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

19. • Freight bill
• Carrier’s invoice for carrier charges

20. 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”

21. 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

22. 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

23. 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

24. 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

25. • Planning & Distribution and transport
1. Speed of deliveries
2. The cost of Transportation
• Packing & Packaging

26. • Marshalling

27. • 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

28. • Documentation
1. Advice Note
2. Consignment Note
3. Labels
4. Delivery Note

29. • Losses / damages in transits
•Store Road Carrier Goods Shed
Transit by
Rail
Railway
Station
Road Carrier User End

30. • Transport of flammable materials
• Return of empty packages (Reverse logistics)

31. 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.

32. 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.

33. 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.

34. 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.

35. THANK YOU