3 logistics - transportation
DESCRIPTION
Logistics 5th SemesterNotes for lecturesTRANSCRIPT
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Transportation Transportation
[Ref. Bowersox page 311]The most visible of all functions of logistics and
high contributor to logistics costTransportation functionality: Functions of
transportation1. Product movement:
What is moved?Raw Material, Semi Finished items, WIP, Finished
goods, packaging material, rejected material- movement is required up or down the supply chain
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How is this done? What resourcesare used?
Resources used by transportation: a. Time, Temporal Costs - product is locked up
during transit, hence inaccessibleb. Money, Financial Costs-
• Administration Costs, salaries, maintenance, etc • Product loss and damage
• Cost of fuel for prime moverc. Nature, Environmental Costs -
• Guzzles natural fuels
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• India consumes about 90% of the total available and imported oil for transportation
• Transportation Creates congestion, air pollution and noise pollution.
• Environmental cost is tangible and substantially intangible.
As transportation utilizes temporal, financial and environmental resources, items must be moved
only when product value is raised
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2. Product Storage:
Temporary storage when loading and
unloading is expensive
Storage space is not available or limited
Vehicles kept moving on circuitous route
Airplanes hovering
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Principles of transportation1. Economy of scale
• Bulk shipping brings down per unit transportation cost
2. Economy of distance• Cost per unit kilometer decreases as the distance
moved increases• Principles of transportation are fundamental in
evaluating transportation strategies.
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Transportation Environment & Transportation decisions
Who are participants in most of the commercial decisions?
What makes transportation environment different?
Who are the participants in transportation decisions?• Shipper
• Consignee• Carrier
• The government• Public
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Roles and perspective of each partyShipper
What does shipper want? • Predictable and minimum transit time
• Minimum cost• Specified pick up times• Zero loss and damage
• Timely exchange of information and invoicing What does consignee want?
• Specified delivery times
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Carrier:What does carrier want?• Revenue maximization
• Cost minimization [labor, fuel and vehicle costs]• Flexibility in pick up and delivery times to
consolidate movesGovernment:
Keen interest in flourishing national economy and hence in transportation
Effective and efficient Public Distribution System
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• Control on carrier rates and licenses • Own carrier service
• Infrastructural support - net work of roads, Airports and ATC, Ports and Harbors
Public Trigger transportation activity by demanding
productsDemand easy accessibility transport
Demand goods and services from all over the world at minimum cost
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Demand safety - accidents of various kind, road, rail, air and water (oil spills)
Demand safe environment - atmosphere, water, noise
When these parties with separate and distinct interests interact transportation
environment is created
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What is transportation mode? Mode identifies transportation method or form
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Impact of transport mode on costs of transportation
Transport time • Inventory
• Transit capital• ObsolescencePackaging
Insurance - air, high insuranceBreakage
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What constitutes Transport Infrastructure? [Transport elements]
Factors that affect the smooth functioning of transport?
1. Terminal facilities - well maintained loading unloading facilities, space for movement of
vehicles, platforms, railway yards2. Vehicles- trucks, ships or wagons. Their size,
shape & speed
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3. Rights of way- cost of right to use passage. Rails, roads, airways
4. Routes and sectional capacity-number of lanes5. Limit on speed, weight, height6. Weigh bridge facility7. Nature of product8. Carrier organizations
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What are various features of modes or modal characteristics?
How do we measure relative weight of each mode?
• System mileage, traffic volume, revenue, nature of traffic composition
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Railways – Rail network Stands out in terms of tonne-kilometres moved 226 billion tonne-kilometres and 55.8% of total
tonne-kilometers moved in 1982 in India 449 billion tonne-kilometres and 51.7% of total
tonne kilometers now moved in India Facing very stiff competition from roadways
(as in US after II World War) High capital investment due to right of way,
switching yards, terminals, locomotives and rolling stock, but low operating costs
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Focus on specific products than on broad range Raw material extractive industries away from
water ways.
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Developments in this area Recent customer friendly attitude
Inter modal transport through alliances and acquisitions as in US, providing single window
service to customers Development of Specialized Equipment to suit
the needs of bulk volume of customersUnit trains
Container trainsDouble stack containers
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Enclosed tri-level automobile car
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A unit train, also called a block train
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Double stack containers
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RORO service to road transport - konkan railway
Private container trains -Adani logistics, boxram
Container corridorsPrivate participation in developing ICDs
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Road transport High flexibility and speed Ultimate mode of transport
Rapid growth, post war Low capital cost as compared to railways
179.2 billion tonne-kilometres and 44.2% of total tonne kilo-metres moved in 1982 in India 585 billion tonne-kilometres and 56% of total
tonne kilo-metres moved in India now
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Operating costs are higher Ideal for small shipments over short distances
Labor intensiveOccasional fuel shortages
Availability of good quality vehiclesAvailability & cost of maintenance and spares
Bad and unsafe road conditionsCarrier organizations and their disputes with
government Octroi
Old MVA Restrictive permits
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Developments in this area Entry of several manufacturers of trucks-entry
of Daimler to produce Mercedes CVs Trailer-tractor sets
National grid of highways Road widening schemes, bypass to cities Pay and use roads – private road builders
Express ways The Golden Quadrilateral
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Water transportSailing vessels, steamships-1800, diesel driven
ships-1920Limited scope for deep water transport
Limited extent of navigable inland water transport -lakes, rivers, canals
Main advantage of water transportation is extremely large shipments & low cost
Importance of deep water vessels & deep water ports to fully realize benefits of water transport
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Diesel towed bargesTug-barge combinations
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Diesel towed barges
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Diesel towed barges- high flexibility, disadvantages are range of operation (not for
long distance) and slow speedFerries- for small water bodies like rivers and
bays.
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Inland water Transport is not used to its full potential in India although we have used mechanized IWT since early 1800.
Main hurdles appear to be1. Low priority in policy2. Construction of dams3. Receding water levels in the rivers4. Tough competition by other modes
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Developments in this areaConstruction of deep water ports: JNPT
Construction of ports with private investmentPort Pipavav, India's first port in the private
sector is operated by APM Terminals, one of the largest operators of container terminals in the
worldA consortium led by P&O Australia is setting up a $200 million Container terminal on BOT basis at Jawaharlal Nehru Port Trial operation
started in April 1999Agreement signed for construction of a captive
Coal Jetty at Mumbai by Tata Electrics.
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PipelinesWhat is transported in a pipe line?
Liquids - oils, crude, petroleum products In India, extensively used for transporting crude
and petroleum products More than 5,000 km of pipeline exists in India
for crude and petroleum productsSlurries - coal slurry, iron ore, lime
Huge quantity of water is necessary which is a concern for environment
In India pipe line is used for transporting iron ore.
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Pipelines
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Gases and vapors- natural gas, LPG, in India LPG pipe line is in existence
Pulverized dry bulk material - cement by hydraulic suspension
Main features of this mode of transportReliable all weather means of transport
Low energy consumptionPipeline being under ground space occupation is
minimalPipe line operates all the time except when it is
shut down for maintenanceNo empty container or wagon to be brought back
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Highest fixed costs, right of way and laying of pipeline, and lowest operating costs
Not labour intensiveNot flexible by nature. Pipe lines are stationary Physical state of the commodity is a limitation.This mode of transport can release capacity of
other modes for transport of essential commodities
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Rope ways Hilly and otherwise inaccessible area
Steep gradients Cause minimum ecological imbalance
Point of supply and demand can be connected by shortest route
Logistics of fruits in Himachal Pradesh
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Rope way
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Air transport Speed of transport is highest
Fixed costs are lower than rail or road or pipe line. But operating costs are highest
Air transport brings distant markets closer - perishables market in gulf countries
Overcomes the hassle and cost of setting up depots and service centers overseas
Full potential of peak seasonal demand can be taken
Test marketing is easy. Products can be shipped directly from the factory
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The Indian Air cargo Market The growth of air cargo in India has also been manifold though it might not have
kept pace with the progress made all over the world. Table 1 shows how both
international and domestic air cargo traffic has increased, reflecting an
overall year on year growth. (Source - Transport India 2000)
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Period International Cargo
Domestic Cargo
Total Percentage Increase
1972-73
47.4 33.6 81 -
1982-83
165.4 84.6 250 209%
1992-93
300.5 90.9 391.4 56.56%
1999-2000
494.2 183.0 677.2 73%
Table 1: Trends in cargo traffic at five international airports in India.
(Figures in '000 tonnes)
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TRANSPORTATION MODES
RAIL ROAD WATER AIR PIPE
LINE
CAPITAL EX II IV III V HIGHEST I
OPERATING
COST
III II IV I V
SYSTEM KM 63,000
kms
15,03,000
kms
15544
kms[IWT]
(Inland
W- ways)
5000 kms
TONNE KM 449
Billion
Tonne
KM
585 Billion
Tonne KM
66 BTKM
(British-T)
[Costal
Shipping]
70 BTKM
SPEED III II IV I V
AVAILABILTY
[ABILITY TO
SERVE A SET
OF LOCATIONS]
II I IV III V
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Rail Road Water Air Pipeline
Dependability
[minimum deviation
from schedule,
weather, congestion&
other problems]
III II IV V I
Capability
[ capacity to tackle any
size of the load]
II III I IV V
Frequency [quantity of
scheduled movement]
IV II V III I
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Freight rate structureFreight Rate Structure & Principles:1. Cover actual cost of transportation.Factors influencing cost of transportation
A. Fixed costs: Interest on capital
Depreciation Insurance premium
Administrative overheads Expenses on fixed facilities like buildings
B. Semi fixed costs: Salaries of the staff
Facility for servicing, periodic maintenance etc
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C. Variable costs Cost of fuel and lubricants
Maintenance directly attributable to a particular trip – breakdown
Damage to the vehicle and also the cargo. Eg. hilly roads, bad roads, war effected sea routes
D.Vehicle utilization Carrier likes to gain maximum mileage out of
his vehicle Run the vehicle at top speed to cover max.
distance at min time Quote higher rates if following are not
conducive to the above Road conditions
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Terminal detentions [congestion, formalities, loading/unloading etc.]
Obtaining a return load [market factors] Nature of goods, hazardous, corrosive [liability,
insurance] Density, consignment light by weight
Stowability, shape and size of the product2. Traffic Bearing Capacity
Value addition by transportation. Transportation cost should not upset the value
added
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3. Public use Items to satisfy basic needs of common man
should be moderately charged 4. Government Policy
freight rates are controlled by the state for Promotion of certain type of trade
Development of certain type of industry Freight rates are hiked or depressed by state
5. Profit Margin for reasonable return on investment
Entrepreneurial time and efforts Funds for future development of business
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Transportation policyComponents of transportation decisions
I. Mode SelectionAir - most expensive, but very fast
Road - relatively quick and inexpensive, highly flexible
Rail - An inexpensive mode for large quantitiesWater - the slowest but most economical for large
overseas consignmentsPipeline - primarily for oil and gas
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Transportation network options
II. Carrier in house or out sourced - whether product owner performs the function or out
sources it. - Private carrier, contract carrier, public carrier,
exempt carrierIII. Trade off situations
Cost of transportation and cost of inventory Cost of transportation and cost of
responsiveness to customer
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IV. Carrier Selection1. Constitution of the carrier’s organization2. Business turn over3. Area of operation4. Branch offices or associates’ offices5. Strength of fleet6. List of clients- current & former, for
ascertaining reliability7. Nature and volume of business8. Normal transit time quoted by carrier9. Record of claims settlement by carrier10.Reference from banks, carriers’ association
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V. Route and network selection Route is the path the product takes and
network is locations and routes along which a product can be shipped
A logistics manager’s options for scheduling and routing decisions
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Supplier Retail stores
Retail stores
Suppliers
Supplier Retail stores
Supplier Retail stores DIRECT
SHIPMENT DIRECT SHIPMENT WITH MILK RUNS
ALL SHIPMENT S VIA DC
MILK RUNS FROM DC
DESIGN OPTIONS FOR A TRANSPORTATION NETWORK
supplier
Retail stores
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Direct shipment network From shipper directly to retailers.
Features:1. Warehouses are eliminated2. Long route, hence low cost3. Simplicity of operation4. Time of transportation is short
5. Decision points are quantity and mode
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Direct shipping with milk runs 1. Single supplier to a number of retailers - deliver like a milkman.2. From a number of suppliers deliver to a single retailer. eg. Toyota plant in US
Features:1. Movement consolidation2. Truck utilization3. Transport cost reduction
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All shipments via Central Distribution Center
suppliers to Distribution center and Distribution center to retailers
Features:1. Supply chain costs reduction when distances are large.2. DC stores inventory and acts like a transfer point3. Economies of scale in inbound transportation to DC. Outbound transportation cost is low as retailers are close to DC
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Shipping via Distribution Center Using Milk Runs
small lot sizes to large number of retailers from DC.
Features:1. Consolidation of small lots - reduction of outbound transportation cost
• Tailored Network Tailor made to the company needs
Features:1. Matches the needs of the company2. Coordination is complex
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NETWORK STRUCTURE
PROS CONS
DIRECT SHIPPING
NO DC COORDINATI
ON EASY
HIGH INVENTORY SIGNIFICANT RECEIVING
EXPENSE DIRECT SHIPPING WITH MILK RUNS
LOWER TRANSP COSTS
SMALLER INVENTORY
INCREASED COORDINATION COMPLEXITY
ALL SHIPMENTS VIA DC WITH INVENTORY STORAGE
MOVEMENT COSOLIDATION
INVENTORY COSTS INCREASED HANDLING INCREASED
COORDINATION COMPLEXITY
ALL SHIPMENTS VIA DC WITH CROSSDOCK
LOW INVENTORY
MOVEMENT COSOLIDATION
INCREASED COORDINATION COMPLEXITY
ALL SHIPMENTS VIA DC WITH MILK RUNS
LOWER OUTBOUND TRANSORTATION COSTS
INCREASED COORDINATION COMPLEXITY
TAILORED NETWORK
TRANSPORTATON SUITES TO INDIVIDUAL NEEDS
STILL HIGER COORDINATION COMPLEXITY
Fig.no.22
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Intermodal TransportationIntermodal transport
Intermodal movements combine the cost and/or service advantages of two or more modes in a
single product movement The more popular combinations are TOFC
[Trailer On Flat Car] and COFC [Container On Flat Car].
Benefits of long haul, short time & flexibility are optimized for achieving overall cost reduction
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Co-ordination of different modes of transport to avoid wasteful competition
Single window service to the customers Encouraging containerization both for internal
as well as import/export cargo
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RAIL COMMON
ROAD COMMON,CONTRACT,EXEMPT,PRIVATE
WATER COMMON,CONTRACT,EXEMPT,PRIVATE
AIR COMMON,CONTRACT,EXEMPT,PRIVATE
FISHY BACK
TRAIN SHIP
AIR TRUCK[BIRDYBACK]
PIGGY BACK
WATER OR AIR WATER OR AIR LAND BRIDGELAND [RAIL OR ROAD]
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COFC
COFC
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TOFC
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TOFC
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04/08/23 74LANDBRIDGE
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Transshipment Transportation goods and materials to the destination using one or more intermediate destinations
A technological requirement Air travel to US
A means of logistical cost reduction
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Containerization
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Containers were introduced in US during 1955 and in India during 1960
Features of a container: 1. Robust but still light for inter modal
transportation2. Equipped with fittings to facilitate safe and
easy handling
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3. Easily be stuffed or unstuffed in a short time4. Water tight and air tight outer shell5. Internal lining that doesn’t buckle under
temperature and can be easily cleaned 6. Watertight flooring, air tight door seals and
locks7. Insulation to protect refrigerated cargo.
Interior washable to required hygienic standard8. Construction to allow circulation of air around
cargo
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Basic types of ISO containers
Dry or cube containers are front loaded, completely enclosed and suitable for general-purpose
transportation.
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Insulated Containers are available in 20 and 40 foot lengths, and contain a layer of foam insulation between the interior and exterior surfaces of the walls, floor and roof.
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An insulated container with a built-in refrigeration unit, the Reefer container maintains a set temperature and stabilizes the environment within the container to prolong the life of the cargo in the most arduous of environments.
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Flatrack Containers:Flatrack containers are used for heavy and oversized cargo, which cannot be loaded into container with fixed walls and needs loading from top or side. Can be delivered with both fixed and collapsible end walls.
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Open top containers are shaped like a box and loaded from either the top or end. They are designed to carry heavy, tall or hard to load materials such as coal or grain
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Tank containers are built to the same standard dimensions as other ISO containers, but are cylindrical vessels mounted in a rectangular steel framework. Typically, these containers are used to transport liquid or bulk materials.
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Universal advantages of container as a packaging unit
1. Reduction in loss, pilferage and damage of goods
2. Reduction in paper work3. Expedites door to door pick up and delivery4. Eliminates multiple handling of contents as
this is shipped as a single unit5. Consolidation of movement of small lots6. Standardization of handling methods and
equipment7. Reduction in packaging cost as container itself
acts like a package
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8. Optimizes the services of various modes9. Container can easily be transshipped.
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Major benefits of containerization to business 1. Integration of various modes of transport2. Reduction in handling time and thereby turn
around time of vehicles3. Standardized size of containers reduces reduce
capital as well as operational costs4. Reduction in packaging cost as container itself
is a robust packaging5. Need for enclosed warehouses redundant6. Transport service is reliable
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7. Containerization has lead to the building of modular ships resulting into quick turn around and de congestion of ports
Infrastructure for Containerization• Deep water ports• Mechanized handling equipment- Equipment
used to load and unload are container cranes called straddle carriers, side loader forklifts. Obviously this equipment is very expensive
• Inland container depots
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• Container ships- are built for optimum utilization of space, easy stowing in the holds, to facilitate fast & easy loading and unloading of container
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Container ships
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Roll On/Roll Off ferries [RORO]: the truck rolls on to the and rolls off at the end of the
voyage
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Roll On/Roll Off ferries
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LASH [Lighters Aboard a SHip]: when a ship is loaded on the high seas from barges, instead of loading the cargo lifted from the barge, entire barge is lifted and loaded on the ship. At the end of the voyage barge is put back on water
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LASH
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Nodal pointsRailways network
• Growth of economy is the responsibility of state• Bulk movement of supplies from production
centers to consumption centers boosts economy• Traffic could be consolidated and moved in full
train loads/wagon loads• Bulk material transported is like coal, steal,
fertilizer, cement
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• State also has the responsibility to distribute essential commodities through the public
distribution system [PDS]• Hence the responsibility for logistics of those
items falls on the state. • State owns the net work of railways, net work that
is the cheapest mode of transport for bulk. • Nodal points in the value chain of such
commodities can provide movement consolidation. • State owned rail net work can link these nodes to the best advantage of state and thereby to that of
national economy.
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Some characteristics of nodal points are as under
1. Nodal points should be closer to consumption points.
2. Number of nodal points would depend on volume of distribution. Neither too many nor too less
3. Nodal points should be well connected by rail net work.
4. Terminal and shunting facilities are required at these places.
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5. Facilities for loading, unloading & inter modal handling.
6. Shipments from the nodal points would be by road in trucks or rail
7. Nodal points should be connected to consumption centers by roads
8. Normally, nodal points are district headquarters for necessary operational support
9. Strategic role by central and state governments10. Strategic development of such nodal points in
the country strengthens the logistical operations for essential commodities and bulk materials
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CONTAINER CORPORATION OF INDIACONCOR
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CONCORSet up in March 1988 under the Companies
Act, to profitably satisfy our customer's needs for high quality, cost effective logistics services
Commenced operation from November 1989 taking over the existing network of 7 ICDs from
the Indian RailwaysA network of more than 40 terminals, offering
scheduled and on demand rapid rail and road services between the hinterland and ports, and
between major metros.
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Inland Container Depots/Container Freight Station
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Material Handling in ICD
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Inland Container Depots and Container Freight Stations
• An ICD is a common user facility with public authority status
• Equipped with fixed installations and offering services for handling and temporary storage of
import/ export laden and empty containers under Customs control
• Customs and other agencies competent to clear goods for home use, warehousing, temporary
missions, re-export, temporary storage for onward transit and outright export
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• Trans-shipment of cargo can also take place from such stations
• I C Ds are dry ports
• connect major ports [able to handle container ships] to hinterland
• facilitate customs clearance, export import formalities
• ICD to be located after ascertaining export import potential and good road net work
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• Serve as consolidation facility and should have handling equipment. Facility to group small
consignments goods transfer from road to rail and otherwise
• Increase the export potential of industries in the hinterland
• Decongest major ports