Logistics, Operation, Transportation Management

1. Group 8
Transportation

2. TRANSPORTATION FUNDAMENTALS
STRATEGY AND DECISIONS
• A transportation strategy, to be effective
in supply chain management, is not
playing one carrier off against another.
• The strategy, regardless of whether you
are involved with domestic or
international,

3. Transportation Strategy
• Customer requirements. The supply chain involves
continuous and efficient movement of product from v
endor to manufacturer to customer.
• Shipments must move timely. Customers demand th
eir shipments be delivered as they require--on the dat
e needed, by the carrier preferred, in the proper shippi
ng packaging method and complete, both shipped co
mplete and delivered complete and in good order.

4. Transportation Strategy
• Mode selection. How will you move your pro
duct, by air versus surface? What roles do tran
sit time play in your supply chain? How will th
e inventory and service impacts be measured a
s compared to the freight charges?
• Carrier relationships. Volume creates carrier/
forwarder attention.

5. Transportation Strategy
• Measuring/benchmarking. You need to know
how well your strategy and your carriers are pe
rforming.
• Regulatory impact. Regulatory changes can c
hange, for better or worse, your strategy.
• Carrier mergers and alliances and closings.
This is an important and difficult issue. In the f
ifteen years or so since motor carrier deregulati
on, there have been significant changes.

6. Transportation Strategy
• Flexibility. Change is happening. It is not a qu
estion of whether or not it happens.

7. DECISION MAKING
• DECISION MAKING is the process by whic
h one alternative is selected over another. Deci
sion making generally occurs in the planning p
hases of transportation projects, but last minute
decision making has been shown to occur, som
etimes successfully.

8. The key decision levels
• Long-Term Decisions
• Lane Operation Decisions
• Dock Level Operations

9. The key decision levels
• Long-Term Decisions- At the highest strategic
decision level, transportation managers must fu
lly understand total supply chain freight flows
and have input into network design.

10. The key decision levels
• Lane Operation Decisions- The second level
of decision-making regards lane operation deci
sions. Where network design decisions are con
cerned with long-term planning, these decision
s focus on daily operational freight transaction
s.

11. The key decision levels
• Dock Level Operations- The final set of trans
portation decisions involves dock level operati
ons, such as load planning, routing, and schedu
ling. These activities encompass the operationa
l execution of the higher-level planning decisio
ns.

12. The key decision levels
• Applied systems- Analysis is the use of rigoro
us methods to assist in determining optimal pla
ns, designs and solutions to large scale proble
ms through the application of analytical metho
ds.
• Systems analysis- Emerged during World War
II, especially with the deployment of radar in a
coordinated way. It spread to other fields such
as fighter tactics, mission planning and weapo
ns evaluation.

13. OBJECTIVES OF
TRANSPORTATION
• Improve the safety of all users of the syste
m for all modes of travel. Maintain the clea
nliness and good repair of transportation in
frastructure. Prioritize transportation projec
ts that enable active, healthy communities.

14. Best practices to help you achieve
those objectives
• 1) Increased efficiency - To increase efficienc
y, a company must develop cost-effective trans
portation rates while reducing overhead, total i
nventory, and overall cost-per-order processing
.
• 2) Improved customer service - In direct mar
keting enterprises, fulfillment operations are in
partnership with marketing and merchandising.

15. Best practices to help you achieve
those objectives
• 3) Increased sales - How can inbound and out
bound logistics and transportation help a retail
er’s sales? Several opportunities exist for impr
oving service, and those in turn can be used to
marketing’s advantage.
• 4) Building relationships - True two-way coll
aboration between retailer and carrier is key to
the success of logistics execution.

16. Forms of Transportation
• Trains - the most used and unique kind of tran
sportation around the globe.
• Cars - the most used of today's kind of transpo
rt for personal use.
• Buses and Trucks - trucks and buses are essen
tial modes of transportation all over the world.
• Three wheelers - it is the symbol of a progress
ing nation and it is motorized version of the cy
cle rickshaw.

17. Forms of Transportation
• Motorbikes - it is the form of carrier favored b
y the single travelers who love adventure.
• Airplanes - are the forerunners of the global a
ge.
• Boats - it is commonly used as personal or pri
vate transport, trading and fishing for thousand
s of years.

18. Forms of Transportation
• Ships - long ago, travelling to faraway places c
an be obtained by ship. And it is common way
of trading, shipping.
• Animal-Powered Transport - many countries
use these animal powered transport because th
ey are much cheaper compared to the other mo
des.
• Human-Powered Transport - human drawn c
arriages and cycle rickshaws can still be seen a
nd are used in some countries.

19. Factors Affecting Transportation
Performance
• Terminal Facilities - one reason for this is that
any delay or any inconvenience caused to truc
k operators is not a loss to the project but is tre
ated as loss to the carrier.
• Vehicles - an important features of movement
of finished products of major projects is the ty
pe of vehicle used for movement.

20. Factors Affecting Transportation
Performance
• Prime Movers - motive power utilized for the
internal handling of vehicles is another importa
nt component of the total movement system.
• Routes and Sectional Capacity - the importa
nt aspect of transport planning is the routes for
streams of traffic, Viz., roadways, railways, wa
terways and airways.

21. Factors Affecting Transportation
Performance
• Transit Time - transmit time generally never r
eceives adequate attention in the planning of m
ajor projects.
• Weigh Bridge - these are generally inaccurate,
if not actually out of order.
• Distribution Pattern - the pattern of moveme
nt of the finished produced by road or rail must
be planned properly

22. Factors Affecting Transportation
Performance
• Nature of Product - another aspect, which is o
ften disregarded by project managements as w
ell as common carrier, is the variability arising
out of the specialized nature of products to be
moved.

23. The following measures of
effectiveness
• Speed - immediate response and on time deliv
ery.
• Cost - the more urgent the delivery, the higher
the cost.
• Reliability - the quality of service rendered in
terms of speed.

24. Transportation evaluation
• Transportation evaluation - it is all direct ch
arges associated with the movement of the Pro
duct from one location from another.

25. Most important criteria to consider
for transport selection
• 1. Competitive rates
• 2. Customers Service
• 3. Transport reliability
• 4. Pick-up and delivery service
• 5. Availability of handling equipment
• 6. Geographic coverage
• 7. Billing accuracy
• 8. Insurance coverage and damage claim
• 9. Electronic data interchange for effective communicatio
n

26. Freight rate determination
The following factors are the determinants in the
freight rate charges…
•Shipping weight per cubic meters.
•Liability for damage
•Perishable product needs refrigeration.
•Liability for damage to other commodities.
• Dangerous cargo that is subject to explosion.

27. • Susceptibility to theft
• The value of the product
• Loading and handling difficulty
• Excessive length or weight
• Trade condition to the forth of destination
• Quantity offered as a single consignment
• Value of service

28. ROUTE OF GOODS
• ROUTE OF GOODS: The trade routes served
to transfer raw materials, foodstuffs, and luxur
y goods from areas to others.

29. 8 TRADE ROUTE
• SILK ROAD // THE MOST FAMOUS TRADE ROUTE IN THE
WORLD
• SPICE ROUTE // BRINGING FLAVOR FROM EAST TO WEST
• INCENSE ROUTE // STARRING THE DOMESTICATED CAME
L
• AMBER ROAD // TRADING BEADS
• TEA ROUTE // THE PRECIPITOUS TEA-HORSE ROA
D
• SALT ROUTE // VIA SALARIA
• TRANS-SAHARAN TRADE ROUTE // TRADING ACRO
SS THE DESERT
• TIN ROUTE // BRONZE AGE BUSINESS

30. TRANSPORTATION COST
• TRANSPORTATION COST - a significant p
art of a company's overall logistics spending.
a cost that is passed on to the customer and th
e price of goods continues to rise.

31. DIFFERENT TRANSPORTATION
COST
• 1. Transport Costs and Rates-All users (e.g. individuals, cor
porations, institutions, governments, etc.) must negotiate or bid
for the mobility of passengers and freight because supplies, dis
tribution systems, tariffs, salaries, locations, marketing techniq
ues as well as fuel costs are constantly changing.
• 2.Costs and Time Components -Transportation offers a spect
rum of costs and level of services, which results in substantial
differences across the world. price of a transport service does n
ot only include the direct out-of-the-pocket money costs to the
user but also includes time costs and costs related to possible i
nefficiencies, discomfort and risk (e.g. unexpected delays).

32. Costs and Time Components
• a. Distance and time- It can be expressed in te
rms of length, time, economic costs or the amo
unt of energy used
• b. Type of product- With containerization the
type of product plays little in the transport cost
since rates are set per container, but products st
ill need to be loaded or unloaded from the cont
ainer.

33. • c. Economies of scale and Energy- Economie
s of scale or the possibilities to apply them are
particularly suitable for bulk commodities such
as energy (coal, oil), minerals and grains if the
y are transported in large quantities.
• d. Empty backhauls -Many transport interacti
ons involve empty backhauls since it is uncom
mon to have a perfect match between an inbou
nd and a return trip.

34. • e. Infrastructures and modes -The efficiency
and capacity of transport modes and terminals
has a direct impact on transport costs. Poor infr
astructures imply higher transport costs, delays
and negative economic consequences
• f. Competition, regulation and subsidies-Tra
nsport services taking place over highly compe
titive segments tend to be of lower cost than on
segments with limited competition (oligopoly
or monopoly).

35. • g. Surcharges, taxes and tolls- Surcharges refer
to an array of fees, often set in an arbitrary fas
hion, to reflect temporary conditions that may i
mpact on the costs assumed by the transporter.

36. DIFFERENT TRANSPORT COST
3 Types of Transport Costs
• Terminal costs. Costs that are related to the lo
ading, transshipment and unloading.
• Linehaul costs. Costs that are a function of the
distance over which a unit of freight or passen
ger is carried. Weight is also a cost function w
hen freight is involved. They include labor and
fuel and commonly exclude transshipment cost
s.

37. • Capital costs. Costs applying to the physical a
ssets of transportation mainly infrastructures, t
erminals and vehicles.

38. Steps on how to compute for
Transportation Cost:
Step 1
•Calculate the cost of ground transportation. Include the
number and cost of containers to be transported (if payi
ng a set fee per container or paying per weight), driver f
ees (along with fees associated with maintaining his truc
k) and fuel costs (single or round trip). In addition, you
are paying for the fees of the truck whether it is full or n
ot, so combine your costs by joining with other farmers
to fill the truck to capacity.

39. Step 2
• Total the final number of boxes of product to be
shipped and their weight per unit, if applicable.
Determine the amount of taxes (road and/or ship
ping taxes), cost of personnel or workers.

40. Step 3
•Multiply the ground transportation number by the num
ber of boxes to be transported, which equals the total co
st of transport. As with the fluctuating prices of supply a
nd demand, the total cost of transport can vary. There ar
e other methods of transport such as air and sea. Add in
the cost of ground transportation to the additional transp
ortation costs.

41. FACTORS DETERMINING
TRANSPORTATION RATES
• Fuel costs
it is the cost of maritime and land transport is, of
course, related to the price of fuel. The labor
market for commercial drivers Increasing
wages and competition among carriers for
truck drivers can have an upward impact on
transportation costs.

42. • Demand for freight
Pricing depends on the volume of product being
shipped by operators just as much as it
depends on the actual, underlying costs.
• Customer loyalty
Merchants who can offer a carrier regular,
consistent business are well placed to receive a
preferential rate, especially if demand across
the industry is low.

43. • Vehicle capacity
Some trucking companies operate an older, smaller
fleet. While these trucks are entirely adequate, newer
trucks are designed to maximize storage space,
allowing a truck to split space even further
• Government regulation
Regulation may directly impact the freight industry and
its bottom line; for example, governments often set
maximum driving hours for commercial operators.

44. • Geopolitical events
International maritime shipping has become
fraught with the dangers of pirates and rogue
governments.
• Your reputation as a merchant
It is the price quoted by a carrier will, at least in
part, reflect the carrier’s expectations as to the
packing of pallets and the time to load.