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Logistics of transportation & distribution

  1. LOGISTICS OF TRANSPORTATION & DISTRIBUTION Navindu Munidasa MSc Logistics and Supply Chain (UK) (Reading); BSc Operations and Logistics Management (UK); Dip in Computer Hardware and Networking ; Certificate in Motor Mechanism (CGTTI); Certificate in Workshop Practices (CGTTI)
  2. THE ROLE OF DISTRIBUTION Distribution is the function of ensuring that goods produced are transported from the point of production to the point of consumption efficiently, effectively and economically. The two important areas of concern in Distribution Management are : • Maintenance of the quality of goods distributed. • Ensuring the physical integrity of the goods in the distribution.
  3. INTRODUCTION TO DISTRIBUTION • Stores distribution and transportation can be effected either from a Central Stores or a Branch or Sub-Store, depending on the location of the users. Distribution and transportation involve considerable cost, can be as much as 10% of the value of goods transported and the costs are steadily growing. • The objective of those involved in this function should be to reduce these costs as far as possible and afford an economical and expeditious service to the users / customers.
  4. SECURITY IN DISTRIBUTION • The responsibilities of a Distributing Manager in this connection involve the following. 1. Security Policy 2. Rules for secure custody of keys and locks 3. Security of installations and buildings 4. Control of entry into stores premises 5. Fire prevention and control arrangements 6. Adequate control of stock deterioration through faulty storage 7. Inadequate packaging 8. Environmental causes 9. Faulty or careless handling 10.Contamination of mixing of materials
  5. THE COSTS OF DISTRIBUTION 1. In-plant movement and storage 2. Plant to depot transport 3. Depot operating costs 4. Depot inventory costs 5. Depot to customer costs
  6. FACTORS AFFECTING THE CHOICE OF DISTRIBUTION The type of product The range and volume of products The geographical spread The level of service expected The number and types of customers The relative costs The finance available for investment
  7. FACTORS TO BE CONSIDERED WHEN SELECTING A MODE OF TRANSPORT Security of goods in transit 1 Packaging, delivery time 2 Handling at intermediate stages 3 Handling at destination 4 Total contribution costs 5
  8. MODES OF TRANSPORT Road Rail Air Water Pipe or Wire
  9. ROAD TRANSPORT • Advantages 1. Flexibility 2. Travel Speed 3. Use extensive road networks 4. Large number of carriers working in the same areas 5. Easy to monitor location of goods • Disadvantages 1. Feasible only for shorter distances 2. Vulnerable to traffic congestions (delays) 3. Dependence on fuel price 4. Vulnerable to pilferage and theft
  10. RAIL TRANSPORT • Advantages 1. Lowest overall cost per unit weight (Land) 2. Can be the safest form of transportation 3. Can be the most effective when linked to a multimodal system • Disadvantages 1. Routes only between fixed terminals 2. Cannot be stopped at intermediary points 3. Cannot provide door to door service
  11. AIR TRANSPORT • Advantages 1. Delivery speed 2. Minimum packaging (Handling is safer than other methods) • Disadvantages 1. High cost 2. Weight limits 3. Routes only between fixed terminals 4. Cannot be stopped at intermediary points 5. Cannot provide door to door service
  12. WATER TRANSPORT • Advantages 1. Cheap 2. Large weights can hauled over long distances • Disadvantages 1. Difficulty in monitoring exact location 2. Limited to appropriate ports 3. High transferring time
  13. PIPE OR WIRE TRANSPORT • Advantages 1. Move large quantities over long distances 2. Cheapest unit cost 3. Local networks can add flexibility • Disadvantages 1. Slow 2. Can carry only certain types of products 3. High fixed cost
  14. CARRIER SELECTION • Selecting the individual transportation service providers within the mode • Major difference between modal and carrier selection is the number of options • Difference is the frequency of the decision • Type of service provided within a mode impacts carrier selection • Most carriers have the capabilities to provide a similar level of service • Core carrier • limited number of carriers • leverage its purchasing dollars
  15. 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
  16. SHIPMENT PREPARATION • Corporate transportation routing guide • Last-minute, cost-saving decisions • Consolidate freight • Coordinate shipment deliveries • Take full advantage of container capacity • An accurate freight count should be taken
  17. 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
  18. • Freight bill • Carrier’s invoice for carrier charges
  19. FREIGHT CLAIMS • 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”
  20. TRANSPORTATION METRICS • Key performance indicators (KPIs) 1. Shipping Time: Spot potential issues in your order fulfilment process 2. Order Accuracy: Monitor the degree of incidents 3. Delivery Time: Track your average delivery time in detail 4. Transportation Costs: Analyze all costs from the order placement to its delivery 5. Warehousing Costs: Optimize the expenses of your warehouse 6. Number of Shipments: Understand how many orders are shipped 7. Inventory Accuracy: Avoid problems because of inaccurate inventory 8. Inventory Turnover: Track how many times your entire inventory is sold 9. Inventory to Sales Ratio: Identify a potential overstock
  21. INTERNAL DISTRIBUTION • In this set-up three arrangements are possible : 1. Controlled by the users – Transportation, Risk, etc. born by users 2. Controlled by the stores – Transportation, Risk, etc. born by stores 3. Open access – Transportation, Risk, etc. divided among both parties clearly
  22. EXTERNAL DISTRIBUTION AND TRANSPORT • The main problems that require careful considerations are the following : 1. The structure of the stores organization (Central Stores, Branch Stores) 2. Planning of distribution and transport 3. Packing and Packaging 4. Marshalling 5. Mode of Transport 6. Documentation 7. Claims for losses / damages in transit 8. Transportation of flammable materials 9. Return of empties
  23. THE STRUCTURE OF THE STORES ORGANIZATION • The advantages of this set-up are; • More economical • Lead time saving • Work on limited range of items • Scaled – down quantities Central Warehouse Distribution Centre Distribution Centre Distribution Centre
  24. • Planning & Distribution and transport 1. Speed of deliveries 2. The cost of Transportation • Packing & Packaging
  25. • Marshalling
  26. • Selection of mode of transport 1. Security of goods in transit 2. Packaging, delivery time 3. Handling at intermediate stages 4. Handling at destination 5. Total contribution cost
  27. • Documentation 1. Advice Note 2. Consignment Note 3. Labels 4. Delivery Note
  28. • Losses / damages in transits •Store Road Carrier Goods Shed Transit by Rail Railway Station Road Carrier User End
  29. • Transport of flammable materials • Return of empty packages (Reverse logistics)
  30. Summary • Without question, transportation is a very dynamic activity and a critical supply chain process. Not only is it the largest logistics cost component in most supply chains, but it also directly impacts fulfillment speed and service quality. By providing the physical links between key participants across domestic and global supply chains, transportation facilitates the creation of time and place utilities. Organizations with highly efficient and effective transportation processes can differentiate their product in the marketplace through lower landed costs and greater inventory availability. • Managing the transportation process for maximum supply chain impact requires considerable knowledge of transportation options, planning, decision making, analytical skills, and information sharing capabilities. • Transportation is a key supply chain process and must be included in supply chain strategy development, network design, and total cost management. • Numerous obstacles—global expansion of supply chains, rising costs, limited capacity, and government regulation—must be overcome to synchronize transportation with other supply chain processes. • Fulfillment of supply chain demand can be accomplished through five modal options or the intermodal use of truck, rail, air, water, and pipeline transportation.
  31. Summary (cont.) • Multiple planning activities occur prior to carrier and mode selection: who will be responsible for managing the transportation function within the organization, what terms of sale and payment will be used, and how goods will be transported must all be determined with a strategic supply chain focus. • Mode selection is based on the relative strengths of each modal/intermodal option in terms of accessibility, transit time, reliability, safety and security, transportation cost, and the nature of the product being transported. • Carrier selection focuses on the type of service required (direct or indirect), geographic coverage, service levels, and carrier willingness to negotiate reasonable rates. • Most commercial freight moves under contractual rates that are negotiated directly between freight buyers and transportation companies for specific volumes of tailored services at mutually agreed-upon prices.
  32. Summary (cont.) • Shipment routing guides help organizations ensure internal compliance with service contracts and maintain centralized control over freight tendering decisions. • Freight documentation provides the details of each shipment, sharing critical information that promotes uninterrupted flows of goods through the supply chain. Domestic transportation documents include the bill of lading, freight bill, and freight claims, while international freight requires additional paperwork such as a commercial invoice, shipper’s letter of instructions, certificate of origin, and insurance certificates. • Organizations must continue to manage freight after it has been tendered to carriers by maintaining in-transit visibility of shipments and monitoring carrier performance. • Numerous metrics are available to evaluate transportation service quality in terms of carrier timeliness, freight protection, accuracy, and perfect deliveries. Service efficiency measures focus on spending proficiency, asset utilization, and labor productivity.
  33. Summary (cont.) • Transportation management systems are widely used information technologies that support the effective planning, execution, and analysis of transportation processes. Emerging tools such as event management and RFID have the potential to improve supply chain visibility and dynamic response to potential challenges.