International Trade Logistics, Role of Transport Logistics

8/13/2019 International Trade Logistics, Role of Transport Logistics

1/26

INTERNATIONAL TRADE LOGISTICS

UNIT III

ROLE OF TRANSPORTATION IN LOGISTICS


2/26


Transportation cost absorb around 40% of total logistics costs

An effective and inexpensive transportation system contributes to thefollowing:

Greater competition in marketplace

Making goods available at the right time from the right place leading tomarket penetration

Greater economics of scale in production

Wider markets can result in lower production cost. It also permitsdecoupling of market and production sites.

Reduced prices for goods

Inexpensive transportation also contributes to reduced prices.


3/26


inferred that the demand for the commodity is notthe same as demand for transport.

per unit distance transportation costs within thecountry always account for the final node of volumeof trade than the same exportable items of other

countries (Rauch ,1991)


4/26

Service Choices

There are five basic modes of transportation,namely, water, air, rail, road, and pipeline

Any one or combination of these can be usedfor transportation of goods from one place toanother

Selection of modes of transportation is madebased on best balance between quality ofservice and cost.


5/26

Characteristics of Transportation

(Alderton, 1994)

Price

Average transit time

Time variability

Loss and damage


6/26

Price

The cost of transportation for shipper includes the following:

Line haul rate

For hire service


7/26

The cost of different services

Cost of service varies from one type of

transport service to another. The hierarchy of

cost for different transport services is as

follows:

Air > truck > rail >water > pipeline


8/26

cost comparison

Cost of movement of goods through trucks is

seven times that by rail

Cost of movement of goods through rail is four

times that by water or pipeline


9/26

cost comparison

Actual cost comparison should be made on

actual charges that reflect the following:

Commodity being shipped

Distance and direction of movement

Any special handling required


10/26

TRANSIT TIME and VARIABILITY

Average delivery time and delivery time variability rank at the top asimportant transportation performance characteristics.

For comparing carrier performance, it is best to measure transit time of door-to-door, even ifmore than one mode is involved.

Variabilityrefers to the usual differences that occur between shipments byvarious modes.Even if transported by same means variability may be due to effects of weather, traffic,congestion, and number of stop-offs and differences in time to consolidate shipments.

Transit time variability is the measures of uncertainty in carrierperformance.

The performance of a particular type of carrier is a function of distance, variability and loss anddamage.


11/26

PERFORMANCE WITH RESPECT TO THE DISTANCE

Distance greater than 600 miles:

Air freight is the fastest mode followed by truck load, then less truck loadand then comes rail.

Distance less than 600 miles:

Air and truck are comparable

Distance less than 50 miles:

`Transit time is influenced by pick up and delivery operation

than line haul transit time


12/26

Variability

The variability of different modes of transport is

as follows:

Rail has the highest delivery time variability

Air has the lowest delivery time variability


13/26

Loss and damage

This becomes factor for selection of a carrier


14/26

MODES OF TRANSPORT

CHARACTERISTICS WITH RESPECT TO:

DISTANCE

SPEED

QUANTITY and VOLUME OF CARGO


15/26

RAIL

Rail: a long hauler,

slow mover

of refrigerated material, raw materials and

low valued bulk commodities, manufacturedproducts like new automobiles etc.

A carload quantity refers to predetermined

shipment size usually approaching orexceeding average capacity of a rail car to

which particular rate is applied.


16/26

RAIL

Other services include :

various stop off privileges which permit partial

loading and unloading

pick-up and delivery,

diversion and re-consignment which allows

flexibility in routing and changes in the finaldestination of a shipment while en-route


17/26

RAIL

Fixed Cost is High while Variable Cost is low

Variable cost includes loading, unloading,

billing, collecting, yard switching and multipleshipment costs

The cost per unit is lower for increased

shipment volume.


18/26

Truck

Best suited for semi finished and finished goods withan average lengths of freight haul of 646 miles fortruck load and 274 miles for less truck load.

The shipment size smaller than rail. It isadvantageous for door-to-door service (less materialhandling, better availability and frequency of service)

Trucking has a service advantage in the smallshipment market.


19/26

Air

Air freight is twice truck charges and sixteen times rail charges.

The appeal of air transportation is its unmatched origindestination speed, especially over long distances (maximumdelay in surface freight handling and movement in door-to-door delivery time)

Delivery time variability is low in absolute magnitude, eventhough air service is quite sensitive to mechanical break down,weather conditions and traffic congestions

Compared to water, average delivery time variability is high asa result one can rank air as one of the least reliable modes.

Loss and damages are less


20/26

Water

Slowest, can handle liquid and bulk cargoes

also high valued cargo in containers,

loss and damage in general low

But for valued good substantial packing is needed to

protect from rough handling of goods.


21/26

WaterwaysWaterways are better means of transport following types

of goods:

Transported across the border i.e. for

international trade

Low cost, containerizable, non-perishablegoods

Liquid cargo, in large quantities

Capable of withstanding longer lead times insupply

Distribution and less careful handling.


22/26

Waterways

now-a-days almost all types of cargo

including cars and vehicles (roll-on - roll-off

ships as well as conventional carriers) finished goods,

raw materials,

small sized or large shaped cargo aretransported through waterways.


23/26

SPEEDVOLUME TRADE-OFF

Speed of flow of goods has been madepossible with introduction of concepts of

multi-modal transportations and feeder-

mainland shipping routes (Frankel, 1990).


24/26


25/26

Pipeline

Pipeline parallels the railroad in cost

characteristics

Fixed cost is high and the variable cost (Power

and cost of operation) vary greatly with line

throughput and diameter of pipe

The cost per ton mile is low.


26/26

MULTI-MODAL TRANSPORTATION

(ALSO REFERRED AS INTER-MODALTRANSPORTATION)

CONCEPT

DEFINITION

ISSUES

POLICIES

Date post:	04-Jun-2018
Category:	Documents
Upload:	gurgurgurgur
View:	239 times
Download:	0 times

International Trade Logistics, Role of Transport Logistics

Documents