Task 4
• Explain the role of logistics in supply chain
management in your organisation (200 words)
LO4 4.1.
• Evaluate the current logistics practices in your
organisation and discuss the key factors that
must be considered to improve those practices.
(200 words) LO4 4.2.
Transportation—Managing the Flow
of the Supply Chain (cont’d)
Learning Objectives
After reading this chapter, you should be able to do the
following:
– Explain the role transportation plays in the supply
chain.
– Discuss the service and cost characteristics of the
primary transportation modes.
– Discuss the key activities involved in transportation
planning and execution.
Transportation—Managing the Flow
of the Supply Chain
– Explain current transportation management strategies
used to improve supply chain performance.
– Use service and cost metrics to analyze transportation
performance.
– Describe how information technology supports
transportation planning and execution.
Introduction
– Transportation involves the physical movement of
goods between origin and destination points.
– The transportation system links geographically
separated partners and facilities in a company’s supply.
– Transportation facilitates the creation of time and place
alternatives in the supply chain.
– Transportation also has a major economic impact on
the financial performance of businesses.
Role of Transportation in Supply
Chain Management
– Transportation provides the critical links between these
organizations, permitting goods to flow between their
facilities.
– Transportation service availability is critical to demand
fulfillment in the supply chain.
– Transportation efficiency promotes the competitiveness
of a supply chain
Challenges to Carrying out This Role
– supply chain complexity
– competing goals among supply chain partners
– changing customer requirements
– limited information availability
– synchronizing transportation with other supply chain
activities
Challenges to Carrying out This Role
– Transportation capacity constraints pose a challenge.
– Rising transportation rates present another major concern
for organizations (surcharge)
– The transportation industry is impacted by governmental
requirements that affect cost structures and service
capabilities.
– Regulation is growing in areas where the transportation
industry has the potential to impact the quality of life, the
safety of citizens, and the growth of commerce.
Primary Modes of Transportation
• truck
• rail
• air
• water
• pipeline
• intermodal transportation
Modes of Transportation
– Modal breakdown:
• Trucking 80.0 % $635 billion
• Rail 06.7%
• Air 04.7%
• Water 04.6%
• Pipeline 01.2%
Modes of Transportation
• Motor Carriers
– widely used mode of transportation in the
domestic supply chain
– Owed by the Buyer, supplier or for-hire
– Full Truckload carriers.
– Less-than-truckload (LTL)
– Small package carriers
– Low fixed cost, high variable
Modes of Transportation
Modes of Transportation
Railroads
– Activity levels is high despite lack of direct
accessibility to all parts of the supply chain
(limitation geographically than Trucks)
– Railroads are “natural monopolies” as rates
controlled by authorities.
– Two carrier types:
• Linehaul
• Shortline carriers
– High fixed, low variable
Modes of Transportation
Water
– Major facilitator of international trade
– 81% international freight movement
– Two primary carrier types
• Liner
• Charter
– low fixed cost, High variable
Modes of Transportation
Water
– Options include
• Container ships
• Bulk carriers
• Tankers
• General cargo ships
• Roll-on, roll-off (RO–RO) vessels
Modes of Transportation
Air Carriers
– Worldwide there are 491 air cargo carriers
• Combination carriers (oil)
• Air cargo carriers
• Integrated carriers (use their
• own tools and trucks)
• Nonintegrated carriers
– Domestic market is dominated by 14 major carriers
– low fixed cost, High variable
Modes of Transportation
Pipeline
– Unique mode of transportation as the equipment is fixed
in place and the product moves through it in high volume
– more suitable for transporting hazardous liquids
(primarily carry crude oil and petroleum products)
– High fixed versus low variable
Modes of Transportation
Types of Pipeline
• Gathering lines (gathering lines are those pipelines
that are used to transport crude oil or natural gas from
the production site (wellhead) to a central collection
point. They generally operate at relatively low
pressures and flow, and are smaller in diameter ) in
diameter than transmission lines.
Modes of Transportation
Distribution or Refined product pipelines
Modes of Transportation
Intermodal Transportation
– Use of two or more different modes in movement
– Greater accessibility
– Overall cost efficiency
– Facilitates global trade
– Development of standardized containers that are
compatible with multiple modes.
Modes of Transportation
Mode Selection
– Accessibility
• Accessibility advantage: Motor
• Accessibility disadvantage: Air, rail, and water
– Transit Time
• Transit time advantage: Air and motor carriage
• Transit time disadvantage: Rail, water, and pipeline
– Reliability
• Reliability advantage: Motor carriers and air carriers
• Reliability disadvantage: Water carriers and rail
carriers
Mode Selection
– Product Safety
• Safety advantage: Air transportation and motor carriage
• Safety disadvantage: Rail and water
– Cost
• Cost advantage: The cost of transportation service varies
greatly between and within the modes
• Cost disadvantage: Motor carriage and air transportation
Mode Selection
Decision Making Factors:
– The nature of a product—size, durability, and value
– Durability
– Product value
– Shipment characteristics—size, route, and required speed
– “make” or “buy” - Commercial carriers “buy” - Private
fleets “make”
Comparison
Functional Control of Transportation
– Which department will be responsible for
transportation?
• Logistics
• Procurement
• Marketing
Functional Control of Transportation
Functional Control of Transportation
Rate Negotiations
– Centralized freight rate negotiations
– Developing contracts with carriers for a tailored set
of transportation services at a specific price
– leveraging volume with a small set of carriers
Shipment Preparation
– Corporate transportation routing guide
– last-minute, cost-saving decisions
• Consolidate freight
• Coordinate shipment deliveries
• Take full advantage of container capacity
Freight Documentation
Bill of lading
• Originates the shipment
• Provides all the information the carrier needs
• Stipulates the contract terms, including carrier’s
liability for loss and damage
• Acts as a receipt for the goods the shipper
tenders to the carrier
• in some cases, shows certificate of title to the
goods
Freight Documentation
• Freight bill
– carrier’s invoice for carrier charges
– lists:
• shipment
• origin and destination
• consignee
• items
• total weight
• total charges
Freight Documentation
Freight claims form
– Filed with the carrier to recoup monetary losses
resulting if carrier fails to protect the shipment.
– Carriers are not liable for freight claims if the damage
is attributable to:
• Natural disaster or some other “act of God”
• Military attack or similar “act of public enemy”
• Government seizure of freight or “act of public authority”
• Failure to adequately package the freight or other negligent
“act of the shipper”
• Extreme fragility, perishability, or similarly problematic “inherent
nature of the goods”
Maintain In-Transit Visibility
– Manage key events as product moves across the
supply chain
– Technology facilitates the ability to monitor product
– Visibility tools must be linked to other capabilities
and processes to have an impact on supply chain
event management
Monitor Service Quality
– analyze the outcome of all their transportation
strategy, planning, and decision-making
– key requirement for service quality monitoring is
information
Transportation Metrics
– key performance indicators (KPIs)
• can be used to evaluate
– current performance versus historical results
– internal goals
– carrier commitments
• challenge lies in narrowing down metrics available to
monitor performance to a manageable number of
KPIs
• primary categories of transportation KPIs include
service quality and efficiency
Transportation Management Systems
(TMS)
– Critical applications include the following:
• Routing and scheduling
– proper planning of delivery routes has a major
impact on customer satisfaction, supply chain
performance, and organizational success
• Load planning
– effective preparation of safe, efficient deliveries
• Load tendering
• Status tracking
• Appointment scheduling
