International Logistics &

Supply Chain Management

Chapter 6: International
Shipping- I
 Chapter Index

S. No Reference No Particulars

1 Learning Objectives

2 Topic 1 Concept of International Transport

3 Topic 2 Role of Transportation in Logistics

4 Topic 3 Transportation Modes

5 Topic 4 Concept of Container Yards (CYs), Inland

Container Depots (ICDs) and
Container Freight Stations (CFS)
 Chapter Index

S. No Reference No Particulars

6 Topic 5 Chartering

7 Topic 6 Transportation Selection Decision

8 Topic 7 Transportation Cost

9 Let’s Sum Up
• Explain the concept of international transport
• Discuss the role of transportation in logistics
• Describe the various transportation modes
• Explain the concept of Container Yards (CYs), Inland Container Depots (ICDs) and Container
Freight Stations (CFS)
• Discuss chartering
• Explain the transportation selection decision
• Describe transportation cost
 1. Concept of International
Transport

• International shipping or transport is defined as the transport of goods from one country to
another through various modes, such as rail, road, air, water.
• The mode of transport is selected by companies depending on the distance, cost, feasibility
and time.
• International transportation is more complicated, involving different modes of transportation,
carriers, transportation documents and higher transit times.
• Companies must consider a viable service which provides lesser transit time at a lower cost.
• The cost includes service cost, chargeable weight (minimum weight), loading and unloading,
packing (if required), and insurance against damage during transit, and any additional services
availed.
 2. Concept of International
Transport

• Once the transportation mode is decided, the shipper has to decide on the type of carrier.
Different types of carriers are:

Types of Carriers

Common
Contract Carriers Private Carriers Public Carriers
Carriers
 3. Concept of International
Transport

• Contract carriers: These are public carriers available on a contract to companies, namely
chartered plane or ship.
• Common carriers: These carriers have specific routes which are served on a regular basis,
through railways, airlines, etc.
• ‰Private carriers: A company can choose to operate their own transport if it has regular and
large amount of goods to be sent.
• Public carriers: These are companies which offer transport on hire basis. The shipper may
hire them as per the requirement.
 4. Concept of International
Transport

Freighting
• Transporting goods in bulk by truck, train, ship, or aircraft is called freighting.
• It is the activity involving transportation of goods by carriers, directly from the dispatcher to
the recipient, without any previous consolidation, without halting on the dock and without any
interruption in loading.
 5. Concept of International
Transport

Objectives of Transportation
• The objectives of transportation are:

Costs

Customer Service

Industry Awareness

Continuous Improvement
 6. Concept of International
Transport

Objectives of Transportation
• Costs: Reduction in cost of transportation and warehousing materials adds to the bottom-line
and maximises the profit from an operation.
• Customer service: In order to provide customers with exceptional service, companies aim to
manage their logistics requirements in an efficient manner. .
• Industry awareness: A logistics company aims to build its reputation in the market. Better the
reputation, better the advantage over competitors.
• Continuous improvement: A logistics company aims to continuously improve the quality of
its transportation service through regular customer interaction and feedback.
 1. Role of Transportation
in Logistics

• Transportation plays a vital role in the logistics chain and is involved at each stage, that is,
from product manufacturing to final delivery at the appropriate location.
• Efficient transportation helps in minimising inventory costs, better warehouse management,
etc.
• Effective transportation also plays an important role in the globalisation of products and this is
done by enabling transportation of products from countries with cheap labour such as India
and China.
• This not only contributes to the economies of these countries but also establishes a channel of
product flow.
 2. Role of Transportation
in Logistics

• Both the carrier and the shipper have to take certain decisions regarding the effective
functioning of the transportation system.
• One of the crucial factors is associated with cost such as the carrier may require incurring a
fixed operating cost in situations where access to an operating facility is needed.
• The two most essential factors which need to be optimised are transportation expenses and
customer responsiveness.
 1. Transportation Modes

• The various transportation modes are:

Air

Rail

Road

Water
 2. Transportation Modes

• Air: Transportation by air is the fastest but costliest way to transport cargo. If the cargo has to
be delivered in a shortest possible time, this is the best option. Air cargo carriers offer two
types of services, namely direct and indirect. Direct carriers can deliver the cargo overnight,
but at a premium cost, than indirect ones. Indirect carriers transport cargo around the world in
3–7 days, depending on the frequency of service to a destination, at a cheaper price.
 3. Transportation Modes

• Rail: This mode of transportation is considered advantageous because through rail transport
large quantities of goods can be transported at a time from one place to another over long
distances. One of the major classes of goods that are transported consists of agricultural
products.
 4. Transportation Modes

• Road: Trucks are the most important medium of road transport through highways.
Transportation through highways is very flexible. The ability to tailor the service to a specific
type of traffic is an added advantage for the shippers. Although the public pays for the
construction and maintenance of highways, a major portion of the revenue used to rebuild and
modify roads comes from motor carriers, which is paid in the form of road taxes.
 5. Transportation Modes

• Water: The goods that are transported through water mainly consist of coal, petroleum, grains
and cereals and iron ore. Water transport is slow and it is highly affected by extreme weather
conditions especially during monsoon and winter. Hence, the organisations that depend on
water transport are required to maintain large quantities of inventories at their disposal to
tackle unpredictable problems caused by extreme weather conditions.
 6. Transportation Modes

International Ocean Transportation

• Companies avail various types of shipping services as part of their international ocean
transport. The two main types of shipping services are:

Types of Shipping
Service

Linear Service Tramp Service

 7. Transportation Modes

International Ocean Transportation

• Some major types of containers are:

Dry Storage Container

Flat Rack Container

Open Top Container

Tunnel Container

Open Side Storage Container

Refrigerated ISO Container

Insulated or Thermal Container

Tanks

Car Carriers
 8. Transportation Modes

International Air Transportation

• This mode of transportation depends on speed, cost and location of the market. Air
transportation is preferred for small goods, which is time-critical.
• Air transport is constrained with lift capacity (load constraints) like ships and availability of
aircraft.
• Air transport does not favour any particular commodity’s domination. Most of the air cargo is
handled on instances of emergency rather than routine.
 9. Transportation Modes

International Land and Multi-modal Transportation

• International land transportation is best suited for handling both small and large shipments
from short and long distances.
• Both road and rail transport modes come under this category.
• Companies use road or rail transport modes according to their requirements such as bulk
goods are transported via railways and can reach their destination in a very short period of
time.
• For short-distance shipment, trucks or cars are used as the forms of road transport.
 10. Transportation Modes

International Land and Multi-modal Transportation

• Multimodal transportation is beneficial in terms of increasing flexibility and reducing cost of
logistics to shippers. Some benefits of multi modal transportation are:
− Single window contact: The shipper has to rely only on a single service provider, that is,
the multimodal operator.
− Reduced documentation and formalities: One contract can be negotiated with the
Multimodal Transport Operator (MTO). Single contract facilitates uniform liability
regime.
 11. Transportation Modes

International Land and Multi-modal Transportation

− Optimum utilisation of each mode: In multimodal transport, advantages of each
transportation mode, such as flexibility of road haulage, large capacity of railways and
low costs of water transport can be combined in the best possible manner.
− ‰Less investment on working capital: Multimodal transport provides faster transit
times, which helps in maintaining lesser inventory for companies. It allows less
investment in working capital.
− ‰Maximum utilisation of resources: Distance between the origin and the destination is
reduced through multimodal transport. So companies can operate from coastal regions
and use the land resources optimally.
 1. Concept of Container Yards (CYS),
Inland Container Depots (ICDS)
and Container Freight Stations
(CFS)

• Cargo containers require a facility to be trans-shipped between different transport vehicles for
further transportation. Such facilities are often termed as container terminals, yards, depots,
stations, etc.
• Maritime container terminals are usually a part of larger ports and are situated around major
harbours.
• Container Yards (CYs) denote a place or facility within a port or terminal, which is used for
handling and storing containers before or after they are loaded or offloaded from a ship. These
facilities are placed either within a port or inland.
 2. Concept of Container Yards (CYS),
Inland Container Depots (ICDS)
and Container Freight Stations
(CFS)

• Inland Container Depots (ICDs) are also called ‘dry ports’. These depots are usually situated
at inland points, far from sea ports. ICDs are independent units of customs and have unique
designator station codes.
• Container Freight Station (CFS) is usually a fixed port or container terminal area, with one or
more warehouses and uncovered storage facilities where cargo is loaded or unloaded from
containers. Thus, CFS is used for temporarily storing cargoes in the sheds or warehouses.
 1. Chartering

• Chartering is a rental agreement, wherein a charterer agrees to hire a ship or aircraft from its
owner to transport cargo.
• Normally, it is the charterer who owns cargo, which needs to be exported to some other part of
the world.
• In case of not owning a ship for transporting cargo, the cargo owner may require hiring a ship
or aircraft to move the cargo for him/her.
• The process of hiring a ship or aircraft for shipment purpose is termed as chartering and the
cargo owner who hires a ship or aircraft is called charterer.
 2. Chartering

• Chartering is required under one of the three conditions:

− When goods are needed to be shipped immediately and using a scheduled ship or airline
could delay the shipment.
− When the shipment is too large or heavy to be loaded onto a scheduled ship or aircraft. In
such cases, haulers do not have much option rather than chartering a carrier, large enough
to accommodate the load.
− The merchandise is needed at a location where regular shipping/airline service is not
available.
 3. Chartering

• Charters can be of different types such as:

Voyage Charter

Contract of Affreightment

Time Charter

Trip Time Charter

Bareboat Charter or Demise Charter

Slot Chartering

Dry Bulk and Tanker Chartering

 1. Transport Selection Decision

• One of the most important supply chain decisions of a firm is the selection of the transport
mode. This selection involves the following two steps:
1. Choice of a transport mode
2. Selection of a specific carrier from within the selected mode
• The selection of a transport mode and a specific carrier affects not only the company’s
transportation cost but also other related supply chain costs and demand for the shipper’s
products.
• In addition, the quality of service (such as speed and reliability) that the mode and selected
carrier provide influences the supply chain costs and product demand.
 2. Transport Selection Decision

• While selecting a carrier, exporters must keep in mind the following points:
− The cheapest carrier may not necessarily guarantee the cheapest landed cost.
− For finalising one carrier, multiple carrier choices should be considered.
− As service capabilities of different carriers vary, it is very important to check the service
delivery of each carrier.
− Critically evaluate the trade-off costs and all the costs and risks involved in selecting a
particular carrier.
− It provides the best service at least cost and involves the least risk.
 3. Transport Selection Decision

Transportation Selection
• The factors that are considered while making the transportation selection decision are:
− Expected transit time taken by the carrier and reliability of the carrier.
− ‰Choosing a highly dependable carrier can be a source of competitive advantage.
− ‰A dependable carrier ideally lowers customers’ inventory costs.
− ‰Cost of shipping
− ‰The carrier must be available and accessible when required.
− ‰The carrier must ensure high level of security in its operations.
 Transportation Cost

• The cost or expenses involved in moving products or merchandise from one location to
another is known as transportation cost.
• Whenever a manufacturer wants to move goods from factory to the distributors, or when the
distributor wants to move goods to retailers, a cost is incurred for such movement of goods.
This cost is called transportation cost.
• Transportation costs in international trade are determined by various factors such as distance
between the country of origin and the destination country, geography, infrastructure quality,
level of technology and trade facilitation measures, cost of fuel internationally and the mode
of transport and the transport technology involved.
 Let’s Sum Up

• International shipping or transport is defined as the transport of goods from one country to
another through various modes such as rail, road, air, water.
• Efficient transportation helps in minimising inventory costs, better warehouse management,
etc.
• ‰Air, rail, road and water are the main modes of transportation.
• ‰The two types of shipping services are liner and tramp.
• ‰Dry storage containers, flat rack containers, open top containers, etc. are the various types of
containers.
• Selection of the type of transport involves two-steps: choice of a transport mode and selection
of a specific carrier from within the selected mode.