Definition:

Transportation is simply moving products and materials from one place to another. This includes shipment of raw materials to the
manufacturer and movement of finished product to the customer. Transportation also includes the movement of parts to assembly
areas as they are assembled.

Purpose:

It is the activity that physically connects the business to its supply chain partners, such as suppliers and customers, and is a major influence
on the customer’s satisfaction with the company. This chapter illustrates the role of transportation in the logistics function, the supply chain,
and the larger economy.

The role of Transportation:

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
 Energy saving

Transportation Functionality:

 Product movement
 Product storage

Product Movement:

 Whether the product is in the form of materials, components, assemblies, work-in-process, or finished goods, transportation is

necessary to move it to the next stage of the manufacturing process or physically closer to the ultimate customer. A primary

transportation function is product movement up and down the value chain. Transportation utilizes temporal, financial, and

environmental resources, it is important that items be moved only when it truly enhances product value.

 The major objective of transportation is to move product from an origin location to a prescribed destination while minimizing

temporal, financial, and environmental resource costs. Loss and damage expenses must also be minimized. At the same time, the

movement must take place in a manner that meets customer demands regarding delivery performance and shipment information

availability.

Product Storage:

 A less common transportation function is temporary storage. Vehicles make rather expensive storage facilities. However, if the

in-transit product requires storage but will be moved again shortly the cost of unloading and reloading the product in a warehouse

may exceed the profitability.

 A second method to achieve temporary product storage is diversion. This occurs when an original shipment destination is

changed while the delivery is in transit. Traditionally, the telephone was used to direct diversion strategies. Today, satellite

communication between enterprise headquarters and vehicles more efficiently handles the information.
Principle of Transportations:

Economy of scale:

 It refers to the characteristic that transportation cost per unit of weight decreases when the size of the shipment increases. For

example, truckload (TL) shipments that utilize the entire vehicle’s capacity cost less per pound than less-than-truckload (L TL)

shipments that utilize a portion of vehicle capacity. It is also generally true that larger capacity transportation vehicles such as rail

or water are less expensive per unit of weight than smaller capacity vehicles such as motor or air.

 Transportation economies of scale exist because fixed expenses associated with moving a load can be spread over the load’s

weight. As such, a heavier load allows costs to be “spread out,” thereby decreasing costs per unit of weight. The fixed expenses

include administrative costs of taking the transportation order, time to position the vehicle for loading or unloading, invoicing,

and equipment cost. These costs are considered fixed because they do not vary with shipment volume.

Economy of distance:

 It refers to the characteristic that transportation cost per unit of distance decreases as distance increases. For example, a shipment

of 800 miles will cost less than two shipments of the same combined weight of 400 miles. Transportation economy of distance is

also referred to as the tapering principle since rates or charges taper with distance.

 The rationale for distance economies is similar to that for economies of scale. Specifically, the relatively fixed expense incurred

to load and unload the vehicle must be spread over the variable expense per unit of distance. Longer distances allow the fixed

expense to be spread over more miles, resulting in lower overall per mile charges.