport of transport companies. With
increase in vehicle ownership, population growth, and a growing number of budget constraints,
fleet managers in transport companies must devise methods of detecting and resolving cost sinks
while improving the ability of the department to meet and exceed expected service levels. With
increasing budgetary constraints and service requirements, it is required that fleet managers,

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optimize fleet utilization through the implementation of management practices that maximize
fleet utilization, while effectively engaging in predictive maintenance practices.
In addition, fleet managers must can determine optimum fleet life cycles points (vehicle economic
life) at which the cost of maintenance exceed the benefits derived from vehicle operation through
analysis of recent, reliable data. Equipping fleet managers with tools for efficiency, and productivity,
is the optimal goal for continues improvement in fleet management within the land transport
department of companies.
Furthermore, maintenance is a complex activity involving such variants as equipment, statistics, cost
administration, productive activity, and business. These variants must be well administered in order
to be efficient. In the past, maintenance decisions have been limited to what kind of action to use
(corrective or preventive) and to the definition of such variables as best frequency, best predictive
technique, and best information organization. Today, due to the changing role of fleet management
and maintenance, decision-makers also must consider the coordination of the human, physical,
logistical, and logical structures of maintenance, which in turn must be combined with previous
variables to create an integrated administration.
Maintenance may be a group of interrelated structures that share the common objective of
supporting and/or executing actions to maintain or repair. In the case of fleet vehicles, the variants
are even more evident. Factors such as size, responsibility of the task carried out, fleet complexity,
market characteristics, and competition level vary markedly from one activity branch to another, or
even from among geographical areas. Traditionally, the information required to manage a fleet of
vehicles has been derived from observations made at the maintenance facility, utilizing mileage,
consumables, operator defect cards, and other data.
Today, more advanced technology allows vehicles to generate and store observations about the
vehicles themselves. In this report we discuss some cost-effective technological solutions available
to help fleet managers better manage their facilities.
4.1. Fleet Vehicle Replacement Strategy
For some companies, their vehicle replacement strategy is to simply wait until a vehicle goes out of
commission to replace it. When leasing a fleet, however, this anti-strategy can hurt rather than help
you. Almost half of the fleet vehicles on the road are past their optimal term, which ultimately
impacts a company’s bottom line. Companies that use vehicles past their optimal life are likely to
experience:
 30% decline in annual FMV,
 15% increase in downtime,
 20% in excess fuel spend.
When we talk about replacing vehicles, we look at the full lifecycle, from cradle to grave. In other
words, from acquisition, to the resale or remarketing of the vehicle. Often, companies will take a
reactionary course of action by solely looking at factors like the economy, safety issues, age or
mileage, or costly repairs. The best plan for replacement of vehicles is one that is strategic and looks
at all factors involved in replacing. We have all heard the term: “Drive it till the wheels fall off”, which
is not economically sound nor safe for drivers.
Focusing on age or mileage is one of the most common methods used. It’s simple but has some
disadvantages. If you rely solely on age or mileage, other conditions within the fleet are not
accounted for. For instance, less reliable vehicles could be kept in service longer than they should
and incur costly repairs. And, other vehicles could be removed while still having plenty of service life
left in them.
When appropriate, extending vehicle lifecycles can be advantageous. It’s important to look at the
utilization, operating costs, and the amount of time you are planning on extending the replacement
cycle.

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Table 1. Fleet vehicle replacement strategy model
Regular
replacement
 A fleet management strategy where vehicles in the fleet are replaced on a set schedule, regardless of their condition or usage.
 This typically involves replacing vehicles after a certain number of years or miles driven.
 The goal of regular replacement is to ensure that all vehicles in the fleet are relatively new, which can improve efficiency, reduce
maintenance costs, and enhance the image of the company.
 This approach is used by fleets that experience a high amount of annual mileage on their vehicles, as well as when vehicles are used
intensively and wear and tear is high.
 This strategy can also be used to take advantage of new technologies and features that are frequently introduced on new vehicles.
Replacement
based
on
mileage
 Vehicle replacement based on mileage is a fleet management strategy where vehicles are replaced when they reach a certain number
of miles driven.
 This approach focuses on maintenance cost avoidance and the wear and tear of the vehicle, rather than its age.
 It can be useful for fleets that have high mileage vehicles, such as delivery or transportation services.
 By monitoring the mileage of each vehicle and replacing them when they reach a certain threshold, it helps to ensure vehicles are
always in good working condition and reduce unexpected breakdowns, which helps minimize significant downtime and maintenance
costs.
Replacement
based
on
vehicle
age
 Vehicle replacement based on age is a fleet management approach where vehicles are replaced when they reach a certain age,
regardless of their mileage.
 It can be useful for fleets that operate in less demanding environments and don't put significant mileage on vehicles, such as office or
government fleets.
 By monitoring the age of each vehicle and replacing them when they reach a certain threshold, it helps to ensure the vehicles are
always relatively new and up-to-date with the latest technologies, which can improve efficiency, reduce maintenance costs, enhance
the image of the company, and improve driver safety.

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Economic drivers of replacement decision:
 Acquisition cost,
 Resale market performance,
 Warranty coverage period,
 Maintenance cost history and forecast,
 Increasing value of driver downtime,
 Seasonal influences on the resale market and depreciation factors.
There are many variables that affect decisions to replace. Minimizing vehicle downtime has become
one of, if not the biggest goals companies try to achieve, since a vehicle down means lost revenue.
4.2. Optimal Vehicle Replacement Point
The optimal vehicle replacement point is when annual operating costs surpass the market value of
the vehicle. After this point, a business begins to lose an increasing amount of money on the vehicle
every year.
While some businesses may be unfamiliar with fleet lifecycle management, the practice is essential
to lowering your total cost of ownership. Not only that, it ensures your vehicles continue to operate
well and generate revenue for the business. A data-driven life cycle management strategy results in
decreased downtime, fewer repairs, and lower fuel costs while maximizing vehicle resale value.
The combination of monthly capital costs (monthly market depreciation on your vehicle) and
operating costs (expenses incurred to keep the car on the road) create a total vehicle cost. This is
usually demonstrated as a curve. These two types of costs create a concave total cost curve.
You should replace vehicles when the monthly operating costs increase at a faster rate than the
monthly capital decreases. There are also fleet-specific variables that impact your vehicle
replacement times. These include your available funds for fleet replacement, lost driver productivity,
lower driver morale, corporate image, your company policies, and the frequency of accidents. We
often call these “soft factors”.
Figure 3. Vehicle life-cycle cost and optimum replacement timing
The point in time where it is best to replace a vehicle is the point that results in the optimal overall
cost over the vehicle’s lifecycle. A general rule of thumb is for sedans to be cycled at 36 months or
75,000 miles, and light duty trucks to be cycled at 48 months or 100,000 miles.

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However, for the best results, every organization should develop a tailored vehicle replacement and
lifecycle management strategy since type of vehicle, amount and type of usage, and vehicle
applications all impact the equation.
There are several techniques you can use to accurately calculate the ideal fleet replacement
schedule. Fleet replacement calculations involve predictions, forecasts, assumptions, and analysis of
available data. Working with a professional fleet consultant to conduct a vehicle lifecycle analysis
can help you understand the best time to replace your vehicles. Questions to be asked when
determining your fleet replacement schedule are:
 Is my team fully using the vehicle(s)?
 Does the vehicle(s) have the proper specifications?
 If my team is not fully using the vehicle(s), do I need to replace it?
 Does the vehicle(s) require frequent repairs or maintenance?
5. Finance a Fleet Vehicle
Commercial vehicle loans, leasing, manufacturer or dealer financing, fleet management companies,
captive finance companies, or asset-based financing are all different options for financing your
vehicle. When financing fleet vehicles for sale, it's important to compare interest rates, loan terms,
down-payment requirements, and repayment schedules before making a decision. Here are the
steps to follow in order to finance your vehicle(s):
Determine fleet requirements: Assess your business needs and determine the number of vehicles
required, their specific use, desired features, and budget limitations.
Research financing options: Explore various financing methods available, such as commercial
vehicle loans, leasing, manufacturer or dealer financing, fleet management companies, captive
finance companies, or asset-based financing.
Gather financial information: Collect the necessary financial documents and information required
for the financing application, including business financial statements, tax returns, bank statements,
and credit history.
Identify potential lenders: Research and identify potential lenders or lessors who specialize in
vehicle financing. This can include banks, credit unions, financial institutions, leasing companies,
manufacturer finance divisions, or fleet management providers.
Submit financing applications: Complete the financing applications provided by the selected
lenders or lessors. Include accurate and up-to-date information regarding your business, vehicle
details, and financial situation.
Review offers: Once you receive financing offers, carefully review the terms and conditions, including
interest rates, loan or lease terms, down payment requirements, repayment schedules, and any
additional fees or charges.
Compare and negotiate: Compare the offers from different lenders or lessors, considering factors
such as interest rates, terms, flexibility, and overall costs. Negotiate terms, if possible, to secure the
most favorable financing arrangement for your vehicles.
Complete required documentation: Once you have selected a financing option, complete the
necessary documentation, including loan agreements, lease contracts, or any other relevant
paperwork as specified by the lender or lessor.
Choose your vehicle: Next, purchase or lease the vehicles from reputable dealerships or
manufacturers, ensuring compliance with any specific requirements set by the financing
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Manage payments: Lastly, establish a system for tracking and managing the financial aspects of your
vehicles, including budgeting for monthly payments, monitoring expenses, and ensuring timely
payments to maintain a good credit history.
6. Managing the Fleet Life Cycle
Fleet vehicle life cycle management refers to strategically acquiring and disposing of vehicles to
lower the total cost of ownership. The three key areas involved in vehicle life cycle management are:
Vehicle Market Value: The estimated value of a vehicle based on its make, model, age, mileage,
condition, and other factors determine its worth in the market.
Maintenance Costs: The costs associated with keeping a vehicle in good working condition,
including regular preventative services, repairs, and replacement of parts.
Fuel Costs: The costs of fueling a vehicle, including the cost of gasoline, diesel, or other fuels used to
power the vehicle.
Fleet life cycle management is the first step to minimizing your total cost of ownership. As a vehicle
ages, its market value decreases, while its operating costs rise. The key is to replace vehicles when
their net expenditure is at the lowest point. Proper fleet life cycle management allows you to
operate a newer fleet for less money. In addition to lower fuel and maintenance costs, newer
vehicles typically have more safety features like collision warnings and automatic braking that help
keep drivers safe and reduce accidents.
Many companies choose to purchase fleet vehicles rather than lease. Once the vehicle is paid for,
they frequently drive it until a major mechanical repair arises. The cost is frequently more than the
value of the vehicle. But as a vehicle's mileage increases, its fuel and maintenance costs rapidly
increase and it is forced into more downtime for repairs, interrupting business operations and
decreasing productivity. If you don't have reporting in place, these rising expenses and downtime
can go unnoticed. You may end up overpaying on operation costs and miss out on good returns
when selling your vehicles.
Figure 4. Optimal vehicle cycle time
Fleet lifecycle management is the strategic acquisition and disposal of vehicles to get the most
value out of them and minimize the total cost of ownership. It compiles all of the data surrounding
vehicle expenses and pinpoints the optimal time to cycle a vehicle out of your fleet. The optimal
disposal point occurs while the vehicle still holds resale value and before fuel and maintenance
costs have skyrocketed. As vehicles age, maintenance and fuel costs rise while the resale price falls.
Monitoring these costs is crucial to pinpointing the best time for disposal.

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By properly tracking data on the expenses, you'll be able to determine how much you're spending
on each vehicle per month, and when is the optimal time to cycle a vehicle out of your fleet.
In other words, the optimal vehicle replacement point is when annual operating costs surpass the
market value of the vehicle. After this point, a business begins to lose an increasing amount of
money on the vehicle every year.
Figure 5. Optimal vehicle replacement point
Life cycle management for fleet operations is a hallmark of fleet optimization. It will help you save
on fuel and maintenance costs, maximize resale value, and minimize downtime. Understanding the
point where your fleet's fuel, maintenance, and depreciation costs are still low will allow you to
strategically cycle vehicles out of your fleet and maintain a healthier bottom line for your business.
7. Driver Selection and Placement
Selecting personnel who are responsible for operating your organization’s vehicles is critical in your
efforts to minimize vehicular accidents. It is suggested that the following elements be addressed
during the driver selection process; however, management must decide how much to emphasize
each of these steps in order to achieve a program that is effective and practical for the company.
Requirements of the Job: This is first and foremost in a comprehensive employee selection process.
The three-step-risk assessment:
 What tasks must the employee perform?
 How will the job be accomplished?
 What skill level is required?
Application for Employment: It is recommended that all drivers, even those NOT regulated by the
Motor Carrier Safety Regulations (MCSR), complete an application form that contains all the
information required MCSR. The application should provide the essential facts about the applicant’s
work experience, education and personal factors.
Personal Interview: A personal interview provides for face-to-face contact and further appraisal of
job knowledge and qualifications. A standard interview process as outlined by your human
resources department should be followed in order to obtain all desired information and to compare
your applicant’s qualifications against what’s needed and your applicant pool.
Reference Checks: A check should be made with previous employers to develop information about
the prospective employee driver’s general character and professional ability. Reference checks help
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A telephone interview, a letter or a personal visit with former employers is essential to a good hiring
process. Information obtained from this process should be documented in the driver’s qualification
file.
Inquiries: Contact the appropriate state/local Motor Vehicle Department (MVD) to confirm that the
applicant has a valid license and to review the applicant’s MVR driving record. This step can provide
essential information about the applicant’s ability to operate motor vehicles.
Drug and alcohol testing: Each applicant should be informed that final acceptance for employment
will be based on the successful completion of a drug and alcohol test. Also, the employer should
consult an employment law attorney prior to implementing a program.
Post-Offer Functional Capacity Evaluations: Post-offer physicals – official term: “functional capacity
evaluation” or FCE – can be a valuable part of the hiring process and can be worth the employer’s
expense because there is significant potential for injury prevention. Generally speaking, employers
can do this but they need to be careful to comply with employment law. As the employer, you
should consult an employment law attorney prior to implementing a physical exam program.
FCEs cannot be “pre-employment” per se, but rather must be conducted “post-offer.” Employers can
make a job offer contingent on passing the FCE. If the FCE is not passed, the employer would need
to make “reasonable accommodation” without “undue hardship.” This does not necessarily mean
that the person would have to still be hired, but disability rules would need to be complied with.
Other regulations/procedures may also apply. FCEs are usually best performed by a physical
therapist or occupational therapist, rather than an MD.
A good FCE should evaluate a person’s abilities in comparison to the specific requirements of the
job – which need to be predetermined. For example, job requirements (“essential functions” in
terminology) could include lifting 50 pounds (~23 kg), climbing ladders, working with arms
overhead for long periods, quickly moving down a bus aisle, etc. Employers may be able to self-
determine these requirements, or a professional such as a vocational rehabilitation consultant can
do a professional description of job requirements.
8. Road Test: All employees who drive as a part of their duties should be given a road test in traffic. A
road test is one of the ways to confirm drivers can do the job expected of them and to meet your
organization’s driver safety program requirements. Before starting work as a driver of your company
vehicles. The same type of vehicle that will be assigned to the driver should be used in the test; as
much as possible the test and route driven should mimic what would be a normal workday.
8. Commercial Truck Driver Orientation and Training (CPC)
As an important element of any fleet safety management program, all new drivers should
participate in and successfully complete a driver orientation program. The goal of your program for
new employees should include:
 Thorough and proper training.
 The right tools and equipment.
 Appropriate driver support systems.
 A thorough understanding of your company policies, and the procedures to perform all
functions and duties of their jobs in a safe, legal and professional manner.
This process may include classroom instruction, assignment to a driver trainer (for evaluation of the
new employee’s overall driving skills and techniques, and to apply what has been learned in the
classroom to an actual job situation) and continued in-service training based on periodic
performance evaluations.
For most countries, driver CPC (Certificate of Professional Competence) training is a mandatory
qualification for all professional bus, coach, and lorry drivers. It's designed to enhance the
knowledge and skills of professional drivers, ensuring they are proficient in road safety and adhere to
international industry standards. The International Road Transport Union (IRU) emphasizes that

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Driver CPC training is not just a formal requirement but a cornerstone in fostering a culture of safety
and professionalism in the transport sector. It is illegal to drive professionally without a Driver CPC
card and there are penalties if you do not comply. Once the driver has been qualified, he/she'll be
sent a Driver Certificate of Professional Competence (CPC) card. This is sometimes called a “driver
qualification card” or “DQC”.
Driver CPC training encompasses a range of modules, each tailored to address key aspects of
professional driving:
Road Safety: Focusing on defensive-driving techniques, this module enhances drivers' ability to
anticipate and safely manage road hazards.
Safe Driving Practices: This includes practical advice on vehicle checks, safe loading, and fuel-
efficient driving.
Health and Safety: Covering first aid,
health and well-being, this module
ensures drivers are prepared for any
emergencies.
Service and Logistics: It highlights the
importance of customer service and
effective communication in the transport
industry.
Legal Compliance: This module focuses
on legal obligations, including drivers'
hours and tachograph use, ensuring
compliance with road transport
regulations. Figure 6. Driver qualification card (DQC)l
Driver CPC training is essential for:
 All professional drivers of buses, coaches, and lorries over 3.5 tons in the EU and beyond,
 Drivers who transport goods or passengers for hire or reward,
 Anyone looking to start a career in the transport industry,
9. Reduce Collisions by Improving Driver Performance
In roughly 80% of collisions between cars and trucks, the car driver is at fault. But since trucks are
heavier and can cause more damage, truck drivers are more often found at fault. Luckily, fleets can
protect their drivers – and their business – with the help of telematics and in-cab technologies. Let
us learn how digital solutions for fleets support driver and road safety:
Driving metrics: Telematics pulls in vehicle data like speed, braking and acceleration. As a result,
fleet managers can assess patterns in driving behavior and understand where drivers may need
coaching or more targeted training.
Driver feedback: In-cab technologies like dashcams provide immediate feedback to drivers about
risky behaviors such as harsh braking or rapid acceleration. This feedback helps drivers adjust their
performance in the moment.
Compliance support: Staying on top of drivers’ hours rules and vehicle inspections is much simpler
with a fleet driver management system. You can track remaining driving times, for instance,
ensuring that drivers are well rested and adhering to regulations.
Cost savings: By promoting safer driving habits, telematics and in-cab technologies drastically lower
the likelihood of accidents. Fewer accidents mean less downtime and lower repair costs,
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10.Driver Supervision
Hiring the right drivers is fundamental to fleet efficiency and safety. The recruitment process should
focus on identifying candidates with the necessary skills and experience, not to mention a strong
safety record. Once you’ve hired the ideal drivers for your business, you’ll want to empower them to
perform their best at the wheel. In other words: training plays an essential role in your driver
management.
Comprehensive training helps drivers operate your fleet vehicles safely, stay on top of compliance
and adhere to safety protocols. Here are just a few of the specific ways your fleet can benefit from
well-planned recruitment and training as part of your overall driver management processes:
Increased safety: Around 90% of accidents are caused by human error. Properly trained drivers are
less likely to be involved in road incidents.
Greater efficiency: Skilled drivers can manage their time on the road better, leading to improved
fuel efficiency and on-time deliveries. Reducing downtime and repair costs.
Easier compliance: Training ensures drivers understand and comply with industry regulations and
company policies, avoiding legal issues and fines.
Improved retention: Investing in driver development fosters loyalty and reduces turnover, saving on
recruitment costs.

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UNIT H – Truck Operating Costs, Finance and Cash Flows
1. Truck Operating Costs
Knowing what to expect, preventing unnecessary expenses and looking for ways to save money will
help reduce costs and maximize profit as we understand the operating costs of running a trucking
company.
It’s important to note that when considering the average cost per mile to operate a truck, the
statistics provided are national averages and calculated with data from owner-operators to large
fleets. Each carrier will have a different cost to operate based on several variables. As a quick note,
you want to make sure all the loads you accept are profitable. So, generally speaking, dividing your
rate by the total miles for the trip should get a number above your current operating cost per mile,
or use the industry average as a benchmark. Need help calculating your cost per mile?
Figure 1. Cost of trucking in 2024.
When considering your operating costs, the largest are often fuel, insurance and equipment
maintenance, but you also have to look out for unplanned or unexpected costs like empty miles or
out-of-service time.
2. Fixed/Variable Costs
Fixed costs are those costs which occur regardless of whether the truck is loaded and working or
merely standing idle. Fixed costs continue running whatever is happening and this is where delays
and waiting time “eat into” truck operating costs!!
Running (variable) costs are those incurred in the truck working.
Vehicle provision is the cost of providing a vehicle/trailer to a transport operation. It can be the
depreciation of a vehicle bought outright or on hire purchase, a lease, a contract hire arrangement
or a vehicle on a short- or long-term truck rental contract. Where a vehicle is bought outright one
should take into account the finance costs.

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Rental/hire contracts will often include routine maintenance and tires, but exclude exceptional
damage. In some instances, drivers might receive overtime payments for excess hours worked, if this
is regular it can be included in
these fixed costs.
All fixed costs relating to
overheads etc. must be
apportioned appropriately and
fairly!
These costs are heavily influenced
by:
 The driver,
 The transport manager,
 Route planning,
 Timetable planning (to avoid
congestion, customer closed times etc.). Figure 2. Fixed vehicle (standing)
costs
Many of variable overhead costs avoidable!
3. Cost of Transport
In most countries these remain the main costs:
 Fuel,
 The driver,
 Provision of the truck.
Diesel can account for nearly 50% of the operating costs. Differences in fuel consumption between
drivers can be up to 30%. When making comparisons it is important to compare like with like,
recent developments in telematics enables operators to have a much more professional approach.
It is an undisputed fact that, apart from actual diesel costs, those drivers with the best fuel economy
will also have lower costs in the following areas:
 Tyres,
 Brakes,
 Accidents to vehicle and load.
Table 1. Monitoring fuel costs
The growing shortage
of professional drivers
must influence current
salary rates. At the
same time drivers can
have a major influence
on operating costs and
customer satisfaction.
Driver direct and
indirect costs are
 basic salary,
 overtime in
respect of
additional hours,
 subsistence
allowances,

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 bonuses for safe and economical driving,
 social security & pensions,
 sickness and replacement driver,
 holiday payments.
Table 2 is produced by Volvo which provides an excellent overview of the main costs in any truck
operation.
Table 2. Volvo example
Outright purchase can only
be possible if adequate funds
are available. Outright
purchase and hire purchase
allow operator to dispose of
assets as required. Leasing
can be costly to terminate
early, also can require vehicle
to be kept in 100% condition,
including minor accident
repairs.
If contract hire is chosen
maintenance, tires, etc. will
be included in contract price
since contracts can specify
maximum kms.
Trucking rates are calculated
on a per-km basis. First, take
the distance between the
starting and destination points. And then apply formulas necessary for daily operations. Having all
these cost elements let us
understand typical truck cost
calculation given here.
Cost directly associated to a
specific transport in addition
to normal truck operating
costs. It is important that
direct costs, and revenue
which these supplies might
generate, should not be
confused with the actual
costs/revenue linked directly
to the truck operation.
Figure 3. Typical truck cost calculation
4. Cash Flow Simulation
Cash flow modeling/simulation is an analytic tool that accountants use to make informed
projections about a business's future cash flow. It incorporates various inputs, including historical
financial data and differing business scenarios to calculate likely cash flow in the future.
This chart below is based on a typical 40T Continental Europe single truck operation. This assumes
that the customer pays the transporter 30 days from the end of the month. It assumes a cash
balance of 15,000 at the start of the operation and anticipates when the different costs of operating
the truck will have to be paid. Effectively the payments are below the line and payments / cash

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balance is above the line. In this example the cash balance is starting to improve once the
payments are received at 30 days.
Table 3. Cash flow modeling/ simulation on a typical 40T Continental Europe single truck operation
If the income is delayed, the impact of this is critical for the enterprise. The EU may strengthen its
directive in order to address the issue of late payment as many enterprises cease operation due to
cash flow issue. The spreadsheet below really emphasises the importance of proper credit control
and demonstrates the results in delayed payments or unforeseen extra costs!
Table 4. Importance of proper credit control
In case of a truck is off road for one week, the consequences would be:
 Reduced income,
 Increased repair costs,
 Negative effect on cash flow.
There are two ways in understanding and managing the finance for road transport operations. First;
financing the assets (the fleet) – truck financing – and secondly, management of fleet for maximum
financial incomes – managing cash flows – and increased profitability for the organization.

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5. The Importance of the Driver
Because the driver has a major influence on operating costs incentive bonuses are sometimes
offered for fewer accidents and better vehicle fuel economy. This is perceived to be a best practice
but unfortunately not regularly implemented. Whilst often these bonuses are offered in financial
terms, some operators might offer other incentives or recognition.
Incentive bonuses are often offered as incentives for better productivity. In many countries including
all the EU bonuses based on kms travelled or loads moved are illegal, as they can encourage
speeding, unsafe driving and driver fatigue. In the event of such bonuses being linked to an
accident the consequences are increasing ever more severe. In some countries leading to prison
sentences for the management.
6. Fleet in Finance
Fleet in finance involves the acquisition and funding of vehicles to support various business needs.
Understanding the importance of fleet financing and exploring the different types available is
crucial for making informed decisions.
Navigating truck finance can be daunting, but it's essential for businesses in the long-haul transport
industry looking to grow and meet increasing demands. This section will cover all you need to know
about truck finance, helping you make informed decisions for your business.
Truck finance is a type of asset loan designed to help business owners acquire heavy vehicles, such
as trucks, by spreading the purchase cost over time. This approach allows companies to invest in
essential equipment without bearing the full upfront cost, freeing up cash flow for other business
needs.
Investing in additional trucks through finance can significantly boost your business's earning
potential. By utilizing a chattel mortgage, where the truck itself acts as collateral, you can have your
new vehicle on the road sooner, increasing your capacity and revenue. Generally speaking, there are
two avenues to seek a loan: one is directly through truck dealers, the other through financial
institutions. Both have their pros and cons, and ranking your priorities will help you make a decision.
6.1. Fleet Financial Management
Mastering the complexities of fleet management requires not only logistical skills, but also a keen
eye for the financial pulse of the organization. Critical to success is financial management, including
sound fleet budgeting techniques, careful cost allocation, and smart fleet ROI analysis. This
comprehensive guide explains the critical financial aspects of fleet operations and provides fleet
managers with the acumen they need to manage their fleets for maximum financial efficiency and
increased profitability.
Fleet financial management is an endeavor that combines precision, strategic foresight and
analytical thinking. It is a multifaceted endeavor that requires a deep understanding of fleet
budgeting techniques, the intricacies of cost allocation in fleet operations and the wisdom of ROI
analysis. By mastering these financial disciplines, fleet managers can transform their operations and
improve their financial management.
Fleet budgeting techniques: A carefully crafted budget is the cornerstone of prudent financial
management in the fleet industry. This process begins with an acute expenditure forecast that
includes the multiple costs of vehicle procurement, fuel consumption, regular maintenance, and
more. Accurately forecasting fleet revenue performance is equally critical and requires a deep
understanding of the potential ebb and flow of revenue streams. By using historical financial data
combined with the predictive power of analytics, fleet managers can create a budget that not only
reflects current fiscal realities but also anticipates the financial demands of new market trends and
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Cost allocation in fleet management: The art of cost allocation in fleet management is a delicate
balancing act that requires an equitable distribution of expenses across the various lines of business.
This fiscal choreography ensures that each department or project bears its fair share of fleet costs
providing the basis for accurate accounting and insightful performance metrics. Beyond
accountability, effective cost allocation serves as a diagnostic tool that highlights potential measures
to strengthen the financial health of the fleet.
Fleet ROI analysis: Investments in the fleet sector require rigorous examination through the lens of
return on investment (ROI). ROI analysis for fleets goes beyond a superficial look at expenditures and
explores the nuanced landscape of investment returns. This analysis identifies both the tangible and
intangible benefits of investment. It considers both the tangible productivity gains and the less
obvious but equally important reductions in operational downtime and improvements in safety
performance. A comprehensive ROI analysis is key to confirming the financial viability of
investments and charting a course towards profitable horizons.
Strategic financial planning: The area of strategic financial planning for fleet management is a
demonstration of the foresight and long-term thinking that underpins the fleet’s financial objectives
and the strategic ways to achieve them.
Utilizing technology in financial management for fleets: In an age where technology is the linchpin
for organizations, fleet managers have an array of digital tools at their disposal to improve their
financial management processes. State-of-the-art software solutions are available to automate the
maze of tasks associated with budgeting, cost allocation and ROI analysis. Detailed financial
reporting enabled by these technological marvels is invaluable to fleet managers, providing the
precision and accuracy required for informed decision making.
Case Study
Abdullah, who owns Abha Ltd, currently operates one truck and turns over around $30,000
monthly. His client, Mansour, offers him additional work that could double his income if he acquires
a second truck. However, his current financials don't support a new loan. After consulting with Saudi
Investment Bank, Abdullah is approved for truck finance based on a work source letter from
Mansour and cash flow forecasts, allowing him to grow his business by adding a second vehicle.
Imagine you own a long-haul transport business with one truck, generating $30,000 a month. By
financing a second truck, you could still increase your monthly profit by $9,000 even after
accounting for loan repayments and driver salaries. This strategy illustrates how truck finance can
help expand your business and increase profitability.
6.2. Common Types of Truck and Trailer Financing
There are a number of methodologies to be chosen for truck and trailer financing. Some of
commonly preferred ones are:
Vendor financing: Truck and trailer sellers can finance the purchase through vendor financing,
which can also be called dealer financing. Many manufacturers and retailers have financing
divisions that offer discounts to stimulate sales at dealerships. Other equipment sellers without in-
house financing options have partnerships with other financial institutions to help get a lease or a
loan.
Opting for vendor financing has the advantage of being fast, convenient and having lower upfront
costs. It can often be done on the spot with limited financial information and a credit history check.
Some brands will also offer 0% interest on new models. Be aware, though, that the price tag was
adjusted to make it worthwhile for the dealer and it will be difficult bargain it down.
Equipment loan: An equipment loan is a specialized term loan used to finance equipment
acquisitions. It is usually secured by the equipment being bought, meaning that the lender can
seize it if you don’t make your payments. This is a more flexible option than vendor financing. With
an equipment loan, you can also get extra cash to cover any additional costs associated with the

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equipment purchase. Some banks also offer principal postponements for up to the first two years
on equipment loans.
Working capital loan: A working capital loan (or a cash flow loan) is a short-term business loan to
finance your day-to-day operations. Cash flow loans usually have shorter amortization schedules
(around 6-7 years), while equipment loans can be repayable for up to 12 years.
7. Managing Cash Flows
As we slowly approach the end of the section it might be useful to relate the previous modules to
the everyday need to remain in business. At the same time, it depends on being paid on a regular
(agreed) basis by its customers. Therefore, everybody within the operation can have a significant
influence on cash flow. On the one hand ensuring that invoices for transport services delivered are
raised promptly, and on the other that all costs are kept to a minimum, without reducing the
quality.
Cash flow is the movement of money into or out of a business, project, or financial product. A cash
flow statement split into three sections. It shows separately the cash flow from operating, investing
and financing activities of the business.
Operating cash flow is cash received or paid by a company in the course of its regular business
during a specific time period. Operating cash flow items will usually have a correspondence to items
in the company’s income statement. A strong positive cash flow from operations is a good sign of
the company’s health.
Investing cash flows are cash received or paid out by the company associated with investment
items. These can be investments in publicly traded securities, investments in other companies or
investments in assets such as property or factories. Oftentimes, investing cash flows will not have a
corresponding item on a company’s income statement but the changes should show up on a
company’s balance sheet. The changes in cash flow form changes in equipment, assets, or
investments are revealed here. Cash goes out to buy new equipment. Also, cash comes into the
company when an asset is sold or divested.
Financing cash flows shows money received or paid out by the company associated with its
capitalization. These items can be related to debt payments or new debt. Dividend payments would
show up here. Stock buybacks or the issuance of new stock would also show up here. Most of these
items would be
unlikely to show up
on a company’s
income statement
(although interest
payments would)
but would show up
on the balance
sheet. The financing
section shows how
borrowing money
affects the
company’s cash flow. Figure 4. Cash inflows vs outflows
In the scenario given at Table 5, it is easy to see how the supplies can have to be paid for long before
the finished product is sold and paid for. Based on 30-day stages covering the process of
manufacture from procurement of materials/supplies through to payment for the finished goods.
The green parts represent the materials/supplies required for the manufacturing process. At any
stage the manufacturer must pay for goods and cash flow is represented by the green parts. Clearly
the terms of payment for both purchases and sales are subject to individual negotiations. However,
length of the credit period can be influenced by the transit times within the supply chain.

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The closer the supplier is the shorter the transit time, this can influence the cash flow of all parties
involved. This simple cash flow diagram can be used for many different activities, even transport
where there are costs incurred which have to be paid before the receipt of money from sales. When
looking at all the transport interfaces in a supply chain there are two areas of “cash flow” that should
be considered.
Table 5. Manufacturer’s cash flow
 Later in this theme, we have seen how important cash flow is for a transport operator. Profit
margins are low and in many cases a road transport operator will have many outlays to make
before receiving payment for the services provided. Therefore, it is important that there are as
few problems in the processes which can cause delays in the payments for the services
delivered.
 The second area for consideration relates to how a transport operator can help the cash flows
of the parties in the supply chain with whom they deal. Such active support not only helps to
strengthen the transporter- client relationship but can also lead to higher transport revenue.
Such actions can be as simple as ensuring documents are processed promptly and correctly
to reducing transit times or eliminating wasteful storage or handling costs. Again, we can
understand the importance of the drivers who often handle the essential and basic
documentation such as signed delivery documents.
In this instance we will generally refer to “freight brokers” but the same situations apply to
“forwarders”, “4PL” (fourth party logistics) and any other party who does not own/operate the physical
means of transport. The freight broker industry is the middle man of the transportation industry.
They are also known as third party transportation providers. Freight brokers provide a service by
linking customers with shippers and transport operators. The freight brokers make the process of
securing a shipper quite easy with one-stop shopping.
Asset-based freight brokers: Asset based freight brokers are companies that have their own
equipment that is needed to move or store the freight. The assets that they own could be
warehouses, distribution centers and/or trucks. To be an asset-based freight broker the company
doesn’t need to have all of the equipment needed to move or store the freight, they usually just own
many of the assets. An asset-based freight broker works directly with the shipper to coordinate the
transportation of the goods.
Non-asset or “asset light” based freight brokers: On the other side of the spectrum are non-asset-
based freight brokers. These types of freight brokers do not own their own equipment (or assets).
They work with their networks and the shipper to arrange the shipment of the freight to the correct
location... Most non-asset-based freight brokers still have direct access to trucks. They work with
various partners and carrier networks to transport the goods from point A to point B. In some cases,

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the non-asset-based freight brokers can even have access to more trucks than an asset-based
freight broker depending on the size of their carrier network.
However, freight brokers can often operate in competition with transport operators and only
compete by pushing down the transport prices or by using fewer professional subcontractors.
Freight brokers can have very few assets and capital and survive by paying their subcontractors later
than they themselves are paid by their shipper clients!
Few transport operators will exceed net profit ratios to turnover of 3%. Those with higher profit
margins are normally engaged in value added activities such as warehousing and fulfilment.
Therefore, it is possible to understand the importance of strict control over all costs.
8. Depreciation
Under the Modified Accelerated Cost Recovery System (MACRS), vehicles are classified as a five-year
property. In other words, the standard depreciation schedule is five years. According to the IRS,
taxpayers can actually depreciate the cost of a car, truck, or van over a period of six calendar years.
Whole life vehicle costs are influenced by:
 Original cost and financial costs,
 Residual values,
 Fuel economy,
 Length of operation and ongoing certainty,
 Driver acceptability,
 Previous operating experience.
For many operations the transport activity can be secondary to the profit on vehicle disposal.
Annual Depreciation = (C – R) / N = (Cost of an asset – Residual value) / Useful life of an asset
“Straight Line” depreciation at 20% per annum over 5 years:
 Depreciation for a truck of 100,000 EUR on a five-year period,
 For example, if you spend €100,000 on a truck, you might use straight-line depreciation to
expense €20,000 of the price each year over five years.
 Tyres and maintenance are fixed costs for which generally depreciation doesn’t apply,
 Depreciation rate will vary from country to country and business to business (fiscal regime),
 The scenario given at Table 6 is also relevant to a fixed lease where the lease charges remain
constant but maintenance etc will increase year on year.
Table 6. Straight line depreciation
“Reducing Balance” depreciation at 25% per annum over 5 years (see Table 7):
 Depreciation for a truck of 100’000 EUR on a five-year period,

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 25% applies to the residual value of the vehicle.
Table 7. Reducing balance depreciation
To conclude it is clear that transport operations work on very tight margins. Through offering more
value-added logistics services it is possible to improve these margins. It could be said that any
logistics provider has to be an optimist. This leads to a positive attitude to sales opportunities. But,
strong financial disciplines are essential.

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UNIT I – Customer Charging Options
1. Freight Charges
Freight charges are costs that a sender or receiver pays for transporting goods from a source
location to another destination. Freight charges have multiple components, including the cost of
transport, fuel charges, local taxes, special charges, handling charges and emergency costs. If you
are a student of business, economics or accounting, or if you work in logistics and supply chain
management, understanding the nuances of freight charges can benefit you. In this unit, we will
examine what freight charges are and list the most common types of freight charges with their
definitions.
The types of freight charges depend on the mode of transportation like air, sea or road. While some
charges are common for every mode of transportation, some are exclusive to a particular mode.
Companies may levy freight charges at the time of booking, during transit, before delivery or at the
time of delivery. Some charges may universally apply to all countries, while some may be exclusive
to a few countries.
2. Type of Truck Freight Charges
The factors determining road freight charges are the shipping modes, type of trucks, the distance
between source and destination locations, size and weight of the shipment and any special delivery
requirements. The different types of truck freight charges are:
Line Haul Charges: Line haul charges are the basic cost of transporting goods over a long distance,
typically from one city to another. This charge is based on the weight or volume of the goods and
the distance between the pickup and delivery locations. Line haul charges are a core component of
truck freight pricing, especially in long-haul trucking across regions or states.
Fuel Surcharge: A fuel surcharge is an additional charge added to the standard trucking rate to
compensate for fluctuating fuel prices. Since fuel costs can vary widely, carriers implement these
surcharges to protect themselves from volatile fuel expenses. The surcharge is typically calculated as
a percentage of the total shipping cost and is adjusted regularly based on fuel market conditions.
Accessorial Charges: Accessorial charges cover extra services beyond standard freight delivery. These
include services like liftgate use, inside delivery, reweighing shipments, and detention time.
Accessorial charges help carriers account for additional labor or equipment costs associated with
nonstandard delivery requirements.
Detention Charges: Detention charges apply when a truck is held at the pickup or delivery location
for longer than the allotted free time, typically around one or two hours. This fee compensates
carriers for the time their equipment and driver are delayed, preventing them from completing
additional shipments during that time.
Tarping Charges: Tarping charges are applied when flatbed truck loads require tarps to protect the
cargo from weather or damage. This service involves additional time and labor from the driver to
cover and secure the load. Tarping is typically used for construction materials, machinery, or any
cargo exposed to the elements, and the charges reject the extra effort required.
Toll Charges: Toll charges are added to the freight cost if the truck travels through toll roads, bridges,
or tunnels. These fees cover the actual tolls paid by the carrier during the route. Toll charges can vary
significantly based on the region, especially in areas with extensive toll infrastructure like the
northeastern United States or Europe.
Stop-Off Charges: Stop-off charges are incurred when a truckload shipment requires multiple stops
along the route for partial unloading. Instead of delivering the entire shipment to one location, the
carrier makes additional deliveries before reaching the final destination.

162
3. Factors Contribute to Freight Costs in Road Logistics
Freight costs, also known as shipping expenses or transportation fees, encompass the total charges
involved in transporting goods from one location to another. These costs cover various modes of
transport, including air, sea, rail, and road. Several factors influence freight costs, such as the
shipment’s weight and volume, the distance traveled, the selected transportation method, and
additional services
like customs
clearance,
insurance, and
specialized
handling
requirements.
Accurately
calculating freight
costs is essential for
effective budgeting,
pricing strategies,
and maintaining
profitability in
logistics and supply
chain operations. Figure 1. Several factors including type of asset influence freight cost
Freight costs in road logistics are influenced by various factors, including:
Distance Traveled: Longer routes typically incur higher fuel and labor costs.
Shipment Weight and Volume: Heavier and bulkier shipments require more resources, increasing
costs.
Type of Goods: Specialized or high-value goods may require additional handling and insurance.
Fuel Prices: Fluctuations in fuel prices directly impact transportation expenses.
Tolls and Fees: Road tolls, permits, and other fees along the route add to the overall cost.
Vehicle Maintenance and Depreciation: Regular maintenance and the wear and tear of vehicles
contribute to freight costs.
Labor Costs: Driver wages and benefits are significant components of freight expenses.
Route Complexity: Difficult terrains or routes with limited infrastructure can increase transportation
costs.
4. Strategies for Road Freight Pricing
An effective freight pricing strategy is key to reducing costs while increasing customer satisfaction
and gaining a competitive edge. This article focuses on the crucial factors and successful strategies
in freight pricing.
Understanding Market Dynamics: Several factors affect freight pricing, including fuel costs, seasonal
demand fluctuations, and political changes in international trade. Therefore, continuously
monitoring market dynamics and adjusting your pricing strategy accordingly is essential.
Cost-Based Pricing: Cost-based pricing is one of the most commonly used strategies by freight
companies. This method calculates the service's cost and adds a specific profit margin. However,
accurately calculating costs and determining an appropriate profit margin according to market
conditions are crucial.

163
Value-Based Pricing: Value-based pricing a.k.a. Ad Valorem focuses on the value perceived by the
customer from the service.: Charging levies as a percentage of value of the item are imposed on,
and not on the item's quantity, size, weight, or other such factor. Value added tax (VAT) and,
generally, import duties are ad valorem taxes. This strategy is particularly suitable for companies
offering customized logistics solutions. By providing services tailored to the customer's needs,
companies can demand a higher price.
Flexible Pricing Models: In the rapidly changing logistics sector, flexible pricing models are
becoming increasingly popular. Dynamic pricing based on demand allows companies to quickly
adapt to market changes and remain competitive.
In conclusion, an effective freight pricing strategy requires in-depth market knowledge, accurate
cost calculation, and an understanding of customer needs. These strategies help logistics
companies achieve sustainable success and a competitive advantage.
5. CBM Calculation for Road Freight LTL Shipments
The CBM is a measurement for shipment volume in cubic meters, which is important in shipping
and logistics. CBM stands for Cubic Meter (m3
), which confirms the total space that your shipment
occupies. In shipping, CBM (cubic meter) is a standard unit of measurement for freight volume. This
is important for international trade.
The CBM helps by providing shippers with individual and overall packaging cubic volumes and
weights. When shipping goods via FCL, this helps shippers to plan the loading of shipping
containers. When shipping goods via LCL cargo, it helps shippers understand the freight costs.
Shipping companies or freight forwarders
usually charge based on volume or weight,
whichever is greater. Understanding CBM
and weight data will help shippers in many
ways, including:
 Understand the total freight costs that
the shipment volume will incur,
 Calculating the Landed Costs of
imported products,
 Plan purchasing quantities,
 Plan the loading of shipping
containers. Figure 2. International measurement units’ conversion
chart
The formula for calculating CBM is quite simple. Multiply the Length x Width x Height of your
package in meters. The result is the cubic meter volume (m3
). See below formula and example for
CBM calculations:
Example: A pallet is 1.2m long, 1.2m wide, and 1.5m high
The formula is: Length (m) x Width (m) x Height (m) = CBM (m3
)
The calculation is: 1.2m x 1.2m x 1.5m = 2.16 CBM (m3
)
DIM Weight (also known as Dimensional Weight, or Volumetric Weight) is a key number used to
calculate the chargeable weight for different modes of transport - via, Sea, Air, Courier/Parcel, Road
or Rail transport. It calculates the amount of space that a shipment will take up when it is
transported and compares it to the actual gross weight of a shipment.
Carriers, freight forwarders and courier companies will calculate the Dimensional Weight by
multiplying the length x width x height of a package, and then divide it by a standard divisor (called
the DIM Factor, which is 6000 for airfreight).

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6. Calculating Charges for Weight/Volume
For any particular shipment, the chargeable freight rate depends on the CBM volume and
the Actual Weight or the DIM Weight (Dimensional Weight) of the shipment, whichever is greater.
It’s important to understand that Sea, Air or Road carriers will use the greater of the Actual
Weight or the Dimensional Weight (also known as the volumetric weight, or cubed weight) to
determine the chargeable cost to move the freight. For example, light but bulky items may cost
more due to the large space that they occupy.
When calculating the chargeable weight, shipments via Sea, Air and Road will use a different DIM
Factor (Dimensional Weight Factor, also known as the conversion factor/conversion rate). The
different factors, conversion rates and formulas for the different modes of transport are as displayed
in the table below.
Table 1. Formulas applicable for different modes of transport
This ensures that even if packages are very large and lightweight, or very small and heavy, that they
are charged accordingly by the carrier. For airfreight the DIM factor is 6000. It’s important to note
that the DIM factor varies per mode of transport.
 Road freight: Length (cm) x Width (cm) x Height (cm) / 3000
 Seafreight: Length (m) x Width (m) x Height (m) x 1000. For seafreight shipments, carriers will
multiply the length x width x height (in meters) and then multiply it by 1000.
 Airfreight: Length (cm) x Width (cm) x Height (cm) / 6000
 Courier/Parcel: Length (cm) x Width (cm) x Height (cm) / 5000
 Railfreight: Length (cm) x Width (cm) x Height (cm) / 3000
If you ship goods via road freight LTL, the carrier will charge for the freight per 1m3
or usually per
333kg (a DIM factor of 3000 is used).
Note that for road freight LTL, a conversion rate 333 is widely used. However, this can vary per
carrier. Some carriers use 250, some 300, most use 333. Always verify with your carrier to ensure
accurate calculations and compliance with their policies.

165
Figure 3. Dimensional (volumetric) weight vs actual gross weight
If a road freight LTL freight rate is quoted at $100USD per CBM/MT10
, let’s look at two examples
below.
Example 1: Shipping 1 pallet of goods. Pallet size: 120cm x 120cm x 150cm. Pallet weight: 550kg.
Dimensional Weight: 120 x 120 x 150 / 3000 = 720kg (0.72mt)
Gross Weight: 550kg (0.55mt)
Since the dimensional weight is 0.72mt, which is greater than the gross weight of 0.55mt, the
freight cost will be $100 x 0.72mt = $72
Example 2: Shipping 1 crate of goods. Crate size 180cm x 120cm x 120cm. Crate weight: 2900kg.
Dimensional Weight: 180 x 120 x 120 / 5000 = 518.4kg (0.518mt)
Gross Weight: 2900kg (2.9mt)
Since the Gross Weight is 0.29mt, which is greater than the dimensional weight of 0.518mt, the
freight cost will be $100 x 2.9mt = $290
Case Study: Third Party Charging Structures
Once a company has determined that outsourcing its non-core competency areas to a third-party
logistics provider (3PL) will positively impact both quantitative and qualitative areas and a 3PL
provider has been chosen the parties must agree to a mutually acceptable compensation package.
Few people are telepathic. Fewer work effectively under someone else's pre-conceived, unspoken
notions. Companies must, as a rule, spell out all expectations for ocher parties with whom they
develop relationships. Compensation is a sensitive issue, and it must be approached with the
understanding that by the very nature of capitalism, people want to be paid for their effort and
want to know the when, the how, and the why.
10
CBM/MT: Cubic meter/Metric ton

166
Fee scheduling should be done according to the company's current operational policies.
Determining compensation schedules should be part of the detailed scope-of-work prepared by
the company (and its hired consultants, if applicable), so proposals from 3PL candidates may be
evaluated with those terms dearly defined.
Three methods of structuring fees are commonly practiced but variations and combinations of
these structures are also widely utilized. The three core methods are unit rate, cost-plus and
management fee. Companies must take special care in choosing the fee structure for their 3PL
arrangement, weighing the advantages and disadvantages of each alternative a:ad carefully
assessing the specific criteria, which impact the project. No black and white or absolute areas follow.
Advice from consultants with experience in logistics management could be helpful in making the
correct judgement call on this important issue.
In mathematical terms, unit rate compensation can be defined as cost per unit handled. In other
words, the sum total of operating costs, facility costs, overheads, fixed costs and profit, divided by
the number of units. URC is a reasonably simple structure to utilize. For example, Company A and its
3PL provider, calculate the following variables:
 Operating costs = €10,000/month
 Facility costs = €1,500/month
 Overhead = €2,500/month
 Fixed costs = €1,500/month
 Profit = €250/month
 Volume = 150,000 units per month (based on forecasting methods)
Unit Fee = (Operating costs + Facility costs + Overhead + Fixed costs + Profit)/Volume = €0.105
The unit fee therefore would be set at €0.105 per unit per customer handled. During the first month
of their arrangement, the 3PL provider handles 155,000 units and therefore receives €16,250 as
compensation. Advantages of the Unit Rate Fee Structure include:
 User friendly,
 Cost change with volume.
 Volume guarantees can be added.
 Incentives may be provided to 3PL provider. For example, company A states clearly that if
25,000 or more, units are handled with less than two percent mishandling, a 10% bonus will
be added.
 Motivation of 3PL provider to produce is enhanced.
Disadvantages of the Unit Rate Fee Structure include:
 Possible ambiguity unless the definition of unit is clear and unmistakable. For instance, does
customer handled mean a customer buying product, or customer buying a product and
returning it, or customer calling just to seek information inflated cost due to addition of
contingencies.
 Lack of incentive on part of 3PL provider to share in productivity gains.
Cost-plus structure is the method most open to modification. The compensation format may look
like the following:
 Fee includes all direct costs (operating, material, and labor plus flat foe (overheads plus
profit). Incentives may be added to flat fee for increased productivity and reduction in
operational costs.
 Company B and its 3PL provider agree that the cost-plus structure best suits their
circumstances. The flat fee agreed upon is €5,000/month to cover any overhead and
€250/month is agreed upon for profit. Since Company B has had access to the financial
records of its 3PL provider, information regarding operational, and facility costs is clear. There
are no surprises when the invoice arrives. After 12 months of a satisfying relationship,

167
Company B builds into its cost plus structures an incentive for its 3PL provider: reduce costs
by 10% and receive 2.5% on top of the total invoice.
Advantages of the cost-plus structure include:
 Profit is fixed, so sacrifice of service for increased profit is not possible.
 Motivation on the part of 3PL provider to enhance productivity and reduce costs (if incentives
are built in).
 No padding for contingencies.
Disadvantage of the cost-plus structure includes:
 Company doing the outsourcing must monitor costs regularly and set reasonable
benchmarks. Without additional, pre-determined incentives, the 3PL provider has no reason
to lower costs and increase productivity.
Though the simplest to define, the fixed management fee compensation structure has the most
barriers for acceptance. It is rigid and often based on inaccurate or unreliable information. The fee is
equal to everything associated with the 3PL outsourcing activity, or to direct costs plus a
management fee wherein the management fee equals overheads plus profit. It is interesting to
note that aggregate management fees are rarely chosen, as they do not reflect cost volatility, or do
they invite enhanced.
Company C chooses the management fee compensation structure because of the nature of its
business. As provider of a number-crunching software package called Elsten, Company C realizes
that volume and shipping trends are difficult to forecast.
For example, after a trade-show, Elsten might be shipped to 100 customers for next day delivery.
Three months after the trade-show, two people may lackadaisically telephone the customer service
department requesting that Elsten be sent to them ‘‘whenever you get round to it’’. Then two weeks
later, ten friends of those two people ‘‘absolutely needed this software yesterday’’. With this situation
and with the fact that Company C owns the distribution facility buck is outsourcing its staff,
Company C and its 3PL provider decide on the following management fee schedule:
Fee per year equals €250,000 to cover all overhead and profit with direct costs billed monthly to
Company C.
Advantages of the Management fee include:
 Reductions in debate over expenses and costs.
 Helpful when volume and shipping are speculative.
 Fixed overhead and profit levels.
Disadvantages of the Management Fee include:
 Barriers to acceptance often difficult.
 Setting the initial fee may be based on inaccurate, inappropriate, or unreliable data.
 No incentives on part of the 3PL provider to improve on present operations.
Accurately calculating freight costs is essential because:
Budgeting and Financial Planning: Precise cost estimates enable businesses to allocate resources
effectively and avoid unexpected expenses.
Pricing Strategies: Understanding freight costs helps in setting competitive prices while maintaining
profitability.
Cost Control: Identifying the components of freight costs allows businesses to implement measures
to reduce expenses.

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Customer Satisfaction: Transparent and accurate cost calculations build trust with customers and
ensure timely deliveries.
Operational Efficiency: Accurate freight cost assessments aid in optimizing logistics operations and
enhancing overall supply chain performance.
Case Study
A road freight logistics company manages freight costs by evaluating the specific requirements of
each shipment. For example, transporting a 20-ton pallet of electronics from a warehouse in
Jeddah to a distribution center in Riyad involves calculating fuel consumption based on the 950 km
distance, driver wages for the duration of the trip, and insurance costs for high-value goods.
Additionally, if the shipment requires expedited delivery to meet a tight deadline, the company may
incur extra charges for priority routing and potential overtime pay for the driver. By meticulously
assessing these factors, the logistics company can provide accurate cost estimates to clients,
optimize their transportation budget, and ensure efficient delivery operations.
7. Ways to Reduce Road Freight Costs
Many factors influence the total cost of road freight transport. There are a number of best strategies
for reducing expenses, helping your transport services become more competitive and cost-effective.
Route optimization: One of the most operative ways to reduce transport costs is by using modern
tools to plan the most efficient routes. These solutions help shorten travel distances, reduce transit
time, and even allow trucks to avoid current traffic congestion. Such approaches directly contribute
to lower fuel consumption and often helps minimize toll fees, resulting in significant savings.
Regular vehicle maintenance: Routine fleet maintenance is essential for reducing the risk of
breakdowns and avoiding expensive repairs. Detecting potential issues early helps prevent major
vehicle damage, ultimately saving money on servicing costs. Additionally, keeping vehicles in top
condition enhances fuel efficiency, which plays a crucial role in optimizing overall transport
expenses.
Driver training: Every transport company should invest in specialized training for truck drivers.
Programs such as eco-driving workshops help reduce average fuel consumption, which is one of the
largest cost components in road freight. Moreover, well-structured training can help drivers extend
vehicle lifespan by reducing wear and tear, improve road safety, and lower accident risks. As a result,
companies benefit from fewer repairs and better insurance offers, further decreasing operating
costs.
Negotiating with suppliers: Maintaining strong, long-term relationships with suppliers of fuel, spare
parts, and maintenance services can significantly impact cost reductions. Establishing favorable
agreements may lead to better pricing, discounts, or improved payment terms, ultimately saving
your company a substantial amount. Existing agreements can also be renegotiated to secure more
competitive rates, making supplier negotiations a key strategy for reducing transport expenses.
Using fleet management technology: Implementing advanced fleet technologies such as GPS
tracking, telematics systems, and transportation management systems (TMS) plays a crucial role in
cost reduction. These tools help track vehicle locations, monitor fuel consumption and driver
behavior, and optimize fleet utilization. Specialized solutions provide essential support for freight
planners, dispatchers, and logistics coordinators. By leveraging these tools, transport companies can
maximize efficiency, improve route planning, and enhance overall service effectiveness.
Office process optimization: Introducing office optimizations, such as modern document
management software and task automation tools, can significantly improve administrative
efficiency in transport companies. By reducing the time spent on routine administrative tasks,
businesses can streamline operations, enhance productivity, and ultimately cut operational costs.

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UNIT J – Health, Safety and Environment in Transport Operations
1. Road Freight Safety
Security in the freight industry has always been a major problem. Illegal immigrants, drug
smuggling, customs duty evasion, piracy, and the deployment of sub-standard vehicles (higher
propensity to accidents) have been some of the most important concerns.
In light of the emergence of global supply chains, the emphasis on freight transport security is
gradually shifting into a more comprehensive but complex approach. The scale and scope of these
problems with freight are of an even greater magnitude. The less-regulated and international
dimensions of the shipping industry, in particular, have made it vulnerable to security breaches.
Ensuring safety in road freight operations is paramount for protecting drivers, cargo, and other road
users. By implementing best practices, companies can mitigate risks, prevent accidents, and
maintain efficient logistics operations.
Accidents in the supply chain can be categorized as:
 Those involving vehicles on the road,
 Those involving vehicle off the road,
 Those involving goods handling in warehouses and factories.
Accidents involve:
 The operator/driver,
 Other people in the workplace,
 Third parties/members of the public.
In addition to the risks of accidents some transport/logistics operations can require actions to
prevent health risks, ranging from personal injuries to cross-contamination, involving sensitive
goods. Accidents may incur damages on the population, the environment and the economy.
2. Safety Equipment
Anyone employed in goods handling – drivers – warehouse staff and those in supervisory roles
should be issued with a minimum of a Hi-Viz garment, safety footwear and work gloves. It is normal
for those visiting facilities are loaned Hi-Viz
garments and sometimes safety footwear. When
work involves entering cold environments
workers and visitors should be issued with
suitable wear.
Depending on the risks of particular
environments and goods handled specific safety
equipment should be made available and its use
enforced. Many warehouses use electric forklifts
where eye, hands and the body should be
protected when working with the batteries.
Personal protective equipment, commonly
referred to as “PPE”, is equipment worn to
minimize exposure to a variety of hazards. PPE is
a crucial aspect of workplace safety, especially in
industries where workers are exposed to
hazardous conditions. Examples of PPE include
such items as gloves, foot and eye protection,
protective hearing devices (earplugs, muffs) hard
hats, respirators and full body suits. Figure 1. PPE

171
Figure 2. Type of fire extinguishers

172
All areas of any operation should have adequate firefighting equipment with nominated employees
being responsible for its maintenance. In warehouse environments the equipment should be
adequate for the handling of fires of the materials stored/handled. Some warehouse installations
might be required, by insurance companies, to have in built sprinkler systems.
3. Safety Signs
All working environments must display sufficient notices relating to emergency actions in the event
of a fire. Usually warehouses,
fleet parking areas, workshops
where there is a constant flow of
vehicles and material handling
equipment, will have clearly
marked pedestrian walkways
with warning signs at strategic
locations.
Attention should be drawn to all
visitors the importance of taking
note of all instructions including
any safety notices or instructions.
Some businesses will include
such instructions within their
reception procedures which
book all visitors into and off the
site. Increasingly businesses will
display other signs relating to
general safety. Figure 3. Site safety notice
4. Need for Training
Workplace safety training is essential for creating a safe work environment, ensuring regulatory
compliance, and improving productivity. In other words, safety training and awareness programs
make employees better at identifying dangers, risks, and problems, creating a safer work
environment. Workplace safety training is crucial for businesses because of it:
 Prevents accidents and injuries,
 Ensures legal compliance,
 Empowers employees and promotes a safety culture Increases efficiency and productivity,
 Minimizes financial losses,
 Enhances reputation and employee morale,
 Adapts to changes and advancements.
Additional training may be needed depending on the roles assigned to employers or individual
managers, supervisors, and workers. For example, employers, managers, and supervisors may need
specific training to ensure that they can fulfill their roles in providing leadership, direction, and
resources for the safety and health program. Workers assigned specific roles in the program (e.g.,
incident investigation team members) may need training to ensure their full participation in those
functions. Effective training and education can be provided outside a formal classroom setting.
Peer-to-peer training, on-the-job training, and worksite demonstrations can be effective in
conveying safety concepts, ensuring understanding of hazards and their controls, and promoting
good work practices.
5. First Aid Training and Equipment
Many people undertake some form of first aid training at some point in their lives. Whether it’s done
as part of your education at school, a requirement for a job or part of professional development,
learning the skills that can be used in a range of emergencies can be a massive benefit if you do
end up in a situation where someone needs medical assistance.

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In many countries it is a requirement for employers to ensure that they have on site during working
hours at least one person who has completed workplace first aid training (normally 4-5 days). All
businesses should ensure that they have at strategic locations first aid equipment relevant to the
working environment. The supplies should be checked regularly and out of date materials duly
replaced.
Workplace first aid training, also referred to as First Aid at Work training, is one of the most popular
courses undertaken by first aiders. It complies with HSE legislation that requires every workplace to
have a trained first aider and is suitable for people in the majority of industries who want to gain
knowledge of what to do in all kinds of medical situations that can occur in the workplace.
This type of first aid training is more thorough than basic first aid training and tends to be
undertaken by people who work in environments where accidents are more likely. As well as basic
topics that have been discussed above, this training may also cover what to do in the event of head
injuries, eye injuries, potential poisoning or ingesting of toxic substances, burns and scalds, broken
bones and spinal injuries.
6. Incidents and Injuries in the Supply Chain
The supply chain is heavily reliant upon product movement and relevant services rendered by
transport companies and warehouses which temporarily hold goods that are intended for market.
Products are trucked in for workers to move to a temporary location until they are ready for final
distribution to retailers. Recent supply chain disruptions emphasize the importance of the supply
chain for everyday people. Although the supply chain’s importance is well-known to most people,
the accidents that occur in fleet operations and warehouses with other links in the supply chain
often are overlooked. The supply chain contains many potential dangers for those who work in it.
The following are some of the most common injuries that workers suffer in the supply chain:
Injuries Caused by Slips, Trips, and Falls: About 20 percent of injuries that supply chain workers
suffer occur due to slipping, tripping, and falling. A warehouse or a loaded truck has lots of items
that might break, spill onto the floor, or pose a hazard to workers. Tripping over an item on the floor
or slipping on a wet or slick surface might cause a soft tissue injury. Slipping, tripping, and falling
could cause a more serious injury, including broken bones, a concussion, or worse.
Struck by or Caught between Objects: Trucks have blind spots which the driver cannot notice using
side mirrors. During a maneuver, a truck may cause severe injuries. Likely, warehouses typically store
items on tall and sturdy racks as well as on the floor and sometimes, items are not properly secured
and are apt to fall when subject to
vibration or other movements.
Someone might be working below
and suffer a serious injury when
struck by a falling object. Moving
pallets or large carts laden with
products can block the vision of
workers who are moving them. Other
workers might not notice the items
are in motion and could be struck by
a load of goods being moved.
Workers also might get pinned
between one or two moving objects
and a stationary object and suffer a
serious injury or worse. Figure 4. Common injuries of truckers
Heavy Lifting or Repetitive Strain Injuries: Improper lifting of heavy items accounts for about 30
percent of all injuries to workers in the supply chain. Repetitive motion injuries also commonly afflict
supply chain workers. A back strain, torn muscle, or other soft tissue injuries could make it difficult to
continue working or to engage in other common daily activities. Repetitive motion injuries might
include a slipped disc, carpel tunnel, and trigger finger, among others.

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Contact with Hazardous Materials: The supply chain includes the handling of hazardous materials
used for industrial purposes. When an accident occurs while handling hazardous materials, workers
can be exposed to caustic and potentially deadly chemicals and gases. It is vital that job providers
thoroughly train and properly equip workers to handle hazardous materials as safely as possible.
Just one accident could cause serious injuries and loss of life.
7. Employees’ Responsibilities
The most important responsibilities of an employee are:
 To take reasonable care of their own health and safety,
 If possible, avoid wearing jewellery or loose clothing if operating machinery,
 If they have long hair or wear a headscarf, make sure it’s tucked out of the way (it could get
caught in machinery),
 To take reasonable care not to put other people – fellow employees and members of the
public – at risk by what they do or don’t do in the course of their work,
 To co-operate with the employer, making sure they have proper training and understand and
follow the company’s health and safety policies,
 Not to interfere with or misuse anything that’s been provided for their health, safety or welfare,
 To report any injuries, strains or illnesses they might suffer as a result of doing the work
designated to them,
 To advise the employer if anything happens that might affect their ability to work (e.g.,
becoming pregnant or suffering an injury) – the employer has a legal responsibility for health
and safety, they may need to suspend an employee while they find a solution to the problem,
but they will normally be paid if this happens,
 If anyone drives or operates machinery, they should tell their employer if they take medication
that makes them drowsy – in which case the employer should temporarily transfer them to
another function if they have one suitable.
8. Employers’ Responsibilities
Procedures for the recruitment and employment of drivers, particularly those driving large goods
vehicles, are particularly important so far as health and safety is concerned. Apart from the obvious
requirement for all drivers to hold a valid driving license, there are many other considerations
relating to legal requirements and the suitability of any individual to carry out the work safely and
professionally.
Employers would check the validity of the driver’s license as well as look for any penalties for road
safety contraventions. Whilst most heavy vehicle drivers are required by legislation to undergo
regular medical examinations, some employers require new recruits to attend a medical by the
company’s own nominated doctor.
Most operators also ask new applicants to undertake a short on road driving appraisal carried out by
a trusted employee. In the interests of safety and professionalism employers will usually seek to
obtain any information they can relating to an applicant’s previous employment. This is specifically
relevant where they have already left their previous employment. Certainly, it is important to know if
the person had been involved in accidents or bad practices.
In some countries such information can be subject to “data protection” legislation. However, failure
to disclose criminal or other information can lead to instant dismissal if discovered at a later date.
Such conditions should be specified on all employment application documents. In order to ensure
that any misunderstandings are understood prior to starting unsupervised work, it is always
advisable for new drivers to be accompanied during their first day(s) by an experienced driver. This
enables new recruits to fully understand company disciplines, safety checks and the proper
handling of vehicles, loads and documentation.

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By accompanying new drivers, they are able to become fully conversant with vehicles, safety
equipment and essential daily checks. Often new drivers will also learn about the issue and
safeguarding of load securing material.
Increasingly modern trucks can be equipped with addition mechanical equipment which should
be used correctly. This includes equipment such as tail lifts used to loading and unloading goods,
often in public areas, this brings additional safety considerations.
One of the areas of driver safety relates to the coupling and uncoupling of trailers. Many accidents
occur because drivers fail to follow safe procedures resulting in vehicles running away. In these
instances, these failures result in the driver of the vehicle running themselves over try to apply the
brakes. After receiving this training all drivers should be required to acknowledge their
understanding and sign to the effect with date. Employers should also undertake brief refresher
training.
9. Driver Fatigue
When commercial drivers become fatigued from excessive daily and weekly work hours, they
substantially increase the risk of crashes that result in death or serious injuries. Whilst it is the
ultimate responsibility of the driver to have proper rest breaks and avoid driving excessive hours, it is
also the moral and legal responsibility of all parties to ensure that transport demands or incentive
bonuses do not force or encourage drivers to drive excessive periods or speeds. Of course, the
induction of new drivers must include confirmation of drivers’ hours legislation linked to route
planning relevant to the normal type of operations involved.
As a driver, fatigue can cause you several problems including:
 Slowing your reactions and decisions,
 Decreasing your tolerance for other road users,
 Poor lane tracking and maintenance of speed,
 Decreasing your alertness.
10. Food Hygiene and Load Contamination
When foodstuffs are transported, there is always a serious risk of deterioration and cross
contamination between different goods carried. For that reason, vigilance must be paid to
cleanliness and hygiene. For the temperature-controlled transportation of perishable foodstuffs,
increasingly they are subject to the regulations of the ATP is the multi-lateral agreement between
Signatory Countries for overland cross border carriage of perishable foodstuffs. It ensures that
vehicles used for this carriage meet agreed international standards. The agreement details the
following:
 Establishes the standards for temperature-controlled transport vehicles such as road vehicles,
railway wagons and sea containers,
 Lists the foodstuffs to be carried in accordance with the ATP agreement and sets the warmest
acceptable temperatures for types of cargo,
 Specifies the tests to be conducted on such equipment to ensure they meet the required
standards. The standards apply to the bodywork and refrigeration units,
 Provides the system of certification for equipment that conforms to the standards,
 Requires all Contracting Parties to recognise certificates issued in accordance with the
agreement by the competent authorities of other signatory countries,
 It is illegal to transport perishable foodstuffs across international boundaries between
countries that are signatories to the agreement unless the vehicle has an ATP certificate. Apart
from the standards laid down in the ATP agreement.
Generally speaking, many hygiene problems can be avoided if the following preloading rules are
applied:
 The vehicle is clean and in good condition,

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 Refrigeration unit is operating properly,
 The trailer or container is pre-cooled (or pre-warmed),
 Refrigeration air chutes or ducts are properly installed and in good repair,
 There is no evidence of insect or rodent infestation,
 There are no off odours that might indicate contamination of the vehicle,
 Door seals are in good condition and seal tightly when closed,
 Walls are free of cracks or holes,
 Front bulkhead is installed,
 Floor drains are open,
 Floor grooves are free of debris,
 Inside length, height, and width is adequate for the load,
 Load locks or other devices are available to secure load.
11. Safety in Supply Chain – CTU Code
The CTU code is a non-mandatory global code of practice for the handling and packing of shipping
containers (and other cargo transport units) transported by sea and land. The introduction of the
freight container revolutionized the carriage of cargo in the supply chain, permitting large volumes
of cargo to be lifted from ships without the need for slings, nets or platforms. But the container
brought its own problems that did not at first manifest themselves. The system is fundamentally
reliant on the integrity of parts that may not regularly be scrutinized in operation.
Complying with the CTU Code requires mainly two things: proper securing of cargo, and proper
distribution, measurement, and declaration of weight to prevent overloading. This statement may
end up sounding simplistic when considering the criticism and resistance the new requirements
have brought forth. But endorsement from influential bodies — International Maritime Organization
(IMO), International Labor Organization (ILO) and United Nations Economic Commission for Europe
(UNECE) — means IMO may be close to its goal of having the Code adopted by many countries,
enshrined into law, and used as a guideline for judging lawsuits involving freight-related incidents.
Figure 5. Compliance with CTU code starts with proper reading
Given this, all parties involved in the movement of CTUs will benefit from complying with the CTU
Code. This includes consignors, packers, consolidators, shippers, road and rail haulers, intermodal

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operators, carriers, and consignees. The extra precautions stipulated in the Code help achieve the
ultimate goal of prevention of injury for cargo handlers and citizens, and product damage.
Thusly, CTU Code can be broken down five important aspects complying with the:
 Safe unloading,
 Adequately secured cargo,
 Loading heavy cargo,
 Loading long and irregular cargo,
 Weight verification.
Following so many serious accidents the International Maritime Organization (IMO) has brought
about amendments to the Safety of Life at Sea Convention (SOLAS) and worked on the creation of
the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (CTU Code).
The person who packs and secures cargo into/onto the cargo transport unit (CTU) may be the last
person to look inside the unit until it is opened at its final destination. Consequently, a great many
people in the transport chain will rely on the skill of such persons, including:
 road vehicle drivers and other road users when the unit is transported by road;
 rail workers, and others, when the unit is transported by rail;
 crew members of inland waterway vessels when the unit is transported on inland waterways;
 handling staff at terminals when the unit is transferred from one transport mode to another;
 dock workers when the unit is loaded or unloaded;
 crew members of a seagoing ship during the transport operation;
 those who have a statutory duty to inspect cargoes;
 those who unpack the unit.
All persons, such as the above, passengers and the public, may be at risk from a poorly packed
freight container, swap body or vehicle. For transport of goods by road, other standards such as
EN12195:2010 exist.
12. Actions against Carbon and GHG Emissions, Environmental Impact Assessment, Ecological
Footprint, Air Pollution and Climate Change
It is no secret that trucking comes with an environmental cost. Modern regulations and newer, more
efficient technologies aim to reduce that cost, although more remains to be done. The most
obvious form of pollution from trucking is carbon dioxide, a greenhouse gas released by burning
fuel. Small quantities of other pollutants, some of which are also greenhouse gasses, are released
from the tailpipe as well. Cleaner-burning fuel or better-maintained engines can reduce these other
pollutants, but one gallon (3.78 liters) of diesel fuel always releases just over 22 pounds (9.97 kg) of
carbon dioxide.
12.1. Actions against Carbon and GHG Emissions
Truck standards will lead to significant greenhouse gas (GHG) emissions reductions. Yet
transportation still is, and will continue to be, a major contributor to carbon pollution, particularly as
the population grows and more goods are shipped. The good news is that there are many
opportunities to lower our climate impact.
There are three routes to reducing GHGs from transportation: increasing the efficiency of vehicle
technology, changing how we travel and transport goods, and using lower-carbon fuels. We need all
three to help achieve our societal goals on climate.

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Figure 6. LNG trucks emit up to 5 times more NOx pollution than diesel

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12.2. Environmental Impact Assessment (EIA)
This environmental impact includes the emission of fuels, the combustion of fossil fuels, and the
overall effect on nature. The combustion of fossil fuel in truck engines results in the release of
significant amounts of greenhouse gas, contributing to climatic changes and air pollution.
Working with road transport, you are at the forefront of sustainable development. You support the
economy by connecting people with employment opportunities, improve society by giving more
communities access to vital services and conserve our environment by making more resource-
efficient transportation solutions possible.
At the same time, transportation operations affect ecosystems in various ways. Environmental
impact assessment is the process of evaluating a project’s influence on the planet. EIA guides
projects toward sustainability and helps authorities protect our natural resources.
12.3. Air Pollution and Climate Change
The transportation sector, fleet operators included, makes a significant contribution to air pollution
and greenhouse gas emissions, creating an impact on global climate change. Incorporating
sustainable practices into fleet operations is essential for organizations to create a positive
environmental impact. Here’s a look at why sustainability is important in fleet operations:
 Of all the different industries in the US, the transportation sector is responsible for the highest
emissions of greenhouse gasses at 28%.
 The fleet industry, particularly road vehicles that rely on gasoline like trucks, cars, and vans, is a
significant contributor to air pollution. Studies show that a shift towards electric vehicles
would reduce pollution exposure of nitrogen dioxide by 30%.
 Adopting sustainable practices isn’t only important for the environment, but fleet operators
can reduce idle time, optimize routes, and maintain vehicle efficiency to cut down on fuel
costs and conserve more resources.
 In some places, sustainability practices aren’t only recommended, they’re becoming law. For
example, in Europe, there are standards for CO2 emissions for heavy-duty vehicles, making
sustainability a compliance issue.

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UNIT K – Measuring and Controlling the Fleet Performance
1. Performance Management and KPIs
Performance management is essential for the ongoing management and improvement of plant
and vehicle fleets. In essence, performance management is a cyclical process that requires the
identification and understanding of objectives, the collection of relevant data, interpretation of
information, decision making and management interventions.
Management guru Peter Drucker said, “If you can’t measure it, you can’t improve it”. This applies to a
broad range of pursuits. In athletics, runners measure their times to monitor performance and as a
basis for targeted training and improvement. Similarly, in fleet management we measure attributes
of the fleet and monitor those metrics through reporting and review to guide decision making and
to identify opportunities for improvement.
It is also important that fleet practitioners apply a targeted approach to measuring and managing
performance to ensure that the fleet is
efficient (optimizing cost and required
levels of service) and effective (aligned to
organizational objectives).
Tracking the right key performance
indicators, or KPIs, is crucial for effective
fleet management. By monitoring the
correct metrics, as a Fleet Manager, you can
measure the impact of strategic decisions
and take steps towards improving your
productivity and results. In this unit, we will
cover the most important KPIs every Fleet
Manager should include in their
measurement plan, so you can make the
best tactical decisions for cutting your costs,
improving your productivity, and increasing
the sustainability of your fleet.
Fleet management KPIs are measurable
metrics that evaluate the efficiency,
effectiveness, and overall performance of
your fleet management strategy. These fleet
management metrics provide objective
insights into the health and success of your
fleet operations. Because of their ability to
provide these clear and actionable insights,
fleet management KPIs are essential tools
for any fleet looking to improve
performance, reduce costs, and drive
sustainable growth. Figure 1. Top five KPIs for fleet management
As a fleet manager, understanding which aspects of your operations are causing setbacks is critical,
and if you don’t analyze key metrics from your fleet operations, then it is impossible to identify and
address inefficiencies. There may be multiple areas requiring attention, but by focusing on
quantifiable measurements, you can pinpoint the specific fleet management metrics that need
improvement. This clarity allows you to prioritize strategies to address these issues effectively. Once
a strategy is in place, fleet KPIs serve as benchmarks for evaluating future performance. By
comparing results over time, you can track progress, ensure continuous improvement, and create a
sustainable path towards operational excellence.

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2. Fleet Performance Measurement System
When establishing fleet performance measures, it is important to consider various aspects of the
fleet’s operation and management. We categorize Key Performance Measures as follows:
Asset performance measures – focusing on the assets and how they are used. For example: the
number of assets in the fleet (fleet establishment), whole-of-life cost (WOL cost), CO2 emission levels
and so on.
Fleet management activities – relating to how the assets are managed and include measures on
budget performance, asset replacement program compliance and residual values achieved versus
market values.
Workshop and maintenance management – addresses maintenance and workshop performance
matters such as repair turnaround times, availability, scheduled preventive maintenance program
compliance, scheduled to unscheduled maintenance ratio, etc. While these are not exhaustive
KPMs above provide an insight into the types of performance metrics, associated measures and
targets that can be applied across various aspects of a fleet operation.
Table 1. Fleet performance metrics, measures and targets
3. Transportation Costs
Transportation cost refers to the expenses associated with moving goods or services from one
location to another. These may include direct costs like fuel and maintenance, and indirect costs
like labor, infrastructure, and time. Indeed, when it comes to international trade, transportation cost
is a significant element in decision-making. It determines the profitability of exporting goods, affects
prices and competitiveness, and influences where businesses choose to locate their operations.
Here are some of the ways how:
The price of products: Products may be priced higher in one country than another primarily
because of transportation costs.
The balance of trade: High transport costs can discourage exports creating a trade deficit
Location of businesses: If transportation costs for raw materials or finished goods are too high in one
area, businesses may choose to relocate to reduce these costs.

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Figure 2. Conditions affecting transport costs
4. Cost Ratios
Transport costs have significant impacts on the structure of economic activities as well as on
international trade. Empirical evidence underlines that raising transport costs by 10% reduces trade
volumes by more than 20%. The general quality of transport infrastructure can account for half of
the variation in transport costs. In a competitive environment where transportation is a service that
can be bid on, transport costs are influenced by the respective rates of transport companies, the
portion of the transport costs charged to users.
Figure 3. Global logistics costs by function and mode, 2018
Rates are the price of transportation services paid by their users. They are the negotiated monetary
cost of moving a passenger or a unit of freight between a specific origin and destination. Rates are

184
often visible to the consumers since transport service providers must provide this information to
secure transactions. They may not necessarily express the real transport costs.
5. Transportation Asset Productivity
Asset management in the transportation industry is a relatively new concept. It means many things
to many organizations, but its practices provide a solid foundation for programs that optimize the
performance and cost-effectiveness of transportation facilities. At its core, asset management is a
business process. The application of asset management principles often means a change in
thinking at every level in an organization: to base decisions on information and on getting results.
The roots of today's asset management programs originated in private industry, integrating many of
the ideas of W. Edwards Demming, Malcolm Baldridge, and others. Because of its focus, asset
management has been highly successful in companies that require a substantial asset base for their
operations, such as electrical power companies, telephone companies, large trucking companies,
and railroads. In these companies, the goal was clear-maintaining a prescribed level of service at the
lowest cost possible. Assets that did not meet these criteria were taken out of service and sold. This
focus on guaranteeing an acceptable level of service to the customer has had positive results and
has made substantial profits for these companies.
Figure 4. Greater asset efficiency through digital supply chain
6. Financial and Quality Indicators
Tracking performance metrics in order to compare current data against past performance is a
critical component of managing a fleet of commercial vehicles. In addition to your many other daily
tasks to keep everyone running smoothly, fleet managers must actively track performance metrics
for their vehicle fleets since managing mobile employees makes it difficult to ensure everything
runs efficiently. Measuring financial KPIs is critical for the growth and profitability of your company.
Examples of financial KPIs include:
 Revenue shows the overall financial performance of your operations.
 Cost per mile reveals opportunities to reduce costs and better understand your operating
costs.
 Net profit measures overall profitability.
 Day sales outstanding (DSO) metrics measure the average payment days of your customers
and help you understand cash flow and determine if you need to consider freight factoring.
 ROI helps you determine the profitability of your investments and whether they’re worth
continuing.

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Compliance-related KPIs ensure you’re operating within the legal and regulatory requirements.
Examples of compliance-related KPIs include:
 Measuring regulatory compliance helps you avoid tickets and fines.
 Audit scores show your company’s performance in safety audits and compliance inspections.
 Accident rate reveals areas where you need to improve safety measures to reduce the number
of accidents per mile your fleet travels.
7. Cycle-time Indicators
It is important to keep track of how much time each vehicle is in operation and how much time it is
idle to optimize your fleet's efficiency. Start by capturing data either manually from an operator, or
by direct integration with equipment to track engine hours. With this information, you can develop
a time utilization model for your mine’s operational goals tailored to what is important to you. For
example, grading could be an important activity for some mine contractors, and any time spent on
grading is considered productive time, while for some other it is considered non-productive.
Similarly, certain events may be classified as standby activity for one mine, but as a delay by another.
Even if the data collection is manual, most mines have these definitions in place.
Cycle-time is the amount of time it takes for a task to be completed, from start to finish. It's a
measure of the time it takes to complete one cycle of a process. Whereas, lead-time is the amount
of time it takes to deliver a product or service to a customer, from the moment the customer
requests it to the moment it's delivered.
Figure 5. Cycle time for a commercial truck for a round trip
8. Measuring and Improving Fleet Utilization
Without analyzing key metrics from your fleet operations, it is virtually impossible to make
improvements. As a fleet manager, you should have a clear understanding of what aspects of your
operations are contributing to setbacks, either financially or operationally. At present, there may be
many flashing lights in terms of areas for improvement, for example, your damage-only accident
rate may be at an all-time high or your fleet’s average fuel spend may be spiraling out of control. By
observing quantifiable measurements, you can gain a clearer understanding of which figures need
work and can then begin to identify the ways in which these figures can be improved. Once a
strategy is in place, fleet managers are able to use these initial figures to benchmark all future
results.

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Figure 6. Critical fleet management KPIs

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9. Operational Analytics for Fleet Management
Effective fleet management requires actionable data. For this reason, data aggregation plays a
crucial role in helping fleet operations to optimize performance. This is especially true for mixed
manufacturer fleets where different telematics systems make it difficult to get a comprehensive
view of fleet performance. The process of data aggregation brings together large volumes of raw
data from multiple sources into one location for statistical analysis. This can often be challenging for
fleet operators that manage a wide range of vehicles and equipment that all run on different
telematics platforms.
More data allows fleet operators to more effectively manage asset lifecycles to save money. That’s
where truck fleet analytics tools come in. With fleet performance monitoring and other elements,
you can optimize how you manage your fleet and assets. In this section we will use a data set built
specifically for fleet professionals — uses hundreds of data points to generate the perfect fleet
optimization program for your business on trucks’ performance, fuel efficiency, and maintenance
demands which vary by dozens of factors. Besides, age, location, time of year, utilization, and many
other factors affect the total cost of ownership (TCO), sometimes dramatically. Unless we know what
each truck in our fleet is costing, we won’t be able to effectively manage and reduce our total cost
of ownership.
Fleet data analytics involves collecting and analyzing information generated from vehicles and
operations — using methods like telematics — to gain actionable insights for fleet management. This
data includes metrics such as vehicle location, speed, fuel consumption, maintenance status and
driver behavior. With this real-time
data and predictive insights, you can
improve safety, enhance vehicle
utilization and cut fuel expenses
while extending the lifespan of your
assets.
Through truck fleet analytics, we can
look at operational costs,
procurement processes, and spend
categories to help us capture cost
savings opportunities. Using fleet
predictive analytics, you will be able
to predict patterns in equipment
usage, schedule preventive
maintenance, and know what costs
you can expect in the near future.
This can prove to be invaluable when
it comes to fleet lifecycle
management, helping you avoid
inefficiencies and maximize the
value of your assets. With the power
of fleet analytics, you can have all the
information you need right at your
fingertips. Figure 7. The importance of utilizing fleet data
Fleet data aggregation can revolutionize your business operations by simplifying data accessibility,
promoting cross-functional collaboration, and enabling data-driven decision-making. However,
integrating fleet management software can be challenging without the right software provider.
Fleet data comes from multiple sources across your operations, from vehicles and drivers to
shipping processes. Understanding these data types helps with effective fleet analysis, eventually
leading to better fleet optimization.

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Figure 7. Fleet operations dashboard

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Assessment Scheme
Assessment of Training and Instructor: Assessment is an integral part of our learning experience and
growth, assessment is an equally important part in the growth of Instructor. Please take the time
(less than 3 minutes) to provide the instructor(s) with an honest assessment of your experience in
class.
Assessment of Participants: Assessment of trainees has two-fold process. There are eight
assignments to be applied at the end of selected units which may take approximately 5-10 minutes
per unit with five points, each. Unit assignments have to be submitted ………………………………..@meli.edu.sa
within 24 hours. Late submissions will be deducted 2 points. Thusly, a participant would take 8
Assignments x 5 points once a unit is concluded followed by an M/C exam (40 q’s x 1.5 points) – 90
min at the end of the course. Passing score is 60 points and above (≥60).
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