INTERNATIONAL TRADE LOGISTICS UNIT III

ROLE OF TRANSPORTATION IN LOGISTICS

ROLE OF TRANSPORTATION IN LOGISTICS
• Transportation cost absorb around 40% of total logistics costs • An effective and inexpensive transportation system contributes to the following:

• Greater competition in marketplace Making goods available at the right time from the right place leading to market penetration • Greater economics of scale in production Wider markets can result in lower production cost. It also permits decoupling of market and production sites.

• Reduced prices for goods
Inexpensive transportation also contributes to reduced prices.

• per – unit distance transportation costs within the country always account for the final node of volume of trade than the same exportable items of other countries (Rauch .1991) .ROLE OF TRANSPORTATION IN LOGISTICS • inferred that the demand for the commodity is not the same as demand for transport.

air. rail.Service Choices • There are five basic modes of transportation. and pipeline • Any one or combination of these can be used for transportation of goods from one place to another • Selection of modes of transportation is made based on best balance between quality of service and cost. . namely. road. water.

1994) • Price • Average transit time • Time variability • Loss and damage .Characteristics of Transportation (Alderton.

Price The cost of transportation for shipper includes the following: • Line haul rate • For hire service .

The hierarchy of cost for different transport services is as follows: Air > truck > rail >water > pipeline .The cost of different services Cost of service varies from one type of transport service to another.

cost comparison • Cost of movement of goods through trucks is seven times that by rail • Cost of movement of goods through rail is four times that by water or pipeline .

cost comparison Actual cost comparison should be made on actual charges that reflect the following: • Commodity being shipped • Distance and direction of movement • Any special handling required .

Even if transported by same means variability may be due to effects of weather. variability and loss and damage. • Variability refers to the usual differences that occur between shipments by various modes. • The performance of a particular type of carrier is a function of distance.TRANSIT TIME and VARIABILITY • Average delivery time and delivery time variability rank at the top as important transportation performance characteristics. congestion. and number of stop-offs and differences in time to consolidate shipments. traffic. For comparing carrier performance. even if more than one mode is involved. it is best to measure transit time of door-to-door. . • Transit time variability is the measures of uncertainty in carrier performance.

then less truck load and then comes rail.PERFORMANCE WITH RESPECT TO THE DISTANCE Distance greater than 600 miles: • Air freight is the fastest mode followed by truck load. Distance less than 600 miles: • Air and truck are comparable Distance less than 50 miles: • `Transit time is influenced by pick up and delivery operation than line haul transit time .

Variability The variability of different modes of transport is as follows: • Rail has the highest delivery time variability • Air has the lowest delivery time variability .

Loss and damage This becomes factor for selection of a carrier .

MODES OF TRANSPORT CHARACTERISTICS WITH RESPECT TO: • DISTANCE • SPEED • QUANTITY and • VOLUME OF CARGO .

. raw materials and low valued bulk commodities.RAIL • Rail: a long hauler. • A carload quantity refers to predetermined shipment size usually approaching or exceeding average capacity of a rail car to which particular rate is applied. manufactured products like new automobiles etc. slow mover of refrigerated material.

RAIL • Other services include :    various stop off privileges which permit partial loading and unloading pick-up and delivery. diversion and re-consignment which allows flexibility in routing and changes in the final destination of a shipment while en-route .

RAIL • Fixed Cost is High while Variable Cost is low • Variable cost includes loading. billing. collecting. yard switching and multiple shipment costs • The cost per unit is lower for increased shipment volume. unloading. .

It is advantageous for door-to-door service (less material handling. . better availability and frequency of service) • Trucking has a service advantage in the small shipment market.Truck • Best suited for semi finished and finished goods with an average lengths of freight haul of 646 miles for truck load and 274 miles for less truck load. • The shipment size smaller than rail.

• The appeal of air transportation is its unmatched origin– destination speed.Air • Air freight is twice truck charges and sixteen times rail charges. weather conditions and traffic congestions • Compared to water. • Loss and damages are less . especially over long distances (maximum delay in surface freight handling and movement in door-todoor delivery time) • Delivery time variability is low in absolute magnitude. even though air service is quite sensitive to mechanical break down. average delivery time variability is high as a result one can rank air as one of the least reliable modes.

can handle liquid and bulk cargoes also high valued cargo in containers. .Water • • • • Slowest. loss and damage in general low • But for valued good substantial packing is needed to protect from rough handling of goods.

Waterways Waterways are better means of transport following types of goods: • Transported across the border i.e. in large quantities • • Capable of withstanding longer lead times in supply Distribution and less careful handling. for international trade • • Low cost. containerizable. non-perishable goods Liquid cargo. .

.roll-off ships as well as conventional carriers) • finished goods. • small sized or large shaped cargo are transported through waterways. • raw materials.Waterways • now-a-days almost all types of cargo including cars and vehicles (roll-on .

.SPEED – VOLUME TRADE-OFF Speed of flow of goods has been made possible with introduction of concepts of multi-modal transportations and feedermainland shipping routes (Frankel. 1990).

It is used for movement of fluids • It is slow but tempered by the fact that products move 24 hours a day and 7 days a week • It is the most dependable mode of transport • The loss and damage is low .Pipeline • Offers limited range of services and capabilities.

Pipeline • Pipeline parallels the railroad in cost characteristics • Fixed cost is high and the variable cost (Power and cost of operation) vary greatly with line throughput and diameter of pipe • The cost per ton mile is low. .

MULTI-MODAL TRANSPORTATION (ALSO REFERRED AS INTER-MODAL TRANSPORTATION) • • • • CONCEPT DEFINITION ISSUES POLICIES .