ASSIGNMENT

OF
INTERNATIONAL LOGISTICS

TOPIC:- INVENTORY MANAGEMENT

SUBMITTED TO SUBMITTED BY

RATNESHPAL SINGH GURVEER SINGH

(ASST.PROF) MBA-2nd
196214
 Inventory Management

In any business or organization, all functions are interlinked and connected to each other and are
often overlapping. Some key aspects like supply chain management, logistics and inventory form
the backbone of the business delivery function. Therefore these functions are extremely importa
nt to marketing managers as well as finance controllers.

Inventory management is a very important function that determines the health of the supply chai
n as well as the impacts the financial health of the balance sheet. Every organization constantly st
rives to maintain optimum inventory to be able to meet its requirements and avoid over or under
inventory that can impact the financial figures.

Inventory is always dynamic. Inventory management requires constant and careful evaluation of
external and internal factors and control through planning and review. Most of the organizations
have a separate department or job function called inventory planners who continuously monitor,
control and review inventory and interface with production, procurement and finance department
s.

Defining Inventory

Inventory is an idle stock of physical goods that contain economic value, and are held in various
forms by an organization in its custody awaiting packing, processing, transformation, use or sale
in a future point of time.

Any organization which is into production, trading, sale and service of a product will necessarily
hold stock of various physical resources to aid in future consumption and sale. While inventory i
s a necessary evil of any such business, it may be noted that the organizations hold inventories fo
r various reasons, which include speculative purposes, functional purposes, physical necessities e
tc.

From the above definition the following points stand out with reference to inventory:

All organizations engaged in production or sale of products hold inventory in one form or other.

Inventory can be in complete state or incomplete state.

Inventory is held to facilitate future consumption, sale or further processing/value addition.

All inventoried resources have economic value and can be considered as assets of the organizatio
n.

Inventory Management Concepts

Inventory management and supply chain management are the backbone of any business operatio
ns. With the development of technology and availability of process driven software applications,
inventory management has undergone revolutionary changes. In the last decade or so we have se
en adaptation of enhanced customer service concept on the part of the manufacturers agreeing to
manage and hold inventories at their customers end and thereby effect Just In Time deliveries. T
hough this concept is the same in essence different industries have named the models differently.
Manufacturing companies like computer manufacturing or mobile phone manufacturers call the
model by name VMI - Vendor Managed Industry while Automobile industry uses the term JIT -
Just In Time where as apparel industry calls such a model by name - ECR - Efficient consumer r
esponse. The basic underlying model of inventory management remains the same.

Let us take the example of DEALER, which has manufacturing facilities all over the world. They
follow a concept of Build to Order where in the manufacturing or assembly of laptop is done onl
y when the customer places a firm order on the web and confirms payment. Dealer buys parts an
d accessories from various vendors. DEALER has taken the initiative to work with third party ser
vice providers to set up warehouses adjacent to their plants and manage the inventories on behalf
of DEALER’s suppliers. The 3PL - third party service provider receives the consignments and h
olds inventory of parts on behalf of Dealer’s suppliers. The 3PL warehouse houses inventories of
all of DEALER’s suppliers, which might number to more than two hundred suppliers. When DE
ALER receives a confirmed order for a Laptop, the system generates a Bill of material, which is
downloaded at the 3PL, processed and materials are arranged in the cage as per assembly process
and delivered to the manufacturing floor directly. At this point of transfer, the recognition of sal
e happens from the Vendor to Dealer. Until then the supplier himself at his expense holds the inv
entory.

Let us look at the benefits of this model for both Dealer as well as Its Suppliers:

1) With VMI model, Dealer has reduced its in bound supply chain and thereby gets to reduce its
logistics and inventory management costs considerably.

2) DEALER gets to postpone owning inventory until at the time of actual consumption. Thereby
with no inventories DEALER has no need for working capital to be invested into holding invent
ories.

3) DEALER does not have to set up inventory operations and employ teams for operations as w
ell as management of inventory functions.

Supplier Benefits
1) Supplier gets to establish better relationship and collaboration with DEALER with long-term
business prospect.

2) By agreeing to hold inventories and effect JIT supplies at the door to DEALER, supplier will
be in a better position to bargain and get more business from DEALER.

3) With VMI model, supplier gets an opportunity to engage in better value proposition with his c
ustomer DEALER.

4) Supplier gets confirmed forecast for the entire year with commitments from DEALER for the
quantity off take.

5) VMI managed is managed by 3PL and supplier does not have to engage himself in having to
set up and manage inventory operations at DEALER’s premise.

Need for Inventory Management - Why do Companies hold Inventories ?

Inventory is a necessary evil that every organization would have to maintain for various purposes
. Optimum inventory management is the goal of every inventory planner. Over inventory or unde
r inventory both cause financial impact and health of the business as well as effect business oppo
rtunities.

Inventory holding is resorted to by organizations as hedge against various external and internal fa
ctors, as precaution, as opportunity, as a need and for speculative purposes.

Reasons why organizations maintain Raw Material Inventory

Most of the organizations have raw material inventory warehouses attached to the production fac
ilities where raw materials, consumables and packing materials are stored and issue for productio
n on JIT basis. The reasons for holding inventories can vary from case to case basis.

1) Meet variation in Production Demand

Production plan changes in response to the sales, estimates, orders and stocking patterns. Accordi
ngly the demand for raw material supply for production varies with the product plan in terms of s
pecific SKU as well as batch quantities. Holding inventories at a nearby warehouse helps issue th
e required quantity and item to production just in time.

2) Cater to Cyclical and Seasonal Demand

Market demand and supplies are seasonal depending upon various factors like seasons; festivals
etc and past sales data help companies to anticipate a huge surge of demand in the market well in
 advance. Accordingly they stock up raw materials and hold inventories to be able to increase pro
duction and rush supplies to the market to meet the increased demand.

3) Economies of Scale in Procurement

Buying raw materials in larger lot and holding inventory is found to be cheaper for the company
than buying frequent small lots. In such cases one buys in bulk and holds inventories at the plant
warehouse.

4) Take advantage of Price Increase and Quantity Discounts

If there is a price increase expected few months down the line due to changes in demand and sup
ply in the national or international market, impact of taxes and budgets etc, the company’s tend t
o buy raw materials in advance and hold stocks as a hedge against increased costs. Companies re
sort to buying in bulk and holding raw material inventories to take advantage of the quantity disc
ounts offered by the supplier. In such cases the savings on account of the discount enjoyed would
be substantially higher that of inventory carrying cost.

5) Reduce Transit Cost and Transit Times

In case of raw materials being imported from a foreign country or from a far away vendor within
the country, one can save a lot in terms of transportation cost buy buying in bulk and transporting
as a container load or a full truck load. Part shipments can be costlier.

In terms of transit time too, transit time for full container shipment or a full truck load is direct an
d faster unlike part shipment load where the freight forwarder waits for other loads to fill the con
tainer which can take several weeks .There could be a lot of factors resulting in shipping delays a
nd transportation too, which can hamper the supply chain forcing companies to hold safety stock
of raw material inventories.

6) Long Lead and High demand items need to be held in Inventory

Often raw material supplies from vendors have long lead running into several months. Coupled
with this if the particular item is in high demand and short supply one can expect disruption of su
pplies. In such cases it is safer to hold inventories and have control.

INVENTORY TYPES
Inventory is defined as a stock or store of goods. These goods are maintained on hand at or near
a business's location so that the firm may meet demand and fulfill its reason for existence. If the f
irm is a retail establishment, a customer may look elsewhere to have his or her needs satisfied if t
he firm does not have the required item in stock when the customer arrives. If the firm is a manuf
acturer, it must maintain some inventory of raw materials and work-in-process in order to keep th
e factory running. In addition, it must maintain some supply of finished goods in order to meet d
emand.

RAW MATERIALS

Raw materials are inventory items that are used in the manufacturer's conversion process to prod
uce components, subassemblies, or finished products. These inventory items may be commoditie
s or extracted materials that the firm or its subsidiary has produced or extracted. They also may b
e objects or elements that the firm has purchased from outside the organization. Even if the item i
s partially assembled or is considered a finished good to the supplier, the purchaser may classify
it as a raw material if his or her firm had no input into its production. Typically, raw materials ar
e commodities such as ore, grain, minerals, petroleum, chemicals, paper, wood, paint, steel, and f
ood items. However, items such as nuts and bolts, ball bearings, key stock, casters, seats, wheels,
and even engines may be regarded as raw materials if they are purchased from outside the firm.

Generally, raw materials are used in the manufacture of components. These components are then
incorporated into the final product or become part of a subassembly. Subassemblies are then use
d to manufacture or assemble the final product. A part that goes into making another part is know
n as a component, while the part it goes into is known as its parent. Any item that does not have
a component is regarded as a raw material or purchased item. From the product structure tree it is
apparent that the rolling cart's raw materials are steel, bars, wheels, ball bearings, axles, and cast
er frames.

WORK-IN-PROCESS

Work-in-process (WIP) is made up of all the materials, parts (components), assemblies, and suba
ssemblies that are being processed or are waiting to be processed within the system. This general
ly includes all material—from raw material that has been released for initial processing up to mat
erial that has been completely processed and is awaiting final inspection and acceptance before i
nclusion in finished goods.

Any item that has a parent but is not a raw material is considered to be work-in-process. A glanc
e at the rolling cart product structure tree example reveals that work-in-process in this situation c
onsists of tops, leg assemblies, frames, legs, and casters. Actually, the leg assembly and casters a
re labeled as subassemblies because the leg assembly consists of legs and casters and the casters
are assembled from wheels, ball bearings, axles, and caster frames.

FINISHED GOODS

A finished good is a completed part that is ready for a customer order. Therefore, finished goods
inventory is the stock of completed products. These goods have been inspected and have passed f
inal inspection requirements so that they can be transferred out of work-in-process and into finish
ed goods inventory. From this point, finished goods can be sold directly to their final user, sold t
o retailers, sold to wholesalers, sent to distribution centers, or held in anticipation of a customer o
rder.

Any item that does not have a parent can be classified as a finished good. By looking at the rollin
g cart product structure tree example one can determine that the finished good in this case is a car
t.

Inventories can be further classified according to the purpose they serve. These types include tra
nsit inventory, buffer inventory, anticipation inventory, decoupling inventory, cycle inventory, a
nd MRO goods inventory. Some of these also are know by other names, such as speculative inve
ntory, safety inventory, and seasonal inventory. We already have briefly discussed some of the i
mplications of a few of these inventory types, but will now discuss each in more detail.

TRANSIT INVENTORY

Transit inventories result from the need to transport items or material from one location to anothe
r, and from the fact that there is some transportation time involved in getting from one location to
another. Sometimes this is referred to as pipeline inventory. Merchandise shipped by truck or rai
l can sometimes take days or even weeks to go from a regional warehouse to a retail facility. So
me large firms, such as automobile manufacturers, employ freight consolidators to pool their tran
sit inventories coming from various locations into one shipping source in order to take advantage
of economies of scale. Of course, this can greatly increase the transit time for these inventories,
hence an increase in the size of the inventory in transit.

BUFFER INVENTORY

As previously stated, inventory is sometimes used to protect against the uncertainties of supply a
nd demand, as well as unpredictable events such as poor delivery reliability or poor quality of a s
upplier's products. These inventory cushions are often referred to as safety stock. Safety stock or
buffer inventory is any amount held on hand that is over and above that currently needed to meet
demand. Generally, the higher the level of buffer inventory, the better the firm's customer service
. This occurs because the firm suffers fewer "stock-outs" (when a customer's order cannot be im
mediately filled from existing inventory) and has less need to backorder the item, make the custo
mer wait until the next order cycle, or even worse, cause the customer to leave empty-handed to f
ind another supplier. Obviously, the better the customer service the greater the likelihood of cust
omer satisfaction.

ANTICIPATION INVENTORY

Oftentimes, firms will purchase and hold inventory that is in excess of their current need in antici
pation of a possible future event. Such events may include a price increase, a seasonal increase in
demand, or even an impending labor strike. This tactic is commonly used by retailers, who routi
nely build up inventory months before the demand for their products will be unusually high (i.e.,
at Halloween, Christmas, or the back-to-school season). For manufacturers, anticipation inventor
y allows them to build up inventory when demand is low (also keeping workers busy during slac
k times) so that when demand picks up the increased inventory will be slowly depleted and the fi
rm does not have to react by increasing production time (along with the subsequent increase in hi
ring, training, and other associated labor costs). Therefore, the firm has avoided both excessive o
vertime due to increased demand and hiring costs due to increased demand. It also has avoided la
yoff costs associated with production cut-backs, or worse, the idling or shutting down of facilitie
s. This process is sometimes called "smoothing" because it smoothes the peaks and valleys in de
mand, allowing the firm to maintain a constant level of output and a stable workforce.

DECOUPLING INVENTORY

Very rarely, if ever, will one see a production facility where every machine in the process produc
es at exactly the same rate. In fact, one machine may process parts several times faster than the m
achines in front of or behind it. Yet, if one walks through the plant it may seem that all machines
are running smoothly at the same time. It also could be possible that while passing through the pl
ant, one notices several machines are under repair or are undergoing some form of preventive ma
intenance. Even so, this does not seem to interrupt the flow of work-in-process through the syste
m. The reason for this is the existence of an inventory of parts between machines, a decoupling i
nventory that serves as a shock absorber, cushioning the system against production irregularities.
As such it "decouples" or disengages the plant's dependence upon the sequential requirements of
the system (i.e., one machine feeds parts to the next machine).
The more inventory a firm carries as a decoupling inventory between the various stages in its ma
nufacturing system (or even distribution system), the less coordination is needed to keep the syst
em running smoothly. Naturally, logic would dictate that an infinite amount of decoupling invent
ory would not keep the system running in peak form. A balance can be reached that will allow th
e plant to run relatively smoothly without maintaining an absurd level of inventory. The cost of e
fficiency must be weighed against the cost of carrying excess inventory so that there is an optimu
m balance between inventory level and coordination within the system.

CYCLE INVENTORY

Those who are familiar with the concept of economic order quantity (EOQ) know that the EOQ i
s an attempt to balance inventory holding or carrying costs with the costs incurred from ordering
or setting up machinery. When large quantities are ordered or produced, inventory holding costs
are increased, but ordering/setup costs decrease. Conversely, when lot sizes decrease, inventory h
olding/carrying costs decrease, but the cost of ordering/setup increases since more orders/setups
are required to meet demand. When the two costs are equal (holding/carrying costs and ordering/
setup costs) the total cost (the sum of the two costs) is minimized. Cycle inventories, sometimes
called lot-size inventories, result from this process. Usually, excess material is ordered and, cons
equently, held in inventory in an effort to reach this minimization point. Hence, cycle inventory r
esults from ordering in batches or lot sizes rather than ordering material strictly as needed.

MRO GOODS INVENTORY

Maintenance, repair, and operating supplies, or MRO goods, are items that are used to support an
d maintain the production process and its infrastructure. These goods are usually consumed as a r
esult of the production process but are not directly a part of the finished product. Examples of M
RO goods include oils, lubricants, coolants, janitorial supplies, uniforms, gloves, packing materia
l, tools, nuts, bolts, screws, shim stock, and key stock. Even office supplies such as staples, pens
and pencils, copier paper, and toner are considered part of MRO goods inventory.

Advantages & Disadvantages of Excess Inventory

For a business that sells products, having inventory on hand is part of creating a positive custome
r experience. When customers can get items quickly, loyalty is built because customers know the
business keeps products in stock. If inventory moves regularly and quickly, business owners are
likely to carry some excess inventory of the most popular items.

Advantage:
1) Wholesale Pricing

Many business owners can take advantages of lower wholesale costs when they buy larger quanti
ties of units. This makes sense for regular items that the business knows will sell, because the bu
siness is confident it will move product effectively and not be left with it. The lower costs could
be significant depending on the price points of the product.

2) Fast Fulfillment

When things are in stock, customers get products in hand much faster. Even when customers don
't have an immediate need for the product, when the decision to buy is made, the customer likes t
o walk out with the product in hand. This is a fundamental part of quality customer service.

3) Low Risk of Shortages

There are times when demand spikes higher. For some items, demand might be cyclical around a
specific holiday or season. When you have excess inventory, you don't run the risk of being the
business that ran out of stock when everyone was looking for one particular product.

4) Full Shelves

When you keep just enough inventory to get through the normal sales cycle, shelves can look spa
rse as you get closer to the next time to order. The appearance of full shelves sends a positive me
ssage to the customer that business is good and the store is ready for business. Keeping a store st
ocked with items to sell requires adequate inventory. Business owners should look at several typ
es of inventory control to determine the best method.

Disadvantage:

1) Obsolete Inventory

Overstocking on products runs the risk of the product becoming obsolete. This is true especially i
n technology sectors such as smartphones and televisions, but no industry is exempt. Even the lat
est kid's game craze might inspire you to place a large order. If the buzz dissipates quickly and ki
ds aren't looking for the game, you'll be left holding a lot of inventory you can't move.

2) Storage Costs

The more stuff you have, the more space you need. Commercial space is leased per square foot.
Consider the costs to store excess inventory compared to the savings on wholesale orders. It also
costs to do more inventory control and audits, potentially requiring additional manpower to work
the warehouse.

3) Potential Insurance Costs and Loss

Insurance costs go up with larger storage areas and larger inventory values. This factor needs to
be considered and compared to wholesale savings. If there is a fire, theft or another natural disast
er, not only will the business be recuperating, it will need to pay higher premiums as insurance ra
tes go up.

4) Tying Up Capital

When you have excess inventory, you pay for the order, the storage and insurance. You can't get
around this. For businesses that are working with small margins and on tight monthly budgets, th
is can hamper business development decisions because they don't have cash on hand.

Business owners might examine the disadvantages pertinent to the business and then decide whet
her carrying excess inventory makes sense. It is up to each business owner to review the financia
l health of his company. Inventory is one key factor in that.

The Advantages of Low Inventory Levels

Maintaining low inventory levels is a common logistics and inventory objective for companies. I
nventory requires management and incurs costs. Companies typically try to achieve a balance wh
ereby they have just enough inventory to meet current and near-term demand, but not so much th
at they have excess.

1) Reduced Holding Costs

Holding inventory has costs. Typical costs include utilities for the space used and labor costs inv
olved in managing the inventory. A grocer, for instance, may have significantly lower utilities co
sts by using less freezer or cooler space to store refrigerated and frozen inventory. A distributor o
r retailer would need less labor to manage a smaller level of inventory holdings than it would to
manage higher inventory levels.

2) Easier Organization

Smaller inventory levels are also easier to manage. It takes less time to organize and retrieve inve
ntory when there is less of it to put away and get out. This makes the process of replenishing shor
t inventory much simpler and more efficient. This is especially important for companies that hav
e high inventory turnover rates and need to quickly get new products onto the shelves.

The Disadvantages of Less Inventory

Having a low level of inventory can seem ideal for many small businesses. It reduces the space y
ou need to stock excess merchandise and limits the danger that your inventory will spoil or grow
obsolete. That can decrease your expenses. But a declining inventory exposes a business to other
risks that may outweigh the benefits.

1) Shipping Cost
Relying on just-in-time inventory management can prove costly when you run out or get an unex
pected request from a key customer. Having to call your supplier for a rush order can increase yo
ur cost of goods sold considerably and cause your profit margin to evaporate. If it costs you more
money to get goods shipped on short notice and you can’t pass that along to the customer, you c
ould be losing more in supply chain costs than you’re gaining by decreasing in-house inventory s
torage.

2) Increased Dependency on Suppliers

Declining inventory increases your reliance on your supplier to replenish your stock. If your sour
ce for inventory replenishment is inefficient, or if something happens that reduces that supplier’s
own production capacity, you could find your business running short of needed materials quickly
. Businesses with few suppliers who can provide necessary goods or raw materials or businesses
with suppliers who take a long time to manufacture and ship materials risk running out of stock.

3) Unpredictable Demand

If you have a customer base that places steady orders or you’ve been in business long enough tha
t you know what sales to expect for a given period, keeping reduced inventory on hand may be a
safe way to save some money. But a declining inventory puts renewed emphasis on those project
ions, because it reduces the amount of flexibility you have to increase your bandwidth. When de
mand increases, your business could suffer long-term consequences if you lack the capacity to se
rve your customers and your competitors are able to fill the breach.

4) Price Spikes

One benefit of ordering inventory in bulk is that you can use your purchasing power to negotiate
discounts, which allows you to minimize those costs. Keeping a minimum inventory means your
cost structure can change quickly if supplier prices fluctuate. For example, if you need a commo
dity that suddenly spikes in value or your main source for widgets has its manufacturing facility
damaged in a fire, you may have to pay a lot more on short notice to replenish your stores

EOQ MODEL
What Is Economic Order Quantity (EOQ)?
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimi
ze inventory costs such as holding costs, shortage costs, and order costs. This production-schedul
ing model was developed in 1913 by Ford W. Harris and has been refined over time. The formul
a assumes that demand, ordering, and holding costs all remain constant.

The EOQ is a company's optimal order quantity that minimizes its total costs related to orderin
g, receiving, and holding inventory.

The EOQ formula is best applied in situations where demand, ordering, and holding costs rem
ain constant over time.

Formula and Calculation of Economic Order Quantity (EOQ)

The formula for EOQ is:

Q=√2DS
h

where:

Q=EOQ units

D=Demand in units (typically on an annual basis)

S=Order cost (per purchase order)

H=Holding costs (per unit, per year)

What the Economic Order Quantity Can Tell You?

The goal of the EOQ formula is to identify the optimal number of product units to order. If achie
ved, a company can minimize its costs for buying, delivery, and storing units. The EOQ formula
can be modified to determine different production levels or order intervals, and corporations with
large supply chains and high variable costs use an algorithm in their computer software to deter
mine EOQ.

EOQ is an important cash flow tool. The formula can help a company control the amount of cash
tied up in the inventory balance. For many companies, inventory is its largest asset other than its
human resources, and these businesses must carry sufficient inventory to meet the needs of custo
mers. If EOQ can help minimize the level of inventory, the cash savings can be used for some ot
her business purpose or investment.
The EOQ formula determines a company's inventory reorder point. When inventory falls to a cer
tain level, the EOQ formula, if applied to business processes, triggers the need to place an order f
or more units. By determining a reorder point, the business avoids running out of inventory and c
an continue to fill customer orders. If the company runs out of inventory, there is a shortage cost,
which is the revenue lost because the company has insufficient inventory to fill an order. An inv
entory shortage may also mean the company loses the customer or the client will order less in the
future.

Example of How to Use EOQ

EOQ takes into account the timing of reordering, the cost incurred to place an order, and the cost
to store merchandise. If a company is constantly placing small orders to maintain a specific inven
tory level, the ordering costs are higher, and there is a need for additional storage space.

Assume, for example, a retail clothing shop carries a line of men’s jeans, and the shop sells 1,000
pairs of jeans each year. It costs the company $5 per year to hold a pair of jeans in inventory, an
d the fixed cost to place an order is $2.

The EOQ formula is the square root of (2 x 1,000 pairs x $2 order cost) / ($5 holding cost) or 28.
3 with rounding. The ideal order size to minimize costs and meet customer demand is slightly m
ore than 28 pairs of jeans. A more complex portion of the EOQ formula provides the reorder poi
nt.

Limitations of Using EOQ

The EOQ formula assumes that consumer demand is constant. The calculation also assumes that
both ordering and holding costs remain constant. This fact makes it difficult or impossible for the
formula to account for business events such as changing consumer demand, seasonal changes in
inventory costs, lost sales revenue due to inventory shortages, or purchase discounts a company
might realize for buying inventory in larger quantities.

ASSIGNMENT - 2
Topic:- Modes of Transportation

TRANSPORTATION
Transport or transportation is the movement of humans, animals and goods from one location
to another. In other words, the action of transport is defined as a particular movement of an organ
ism or thing from a point A to a point B. Modes of transport include air, land (rail and road), wat
er, cable, pipeline and space. The field can be divided into infrastructure, vehicles and operations
. Transport enables trade between people, which is essential for the development of civilizations.

Transport infrastructure consists of the fixed installations, including roads, railways, airways, wa
terways, canals and pipelines and terminals such as airports, railway stations, bus stations, wareh
ouses, trucking terminals, refueling depots (including fueling docks and fuel stations) and seaport
s. Terminals may be used both for interchange of passengers and cargo and for maintenance.

Vehicles traveling on these networks may include automobiles, bicycles, buses, trains, trucks, hel
icopters, watercraft, spacecraft and aircraft.

Operations deal with the way the vehicles are operated, and the procedures set for this purpose, i
ncluding financing, legalities, and policies. In the transport industry, operations and ownership of
infrastructure can be either public or private, depending on the country and mode.

MODES OF TRANSPORTATION
Road Transportation

There are many advantages to road transportation, especially for companies who rely on fast deli
very to retain their customers. If goods are meant to be transported immediately to the Maritime
s from Mississauga, for example, your best bet would be ground shipping transportation. Water
transport is notoriously slow, and it can be a hassle to book railway transportation.

Advantages and Disadvantages of Road Transport

Advantages:

1. Less Capital Outlay:

Road transport required much less capital Investment as compared to other modes of transport su
ch as railways and air transport. The cost of constructing, operating and maintaining roads is che
aper than that of the railways. Roads are generally constructed by the government and local auth
orities and only a small revenue is charged for the use of roads.

2. Door to Door Service:

The outstanding advantage of road transport is that it provides door to door or warehouse to ware
house service. This reduces cartage, loading and unloading expenses.

3. Service in Rural Areas:

Road transport is most suited for carrying goods and people to and from rural areas which are not
served by rail, water or air transport. Exchange of goods, between large towns and small villages
is made possible only through road transport.

4. Flexible Service:

Road transport has a great advantage over other modes of transport for its flexible service, its rou
tes and timings can be adjusted and changed to individual requirements without much inconvenie
nce.

5. Suitable for Short Distance:

It is more economic and quicker for carrying goods and people over short distances. Delays in tra
nsit of goods on account of intermediate loading and handling are avoided. Goods can be loaded
direct into a road vehicle and transported straight to their place of destination.

6. Lesser Risk of Damage in Transit:

As the intermediate loading and handling is avoided, there is lesser risk of damage, breakage etc.
of the goods in transit. Thus, road transport is most suited for transporting delicate goods like ch
inaware and glassware, which are likely to be damaged in the process of loading and unloading.

7. Saving in Packing Cost:

As compared to other modes of transport, the process of packing in motor transport is less compl
icated. Goods transported by motor transport require less packing or no packing in several cases.

8. Rapid Speed:

If the goods are to be sent immediately or quickly, motor transport is more suited than the railwa
ys or water transport. Water transport is very slow. Also much time is wasted in booking the goo
ds and taking delivery of the goods in case of railway and water transport.

9. Less Cost:
Road transport not only requires less initial capital investment, the cost of operation and mainten
ance is also comparatively less. Even if the rate charged by motor transport is a little higher than
that by the railways, the actual effective cost of transporting goods by motor transport is less. Th
e actual cost is less because the motor transport saves in packing costs and the expenses of inter
mediate loading, unloading and handling charges.

10. Private Owned Vehicles:

Another advantage of road transport is that big businessmen can afford to have their own motor v
ehicles and initiate their own road services to market their products without causing any delay.

11. Feeder to other Modes of Transport:

The movement of goods begins and ultimately ends by making use of roads. Road and motor tra
nsport act as a feeder to the other modes of transport such as railways, ships and airways.

Disadvantages:

1. Seasonal Nature:

Motor transport is not as reliable as rail transport. During rainy or flood season, roads become un
fit and unsafe for use.

2. Accidents and Breakdowns:

There are more chances of accidents and breakdowns in case of motor transport. Thus, motor tra
nsport is not as safe as rail transport.

3. Unsuitable for Long Distance and Bulky Traffic:

This mode of transport is unsuitable and costly for transporting cheap and bulky goods over long
distances.

4. Slow Speed:

The speed of motor transpot is comparatively slow and limited.

5. Lack of Organisation:

The road transport is comparatively less organised. More often, it is irregular and undependable.
The rates charged for transportation are also unstable and unequal.

Rail Transportation
Railway transportation is arguably the most dependable method of transport to the Maritimes f
rom Toronto and pretty much anywhere else. Unlike road and marine transport, rail is hardly aff
ected by weather conditions. Transport trains will run in rain, fog, snow, and other conditions tha
t would otherwise delay shipments carried by other methods. With fixed schedules that run regul
arly, railway service is more certain compared to other methods of shipment.

Rail transport also offers huge carrying capacities, which can grow to fit your needs. Unlike truc
ks or boats, which have a fixed about of space that can’t be exceeded, additional wagons can alw
ays be added to trains if you need more room.

Advantages and Disadvantages of Railway Transport

Advantages:

1. Dependable:

The greatest advantage of the railway transport is that it is the most dependable mode of transpor
t as it is the least affected by weather conditions such as rains, fog etc. compared to other modes
of transport.

2. Better Organised:

The rail transport is better organised than any other form of transport. It has fixed routes and sche
dules. Its service is more certain, uniform and regular as compared to other modes of transport.

3. High Speed over Long Distances:

Its speed over long distances is more than any other mode of transport, except airways. Thus, it is
the best choice for long distance traffic.

4. Suitable for Bulky and Heavy Goods:

Railway transport is economical, quicker and best suited for carrying heavy and bulky goods ove
r long distances.

5. Cheaper Transport:

It is a cheaper mode of transport as compared to other modes of transport. Most of the working e
xpenses of railways are in the nature of fixed costs. Every increase in the railway traffic is follow
ed by a decrease in the average cost. Rail transport is economical in the use of labour also as one
driver and one guard are sufficient to carry much more load than the motor transport.

6. Safety:
Railway is the safest form of transport. The chances of accidents and breakdowns of railways are
minimum as compared to other modes of transport. Moreover, the traffic can be protected from t
he exposure to sun, rains, snow etc.

7. Larger Capacity:

The carrying capacity of the railways is extremely large. Moreover, its capacity is elastic which c
an easily be increased by adding more wagons.

8. Public Welfare:

It is the largest public undertaking in the country. Railways perform many public utility services.
Their charges are based on ‘charge what the traffic can bear’ principle which helps the poor. In f
act, it is national necessity.

9. Administrative Facilities of Government:

Railways provide administrative facilities to the Government. The defence forces and the public
servants drive their mobility primarily from the railways.

10. Employment Opportunities:

The railways provide greater employment opportunities for both skilled and unskilled labour. Ov
er 16 lakh persons are depending upon railways for their livelihood.

Disadvantages:

Although railway transport has many advantages, it suffers from certain serious limitations:

1. Huge Capital Outlay:

The railway requires is large investment of capital. The cost of construction, maintenance and ov
erhead expenses are very high as compared to other modes of transport. Moreover, the investmen
ts are specific and immobile. In case the traffic is not sufficient, the investments may mean wasta
ge of huge resources.

2. Lack of Flexibility:

Another disadvantage of railway transport is its inflexibility. Its routes and timings cannot be adj
usted to individual requirements.

3. Lack of Door to Door Service:

Rail transport cannot provide door to door service as it is tied to a particular track. Intermediate l
oading or unloading involves greater cost, more wear and tear and wastage of time.

The time and cost of terminal operations are a great disadvantage of rail transport.
4. Monopoly:

As railways require huge capital outlay, they may give rise to monopolies and work against publi
c interest at large. Even if controlled and managed by the government, lack of competition may b
reed inefficiency and high costs.

5. Unsuitable for Short Distance and Small Loads:

Railway transport is unsuitable and uneconomical for short distance and small traffic of goods.

6. Booking Formalities:

It involves much time and labour in booking and taking delivery of goods through railways as co
mpared to motor transport.

7. No Rural Service:

Because of huge capital requirements and traffic, railways cannot be operated economically in ru
ral areas. Thus, large rural areas have no railway service even today. This causes much inconveni
ence to the people living in rural areas.

8. Under-utilised Capacity:

The railway must have full load for its ideal and economic operation. As it has a very large carryi
ng capacity, under-utilisation of its capacity, in most of the regions, is a great financial problem a
nd loss to the economy.

9. Centralised Administration:

Being the public utility service railways have monopoly position and as such there is centralised
administration. Local authorities fail to meet the personal requirements of the people as compare
d to roadways

Marine Transportation
Marine transportation is notoriously slow, but that doesn’t matter when a product has a long lead
time. This is a great option for those looking to ship bulky items that aren’t in much of a rush. Of
ten cheaper than road transport, ships are usually the main cost that you’ll incur—you won’t hav
e to worry about road tolls and other similar charges. While roadway transportation can easily be
delayed by rain or other types of inclement weather, the same conditions may not affect marine t
ransport.

Advantages and Disadvantages of Water Transport are as follows:

Advantages:
1. Less Maintenance Cost:

Maintenance cost in rail and road transport is quite high but maintenance cost of water transport i
s quite less.

2. Cheap:

The transport channel is quite cheap as compared rail and road Transport.

3. Useful for Bulky Goods:

Heavy and bulky goods can be transported easily at little cost through water transport.

4. Useful During Natural Calamities:

During natural calamities like flood and rains, when rail and road transport is disrupted, relief op
erations can be operated through water transport.

5. Helpful in Defence:

Development of shipping is essential for the defence of the country also. It is also called second l
ine of defence.

6. Important for Foreign Trade:

Water transport plays important role in foreign trade. India’s foreign trade is mainly dependent o
n water transport.

Disadvantages of Water Transport:

1. Slow Speed

It is a slow means of transport. Failure of monsoon results into fall in the water level of rivers ma
king navigation difficult.

2. More Risky:

Water transport is more risky as compared to other means because there is always danger of sinki
ng ships or boats.

Air Transportation
Air transport is extremely useful for many reasons: it`s convenient, fast, and doesn’t have to com
pete with natural barriers. While road transport is the quickest way to deliver goods that only hav
e a short distance to travel, air transportation is the fastest option for freight that have a furthe
r destination—it’s even regarded as the best mode of transportation for perishable goods for this
reason.

In addition, air transportation doesn’t require the infrastructure investment that railways do; airpl
anes fly freely, which means you don’t need to spend the initial cash building a pathway to your
destination for it to get there! The lack of barriers also means that it’s accessible to all areas, rega
rdless the obstruction of land.

Advantages of air transport

1) High Speed

It is the fastest mode of transport and therefore suitable for carriage of goods over a long distance
. It require less time.

2) Quick Service

Air transport provides comfortable, efficient and quick transport services. It is regarded as best m
ode of transport for transporting perishable goods.

3) No Infrastructure Investment

Air transport does not give emphasis on construction of tracks like railways. As no capital invest
ment in surface track is needed, it is a less costly mode of transport.

4) Easy Access

Air transport is regarded as the only means of transport in those areas which are not easily access
ible to other modes of transport. It is therefore accessible to all areas regardless the obstruction of
land.

5) No Physical Barrier

Air transport is free from physical barriers because it follows the shortest and direct routes where
seas, mountains and forests do not obstruct.

6) Natural Route

Aircrafts travels to any place without any natural obstacles or barriers because the custom formal
ities are compiled very quickly. It avoids delay in obtaining clearance.

7) National defence

It plays a significant role in the national defense of the country because modern wars are conduct
ed with the help of aero planes. Airways has a upper hand a destroying the enemy in a short perio
d.
Disadvantage of air transport

1) Risky

Air transport is the most risky form of transport because a minor accident may put a substantial l
oss to the goods, passengers and the crew. The chances of accidents are greater in comparison to
other modes of transport.

2) Very Costly

Air transport is considered costlier as compare to other mode of transport. The operating cost of
aero-planes are higher and it involves a great deal of expenditure on the construction of aerodro
mes and aircraft. Because of this reason the fare of air transport are high that common people can
’t afford it.

3) Small Carrying Capacity

The aircrafts have small carrying capacity and therefore these are not suitable for carrying bulky
and cheaper goods. The load capacity cannot be increased as it is found in case of rails.

4) Unreliable

Air transport is unreliable as it depends of the weather forecast. Normally if the weather is not ce
rtain the flight may got delayed.

5) Huge Investment

Air transport requires huge investment for construction and maintenance of aerodromes. It also r
equires trained, experienced and skilled personnel which involves a substantial investment.

Pipeline transport
Pipeline transport is the long-distance transportation of a liquid or gas through a system of pipes
—a pipeline—typically to a market area for consumption. The latest data from 2014 gives a total
of slightly less than 2,175,000 miles (3,500,000 km) of pipeline in 120 countries of the world.[1]
The United States had 65%, Russia had 8%, and Canada had 3%, thus 75% of all pipeline were i
n these three countries.

Pipeline and Gas Journal's worldwide survey figures indicate that 118,623 miles (190,905 km) of
pipelines are planned and under construction. Of these, 88,976 miles (143,193 km) represent pro
jects in the planning and design phase; 29,647 miles (47,712 km) reflect pipelines in various stag
es of construction. Liquids and gases are transported in pipelines and any chemically stable subst
ance can be sent through a pipeline. Pipelines exist for the transport of crude and refined petroleu
m, fuels – such as oil, natural gas and biofuels – and other fluids including sewage, slurry, water,
beer, hot water or steam for shorter distances. Pipelines are useful for transporting water for drin
king or irrigation over long distances when it needs to move over hills, or where canals or channe
ls are poor choices due to considerations of evaporation, po

Advantages And Disadvantages Of Pipeline Transportation

Advantages：

(1) It can be transported continuously, is not affected by the weather, and has high reliability thro
ughout the day.

(2) The pipeline can take shortcuts and the transportation distance is short;

(3) The transportation volume is large. A foreign coal pipe with a diameter of 720 mm can transp
ort 20 million tons of coal a year, which is almost equivalent to the single-direction conveying ca
pacity of a single-track railway;

(4) High environmental benefits and no harmful substances.

(5) The transportation project is small in quantity and covers a small area. Pipeline transportation
only needs to lay pipelines and build pumping stations. The amount of earth and stone works is
much smaller than that of railway construction. Moreover, most of the plain areas are buried und
erneath, and do not occupy farmland;

(6) The energy consumption is small, which is the lowest among various modes of transportation
;

(7) Safe and reliable, no pollution, low cost;

(8) Closed transportation can be realized with less loss.

Disadvantages：

(1) The speciality is strong, the transportation goods are too specialized, and the transportation it
ems are limited to gases, liquids and fluids.

(2) The distance between the pipeline transportation volume and the maximum transportation vol
ume is small. Therefore, in the initial stage of oilfield development, when pipeline transportation
is difficult, road, road, and land and water transportation should be used as a transition.

(3) Forever one-way transportation, poor maneuverability.

(4) Fixed investment is large.

Ropeway Transportation
A ropeway is a form of naval lifting device used to transport light stores and equipment across ri
vers or ravines. It comprises a jackstay, slung between two sheers or gyns, one at either end, fro
m which is suspended a block and tackle, that is free to travel along the rope and hauled back and
forth by inhauls (ropes attached to the pulley from which the block and tackle are suspended). It
is a useful method of transportation for a very short distance. Because they are more stable, in pa
rticular in the direction along the ropeway, and because they require less guying, gyns are better t
han sheers for supporting a ropeway.

Advantages and Disadvantages of Ropeway Transportation:-

Advantages

1) Structural efficiency. Ropeways are tensile structures - structures loaded primarily in tension
- which makes them inherently more efficient than structures with significant bending and compr
essive loads.

2) Economy. Mainly a result of structural efficiency (above), but also the result of having multipl
e cars propelled by a single power-plant and drive mechanism. This reduces both construction an
d maintenance costs. The use of a single operator for an entire ropeway is a further saving, in lab
or cost. On level ground, the cost of ropeways is competitive with narrow-gauge railroads; in the
mountains the ropeway is far superior.

3) Ability to handle large slopes. Ropeways and cableways (cable cranes) can handle large slope
s, and large differences in elevation. Where a road or railroad needs switchbacks or tunnels, a rop
eway travels straight up and down the fall line. The old cliff railways in England and ski resort ro
peways in the mountains take advantage of this feature.

4) Low footprint. The fact that only narrow-based vertical supports are needed at intervals, leavin
g the rest of the ground free, makes it possible for ropeways to be constructed in built-up areas a
nd in places where there is intense competition for land use.

5) Safety. There is no danger of collision between cars, or between ropeway cars and other mode
s of transportation - except aircraft of course.

Disadvantages

1) Ropeways are strictly straight-line devices. Where a change of direction is needed, an angle-st
ation must be constructed and the ropeway split into two sections at that point. This represents a
considerable increase in cost.

2) Where a change in vertical direction is needed (e.g. cresting a hill or peak), a pressure frame
must be built to take the downward force from the cables, plus the weight of the cars. This too re
presents a cost increase.
3) Ropeways are not as versatile as ground vehicles in handling oversize or overweight loads. Th
ey work best on divisible loads like people, bulk goods and identical small items that can be grou
ped or separated for optimal loading.