Transportation

CHAPTER 5
Transportation
 Introduction

Transportation refers to the movement of product from one location to another as it

makes its way from the beginning of supply chain to the customer. Transportation is
an important supply chain driver because products are rarely produced and consumed
in the same location.

Meaning:
The process of moving an item from point A to point B. It is a Safe, efficient, reliable,
and sustainable movement of persons and goods over time and space.
 Importance of Transportation in
Logistics
▪ The operation of transportation determines the efficiency of moving products

▪ The progress in techniques and management principles improves the moving load, delivery
speed, service quality, operation costs, the usage of facilities and energy saving.

▪ Transportation takes a crucial part in the Logistics Operation

▪ Therefore, transportation is the base of efficiency and economy in business logistics and
expands other functions of logistics system

▪ Without well-developed transportation systems, logistics could not bring its advantages into
full play.

▪ A good transport system in logistics activities could provide better logistics efficiency,
reduce operation cost, and promote service quality.

▪ A well-operated logistics system could increase both the competitiveness of the

government and enterprises.

▪ Transport system is the most important economic activity among the components of business
Principle of Transportation

Economy of
Scale
Principles of
Transportation
Economy of
Distance
A. Economies of Scale

▪ Transportation cost per unit of weight decreases when the size of the shipment increases i.e.
shipments that utilize the entire vehicle’s capacity like truck load (TL) cost less per kg than less
than truck load (LTL) shipments.

▪ Fixed costs in transportation include administrative costs of taking transportation order, time to
position the vehicle for loading or unloading, invoicing and equipment cost.

▪ It costs as much to administer a shipment of 1 kg as it does to administer a 1000 kg shipment.

B. Economies of Distance

▪ Transportation cost per unit of distance increases at a decreasing rate as distance increases. Also
called “Tapering Principle”

▪ For instance, a shipment covering a distance of 800 kilometers will cost less than two shipments
of same combined weight covering 400 kms.

▪ Fixed expenses incurred to load and unload the vehicle get spread over more kilometers resulting
in lower overall per kilometer charges.
 Participants in Transportation
Decisions

Public

Government

Shipper Carrier Consignee

7
1. Shipper/Originating Party/Consigner:
Shipper is the party who transports the product to the market and ultimately to the final customer. He is
also known a consigner and are normally the businessmen who produce goods as per demand. they
Role and Perspective of Shipper:
a. Moving the goods from origin to destination in shortest Possible time and lowest cost.
b. Delivering the goods without any damage or loss.
c. Accurate and timely exchange of information relating to status of goods. d. Proper Invoicing.

2. Receiver/Destination Party / Consignee:

Consignee is the person to whom the goods are sent. They may be a wholesaler, retailer or the final
customer.
Role and Perspective of Receiver:
a. Receiving the goods from origin to destination in shortest possible time and lowest cost.
b. Receiving the goods without any loss or damage.
c. Accurate and timely exchange of information relating to status of goods.
3. Carrier:
The carrier is the service provider or the transporter who carries the shipment from the
shipper to receiver.
Role and Perspective of Carrier:
a.To maximize their revenue b and minimizing the cost.
b. Carrier would like to: Charge the highest rate that the shipper will accept, Minimize the
labour, fuel and vehicle costs required to move the goods.
c. Carriers add value to the supply chain by moving the product from one place to another.
4. Government:
Government is a major participant in transportation decision. Government desires a stable
and efficient transportation environment for economic growth. Government expects
uniform movement of products to markets throughout the country.
Role and Perspective of Government:
a.Government should provide a good infrastructure to support transportation.
b. Government may also regulate carriers by restricting the markets they can serve For
Example: In India, regulation is done through permits. Vehicles that require to go to
locations outside their state of registration require All — India Permit.
c. Government may support carrier by providing right - of — way infrastructures like:
Golden Quadrilateral provides a right — of — way for roadways for efficient
transportation of goods and The Dedicated Freight Corridor provides a rail network
exclusively for transportation of goods.

d. Government should also provide appropriate government owned transport modes.

5. Public:
General Public are the another party who have a large involvement in the transportation
transaction. Public demands for the goods produced not only in the country but also all
over the world. Thus, Public creates the need for transportation by demanding goods
from all over the world.
Role and Perspective of Public:
a. Public is concerned with the transportation expenses and effectiveness as well as
environment and safety standards.
b. While minimizing transportation cost is important to consumers, trade — offs
associated with environment and safety standard also require consideration.
c. Air pollution and oil spills remain a significant transportation issue even though
Transport Functionality

Product Movement
Functions of
Transportation
Product Storage
Transport Functionality: Transportation is the most visible of all functions of logistics and
high contributor to logistics cost. We can see trucks, containers and wagon loads of material
being moved from place to place as an activity directly associated with trade and business. We
should also appreciate that this is an activity that adds highest amount of cost to the activity of
making inputs and outputs available to consumers. Transportation function moves the products
to meet customer expectations at minimum cost.

1)Product Movement

To move various types of products whether it is raw materials, components, semi-

finished goods, packaging material, scrap, and so on, transportation is very essential.
While moving semi-finished goods or W.I.P., transportation moves them to the next
stage in manufacturing, whereas while moving finished goods, it plays a role of
physically bringing the goods closer to the ultimate consumers.

Temporal Resources: Transportation of a product involves the use of temporal (time)

resources. A particular product is inaccessible while it is in-transit. Such types of
products, are called in-transit inventories. These products are significantly important
because they influence a variety of supply chain decisions.
• Financial Resources: Transportation of a product involves the use of
financial resources. Transportation of a product involves various costs such
as cost of driver, cleaner, fuel, taxes, repairs/ maintenance, etc.

• Environmental Resources: Transportation of a product also uses

environmental resources either directly or indirectly. In direct terms,
transportation uses a, very large amount of energy in terms of fuel and oil. In
indirect terms transportation creates environmental expenses in terms of
congestion, air-pollution and noise pollution.

2) Product storage
One of the functions of transportation is temporary storage of goods. This
function may be called as the secondary function of transportation as
transportation is not meant for storage of goods. At times it may be used due to
diversion in route. This may happen when delivery location is changed while the
goods are in transit or movement.
E.g.: In case the goods have to be moved once again within just a few days. It is
advisable to keep them stored in the transport vehicle themselves. This will avoid
the cost of unloading and loading as well as the possible damage to goods during
such operations.
 Factors Influencing
Transportation Cost & Pricing
Factors Influencing transport
cost

Product Related Market Related

Factors Factors

→Density →Location of Market

→Stow Ability →Govt. Regulation
→Handling → Seasonality of Product
→ Liability Movement
→ Degree of Competition
PRODUCT RELATED FACTORS

1) DENSITY

It refers to a products weight to volume ratio. Items such as steel canned foods, building
products and bulk paper have high weight to volume ratios. They are relatively high weight
to volume ratios. They are relatively heavy given their size. On the other hand products such
as luggage and toys have low weight to volume ratios and thus are relatively lightweight
given their size. In general low density products those with low weight to volume ratios tend
to cost more to transport on a kilo basis than high density products.

2) STOW ABILITY

It is the degree to which a product can fill the available space in a transport vehicle. For
example petroleum products in bulk have excellent stow ability because they can completely
fill the container in which they are transported. Other items such as automobiles, machinery,
livestock and people do not have good stow ability. A products stow ability depends on its
size, shape, and other physical characteristics.
3) EASE OR DIFFICULTY OF HANDLING
Difficult to handle products are more costly to transport. Products
that are uniform in their physical characteristics require less
handling expenses and are therefore less costly to transport.

4) LIABILITY
It is an important concern. Products that have high value to weight
ratios are easily damaged and are subject to higher rates of theft,
cost more to transport. Where the transportation carrier assumes
greater liability higher price will be changed to transport the
product.
MARKET RELATED FACTORS

1. Location of Market
The cost of transportation also depends upon the location of
market. If the goods are to be transported to longer distance,
transport cost will be higher and vice versa.

2. Nature & Extent of Govt. Regulation

The cost of transportation also depends upon the extent of
Government regulation imposed on transport carriers.

3. Seasonality of Product Movement

For some routes, the movement is seasonal in nature. For eg. In
regions producing seasonal fruits/agricultural products, the
transport cost will be high during season’s peak and will be very
low during off season.
4. Degree of Competition
Cost of transportation to a certain extent also depends upon degree
of competition. If there are many transport carriers, transport cost
would be low and vice versa.
 Factors Influencing Transportation Decision
1. Accessibility – This primarily deals with the ease of getting or boarding a vehicle. If a mode is
not easily accessible then it loses its usefulness because of its unavailability in a certain condition.

2. Cost/fare of ticket or cost of service – Considering large number of trips taking place for
different purposes and a modern capitalist economy, cost becomes one of the single most important
determining factor. It can also be linked to affordability of the user. This factor is one of the most
dynamic as the willingness to pay changes on the basis or urgency and need to travel/transport.

3. Fuel efficiency/ carbon emission – With the growing environmental concerns many people and
companies prefer to choose a option with smaller carbon footprint. Some people prefer electric
vehicle solely because of the “green” label associated with them. Fuel efficiency is closely linked
with carbon emission while doing a comparative study, getting more output from same quantity of
fuel is always desirable.
4. Speed – This factor is another most important and deterministic factor depending upon the
situation. Fastest mode may seem to be best option but cost associated with it makes it less
lucrative, a cheap mode might result in delay and the purpose of whole trip may be defeated. In
cases of emergency speed gains much more significance as compared to day to day trips.

5. Carrying Capacity – This is another important factor especially for logistic companies, it
becomes important in case of travelling in a group. While going on a trip with your complete class
you cannot expect to take multiple vehicles because of safety and security concerns, a vehicle with
more carrying capacity will be preferred. In case of transporting goods the concept of scale of
economies is best exploited for economic profit while dealing with bulk orders.

6. Integration with other modes – For long trips or trips which requires change of mode this
factors becomes most significant for completion of the trip. In case the selected mode is not
integrated with other modes than the trip will never get completed. In some cases to overcome the
problem of integration a heavy cost will be incurred to complete the required trip.
7. Reliability of the vehicle/mode – The chosen mode must be reliable. All factors will turn
out to be useless if the vehicle develops some fault or is prone to develop fault. If the mode is
not reliable than it will result in loss of both time and money. Reliability again becomes
important on the basis of situation.

8.Comfort – This factor is at times ignored while some makes it priority depending upon the
affordability. This is essential in case of travelling and ignored in case of transporting goods.
Humans undertake the trip for various purpose like work, leisure journey, picnic, shopping and
thus always prefer comfort. Those who can afford to pay more are expected to get more
comfort while some prioritize cost over comfort depending on their personal decision.

9. Safety – Considering the increased cases of accidents safety becomes another important
factor. Anyone will wish to ensure maximum available safety for their loved ones. In case of
logistics also safety matters a lot especially while dealing with fragile material.
10. Privacy – This factor is usually ignored and comes into mind in some cases especially
when the purpose of trip is confidential like in case of business trips. All conversation taking
place during the journey are required to be kept confidential. It can also be required when a
person wishes to spend quality time with someone. Public transport does not provide option of
privacy or if in some cases they do provide than its negligible. Private vehicles can provide
high level of privacy.

11. Employment generation – This factor is not considered for individuals and companies but
is essential for government while making policies as employment generation becomes their
responsibility.

12. Frequency – A mode with higher frequency is desirable as the waiting time reduces thus
saving time. A mode with good frequency helps especially in cases of delays.
 Modes of Transportation
❖Roadways

❖Railways

❖Airways

❖Waterways

❖Ropeways

❖Pipeline
Roadways
 Advantages
1. Door to Door Service: The outstanding advantage of road transport is that it provides door to
door or warehouse to warehouse service. This reduces cartage, loading and unloading expenses.

2. Economical over short distance: It is more economic and quicker for carrying goods and people
over short distances. Delays in transit of goods on account of intermediate loading and handling are
avoided. Goods can be loaded direct into a road vehicle and transported straight to their place of
destination.

3. Flexibility: Road transport has a great advantage over other modes of transport for its flexible
service; its routes and timings can be adjusted and changed to individual requirements without much
inconvenience.

4. Limited Capital Expenditure: Road transport required much less capital Investment as
compared to other modes of transport such as railways and air transport. The cost of constructing,
operating and maintaining roads is cheaper than that of the railways. Roads are generally
constructed by the government and local authorities and only small revenue is charged for the use of
roads.
 Disadvantages
1. Irregular and Unreliable: Motor transport is not as reliable as rail transport.
During rainy or flood season, roads become unfit and unsafe for use.

2. Unsuitable for Long Distances: This mode of transport is unsuitable and

costly for transporting cheap and bulky goods over long distances.

3. No Uniformity in Rates: The road transport is comparatively less organised.

More often, it is irregular and undependable. The rates charged for transportation
are also unstable and unequal.

4. Limited Speed: The speed of motor transport is comparatively slow and

limited.
Railways
 Advantages
1. High Speed: Its speed over long distances is more than any other mode of transport,
except airways. Thus, it is the best choice for long distance traffic.

2. Suitable for Long Distances : The greatest advantage of the railway transport is that it
is the most dependable mode of transport for long distances as it is the least affected by
weather conditions such as rains, fog etc. compared to other modes of transport.

3. Bulky Goods: Railway transport is economical, quicker and best suited for carrying
heavy and bulky goods over long distances.

4. Protection: Railway is the safest form of transport. The chances of accidents and
breakdowns of railways are minimum as compared to other modes of transport.
Moreover, the traffic can be protected from the exposure to sun, rains, snow etc.

5. Large Carrying Capacity: The carrying capacity of the railways is extremely large.
Moreover, its capacity is elastic which can easily be increased by adding more wagons.
 Disadvantages
1. Huge Capital Expenditure: The railway requires is large investment of capital. The cost of
construction, maintenance and overhead expenses are very high as compared to other modes of
transport. Moreover, the investments are specific and immobile. In case the traffic is not
sufficient, the investments may mean wastage of huge resources.

2. High Overheads due to under utilization of capacity: The railway must have full load for
its ideal and economic operation. As it has a very large carrying capacity, under-utilisation of
its capacity, in most of the regions, is a great financial problem and loss to the economy.

3. No Door to Door Service: Rail transport cannot provide door to door service as it is tied to
a particular track. Intermediate loading or unloading involves greater cost, more wear and tear
and wastage of time.

4. No Competition: As railways require huge capital outlay, they may give rise to monopolies
and work against public interest at large. Even if controlled and managed by the government,
lack of competition may breed inefficiency and high costs.

5. Inflexible Mode: Another disadvantage of railway transport is its inflexibility. Its routes and
timings cannot be adjusted to individual requirements.
Waterways
 Advantages
1. Cheapest Mode of Transport: Rivers are a natural highway which does not require
any cost of construction and maintenance. Even the cost of construction and maintenance
of canals is much less or they are used, not only for transport purposes but also for
irrigation, etc. Moreover, the cost of operation of the inland water transport is very low.
Thus, it is the cheapest mode of transport for carrying goods from one place to another.

2. Large Carrying Capacity: It can carry much larger quantities of heavy and bulky
goods such as coal, and, timber etc.

3. Safety: The risks of accidents and breakdowns, in this form of transport, are minimum
as compared to any other form of transport.

4. Flexibility: It provides much more flexible service than railways and can be adjusted
to individual requirements.
 Disadvantages
1. Slow: Speed of Inland water transport is very slow and therefore this mode of transport
is unsuitable where time is an important factor.

2. Huge Capital Expenditure: Due to a high demand for ships, ports are also declining
vessels, which is starting to pose a problem, meaning more money needs to be spent on
building ports.

3. No Door to Door Service: It is also unsuitable for short distance journeys, due to
being costly and time-consuming. It does not provide door to door service also.

4. Special Packing: Water transport is more risky as compared to other means because
there is always danger of sinking ships or boats and thus requires special packing.
Airways
 Advantages
1. Quick service: It provides a regular, comfortable, efficient and quick service.

2. Natural Highways: It does not require huge capital investment in the construction and
maintenance of surface track as it is natural way of transport.

3. Suitable for Carrying Light Goods of High value: It is most suitable for carrying
goods of perishable nature which require quick delivery and light goods of high value
such as diamonds, bullion etc. over long distances.

4. High Speed: The supreme advantage of air transport is its high speed. It is the fastest
mode of transport and thus it is the most suitable mean where time is an important factor.
 Disadvantages
1. High Cost of Construction and Maintenance: It requires a large amount of capital
investment in the construction and maintenance of aeroplanes. Further, very trained and
skilled persons are required for operating air service.

2. Costliest: It is the costliest means of transport. The fares of air transport are so high
that it is beyond the reach of the common man.

3. Limited Carrying Capacity: Its carrying capacity is very small and hence it is not
suitable to carry cheap and bulky goods.

4. International Restrictions: There are many legal restrictions imposed by various

countries in the interest of their own national unity and peace.
 Pipeline
Generally liquids like oils, crude, petroleum products are transported. More than 6350
KM of Pipeline exists in India. Currently 27% of petroleum products are moved by
pipelines in India.
 Advantages
1. They are ideally suited to transport the liquids and gases.

2. Pipelines can be laid through difficult terrains as well as under water.

3. It involves very low energy consumption.

4. It needs very little maintenance.

5. Pipelines arc safe, accident-free and environmental friendly

 Disadvantages
1. It is not flexible, i.e., it can be used only for a few fixed points.

2. Its capacity cannot be increased once it is laid.

3. It is difficult to make security arrangements for pipelines.

4. Underground pipelines cannot be easily repaired and detection of leakage is also

difficult.
 Ropeways

Ropeway Transport is used for transporting materials in hilly areas. A ropeway is a form
of naval lifting device used to transport light stores and equipment across rivers or
ravines. In India 16% of total area is hilly, currently in India nearly 178 Km ropeways are
used for transportation.
 Advantages
1. Transports Bulk Material over Short Distance.

2. Lower Capital Costs.

3. Less environmental damage.

4. It is pollution free

5. It is efficient way in hills crossing one end to another end

6. It is Solve traffic problem in critical places

7. It is very good source in urban transportation

 Disadvantages
Limited Scope of operation because it can only function in hilly areas.

It is Slowest Mode of Transport.

 Transportation Infrastructure

a.Terminal Facilities: Terminal Facilities means all terminal facilities and spaces leased, subleased or
otherwise retained or used by a party at an Applicable Airport, including without limitation all all
passenger lounges, passenger holding areas, aircraft parking positions (which may or may not be
adjacent to a passenger holding area) and associated ramp spaces, gates (including loading bridges and
associated ground equipment parking areas), ticketing counters, curbside check-in facilities, baggage
makeup areas, inbound baggage areas, crew rooms, in-terminal office spaces, associated employee
parking areas and other terminal facilities.

b. Vehicles: It includes all the vehicles involved in movement of goods from one place to another. It
includes trucks, ships, train, etc. the selection of vehicle depends on various factors such as speed, cost,
carrying capacity, etc.
c. Right of Way: Right of the way is an easement (privilege) to pass
over the land for transportation purposes.

d. Prime movers: In engineering prime movers is an engine that

converts fuel to useful work. Prime movers are the powerhouses moving
the vehicle of transportation. For examples, in locomotives, the prime
movers are the source of power for its movement.

e. Carrier Organization: Carrier organizations are the transportation

services providers in business. Transportation of goods is the core
business of such services providers.
 Multimodal /Intermodal Transportation
Intermodal transportation is the use of more than one mode of transport to
move a shipment to its destination. A variety of intermodal combinations are
possible depending upon the type and amount of goods, the time of delivery,
the pricing factor, etc. the most common combination is that of the motor
carrier and railway.

Intermodal combination of transport has also helped to increase the revenue of each of the modes of transport.
On land it has been found that a combination of truck and rail mode of transport offer a better deal in terms of
cost and time rather than transport by truck alone. In general, therefore intermodal means of transport helps to
bring together different modes of transport to create a price and /or service offering that may not be matched by
any single mode transport.
1) Piggyback / railroad: It is a specialized form of containerization in which rail and and road transport co-
ordinate. In piggyback, the carrier places the motor carrier trailer on a rail flatcar, which moves the trailer by
rail for a long distance. A motor carrier then moves to trailer for short-distance pickups and deliveries.

a)TOFC- Trailer on Flat Car:-In this technique the trailer is placed on a rail flat car and is transported from
station of origin to station of destination through railways. Then after reaching the station of destination, the
trailer is placed on the truck and transported to the actual destination.

b) COFC- Container on flat Car:-In this technique, the container is placed on a rail flat car and is
transported from station of origin to station of destination through railways. Then after reaching the station
of destination, the container is placed on the truck and transported to the actual destination.
 2) Fishy Back: Fishy back is a combination of water and road transport. The
consignment is placed on the ship or vessel at the port of origin and then
transported by waterways up to port of destination. After reaching the port of
destination, the consignment is placed on a truck and transported by roadways to
the exact destination.

3) Birdy back: Birdy back is a combination of air and road transport. The
consingnment is placed on the Airbus / Air truck / Air cargo at the airport of
origin and then transported by Airways up to Airport of destination.
4) Land Bridge: Land Bridge is a part of Intermodal logistics distribution system.
In Land Bridge, transportation happens over water — land - water route. Land
Bridge involves: • Beginning by shipping a product across water. • Transferring the
shipment to surface transportation. • Finishing the move across water. Thus, a land
bridge is provided between two water movements. It is a service in which a foreign
cargo crosses a country en route to another country.

a. Mini Land Bridge: A mini land bridge involves port-to-port transportation. • For
Example, if the cargo from Europe has to be delivered to Chennai port, the cargo
might be received at the Mumbai port and then transported through rail to Chennai. •
It is termed as mini land bridge as the foreign cargo originates or terminates at the
point within the same country.

b. Micro Bridge: A microbridge involves transportation between port city and a non
— port city. • For Example, If the cargo from Europe has to be delivered to New
Delhi ( a non — port city) then the cargo might be received at the Mumbai port (a
port city) and then transported through rail to New Delhi.
Thank you