Role of transport as an element in logistics

ROLE OF TRANSPORTATION
IN THE MOVEMENT OF
GOODS AND SERVICES
EBO HAMMOND, CMILT
International Diploma in Logistics & Transport (GIM PA)

TOPIC OBJECTIVES 1

• It is to help
– Appreciate the role and importance of
transport in the logistics chain
– Understand the general principles
underpinning transport in logistics
– Identify the various carriers/modes and
characteristics
– Apply principles and theories in
designing own distribution system
18/08/10 EBO HAMMOND-CMILT 2

TOPIC OBJECTIVES 2

• It is to help
– Appreciate the role and importance of packaging
as it relates to transportation
– Understand the role of unitization and
containerization and its importance in
transportation
– Appreciate the risks in transportation of
hazardous goods


INTRODUCTION 1
• Transportation plays a critical role in the entire
logistics chain
• The chain is set in motion with orders from suppliers
for raw materials, semi-finished products, finished
products, etc, which are transported from supply
sources to production sites
• These raw materials are stored or sent directly to the
plant to aid production
• Finished goods are then sent or transported through
distribution centres to intermediaries for
redistribution and sale to consumers

INTRODUCTION 2

• The management of transport services is an important
element in logistics
• The interface between transportation and logistics
systems could be described as consisting of Nodes and
Modes
• The Node portion involves activities such as
warehousing, goods handling, sorting, processing, etc.
The Mode portion deals with transportation services in
the movement of goods and services
• Transport is the link between nodes


CONCEPT OF NODES AND MODES 1

Mode Mode Mode
Node Node Node Node

MODE- For movement or transportation of products/services

NODE- For general processing and all handling apart from movement



MODE MODE MODE MODE

SOURCE CONSUM
PTION

NODE NODE NODE NODE NODE


CASE STUDY- SUPPLY CHAIN OF ELECTRICITY PRODUCTION –
MODES AND NODES (INTERFACE BETWEEN TRANSPORT AND OTHER
LOGISTICS ELEMENTS
Source Point Mode
Node

Mode

Raw materials Generation

Node
Consumption Point

Transportation

e
Mode

d
Mo
Users Storage

DEFINITION OF TRANSPORTATION 1
 The following synonyms could best provide a clue to
what transportation means- Convey, Move, Carry,
Bring, Transfer, Ship
 Transportation simply comprises all the various
devices, equipment and related activities such as
driving, maintenance, vehicles, etc harnessed in
physically moving goods and services from point A
to B which represents the nodes.
 Transport provides spatial mobility which helps to
reposition goods and services for consumer
accessibility and possession.


DEFINITION OF TRANSPORTATION 2
• It adds value to the logistics function by way of
providing time and place utilities. An efficiently
managed transport system could reduce the overall
cost of products to end-users.
• Transport organisations provide the following extra
functions/services:
– Packaging
– Freight forwarding services
– Distributors (wholesalers)
– Corporate branding on vehicles
– Warehousing/Depots
– Reverse logistics management
– Others


DEFINITION OF FREIGHT 1
• The following synonyms could best provide a
clue to what Freight means- Goods, Cargo,
Shipment, Contents, Stowage, luggage, etc
• Freight is anything, other than passengers,
carried by a transport mode from point a
source point to an end point
• It is usually carried for a fee; and from a
consignor to a consignee


DEFINITION OF FREIGHT 2
• Freight transportation is sometimes also
referred to as-
– Cargo transportation
– Physical distribution
• Freight transportation serves as the threaded
needle (mode) that weaves the logistics
elements (Nodes) together into a seamless
logistics dress


STRATEGIC FACTORS IMPACTING ON
TRANSPORTATION IN LOGISTICS I
• Some of the factors are as follows:
– Globalisation; which has lengthened the physical distance covered
and also cost
– Information, Communication and Technology; which has facilitated
the flow of information along the chain; helped shortened the chain
– Socio-economic; which has increased demand and the need for
convenience thereby affecting choice of mode and speed of flow

Final-assembly
Product Design A C
D Sub-assembly
GLOBAL ISATION B
OF PRODUCTION Consumption Raw Material


TRANSPORTATION IN LOGISTICS I
• Some of the factors are as
follows:
– Political; which has at a point
integrated markets but on the
other hand created physical
barriers to transportation
through varying legislations
– Environmental- use of green
materials, degradation
– Competition; driving down
margins, promoting
innovation


TRANSPORTATION IN LOGISTICS II
• Some of the factors are as follows:
– Dwindling Natural Resource; which
has resulted in seeking alternative
sources of supply such as water, fossil
fuel
– Rise of New Economic Powers blocs;
which has switched and realigned
economic resources flow and changing
the balance of economic power and
even impacting on political dynamics.
Such economic powers are Asia Tigers,
China, Brazil, India, South Africa,
others


TRANSPORTATION IN LOGISTICS II
• Some of the factors are as
follows:
– Natural Disasters; such as
earth quakes, tsunamis,
typhoons, floods , drought,. Etc
further worsening depletion
and destruction of resources
– Population Boom; coupled
with economic development
driving trade boom and cheap
labour
– Financial Crisis (Credit Crunch)-
dwindling investible funds for
logistics and transport activities


ROLE AND IMPORTANCE OF TRANSPORT
IN THE SUPPLY CHAIN
• The various roles played by transportation services in
freight movement include the following:
– Movement of goods and services physically along the
logistics chain
– helps achieve the following logistics utilities such as Time
(When) and Place (Where) and supporting Form Utility
– Help build strong brand image through vehicle branding
and marketing
– Facilitates customer satisfaction through timely delivery of
goods and services


TRANSPORT PHASES IN THE SUPPLY CHAIN
Inbound Freight
• Transport movement along the
supply chain can be segmented
into THREE PHASES such as:
– Inbound Phase- which moves mostly
raw materials, semi-finished, sub- Internal Freight
assemblies, etc to be added to
production. This is the input stage.
– Internal/Operations Phase- which
moves goods and services within the
confines of production or operations
site Outboard Freight
– Outbound Phase- which moves
finished goods for packaging, storage
or distribution to consumption points


AVAILABLE MODES AND XTICS 1
 There are different types of transport systems
available for logistics organisations to choose for
the movement of goods and services. The following
are the key existing transport modes:
◦ Sea transport (Maritime)
◦ Road Transport
◦ Rail Transport
◦ Air Transport
◦ Inland Water Transport
◦ Pipeline


General Objectives for Mode Selection
It ensures that the goods are delivered safely and on
time to the customer. General qualities guiding
choice of carrier include:
●Speed of delivery
●Certainty of timing
●Freedom from interruption
●Avoidance of damage
●Avoidance of loss through pilferage
●Quality and/or impact of ancillary services


• Sea/Maritime Transport
• This refers to movement of goods and services by the sea/ocean. The
following are the main characteristics of this mode:
• Can move great volume of goods due to the availability of big ocean
liners
• Generally less expensive in relation to some other modes
• Generally less faster in relation to some other modes due to slow
turnaround time and actual voyage time
• Has high fixed cost but low variable cost
• It has high availability but for those countries which are not land-locked
• There is generally flexibility in choice due to existence of many ports
around the world and number of alternative ships
Mostly used for cargo consolidation, high volume, heavy weight and
relatively low cost freight.

Sea transport has the following advantages and
weaknesses:

Advantages Disadvantages
Large volumes of cargo can be Ships are relatively slow
transported in one ship on one
voyage
May be cheapest method of Ports suffer from congestions
transport
Flexible particularly following Not all ports are well equipped
containerisation and some have draught
restrictions
Similarity in infrastructure and Port practices need improving
superstructure


• Road Transport
• This refers to movement of goods and services by the road. It is the
most dominant mode of transportation in the logistics chain. The
– Can move small to medium volume of goods due to capacity constraints
– Widely available. It is very ubiquitous
– Widely accessible
– Has low fixed cost but high variable cost
– Moderate to high speed due to fast turnaround time and actual trip time
– Faster transit time
– High flexibility in choice due to high availability
– High throughput and modal integration with other modes
Mostly used for break-bulk cargo, small to medium volume, variable
weight and cost freight.


Road transport has the following advantages
and weaknesses:

Any dwelling or work place can be Size of the load is restricted by
serviced by road. vehicle size and legislation
Routes can be changed at short Distance travelled determined by
notice driver’s working hours and
legislation
Terminals are less expensive Speed circumscribed by law
Costs less than competing Roads may be congested during
transport means peak periods
Restrictions on heavy vehicles in
certain localities
Land severance and emissions



• Rail Transport
• This refers to movement of goods and services by the rail (tracks).
The following are the main characteristics of this mode:
– Can move great volumes of freight
– Generally less expensive in relation to some other modes such as road
– Generally less faster in relation to some other modes due to slow
turnaround time and actual journey time
– It is dependent on other modes for completion of delivery, especially road
– High fixed costs, relatively less variable costs
– Allows for easy unitization of freight
– Low accessibility
• Mostly used for cargo consolidation, high volume, heavy weight and low cost
freight.

Rail transport has the following advantages and
weaknesses:

Large volumes of cargo can be Investment in infrastructure and
transported on one voyage maintenance is expensive
May be cheaper than other modes Is limited in volumes it can
(except sea) transport
Can carry different loads Network construction has major
impact on the environment
Can link with other transport Operating practices need
modes improving



• Air Transport
– This refers to movement of goods and services by air. The
– Limited in volume and weight it can carry
– Highly expensive carrying cost in relation to some other
modes such as road
– fastest mode in actual journey time
– It is dependent on other modes for completion of delivery,
especially road
– High fixed costs, relatively high variable costs
– Medium to high accessibility
• Mostly used for cargo consolidation, low volume, low weight, high cost freight.

Air transport has the following advantages and
weaknesses:
Speed of travel Inflexible as aeroplanes have to
land and take off in an airport
which may be away from final
destinations.
Has a good safety record Aeroplanes are noisy
Employs highly trained Expensive when compared to
professionals other transport types.
More effective where the goods Terminals very expensive to
are high value and time sensitive construct and maintain


• Inland Water Transport
– This refers to movement of goods and services by inland
water bodies. The following are the main characteristics of
this mode:
– Can move medium to high volume of goods
– Low cost alternative to road transport
– No right of way
– Long transit times
– Allows for roll-on-roll-off (RORO)
– Low speed
• Mostly used for cargo consolidation, high volume, heavy weight and
relatively low cost freight. EBO HAMMOND-CMILT
18/08/10 29

• Pipeline Transport
– This refers to movement of freight by the pipeline. This mode
is primarily used for liquid or gaseous ‘freight’. The following
are the main characteristics of this mode:
– Can move great volumes of liquid freight
– Own right of way
– Not suitable for general transport
– Less expensive in relation to other modal options
– Low fixed costs, relatively less variable costs
– Security and safety problems
• Mostly used for cargo consolidation, variable volume and variable cost freight

OPERATIONAL FACTORS CONSIDERED
IN ASSESSING MODE CHOICE
• Logisticians need to take into considerations the following factors when
selecting the mode(s) to be used for freight haulage. The key factors are as
follows:
– Type of Product to be transported; solid, liquid, gaseous, living, etc
– Value of product to be transported
– Weight and volume
– Customer expectation and demand
– Mode capability; is there enough space to carry product
– Distance to be covered
– Cost of mode
– Terminal and ancillary infrastructure of particular mode
– Transit time and reliability
– Accessibility
– Security and safety
– priority


Modal Choice Matrix
Size of order/ 100T Road Road/rail Rail/sea Sea
load
20T Road Road Road/rail Rail/sea

Pallet Road Road Road/rail Air/sea

Parcel Post/roa Post/road/a Post/road/a Post/air
d ir ir
Short Medium Long Very
long

Delivery distance


KEY FREIGHT TRANSPORT CONCEPTS 1
• Inter-modal Transport (Modal Split)
• This simply refers to where more than one mode or different modes of
transport are used to move freight from point A to point B.
• ‘The movement of goods in one and the same loading unit or vehicle,
which uses successively several modes of transport without handling of
the goods themselves in changing modes’- The European Conference of
Transport Ministers.
• Inter-modal (modal split) transport helps facilitate freight movement
globally and over different terrains and environmental conditions.


KEY FREIGHT TRANSPORT CONCEPTS 1 cont…
•Inter-modal Transport (Modal Split)
Intermodal or combined transport has increased
because of:
● Globalisation
● The extension of market areas
● Concerns on the impact of transport on the
environment
● New improved systems of modal interchange
● Increasing road congestion
● Restrictions on vehicle size, weight limits and
operating times
● containerization

cont…
•Inter-modal Transport (Modal Split)
The following modes are possible:
● Containerisation using road, rail, sea and inland
waterway
● Sea transport combined with road transport eg.
Roll-On Roll-Off
● Sea transport combined with rail transport
● Road and rail combinations eg. Trailer on truck
or truck/trailer on train (piggyback)
● Swap body systems for road/rail use


• Modal Shift
• This is a current concept being pursued by Japan. This
simply refers to a conscious effort to offload freight from
one dominant mode (especially road) to other modes
(rail/sea). The main factors driving the pursuit of modal
shift are:
• Environmental; global warming
• Cost savings
• Energy
• Labour shortages and savings
• Traffic
• Sustainability
• Prevention of deterioration of infrastructure of a mode

KEY TRANSPORT CONCEPTS

• Cargo Consolidation
• This simply refers to the aggregation of small
amounts of cargo (mostly from different points
into bulk cargo for movement into mostly a
single point or destination). Cargo consolidation
facilitates inter-modal transportation and modal
shift.
• Light trucks move small disaggregated cargo to
small depots; a heavy cargo truck moves
aggregated cargo (consolidated goods) collected
from these depots to a central distribution
centre

KEY TRANSPORT CONCEPTS
• Break-Bulk Cargo
– This simply is the reverse of cargo
consolidation. It is the disagregation of
bulk amounts of cargo (mostly from one
point, into small different cargo for
movement into mostly multiple points
or destinations.
– A heavy cargo truck moves consolidated
goods to distribution centre; light trucks then
move in to pick disaggregated goods to
different destinations (depots).

CASE STUDY
FORMER CARGO TRANSPORT SYSTEM OF GHS
Districts
Regional
GHS

National GHS
Store 30 0km GHS

700km GHS

GHS
GHS

25 GHS
0k 500k
m m
GHS
GHS


NEW CONSOLIDATED CARGO PHYSICAL Hospitals
DELIVERY MODEL
Regional Store

GHS
National
Store CONSOLIDATED
CARGO BREAK-BULK
CARGO
GHS
GHS

GHS


PACKAGING AND
TRANSPORTATION
 This refers to the packaging of goods
to facilitate transportation. It is the
art, science, and technology of
preparing goods for transport and sale
and also a means of ensuring safe
delivery of a product to the end-user
at overall competitive price. Packaging
impacts greatly on transportation
efficiency and ensures Time, Place
and the maintenance of Form Utility.

PACKAGING AND
TRANSPORTATION
• Some of the roles packaging plays in
facilitating transportation are as follows:
– Protection and preservation from physical,
chemical and mechanical damage
– Easy transportation
– Easy stowability (able to fully utilize truck space)
– Facilitates ease of handling (loading and
unloading)
– Facilitates unitization of goods
– others

PACKAGING AND
TRANSPORTATION
• It must be noted that during
transportation of goods through the
supply chain, there is the likelihood of
breakage, pilferage, deformation,
evaporation, which sometimes reduces
the quality and quantity of the products.
Good packaging helps to prevent and
reduce some of the problems mentioned.


UNITIZATION AND TRANSPORTATION
• Unitization refers to where goods are
packaged or grouped together, in
mostly equal quantities, form/shape,
weight, height, length, etc to aid
handling (loading and unloading) and
facilitate transportation.
• Unitization of goods helps achieve the
following:
– facilitates inventory management
(warehousing, stock taking, loading and
unloading)
– Achieve full stowability of transport space
– Facilitates smooth transportation


UNITIZATION AND TRANSPORTATION
• Basic device(s)/technology that support and
revolutionized unitization are palletization
(e.g. wooden pallets) and containerization
(e.g. large shipping containers). These in effect
have impacted greatly on logistics systems.
• Pallets are load carrying devices which
facilitates goods handling. They serve a dual
purpose in that they enable goods of similar
nature and size to be made up into unit loads
and palletized loads can be more easily
handled mechanically which reduces the effort
required to handle and transport them. The
most widely used types are wooden pallets.


CONTAINERIZATION AND
TRANSPORTATION
• Containerization is at the heart of international multi-
modal freight transportation
• However other modes such as Air use a slightly different
type of containers; pipelines transportation are not usually
amenable to containerization. Products are moved virtually
nakede
• Containerisation or the movement of goods in specially
designed units commenced in the 1950s.
• Containers are usually rectilinear/rectangular boxes
constructed of steal. Most common sizes of container
available are 20ft, 30ft, 40ft and 45ft in length.
• They are produced under International Standards
Organisation (ISO) defined specifications.

CONTAINERIZATION AND
TRANSPORTATION- FUNCTIONS
• It simplifies the movement of bulk goods across different
transport modes. In addition, containers help achieve the
following:
– Enables goods consolidation
– Reduction in goods handling
– Reduction in individual packaging requirements depending on the
load within the container
– Protection of goods from damage
– Provides goods security
– Ensures safety of goods
– Faster throughput during transit due to no or limited handling at
terminal points
– Door-to-door service possible from factory


CONTAINERIZATION ADVANTAGES
The advantages of containerisation include:
●Less packing is needed for shipments, producing
substantial cost savings
●The cargo is able to arrive in a better condition
●As a capital-intensive transport system, rates are more
competitive
●Much quicker, more reliable transits are possible
●Faster payments of export invoices is possible
Faster transits, usually coupled with more reliable schedules,
and ultimately increased service frequency, tend to
encourage importers to hold reduce stocks. This results in
savings in warehouse costs, lessens risks of obsolescent
stocks and reduces importers’ working capital.

CONTAINER CLASSIFICATION
Containers are classified as:
●General cargo containers:
o General purpose containers
o Specific purpose containers:
o Closed ventilated containers
o Open top containers
o Platform based containers (open sided)
o Platform
●Specific cargo containers:
o Thermal containers
o Tank containers for liquid and gases
o Dry bulk containers
o Named cargo types


CONTAINER CLASSIFICATION
● General cargo containers are so called because most
types of dry cargo can be carried in these containers.
● Open top containers have a solid removable top or a
canvas top and are suitable for cargo that is too large or
too awkward to be packed in via the doors of the
container. Also used for “overheight” cargo.
● Refrigerated containers are insulated units with
refrigeration as well as heating equipment. These are
units used for the transport of perishables and any
goods that are sensitive to fluctuations in
temperatures.


LECTURE REVIEW

• Definition of Transportation
• Definition of Freight
• Factors impacting on Transportation
• Containerization, Unitization and
Packaging as relating to Transportation
• Freight Transportation and Distribution
Concepts
• Others

CONCLUSION
• Transportation plays a critical role in facilitating
the movement of goods and services from point
of origin to point of consumption.
• It is also a value-added activity. Its efficient
management will greatly increase the
competitive advantage of the organisation over
competitors


Role of transport as an element in logistics

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