Transportation : The Backbone of

Logistics
Rate
Negotiation

Claim
Administratio
n

Documentati
on

Freight
Manageme
nt
Carrier
Evaluation &
Selection

Transport
Mode & Mix
Decision

Shipment
Scheduling

Route
Planning

Transportation-Meaning and
Definition
The process of moving an item from point A to point
B.
Safe, efficient, reliable, and sustainable movement of
persons and goods over time and space.
Transportation in Logistics: The operation of
transportation determines the efficiency of moving
products. The progress in techniques and management
principles improves the moving load, delivery speed,
service quality, operation costs, the usage of facilities
and energy saving. Transportation takes a crucial part in
the Logistics Operation. Therefore, transportation is the
base of efficiency and economy in business logistics and
expands other functions of logistics system

Transportation: An overview
Transportation is the most visible logistic
operation (approx 40-50 % of total Logistics cost)
A good indicator to measure the Economic, Social
& Commercial progress of a country.
Modes of Transportation can be categorized as
Roadways, Railways, Waterways, Airways,
Pipelines & Ropeways.
It facilitates production by moving the various
means of production.
Serves to link the facilities of the firm which are
geographically distributed.
It directly and indirectly accelerate employment.

Roadways
Benefits/ Advantages:
Door-to-door service
Flexibility
Reliability
Can reach remote locations
Speed
Challenges:

Multi point octroi

Multi point police checks
Unauthorized local levy
Poor conditions of road
Mostly unorganized

Roadways
National Highways=96,260 (approx. as
of 2015)
State highway= 1,80,000 (approx)
Operating cost of truck=Rs. 25-30 per
KM (approx)

RAILWAYS
Good for Larger loads, long distance transportation.
Transport all types of goods-mostly the bulk items like
Coal, Iron ore, Cement, Fertilizers, Petroleum, Heavy
Machineries, Raw materials, Finished products, live cattle
etc.

High fixed cost due to infrastructure of railway tracks

etc
Variable cost reduces as compared to other modes
Slow speed due to consolidation of wagons
Monopoly Carrier
Route / service limitations can be over come by
multimodal transportation.

Railways
No of stations= (around) 7,112
Rail Network= (around) 115,000 KM(Track),

65,808KM
(Route)
Broad gauge (1,676mm (5ft6in)) lines=
105,000 Km

Meter Gauge (1,000mm (3ft338in))

Standard Gauge (1,435mm (4ft812in))
Narrow Gauge (762mm (2ft6in))

No of Wagons=2,39,281 (approx.)

MODES OF TRANSPORTATION : AIRWAYS

Fastest and less hazardous.

Fixed cost is little low than other
High variable cost due to fuel, maintenance, labour

USED FOR
lightweight, high value and highly perishable items.
urgent delivery
critical maintenance
passenger, cargo etc
Disadvantage
Overall HIGH COST
WEATHER DISTURBANCE
Limited routs

MODES OF TRANSPORTATION
Seaways

Used mostly for International trade.

Types-Tankers, Dry bulk carriers, Container
ships and Special vessels
India has around 55 shipping companies
with 510 ships
Major items are- crude oil and other
petroleum products, Iron ores, Coal, Food
grains etc

MODES OF TRANSPORTATION : Pipeline

Utilized for fluids, sewages, gas, chemicals etc
Privately owned or hired
Advantage Available all the time
Lower variable or operating cost
Large quantities in a single continuous shipment
Protection provided by pipeline
Disadvantage Limited to routes
Limited with respect to commodities
Highest investment cost or fixed cost

MODES OF TRANSPORTATION
MULTIMODAL OR INTERMODAL:
COMBINING OF 2 OR MORE MODES OF TRANSPORTATION
SERVICES LINKING 2 NODAL LOCATIONS
REASONS: LIMITED ACCESSIBILITY OF RAIL, WATER, PIPELINE & AIR
MODES
Eg. COMBINATION OF RAIL & ROAD MAY PROVIDE THE LONG
DISTANCE ECONOMY OF RAIL & HIGH ACCESSIBILITY OF ROAD
TOGATHER
Eg. RAIL-WATER COMBINATION COULD YIELD THE SPEED & LOWER
COST
DISADVANTAGE : TRANSFER OF CARGO FROM ONE MODE TO
ANOTHER BUT COULD BE SOLVED BY USE OF CONTAINERS

Cost Structure For Each Module:

Mode

Fixed Costs

Variable Costs

Rail

High- Equipments, Terminals ,

Tracks ,etc

Low

Road

Low-Highway provided by
government

Medium-Fuel ,
Maintenance, etc

Water

Medium-Ships and Equipment

Low-As capacity is
huge

Pipeli
ne

Highest-Right of the way ,

construction, Equipment for
control station and Pumping
capacity

Lowest-Insignificant
labour costs

Air

Low-Aircraft and cargo

handling systems

High- Fuel, labour,

Maintenance

Principles of Transportation

Principles
of
Transporta
tion

Econom
y of
Scale
Economy
of
Distance

PRINCIPLES OF
TRANSPORATION
1. Cost of transportation decrease with
increasing loads & increasing distance of
transportation
Eg. 10 kg shipment cost will be less per kg. than 5
kg. shipment, because cost incurred in executing
an order does not vary much with the size of the
order with most cost components like order
preparation, invoicing & collecting the shipment
remaining fixed irrespective of shipment size.
Also transportation vehicles having larger
holding capacity cost less than those with
smaller

2) PRINCIPLES OF TRANSPORTATION DISTANCE

Unit cost of transportation decreases with

increasing distance in transportation
Same load transported in one step across
1000 km cost less than transporting load in
two steps of 500 km each across the same
1000 km because of double loading &
unloading charges.
The two principles state that transportation
management decisions should aim to
maximise size of load & distance of
shipment in order to obtain cost benefits,
taking care of customers requirements &
satisfaction.

TRANSPORTATION TERMS
Consignment (GOODS SHIPPED)
Transportation mode (Form)
Container (large box)
Rights-of-way (legally permitted routes)
Consignor (sender of goods shipment, seller)
Consignee (receiver of goods shipment, buyer)
Carrier (services of transporting goods)
Public carrier (services to general public at non
discriminatory pricing)
Private carrier (services to own organisation)

TRANSPORTATION TERMS

FRIGHT FORWARDERS (CONSOLIDATE SMALL SHIPMENTS

INTO LARGE ONES FORWARD TO COMMON DESTINATION)

BILL OF LADING ( DOCUMENT REPRESENTING CONTRACT

BETWEEN BUYER & SELLER, GIVES DETAILS TO
SHIPER,RECEIPT OF GOODS & CONFERS RESPONSIBILITY TO
CARRIER FOR TRANSRORTATION BY LEGAL TRANSFER OF
OWNRSHIP)

FREIGHT BILL (INVOICE OF THE CARRIER, MAY BE PREPAID

OR ON TIME OF DELIVERY)

Multimodal Transport
Multimodal transport(also known
as combined transport) is the
transportation of goods under a
single contract, but performed with
at least two different means
oftransport; the carrier is liable (in a
legal sense) for the entire carriage,
even though it is performed by
several different modes of transport
(by rail, sea and road, for example)

Intermodal combinations

SPECIFIC COMBINATION
Piggy Back :
Piggybacktransportation
refers to the transportation of
goods where one
transportation unit is carried
on the back of something
else.
Trailer-on-Flatcar (TOFC)
Piggybacking :
The goods are packed in
trailers and hauled by tractors
to the railway station. At the
station, the trailers are moved
onto railway flat cars and the
transport tractors, which stay
behind, be then disconnected.

 COFC (Container-On-Flatcar):
type of piggybacking facilitates multiple
containers to be transported on a flat cars.

This

 Roadrailers:

(For bi-modal transportation)

These are specially designed trailers which

can run on road as well as on rails.

SPECIFIC COMBINATION
Fishy Back:
It is a combination of road and water transport. Fishy
back/ train ship/ containership are examples of the oldest
mode of the intermodal transport. They utilize waterways,
which are one of the least expensive methods for linehaul movement. The fishy back, concepts load a truck
trailer, railcar, or container on to ship for transportation.
Birdy Back:
It is a combination of road and airways and is generally
used in International shipments Air- truck movements
usually provide service and flexibility comparable to
straight motor freight.

Intermodal (conti..)
Land Bridge (TranShip):
A variant of this intermodal option is the
LAND BRIDGE concept, which moves
containers by a combination of sea and rail.
The land bridge concept is based on the
benefit of ocean and rail combination that
utilize a single tariff, which is lower than the
total cost of the separate rates. The-goods
can be transported by water transferring the
shipment to surface transport and again finish
destination will be placed on a rail car and
transported to Chennai from where it will

ROLL-ON ROLL-OFF (RORO)

ROROmeans Roll-on/roll-off, where loaded

trucks are directly carried by railway wagons
to their destination.
Ships also act as a ferry for loaded trucks. The
trucks Drives onto the ship, the ship sails to
the destination Port, and the trucks drives off
the ship to deliver the goods.

TRANSPORTATION MANAGEMENT DECISIONS

It has two stage process
1)

Mode of transportation selection:Based on factors affecting desired performance , the total logistics
performance & cost incurred in it.
Speed of transportation affects lead time of inventory, availability to
firm, inventory carrying cost, stock out cost

2)

The carrier whether Common (Public) , Contract, exempt or

Private:) Reliability or consistency of lead time affects inventory carrying
cost & stock out cost
) Safety
) Capability ability to transport different products
) Flexibility door to door delivery
) Capacity amount that can be carried in one trip
) Frequency

Relative Opening Characteristics by Transportation

Modes:
Operating
Rail Truc Wate
Pipeli Air Remarks
Characteristi
cs

ne

Speed

Air is the fastest

Availability

Road is the best since

they can drive from
origin to destination

Dependabilit 3
y

Pipeline ranks best-As

the service is
continuous and there
is no stoppage due to
traffic or congestion

Capability

Sea is the best-Can

handle all types and
size of cargo

Frequency

Pipeline is ranked
best-As the
movement is
continuous

LEGAL GROUPING OF CARRIERS

Common (Public)carrier :
1) Most frequently employed legal category for transportation
resources
2) Common carrier is a firm that transports for revenue at any
time & at any place within jurisdiction
3) Required to published all rates charged for this service &
should be similar for similar services.
4) Authorised to offer transport for hire upon receiving a
certificate for public convenience & need.

LEGAL GROUPING OF CARRIERS

1)

CONTRACT CARRIER
Authorised the transportation of specific items
over
specified routes.

2) Arises from contractual arrangements between two

parties
i.e. the shipper & the carrier
3) Contract provides shipper with defined
transportation service at agreeable price
4) Unlike common carrier they are not required to
charged the same rate for equal service

LEGAL GROUPING OF CARRIERS

EXEMPT CARRIER:

1) do not fall under the umbrella of direct regulation w.r.t.

Pricing policies & operating rights
2) restricted to law of that state in which they are operated
3) transported commodities such as agriculture Products
4) exemptions may also be granted for specified areas such as
within the city and commercial areas of the activity

LEGAL GROUPING OF CARRIERS

PRIVATE CARRIER:

1) originally consisted of transportation resources that are

controlled by the firm through ownership or lease.
2) permitted to use owner operators or others outside sources
of vehicles & drivers
3) restricted in that the materials being shipped must be
owned by the firm & the transportation of the materials
must be incidental to the primary business of the firm

Transportation Costs
Transportation cost is the cost occurred
during transporting the freight from one
place to another. The followings are the
elements of transportation costs1. Tariff of transportation mode: It depends
on Nature of the product
Distance to be covered
Quantity of the shipment
Transit time
En route handling needs
Trade relationship

Transportation Costs (Cont..)

2. Transit Time Cost:
Working Capital cost
Customer service cost

3. Obsolescence & Deterioration Cost:

- Changes in physical feature of the
products resulting in value reduction,
especially perishable items like Milk,
Vegetables, Fruits, Fish, Egg etc.

Transportation Costs (Cont..)

3. Protective Packaging Cost To avoid breakage and pilferage
To avoid damage due to rain etc
It depends on the mode of transport or
multi modal needs

4. Transit Insurance Cost-To cover the loss during transit

5. Miscellaneous Cost- Toll tax, Local levy etc

Transportation networks
Nodal Network:
- points or nodes are defined to
enable multi-stop pickup and delivery of
consignments.

Hub & spoke Network:

Hub and spoke network works like a
hub and spoke of a wheel. The hub acts
like a central feeder point to the
different distribution centers located
across the geography.

MILK RUN (concept for route

planning)
Amilk run, inlogistics, is a round trip that
facilitates either distribution or collection.
A milk run ensures that that minimum
distance is travelled and the maximum
demand is carried into the truck so as to
meet both the demand requirement and
effective transportation with least cost.
This is applied where the load is scattered in
many different places and in smaller units.

Transportation networks
Direct shipment Network:
Different plant of suppliers to customers
directly.
Supplier

Customer

PLANT-A

Customer-1

PLANT-B

Customer-2

PLANT-C

Customer-3

 Direct Shipment With Milk Runs:

Collected from one or many en-route suppliers and
delivered to one or many en-route customers directly.

Direct shipment via Distribution Centers:

Collected from one or many suppliers and delivered to
customers individually via distribution center.

Shipment via Distribution Centers Using Milk Runs:

Collected from one or many suppliers and delivered to
customers using milk run concept via distribution center.

Containerization
Containerizationis a system ofintermodal freight
transportusingintermodal containers(also
calledshipping containersandISOcontainers) made
ofweathering steel.
The containers havestandardizeddimensions. They
can be loaded and unloaded, stacked, transported
efficiently over long distances, and transferred from
one mode of transport to anothercontainer
ships,rail transportflatcars, andsemi-trailer trucks
without being opened.

Containerization (Cont..)
Container Dimension:
Length : 20Ft, 40Ft, 45 Ft
Width : 8Ft
Height: 8.6 Ft & 9.6Ft
TEU (Twenty-foot Equivalent Unit):
It is a standard unit for describing a ship's cargo
carrying capacity, or a shipping terminal's cargo
handling capacity. A standard twenty-foot
(20x8x8.6 feet) container equals One TEU.

Benefits of Containerization
1.Secure the goods from damages like
breakage & pilferage during transportation
2. Ease of Handling
3. Lessen transit time due to fast loading,
unloading, checking etc.
4. Less documentation
5. Less Insurance cost due to low risk of loss.
6. Improve overall efficiency in operation.
7. It reduces overall transportation costs.
8. Least requirement of protective packaging.

Types of containers

General purpose containers

Tank Containers
Refrigerated containers
High Cube containers
Ventilated Containers
Open-Top containers
Hard-Top containers
Flat containers
Platform containers

Challenges of Logistics

Just in time requirement

High customer expectations
Uncertain demand
Vehicle breakdown
Customer line stoppage cost

Assignment Questions:
Explain different modes of
transportation with their benefits and
limitations.
What transport decisions should a
manager take into consideration
while selecting the transportation
mode?
Explain multimodal transportation.
Explain concept of containerization
and its benefits.