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Transportation [Ref. Bowersox page 311] The most visible of all functions of logistics and high contributor to logistics cost Transportation functionality: Functions of transportation 1. Product movement: What is moved? Raw Material, Semi Finished items, WIP, Finished goods, packaging material, rejected materialmovement is required up or down the supply chain
How is this done? What resources are used? Resources used by transportation: a. Time, Temporal Costs - product is locked up during transit, hence inaccessible b. Money, Financial Costs• Administration Costs, salaries, maintenance, etc • Product loss and damage • Cost of fuel for prime mover c. Nature, Environmental Costs • Guzzles natural fuels
• India consumes about 90% of the total available and imported oil for transportation • Transportation Creates congestion, air pollution and noise pollution. • Environmental cost is tangible and substantially intangible. As transportation utilizes temporal, financial and environmental resources, items must be moved only when product value is raised
2. Product Storage: Temporary storage when loading and unloading is expensive Storage space is not available or limited Vehicles kept moving on circuitous route Airplanes hovering
Principles of transportation 1. Economy of scale • Bulk shipping brings down per unit transportation cost 2. Economy of distance • Cost per unit kilometer decreases as the distance moved increases • Principles of transportation are fundamental in evaluating transportation strategies.
Transportation Environment & Transportation decisions Who are participants in most of the commercial decisions? What makes transportation environment different? Who are the participants in transportation decisions? • Shipper • Consignee • Carrier • The government 06/24/08 6 • Public
Roles and perspective of each party Shipper What does shipper want? • Predictable and minimum transit time • Minimum cost • Specified pick up times • Zero loss and damage • Timely exchange of information and invoicing What does consignee want? • Specified delivery times
Carrier: What does carrier want? • Revenue maximization • Cost minimization [labor, fuel and vehicle costs] • Flexibility in pick up and delivery times to consolidate moves Government: Keen interest in flourishing national economy and hence in transportation Effective and efficient Public Distribution System
• Control on carrier rates and licenses • Own carrier service • Infrastructural support - net work of roads, Airports and ATC, Ports and Harbors Public Trigger transportation activity by demanding products Demand easy accessibility transport Demand goods and services from all over the world at minimum cost
Demand safety - accidents of various kind, road, rail, air and water (oil spills) Demand safe environment - atmosphere, water, noise When these parties with separate and distinct interests interact transportation environment is created
What is transportation mode? Mode identifies transportation method or form
Impact of transport mode on costs of transportation Transport time • Inventory • Transit capital • Obsolescence Packaging Insurance - air, high insurance Breakage
What constitutes Transport Infrastructure? [Transport elements] Factors that affect the smooth functioning of transport? 3. Terminal facilities - well maintained loading unloading facilities, space for movement of vehicles, platforms, railway yards 4. Vehicles- trucks, ships or wagons. Their size, shape & speed
1. Rights of way- cost of right to use passage. Rails, roads, airways 2. Routes and sectional capacity-number of lanes 3. Limit on speed, weight, height 4. Weigh bridge facility 5. Nature of product 6. Carrier organizations
What are various features of modes or modal characteristics? How do we measure relative weight of each mode? • System mileage, traffic volume, revenue, nature of traffic composition
Railways – Rail network Stands out in terms of tonne-kilometres moved 226 billion tonne-kilometres and 55.8% of total tonne-kilometers moved in 1982 in India 449 billion tonne-kilometres and 51.7% of total tonne kilometers now moved in India Facing very stiff competition from roadways (as in US after II World War) High capital investment due to right of way, switching yards, terminals, locomotives and rolling stock, but low operating costs
Focus on specific products than on broad range Raw material extractive industries away from water ways.
Developments in this area Recent customer friendly attitude Inter modal transport through alliances and acquisitions as in US, providing single window service to customers Development of Specialized Equipment to suit the needs of bulk volume of customers Unit trains Container trains Double stack containers
Enclosed tri-level automobile car
A unit train, also called a block train
Double stack containers
RORO service to road transport - konkan railway Private container trains -Adani logistics, boxram Container corridors Private participation in developing ICDs
Road transport High flexibility and speed Ultimate mode of transport Rapid growth, post war Low capital cost as compared to railways 179.2 billion tonne-kilometres and 44.2% of total tonne kilo-metres moved in 1982 in India 585 billion tonne-kilometres and 56% of total tonne kilo-metres moved in India now
Operating costs are higher Ideal for small shipments over short distances Labor intensive Occasional fuel shortages Availability of good quality vehicles Availability & cost of maintenance and spares Bad and unsafe road conditions Carrier organizations and their disputes with government Octroi Old MVA Restrictive permits
Developments in this area Entry of several manufacturers of trucks-entry of Daimler to produce Mercedes CVs Trailer-tractor sets National grid of highways Road widening schemes, bypass to cities Pay and use roads – private road builders Express ways The Golden Quadrilateral
Water transport Sailing vessels, steamships-1800, diesel driven ships-1920 Limited scope for deep water transport Limited extent of navigable inland water transport -lakes, rivers, canals Main advantage of water transportation is extremely large shipments & low cost Importance of deep water vessels & deep water ports to fully realize benefits of water transport
Diesel towed barges Tug-barge combinations
Diesel towed barges
Diesel towed barges- high flexibility, disadvantages are range of operation (not for long distance) and slow speed Ferries- for small water bodies like rivers and bays.
Inland water Transport is not used to its full potential in India although we have used mechanized IWT since early 1800. Main hurdles appear to be 3. Low priority in policy 4. Construction of dams 5. Receding water levels in the rivers 6. Tough competition by other modes
Developments in this area Construction of deep water ports: JNPT Construction of ports with private investment Port Pipavav, India's first port in the private sector is operated by APM Terminals, one of the largest operators of container terminals in the world A consortium led by P&O Australia is setting up a $200 million Container terminal on BOT basis at Jawaharlal Nehru Port Trial operation started in April 1999 Agreement signed for construction of a captive Coal Jetty at Mumbai by Tata Electrics. 40 06/24/08
Pipelines What is transported in a pipe line? Liquids - oils, crude, petroleum products In India, extensively used for transporting crude and petroleum products More than 5,000 km of pipeline exists in India for crude and petroleum products Slurries - coal slurry, iron ore, lime Huge quantity of water is necessary which is a concern for environment In India pipe line is used for transporting iron ore.
Gases and vapors- natural gas, LPG, in India LPG pipe line is in existence Pulverized dry bulk material - cement by hydraulic suspension Main features of this mode of transport Reliable all weather means of transport Low energy consumption Pipeline being under ground space occupation is minimal Pipe line operates all the time except when it is shut down for maintenance No empty container or wagon to be brought back
Highest fixed costs, right of way and laying of pipeline, and lowest operating costs Not labour intensive Not flexible by nature. Pipe lines are stationary Physical state of the commodity is a limitation. This mode of transport can release capacity of other modes for transport of essential commodities
Rope ways Hilly and otherwise inaccessible area Steep gradients Cause minimum ecological imbalance Point of supply and demand can be connected by shortest route Logistics of fruits in Himachal Pradesh
Air transport Speed of transport is highest Fixed costs are lower than rail or road or pipe line. But operating costs are highest Air transport brings distant markets closer perishables market in gulf countries Overcomes the hassle and cost of setting up depots and service centers overseas Full potential of peak seasonal demand can be taken Test marketing is easy. Products can be shipped directly from the factory
The Indian Air cargo Market The growth of air cargo in India has also been manifold though it might not have kept pace with the progress made all over the world. Table 1 shows how both international and domestic air cargo traffic has increased, reflecting an overall year on year growth.
(Source - Transport India 2000)
Table 1: Trends in cargo traffic at five international airports in India. (Figures in '000 tonnes)
Period 197273 198283 199293 19992000
International Cargo 47.4 165.4 300.5 494.2
Domestic Cargo 33.6 84.6 90.9 183.0
Total 81 250 391.4 677.2
Percentage Increase 209% 56.56% 73%
RAIL CAPITAL EX OPERATING COST SYSTEM KM 63,000 kms II III
ROAD IV II 15,03,000 kms
WATER III IV 15544 kms[IWT] (Inland W- ways)
AIR V I
PIPE LINE HIGHEST I V 5000 kms
449 Billion Tonne KM
585 Billion Tonne KM
66 BTKM (British-T) [Costal Shipping]
SPEED AVAILABILTY [ABILITY TO SERVE A SET OF LOCATIONS]
Rail Dependability [minimum deviation from schedule, weather, congestion& other problems] Capability [ capacity to tackle any size of the load] Frequency [quantity of scheduled movement] IV II III
Road Water II IV
Freight rate structure Freight Rate Structure & Principles: 1. Cover actual cost of transportation. Factors influencing cost of transportation A. Fixed costs: Interest on capital Depreciation Insurance premium Administrative overheads Expenses on fixed facilities like buildings B. Semi fixed costs: Salaries of the staff Facility for servicing, periodic maintenance etc
C. Variable costs Cost of fuel and lubricants Maintenance directly attributable to a particular trip – breakdown Damage to the vehicle and also the cargo. Eg. hilly roads, bad roads, war effected sea routes D.Vehicle utilization Carrier likes to gain maximum mileage out of his vehicle Run the vehicle at top speed to cover max. distance at min time Quote higher rates if following are not conducive to the above Road conditions 06/24/08 53
Terminal detentions [congestion, formalities, loading/unloading etc.] Obtaining a return load [market factors] Nature of goods, hazardous, corrosive [liability, insurance] Density, consignment light by weight Stowability, shape and size of the product 2. Traffic Bearing Capacity Value addition by transportation. Transportation cost should not upset the value added
3. Public use Items to satisfy basic needs of common man should be moderately charged 4. Government Policy freight rates are controlled by the state for Promotion of certain type of trade Development of certain type of industry Freight rates are hiked or depressed by state 5. Profit Margin for reasonable return on investment Entrepreneurial time and efforts Funds for future development of business
Transportation policy Components of transportation decisions I. Mode Selection Air - most expensive, but very fast Road - relatively quick and inexpensive, highly flexible Rail - An inexpensive mode for large quantities Water - the slowest but most economical for large overseas consignments Pipeline - primarily for oil and gas
Transportation network options II. Carrier in house or out sourced - whether product owner performs the function or out sources it. - Private carrier, contract carrier, public carrier, exempt carrier III. Trade off situations Cost of transportation and cost of inventory Cost of transportation and cost of responsiveness to customer
IV. Carrier Selection 2. Constitution of the carrier’s organization 3. Business turn over 4. Area of operation 5. Branch offices or associates’ offices 6. Strength of fleet 7. List of clients- current & former, for ascertaining reliability 8. Nature and volume of business 9. Normal transit time quoted by carrier 10.Record of claims settlement by carrier 11.Reference from banks, carriers’ association
V. Route and network selection Route is the path the product takes and network is locations and routes along which a product can be shipped A logistics manager’s options for scheduling and routing decisions
DESIGN OPTIONS FOR A TRANSPORTATION NETWORK
Retail stores Supplier Supplie rs Retail stores Retail stores supplier Retail stores
ALL SHIPMENT S VIA DC
DIRECT SHIPMENT WITH MILK RUNS
MILK RUNS FROM DC
Direct shipment network From shipper directly to retailers. Features: 1. Warehouses are eliminated 2. Long route, hence low cost 3. Simplicity of operation 4. Time of transportation is short 5. Decision points are quantity and mode
Direct shipping with milk runs 1. Single supplier to a number of retailers - deliver like a milkman. 2. From a number of suppliers deliver to a single retailer. eg. Toyota plant in US Features: 1. Movement consolidation 2. Truck utilization 3. Transport cost reduction
All shipments via Central Distribution Center suppliers to Distribution center and Distribution center to retailers Features: 1. Supply chain costs reduction when distances are large. 2. DC stores inventory and acts like a transfer point 3. Economies of scale in inbound transportation to DC. Outbound transportation cost is low as retailers are close to DC
Shipping via Distribution Center Using Milk Runs small lot sizes to large number of retailers from DC. Features: 1. Consolidation of small lots - reduction of outbound transportation cost • Tailored Network Tailor made to the company needs Features: 1. Matches the needs of the company 2. Coordination is complex
NETWORK STRUCTURE DIRECT SHIPPING DIRECT SHIPPING WITH MILK RUNS ALL SHIPMENTS VIA DC WITH INVENTORY STORAGE ALL SHIPMENTS VIA DC WITH CROSSDOCK ALL SHIPMENTS VIA DC WITH MILK RUNS TAILORED NETWORK
PROS • NO DC • COORDINATI ON EASY • LOWER TRANSP COSTS • SMALLER INVENTORY • MOVEMENT COSOLIDATI ON • LOW INVENTORY • MOVEMENT COSOLIDATI ON • LOWER OUTBOUND TRANSORTA TION COSTS • TRANSPORT ATON SUITES TO INDIVIDUAL NEEDS
CONS • HIGH INVENTORY • SIGNIFICANT RECEIVING EXPENSE • INCREASED COORDINATION COMPLEXITY • INVENTORY COSTS • INCREASED HANDLING • INCREASED COORDINATION COMPLEXITY • INCREASED COORDINATION COMPLEXITY • INCREASED COORDINATION COMPLEXITY • STILL HIGER COORDINATION COMPLEXITY
Intermodal Transportation Intermodal transport Intermodal movements combine the cost and/or service advantages of two or more modes in a single product movement The more popular combinations are TOFC [Trailer On Flat Car] and COFC [Container On Flat Car]. Benefits of long haul, short time & flexibility are optimized for achieving overall cost reduction
Co-ordination of different modes of transport to avoid wasteful competition Single window service to the customers Encouraging containerization both for internal as well as import/export cargo
COMMON PIGGY BACK
COMMON, CONTRACT, EXEMPT, PRIVATE COMMON, CONTRACT, EXEMPT, PRIVATE COMMON, CONTRACT, EXEMPT, PRIVATE
AIR TRUCK [BIRDYBACK]
WATER OR AIR
LAND BRIDGE LAND [RAIL OR ROAD]
WATER OR AIR
C O F C COFC
Transshipment Transportation goods and materials to the destination using one or more intermediate destinations A technological requirement Air travel to US A means of logistical cost reduction
Containers were introduced in US during 1955 and in India during 1960 Features of a container: 3. Robust but still light for inter modal transportation 4. Equipped with fittings to facilitate safe and easy handling
1. Easily be stuffed or unstuffed in a short time 2. Water tight and air tight outer shell 3. Internal lining that doesn’t buckle under temperature and can be easily cleaned 4. Watertight flooring, air tight door seals and locks 5. Insulation to protect refrigerated cargo. Interior washable to required hygienic standard 6. Construction to allow circulation of air around cargo
Basic types of ISO containers Dry or cube containers are front loaded, completely enclosed and suitable for general-purpose transportation.
Insulated Containers are available in 20 and 40 foot lengths, and contain a layer of foam insulation between the interior and exterior surfaces of the walls, floor and roof.
An insulated container with a built-in refrigeration unit, the Reefer container maintains a set temperature and stabilizes the environment within the container to prolong the life of the cargo in the most arduous of environments.
Flatrack Containers: Flatrack containers are used for heavy and oversized cargo, which cannot be loaded into container with fixed walls and needs loading from top or side. Can be delivered with both fixed and collapsible end walls.
Open top containers are shaped like a box and loaded from either the top or end. They are designed to carry heavy, tall or hard to load materials such as coal or grain
Tank containers are built to the same standard dimensions as other ISO containers, but are cylindrical vessels mounted in a rectangular steel framework. Typically, these containers are used to transport liquid or bulk materials.
2. 3. 4. 5. 6. 7. 8.
Universal advantages of container as a packaging unit Reduction in loss, pilferage and damage of goods Reduction in paper work Expedites door to door pick up and delivery Eliminates multiple handling of contents as this is shipped as a single unit Consolidation of movement of small lots Standardization of handling methods and equipment Reduction in packaging cost as container itself acts like a package
1. Optimizes the services of various modes 2. Container can easily be transshipped.
Major benefits of containerization to business 2. Integration of various modes of transport 3. Reduction in handling time and thereby turn around time of vehicles 4. Standardized size of containers reduces reduce capital as well as operational costs 5. Reduction in packaging cost as container itself is a robust packaging 6. Need for enclosed warehouses redundant 7. Transport service is reliable
7. Containerization has lead to the building of modular ships resulting into quick turn around and de congestion of ports Infrastructure for Containerization • Deep water ports • Mechanized handling equipment- Equipment used to load and unload are container cranes called straddle carriers, side loader forklifts. Obviously this equipment is very expensive • Inland container depots
• Container ships- are built for optimum utilization of space, easy stowing in the holds, to facilitate fast & easy loading and unloading of container
Roll On/Roll Off ferries [RORO]: the truck rolls on to the and rolls off at the end of the voyage
Roll On/Roll Off ferries
LASH [Lighters Aboard a SHip]: when a ship is loaded on the high seas from barges, instead of loading the cargo lifted from the barge, entire barge is lifted and loaded on the ship. At the end of the voyage barge is put back on water
Nodal points Railways network • Growth of economy is the responsibility of state • Bulk movement of supplies from production centers to consumption centers boosts economy • Traffic could be consolidated and moved in full train loads/wagon loads • Bulk material transported is like coal, steal, fertilizer, cement
• State also has the responsibility to distribute essential commodities through the public distribution system [PDS] • Hence the responsibility for logistics of those items falls on the state. • State owns the net work of railways, net work that is the cheapest mode of transport for bulk. • Nodal points in the value chain of such commodities can provide movement consolidation. • State owned rail net work can link these nodes to the best advantage of state and thereby to that of national economy. 06/24/08 96
Some characteristics of nodal points are as under Nodal points should be closer to consumption points. Number of nodal points would depend on volume of distribution. Neither too many nor too less Nodal points should be well connected by rail net work. Terminal and shunting facilities are required at these places.
5. Facilities for loading, unloading & inter modal handling. 2. Shipments from the nodal points would be by road in trucks or rail 3. Nodal points should be connected to consumption centers by roads 4. Normally, nodal points are district headquarters for necessary operational support 5. Strategic role by central and state governments 6. Strategic development of such nodal points in the country strengthens the logistical operations for essential commodities and bulk materials
CONTAINER CORPORATION OF INDIA CONCOR
CONCOR Set up in March 1988 under the Companies Act, to profitably satisfy our customer's needs for high quality, cost effective logistics services Commenced operation from November 1989 taking over the existing network of 7 ICDs from the Indian Railways A network of more than 40 terminals, offering scheduled and on demand rapid rail and road services between the hinterland and ports, and between major metros.
Inland Container Depots/Container Freight Station
Material Handling in ICD
Inland Container Depots and Container Freight Stations • An ICD is a common user facility with public authority status • Equipped with fixed installations and offering services for handling and temporary storage of import/ export laden and empty containers under Customs control • Customs and other agencies competent to clear goods for home use, warehousing, temporary missions, re-export, temporary storage for onward transit and outright export 104 06/24/08
• Trans-shipment of cargo can also take place from such stations • I C Ds are dry ports • connect major ports [able to handle container ships] to hinterland • facilitate customs clearance, export import formalities • ICD to be located after ascertaining export import potential and good road net work
• Serve as consolidation facility and should have handling equipment. Facility to group small consignments goods transfer from road to rail and otherwise • Increase the export potential of industries in the hinterland • Decongest major ports