What is the Transportation Supply Chain?

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

makes its way from the beginning of a supply chain to the customer. This requires a
new broad look at the business of transportation supply chain, including supply
chain management, logistics, and procurement. Freight transportation costs in the
United States amount to about 6% of the GDP, which means that a large portion of a
company's supply chain costs come from transportation. When you think more
holistically about the role of transportation in the overall supply chain and business,
and less about the tactics of transportation (technology now is the business process
enablement tool), you can strategically work with other players in the supply chain in
order to more effectively reach the corporate and business vision your organization
has set out to reach.

Many manufacturers and retailers have found that they can use state of the art
supply chain management to reduce inventory and warehousing costs while speeding
up delivery to the end customer.

Any supply chain’s success is closely linked to the appropriate use of

transportation. Walmart has effectively used a responsive transportation system to
lower its overall costs. At distribution centers, Walmart uses cross-docking, a process
in which product is exchanged between trucks so that each truck going to a retail
store has products from different suppliers.

Managers should ensure that a firm’s transportation strategy supports its

competitive strategy. Firms should evaluate the transportation function based on a
combination of transportation costs, other costs such as inventory affected by
transportation decisions, and the level of responsiveness achieved with customers.

Managers should consider an appropriate combination of company-owned and

outsourced transportation to meet their needs.

The Adverse Affect of Not Understanding the Transportation Supply Chain's Role

When freight costs are high, even seemingly small oversights can result in unneeded
expenses that could have been avoided and thus cut into overall profit margins.
Product write-offs can occur when sales channels are oversupplied. Undersupplied
sales channels can also have negative results in the form of missed sale
opportunities. Failure to monitor raw material prices can also result in above average
costs across multiple sources. In addition to this, and probably more detrimental to
budgeting, is the hidden cost of transportation in a poor supply chain. When getting
goods from one point to another is a crucial aspect of business, then ensuring that
this process is most efficient becomes a huge economic concern.

This is especially true in large enterprises and the obvious connection between
visibility of freight and the transportation economics become easy to see. Even in
smaller businesses where the margins are rather low, transportation costs are still a
crucial element of creating profitability.
The Transportation Supply Chain is Driven By Properly Integrated Technology
Systems

Most businesses would identify transportation supply chain visibility as a primary

goal, however, it is sometimes used to simply impress those invested in the company.
This is especially true in larger enterprises. That is because many enterprises have
never really figured out ways to implement real transportation and supply chain
visibility. One of the reasons that transportation supply chain visibility does not get
the attention it deserves is because, as a process, supply chain visibility requires true
system integration operating between many elements. Some of these elements have
different master data that must be used. This data must be not only present, but also
running in harmony over all systems. These can include warehouse management
systems, multiple ERPs, ordering systems, and transportation management systems.

When these sources are made up across many geographies, special attention is
required in order to keep them all cohesively glued together. The glue is getting the
materials from starting point to destination. The goal is to get this done efficiently
and cost effectively. Without transportation supply chain visibility there will be time
delays, expenses, and even backlogs. These events can throw off production
schedules, even creating idle labor or eventual lost sales. So, as the costs add up, you
can see the importance of focusing on understanding transportation's role in the
supply chain.

The Delicate Balance of Transportation Supply Chain Management

Usually supply chain management simply becomes a balancing act of time versus
cost. This is seen most easily in the transportation element. There are many ways to
ship goods from one place to another, but with foresight, the cost of shipping can be
balanced through different practices and compared against relative shipping times.
When manufacturers plan ahead to make sure the materials are arriving in the most
time-efficient way, they can then achieve the lowest freight costs.

Many like to think of an enterprise supply chain as a living thing. Living things are
always changing. Some suppliers like to challenge incumbents with what seems to be
better prices or services; raw materials may fluctuate in price; or foreign exchange
rates could change. Any of these changes can affect the transportation supply chain
as well. This means the supply chain is not static, and if the supply chain is not static
then the distribution requirements will change. Transportation systems must change
in response and it's up to the shipper putting in place systems either in-house
or through a transportation management 3PL to provide that expertise.

Many problems in the transportation supply chain can be addressed through the
availability of analytics provided by a transportation management system. Needing
such insights to allow companies to make smarter business decisions is especially
true when supply chains grow and begin operating on a larger scale. Recent
advancements in technology also help promise a better integration between physical
product movement and visibility. One good example is the surge of interconnected
devices to connect pallets, trailers and containers systems in order to provide greater
visibility. Of course, proper implementation is essential in order for these great
technologies to succeed.
Companies of all sizes must approach the transportation supply chain by
implementing more harmonious systems in order to achieve greater visibility and a
lower occurrence of supply chain errors. In the end, this will result in lower total
costs for the organization even beyond transportation costs.

Well executed transportation management systems always lead to the greatest supply
chain visibility. When transportation systems feed into a predictive analytics scheme,
performance will be improved across the board. In fact once the inventory is loaded
into a channel it is the predictive analytics’ responsibility to plan for efficient
transportation.

Supply chain management ultimately has many moving parts. The starting point
must always be transportation, however, as it is anywhere from 40 to 60% of your
costs.

With regard to transport, some vegetable traders use cart to transport the
produce directly from the field/farm to their business center, while others
engage the services of suppliers to bring the produce to their place.
Collectors used only vehicles and animal-drawn carts, while retailers used
animal-drawn carts and human labor to transport tomato. Wholesalers use
different means of transportation (Table 6).

Table 6 Proportion of traders by how they transport vegetables (%)

Vegetable traders, who do not transport the product directly from field/farm to their
business center, receive the produce from their suppliers/partners transported to
their business area. Most of the collectors and retailers receive the produce
transported by the sellers. The suppliers used different modes of transport to bring
tomato to the buyers. Vehicles (own and rented) are the most common means of
transport followed by animal-drawn cart used by suppliers to deliver tomato to
collectors and wholesalers. Retailers receive tomato transported by human and carts
only.

Produce from the farm gate is mostly packed and delivered in wooden boxes
(Table 7). Insulated Styrofoam boxes and airtight plastic packing materials were not
known as containers used for delivery by the respondents involved in this study.

 while wholesalers indicated that damage during transportation was a

concern. Due to its perishable nature

Producers focus on appropriate harvesting practices and identification of

potential buyers before harvesting, while village collectors and wholesalers
give due attention to better transportation infrastructure, and produce
handling and management.