For us to succeed as a class we must work together in every possible way to collectively boost our performance.

4/1/2014
One of the ways that we can do this is by sharing with each other the academic materials that we have. There is a
scanner at MUSO that has been set up to facilitate the sharing of materials among students, by converting the
materials into soft copy and sending them to students through their class e-mail addresses. Please be ready to share
any academic materials that you may have.
“Whatever we possess doubles in value when we share it with others.”

Transportation and Fleet Management

• Transportation is one of the logistical drivers
of a supply chain and interacts closely with
two other logistical drivers: warehousing and
inventory
• Transportation cost forms a substantial
portion of supply chain costs through the
selection of transport modes
• Transportation is significant in an economy in
terms of employments created

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• It is an enabler and key in business where

responsiveness and product availability
• Transportation decisions should be taken with
a strategic view with a long-term horizon view
• Decisions in transportation should be taken in
alignment of all players: shipper, transporter,
asset owner, consignee, agents and brokers,
the government, Internet, and the public at
large.

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Role players in transportation decision

making

R
e
g
Brokers
ul
Shipper a
transport t
ers Consignee
Asset o
owners r
y

Technology

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Factors that Influence Transport

Decisions
• Transportation costs: tend to vary based on
the product to be handled/moved, the region,
and turnaround time (TAT). These costs can be
considered variable if the shipper does not
own the transportation resources.
• Inventory cost: these costs are towards
holding inventory in various stages. For
transportation decisions, these are considered
as fixed for short-term transportation and
variable when designing the total distribution
network.

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• Facility cost: these are the costs for

maintaining the various facilities- factories,
warehouses, and so on – and considered as
fixed for making transportation decisions.
• Processing cost: these are the costs associated
with loading, unloading, and handling of
goods. They are considered as variable costs
for transportation decisions. If containers are
used, these costs can be quite significant.

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• A shipper should consider all the above costs

while making transportation decisions, since
they impact the overall cost of the supply
chain, the product, and the service level
offered to the customer.
• Within these costs, there is a possibility for
making trade-offs where necessary based on
the overall strategy - cost-based or
responsiveness oriented.
• The following need also to be considered:

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• Vehicle-related costs: costs towards the

purchase or lease of a vehicle. They are
considered fixed for the short term. In the
medium or long-term, these costs become
variable depending on whether or not the
vehicle is operating.
• Fixed operating expenses: these costs are
associated with maintaining transportation
assets such as insurance, taxes, labour, etc. if
the vehicle operators are paid irrespective of
the trips made, they would fall under this
category.

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For us to succeed as a class we must work together in every possible way to collectively boost our performance. One
of the ways that we can do this is by sharing with each other the academic materials that we have. There is a
scanner at MUSO that has been set up to facilitate the sharing of materials among students, by converting the
materials into soft copy and sending them to students through their class e-mail addresses. Please be ready to share
any academic materials that you may have.
“Whatever we possess doubles in value when we share it with others.”

• Operations-related expenses: these costs

include labour and fuel, which depend on the
duration of the trip and are independent of
the quantity transported.
• Quantity-related costs: the costs of loading,
unloading, and handling fall under this
category. A small portion of fuel cost also
depends on the quantity carried.
• Overhead costs: these costs are incurred for
planning, coordination, scheduling, and any
investment in IT tools and applications.

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Transportation Principles
• The fundamental economic principles for
transportation decisions are economy of scale
and economy of distance.
• Economy of scale states that as the size of the
shipment increases, the cost of weight
transported per unit decreases. It operates in
such a way that the fixed cost of moving a
shipment is spread over a larger weight.

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• The principle of economy of distance states

that the transportation cost per unit weight
decreases as the transportation distance
increases. It is also referred to as the tapering
principle. The fixed costs are also spread over
longer distance, resulting in lower cost per
kilometre.
• These principles need to be considered in
making a transportation decision.

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Transportation Modes and selection

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Modes of Transportation
• Mode of transportation involves the way and means of
movements. It involves the nature of carriage and/or
carrier and the way through which the carriage is taking
place.
• Tanzania, for that matter, has been endowed by number
of modes of transportation namely:
1. Road transport;
2. Railways;
3. Water transport;
4. Airways/ Airlines;
5. Pipeline (TAZAMA);
6. Ropeways; and
7. Multimodal/ Intermodal.

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1. Road Transport
• Is a predominant mode of transport of goods in
Tanzania. The very famous highways are: (1) Dar
es Salaam – Morogoro – Iringa – Mbeya
(Tunduma) that enters the Zambian territories
and beyond; (2) Dar es Salaam via Chalinze –
Segera – Tanga or Arusha (via Moshi); (3) Dar es
Salaam – Morogoro – Dodoma – Isaka (inland
port) to Rwanda and Burundi.
• There are also important roadways that serve
various regions plus a vast of networked feeder
roads that join numerous productive nodes (for
mining, agriculture, forestry and petty
manufacturing).

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2. Railways
• Is one of the cost efficient means for movement of
goods.
• The TAZARA (Tanzania Zambia Railways) runs from Dar
es Salaam (Tanzania) to Kapiri Mposhi (Zambia) serving
Dar es Salaam, Morogoro, Iringa (at Makambako),
Mbeya and the Zambian territories of the Copper Belt.
The Central Line runs from: (1) Dar es Salaam –
Morogoro – Dodoma – Singida – Tabora to either
Kigoma or Shinyanga and Mwanza; and (2) Dar es
Salaam – Ruvu – Mnyusi to either Kilimanjaro or Tanga.
• Despite of having a considerable hinterland to be
served by the railways, Tanzania has been facing a
number of problems as far as the railways transport is
concerned.

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3.Airlines
• Airlines are the most expensive way of
shipment and are primarily used for
movement of high value and low
volume/weight goods.
• Airline have a high fixed cost compared to the
other modes of transport because of the
infrastructure and equipment involved.

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4. Water transport
• Historically, water transport is the earliest form
of transportation. It can be classified as;
1. Domestic water transport: This involves
transport of products through inland
waterways as well as within domestic ports.
This can be further classified as:
a) Coastal domestic water transport; This
involve transport of products through inland
waterways as well as within domestic ports.

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b) Inland domestic water transport; This uses

the rivers, canals and lakes of the country for
transportation of goods.
2. Overseas water transport; This is the
movement of goods over water across the
domestic waterways onto international
waterways and boundaries.
This modes of transportation is ideally suited
for transport of very large shipments at low
cost.

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For us to succeed as a class we must work together in every possible way to collectively boost our performance. One
of the ways that we can do this is by sharing with each other the academic materials that we have. There is a
scanner at MUSO that has been set up to facilitate the sharing of materials among students, by converting the
materials into soft copy and sending them to students through their class e-mail addresses. Please be ready to share
any academic materials that you may have.
“Whatever we possess doubles in value when we share it with others.”

5.Pipelines
• Pipeline is primarily used for transportation of
crude petroleum, refined petroleum products
and natural gas. This modes of transport has a
high fixed cost for setting up and operationalizing
the pipeline.
• NOTA BENE: Students are assigned to read and
write brief but concise notes on the remaining
modes of transportation hinting on: (1)
advantages; (2) disadvantages; and (3)
applicability.

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• Selection of mode of transportation largely depends

on a number of important factors.
• However, the general factors to be considered in
selecting any mode of transport should consider, inter
alia, the following:
1. Cost of transport;
2. Commodity value;
3. Size of shipment;
4. Distance to be covered;
5. Type of transport available and required under
available circumstances; and
6. The required speed at which the transportation is
envisaged.

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• Cost of Transport
Cost of transport depends on place (distance),
time and type of transport to be used. Route
choice also plays a significant role in either
reducing or increasing the cost of transport.
• Commodity Value
Value of the commodity is the first factor that
largely influences the cost of transportation
and hence is the fundamental determinant so
far as the selection of the mode of transport is
concerned.

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• Size of Shipment
The size of the shipment normally determines the
mode of transport at the same time is the
determinant of cost of transportation. Normally,
the larger is the shipment the lesser is the cost.
Transport costs normally increases at a decreasing
rate – that is, the larger the shipment becomes the
lower the transportation cost becomes.
• Distance Covered
Though transport cost shows variations depending
on the distance covered by the shipment but the
unit transport cost increases at a lower rate with
the increase in the distance to be covered. This is
true in almost all modes of transport.

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• Type of Transport (Mode of Transport)

There is a direct relation between speed, transport cost and
choice of mode of transport.
Flexibility and serviceability of the form of transportation is
also directly linked with both the choice as well as cost.
Generally, air transport is the costlier.
Pipelines for transporting liquefied products (such as
petroleum and gas) are less costly as compared to road or
railways transport through tankers.

• Speed
Speed and time go hand in hand. Consignment must reach
in time and delivered to the consignee when they are
needed. Speed normally influences the selection of mode as
well as determine the cost of transport thereof.

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Vehicle Routing and Scheduling

• One of the most fundamental issues of
distribution planning is regarding the choice
and selection of the channels.
• Considering the significant capital investments
in equipment and facilities, along with
operating expenses, carriers have long
recognized the importance of good routing
and scheduling in achieving acceptable level of
company profit and customer service.

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Objectives of Vehicle Routing and

Scheduling
• Planning and selection of the channels (of distribution)
essentially is aimed at placing the goods and/or
services to the right place at the time with an
optimized cost. In essence, the main objectives of
vehicle routing and scheduling should be:
• To maximize the time that vehicles are used, that is,
make sure that the vehicles are working for as long as
possible;
• To maximize the capacity utilization of vehicles, that is,
ensure that all vehicles are fully loaded as possible;
• To minimize mileage, that is, complete the work by
travelling as few miles as possible;

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For us to succeed as a class we must work together in every possible way to collectively boost our performance.
of the ways that we can do this is by sharing with each other the academic materials that we have. There is a
scanner at MUSO that has been set up to facilitate the sharing of materials among students, by converting the
materials into soft copy and sending them to students through their class e-mail addresses. Please be ready to share
any academic materials that you may have.
“Whatever we possess doubles in value when we share it with others.”

• To minimize the number of vehicles used, that

is, keeping the capital or fixed costs to a
minimum;
• To maximize the use of labour; and
• To maximize customer satisfaction.

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The Assignment Model (for Routing

and Scheduling)
• This is a linear programming model for
optimal assignment (as used in routing and
scheduling) of vehicles and routes. Basically,
to solve the assignment problem we need the
Hungarian Method (this is the method of
assigning jobs by a one-for-one matching to
identify the lowest cost solution).

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Hungarian Method Procedures

1. Subtract the smallest number in each row from every

number in the row. Enter the result in a new table.
2. Subtract the smallest number in each column of the
new table from every number in the column. Enter the
results in another table.
3. Test to see if an optimal solution can be made. This is
accomplished by determining the minimum number of
lines that are needed to cover all zeros. If the number
of lines equals the number of rows, an optimal
assignment is possible.
• In that case go to step 6. Otherwise go on to step 4.
Note that cover means cross.

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4. if the number of lines is less that the number of

rows, modify the table in this way:
• Subtract the smallest uncovered number in the
table; and
• Add the smallest uncovered number to the
numbers at the intersections of the covering
lines.
5. Repeat step 3 and 4 until an optimal table is
obtained.
6. Make the assignments. Begin with rows or
columns with only one zero. Match items that
have zeros, using only one match for each row
and each column. Cross out both the row and the
column after the match.

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Example:

• Kalunguyeye Ltd has four vans to transport

fresh breads and diary products to Ilala Boma,
Ilala Mchikichini, Ilala Bungoni and Kigogo-
Mwisho. The cost of transporting the breads
to the envisaged consumptions nodes are
provided in the following assignment problem.

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CONSUMPTION NODES
VANS BOMA MCHIKICHINI BUNGONI KIGOGO
1 9 12 7 15
2 13 14 15 10
3 8 10 20 6
4 11 15 13 10

For us to succeed as a class we must work together in every possible way to collectively boost our performance. One
of the ways that we can do this is by sharing with each other the academic materials that we have. There is a
scanner at MUSO that has been set up to facilitate the sharing of materials among students, by converting the
materials into soft copy and sending them to students through their class e-mail addresses. Please be ready to share
any academic materials that you may have.
“Whatever we possess doubles in value when we share it with others.”

30
 4/1/2014

• NB: Costs are in ’000 TZS

• Required:
• (a) Find the routes that will minimize the
overall transportation cost.
• (b) Determine the optimum transportation cost
given the optimized assignment.

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