Diploma in Maritime Business

MA0112 Logistics Management

Topic 1: Introduction to Logistics

Objectives:

At the end of this lesson, the student should be able to:

 Define logistics
 Understand the growth of multimodal transport
 Discuss the impact of globalisation
 Understand basic intermodal systems

1.0 Logistics

Logistics is the process of planning and executing the efficient transportation and storage of goods
from the point of origin to the point of consumption (TechTarget, 2019).

Logistics Management is the governance of supply chain management functions that helps
organisations plan, manage and implement processes to move and store goods (TechTarget, 2019).

1.1 Growth of Multimodal Transportation

Growth in World Trade

A number of pressures prompted the search for new means of handling the international movement
of general cargo. Chief among these was the dramatic growth in world trade in the years following
the Second World War (1939 -1945) and more recently, the opening up of China (The China Story).

Technological Developments

The war had seen great advances in methods of mass production, manufacturing and innovation,
especially in the field of electrical and electronic engineering. This led to sophisticated consumer
goods becoming much cheaper in real terms.

Consumer Expectations

Increasing expectations in improving living standards and wages, especially in industrial developed
countries.
 Advanced countries had high aspirations both for the living standards of their people and for
the development of their industries.
 Developing countries were taking advantage of improved industrial processes and a cheaper
labour force to create or strengthen their manufacturing and industrial bases.

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Air Freight

The introduction of large jet powered aircraft meant that air transport could compete with shipping
for larger movements of the more valuable and hence higher paying cargoes. The speed of transit
opened new markets for perishable cargoes (remember that today’s newspaper is just as
'perishable' as today's strawberries).

1.2 Unitisation and Palletisation

Packing, storage and stacking concerns resulted in consideration for unitisation.

As a result, throughout 1950s and early 1960s, a great push took place to determine how cargo
might be more effectively handled in larger units and by mechanical means. Idea was to have
every piece of cargo palletised before the ship arrived for loading.

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1.3 Containerisation

Ability to be carried by different transport media, giving rise to the words multimodalism and
intermodalism. The idea of containers was rapidly accepted, not only for their productivity benefits
(and Subsequent introduction of re-useable containers).

Shippers and consignees could see the advantages of greater protection for their cargo and the
door-to-door concept

Today the greater part of all general cargo by sea is handled in containers, but it was only in 1965
that the first full container services operated by purpose built ships began, replacing cargo
handling systems that had been in place for some 3000 years.

1.4 Components of Multimodal Infrastructure

The following items will have to be considered towards infrastructure for multimodal transportation:
 the main international carrying vehicle: ship, aircraft, train or truck
 port and terminal handling: straddle carriers, gantry cranes, fork-lift trucks, tractor and
trailer units
 railway systems and in some countries, the inland waterway system
 road haulage trailer and tractor units
 inland container depots and inland clearance depots
 the container
 through pricing
 computer technology

1.5 Globalisation

The most visible symbol of globalisation is the ‘global teenager’, who not only wants but expects
Coke and Nike wherever they are in the world!

The concept of globalisation depends on some basic economic and business assumptions:
 serving a global market increases total demand
 increased demand results in the benefit of economy of scale
 a global identity enhances the ability to market goods

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1.6 Shipper’s Concern with Transportation

Pricing transparency

Shippers want transparency of costs, so that they know that some of the benefits of the operator's
efficiency and economy of scale are being passed on, and in order to assess the operator's
performance.

Pipeline visibility

Shippers want to know just where their cargo is and have fast information about changes. This
means 'one stop shopping' for door to door movement, with enhanced IT focused on logistics.
Merchants are moving beyond 'just in time' to a pipeline or conveyor belt method of supply.

This is bound to reinforce the dynamic movement already shown by many major liner shipping
operators towards diversification beyond ship owning into all other sectors of the logistics supply
chain.

One stop global shopping

Many major shippers have already made it clear that they wish to deal with a smaller number of
logistic suppliers on a global basis. This is where the container lines alliances fit into the picture,
as they permit their members to offer the worldwide deal that is needed. On the other hand, this is
also the great strength of the independent mega-carriers: they do not suffer from the inherent
instability of the alliances, who are always vulnerable to change because of potential mergers of
individual alliance members.

1.7 “Just in Time” Delivery Service Aspects Affecting Cost

Speed

Speed of the through transport service is especially important for perishable cargo such as
foodstuffs with a limited shelf life, or cargo with rapid obsolescence, such as newspapers,
periodicals and high fashion goods. Goods with an erratic demand pattern also benefit from a fast
service, as the lead time on ordering can be lower.

Reliability

Reliability also plays an important part in the inventory required at destination, as the importer
needs to hold a safety stock to guard against delays in the arrival of a shipment. The record of the
operator in giving reliable arrival dates determines the size of this stock, as well as the
consequences to the company of suffering a ‘stock-out'.

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Frequency

The more frequent the service, the smaller the stock which has to be held at destination and the
easier it is to meet the 'just in time’ requirement.

1.8 Basic Intermodal Systems

Road/Rail and Sea (container)

This accounts for the largest international movements and comprises transport by container with
pre-carriage and on-carriage by road vehicle or rail wagon and sea carriage on a container ship.

The advantage of this combination is the ability to handle almost any type of commodity, large
indivisible loads as well as small packages, along with its total world-wide cover with reliable and
frequent services.

Road/Sea (trailer and ro-ro)

This is the use of the through road trailer or truck, which may be accompanied by its tractor unit
throughout its journey or unaccompanied for any ferry crossings that occur on its route.

The principal advantages are flexibility and speed. It is best suited to routes involving minimal sea
crossings. One disadvantage is pressure from governments to move long haul road traffic to rail or
sea on environmental and pollution grounds.

Road/Rail

One of the earliest forms of dedicated intermodal transport was the ‘lift van', used in both Europe
and the USA in the 1920s: a small container that could be interchanged between road trailer and
rail car.

They were primarily used for household removals. The use of ‘piggyback’ trailers that can be
loaded onto rail wagons for the long haul overcomes the environmental objection just mentioned,
achieving rail movement without the need to handle the goods at the road/rail interface.

Road/Air

The combination of road/air movements is used both by air consolidators as well as by airlines
themselves. In the case of a consolidator the goods are vanned at the consolidator's own depot
before moving the unit to the airport for airside loading and vice-versa. Many consolidation depots
are 'off airport' because of the availability and cost of land.

However, many scheduled service airfreight operators move a very large amount of airfreight by
road from the point of initial receipt to their 'hub' airport.

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Sea/Air

Sea/air combinations might not be considered to be fully multimodal, in that the units used are not
fully compatible. The sea transport leg involves the use of a maritime container loaded with pallets
that are discharged and handled individually on the air leg.

Sea/air services today are generally used only where the ultimate destination is inadequately
served by land surface transport, in very remote regions, or where there is a particular need for
urgent delivery. For example large volume sea/air services are used for urgent humanitarian relief
following disasters in remote areas.

1.9 Modal Interfaces

This is the term used for ports, airports, depots, railheads and any other place where cargo is
transferred from one type or mode of transport to another.

These are also the points at which interruption to a smooth and successful intermodal movement
is most likely to occur. It is when the vehicle has arrived at a modal interface that disruption might
occur. Series of events have to take place at about the same time and in the right sequence.

The physical transfer of the goods from one mode to another involves:
 Terminal facilities for the transfer
 Labour and handling equipment

Placing goods into temporary storage awaiting the next mode requires:
 Suitable storage
 Labour and equipment
 Security

The need to comply with statutory requirements; customs, health, security etc. means:
 Documentation
 Customs, health and other officials
 The arrangement of the next modal leg needs:
 The on-carrying vehicle
 Timetabling delivery
 More documentation

It should be clear therefore that the smooth operation and the provision of adequate facilities at
modal interfaces are vital to meeting the supply chain requirements in the system.