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TRANSPORTATION IN LOGISTICS
SUNITHA V
GREAT EASTERN MANAGEMENT SCHOOL, CHENNAI
2010-2011
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CERTIFICATE
This is to certify that the Project work TRANSPORTATION INLOGISTICS is submitted to the college by the candidate Miss
Sunitha V bearing Reg. No. HAE068BC7A7C5A2N is the product of
bonafide research carried out by the candidate under my supervision in
Logistics Management.
(GUIDE)
Mr. KARTHIKEYAN
Lecturer, LOGISTICS MANAGEMENT
Great Eastern Management School
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ACKNOWLEDGEMENT
The Project work was carried out under the remarkable guidance of
Mr. Karthikeyan Lecturer, Great Eastern Management School. I am
grateful for his guidance, valuable suggestions and for the constant
encouragement and co-operation.
I also express my sincere gratitude and thanks to all the subjects
participated in the study.
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The most visible of all functions of logistics and high contributor tologistics costTransportation functionality: Functions of transportation1. Product movement:
What is moved?Raw Material, Semi Finished items, WIP, Finished goods, packagingmaterial, rejected material movement is required up or down the supplychainHow is this done? What resources are used?Resources used by transportation:a. Time, Temporal Costs - product is locked up during transit, hence
inaccessibleb. Money, Financial Costs- Administration Costs, salaries, maintenance, etc Product loss and damage Cost of fuel for prime moverc. Nature, Environmental Costs - Guzzles natural fuels India consumes about 90% of the total available
and imported oil for transportation
Transportation Creates congestion, air pollution and noise pollution.
Environmental cost is tangible and substantially intangible.
As transportation utilizes temporal, financial and environmental
resources, items must be movedonly when product value is raised
2. Product Storage:
Temporary storage when loading and unloading is expensive
Storage space is not available or limited
Vehicles kept moving on circuitous route
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Airplanes hovering
Principles of transportation
1. Economy of scale
Bulk shipping brings down per unit transportation cost
2. Economy of distance
Cost per unit kilometer decreases as the distance moved increases
Principles of transportation are fundamental in evaluating
transportation strategies.Transportation Environment & Transportation decisions
Who are participants in most of the commercial decisions?
What makes transportation environment different?
Who are the participants in transportation decisions?
Shipper
Consignee
Carrier
The government
Public
Roles and perspective of each party Shipper
What does shipper want?
Predictable and minimum transit time
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Minimum cost
Specified pick up times
Zero loss and damage
Timely exchange of information and invoicing
What does consignee want?
Specified delivery times
Carrier:
What does carrier want?
Revenue maximization
Cost minimization [labor, fuel and vehicle costs]
Flexibility in pickup and delivery times to consolidate moves
Government:
Keen interest in flourishing national economy and hence in
transportation
Effective and efficient Public Distribution System
Control on carrier rates and licenses
Own carrier service
Infrastructural support - net work of roads,
Airports and ATC, Ports and Harbors
Public
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Trigger transportation activity by demanding products
Demand easy accessibility transport
Demand goods and services from all over the world at minimum cost
Demand safety - accidents of various kind, road, rail, air and water
(oil spills)
Demand safe environment - atmosphere, water, noise
When these parties with separate and distinct interests interact
transportationenvironment is created
What is transportation mode?
Mode identifies transportation method or form
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Impact of transport mode on costs of transportation
Transport time
Inventory
Transit capital
Obsolescence
Packaging
Insurance - air, high insurance
Breakage
What constitutes Transport Infrastructure?
[Transport elements]
Factors that affect the smooth functioning of transport?
3. Terminal facilities - well maintained loading unloading facilities,
space for movement of vehicles, platforms, railway yards
4. Vehicles- trucks, ships or wagons. Their size, shape & speed
1. Rights of way- cost of right to use passage.
Rails, roads, airways
2. Routes and sectional capacity-number of lanes
3. Limit on speed, weight, height
4. Weigh bridge facility
5. Nature of product
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6. Carrier organizations
What are various features of modes or modal characteristics?
How do we measure relative weight of each mode?
System mileage, traffic volume, revenue, nature of traffic
composition
Railways Rail network
Stands out in terms of tonne-kilometres moved
226 billion tonne-kilometres and 55.8% of total Tonne-kilometersmoved in 1982 in India
449 billion ton-kilometers and 51.7% of total tone kilometers now
moved in India
Facing very stiff competition from roadways
(as in US after II World War)
High capital investment due to right of way, switching yards,
terminals, locomotives and rolling stock, but low operating costs
Focus on specific products than on broad range
Raw material extractive industries away from water ways.
Developments in this area
Recent customer friendly attitude
Inter modal transport through alliances and acquisitions as in US,
providing single window service to customers
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Development of Specialized Equipment to suit the needs of bulk
volume of customers
Unit trains
Container trains
Double stack containers
Enclosed tri-level automobile car
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A unit train, also called a block train
Double stack containers
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RORO service to road transport konkan railway
Private container trains -Adani logistics, boxram
Container corridors
Private participation in developing ICDs
Road transport
High flexibility and speed
Ultimate mode of transport
Rapid growth, post war
Low capital cost as compared to railways
179.2 billion tonne-kilometres and 44.2% of total tonne kilo-metres
moved in 1982 in India
585 billion tonne-kilometres and 56% of total tonne kilo-metres
moved in India nowOperating costs are higher
Ideal for small shipments over short distances
Labor intensive
Occasional fuel shortages
Availability of good quality vehicles
Availability & cost of maintenance and spares
Bad and unsafe road conditions
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Carrier organizations and their disputes with government
Octroi
Old MVA
Restrictive permits
Developments in this area
Entry of several manufacturers of trucks-entry of Daimler to
produce Mercedes CVs
Trailer-tractor sets
National grid of highways
Road widening schemes, bypass to cities
Pay and use roads private road builders
Express ways
The Golden Quadrilateral
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Trailers
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Water transport
Sailing vessels, steamships-1800, diesel driven ships-1920
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Limited scope for deep water transport
Limited extent of navigable inland water transport -lakes, rivers,
canals
Main advantage of water transportation is extremely large shipments
& low cost
Importance of deep water vessels & deep water ports to fully realize
benefits of water transport
Diesel towed barges
Tug-barge combinations
Diesel towed barges
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Diesel towed barges- high flexibility, disadvantages are range of
operation (not for long distance) and slow speed
Ferries- for small water bodies like rivers and bays.
Inland water Transport is not used to its full potential in India
although we have usedvmechanized IWT since early 1800.
Main hurdles appear to be
3. Low priority in policy
4. Construction of dams
5. Receding water levels in the rivers
6. Tough competition by other modes
Developments in this area
Construction of deep water ports: JNPT
Construction of ports with private investmentPort Pipavav, India's first port in the private sector is operated by
APM Terminals, one of the largest operators of container terminals in
the world
A consortium led by P&O Australia is setting up a $200 million
Container terminal on BOT basis at Jawaharlal Nehru Port Trial
operation started in April 1999
Agreement signed for construction of a captive Coal Jetty at
Mumbai by Tata Electrics.
Pipelines
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What is transported in a pipe line?
Liquids - oils, crude, petroleum products
In India, extensively used for transporting crude and petroleumproducts
More than 5,000 km of pipeline exists in India for crude and
petroleum products
Slurries - coal slurry, iron ore, lime
Huge quantity of water is necessary which is a concern for
environment
In India pipe line is used for transporting iron ore.
Pipelines
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Gases and vapors- natural gas, LPG, in India
LPG pipe line is in existence
Pulverized dry bulk material - cement by hydraulic suspension
Main features of this mode of transport
Reliable all weather means of transport
Low energy consumption
Pipeline being underground space occupation is minimal
Pipe line operates all the time except when it is shut down formaintenance
No empty container or wagon to be brought back
Highest fixed costs, right of way and laying of pipeline, and lowest
operating costs
Not labour intensiveNot flexible by nature. Pipe lines are stationary
Physical state of the commodity is a limitation.
This mode of transport can release capacity of other modes for
transport of essential commodities
Rope ways
Hilly and otherwise inaccessible area
Steep gradients
Cause minimum ecological imbalance
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Point of supply and demand can be connected by shortest route
Logistics of fruits in Himachal Pradesh
Rope way
Air transport
Speed of transport is highest
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Fixed costs are lower than rail or road or pipe line. But operating
costs are highest
Air transport brings distant markets closer - perishables market in
gulf countries
Over comes the hassle and cost of setting up depots and service
centers overseas
Full potential of peak seasonal demand can be taken
Test marketing is easy. Products can be shipped directly from the
factory
The Indian Air cargo Market
The growth of air cargo in India has also been manifold though it might
not have kept pace with the progress made all over the world.
Freight Rate Structure & Principles:
1. Cover actual cost of transportation.
Factors influencing cost of transportation
A. Fixed costs:
Interest on capital
Depreciation
Insurance premium
Administrative overheads
Expenses on fixed facilities like buildings
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B. Semi fixed costs:
Salaries of the staff
Facility for servicing, periodic maintenance etc
C. Variable costs
Cost of fuel and lubricants
Maintenance directly attributable to a particular trip breakdown
Damage to the vehicle and also the cargo. Eg. hilly roads, bad roads,
war effected sea routesD.Vehicle utilization
Carrier likes to gain maximum mileage out of his vehicle
Run the vehicle at top speed to cover max. distance at min time
Quote higher rates if following are not conducive to the above
Road conditions
Terminal detentions [congestion, formalities, loading/unloading etc.]
Obtaining a return load [market factors]
Nature of goods, hazardous, corrosive [liability, insurance]
Density, consignment light by weight
Stowability, shape and size of the product
2. Traffic Bearing Capacity
Value addition by transportation.
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Transportation cost should not upset the value added
3. Public use
Items to satisfy basic needs of common man
should be moderately charged
4. Government Policy freight rates are controlled by the state for
Promotion of certain type of trade
Development of certain type of industry
Freight rates are hiked or depressed by state
5. Profit
Margin for reasonable return on investment
Entrepreneurial time and efforts
Funds for future development of business
Components of transportation decisions
I. Mode Selection
Air - most expensive, but very fast
Road - relatively quick and inexpensive, highly flexible
Rail - An inexpensive mode for large quantities
Water - the slowest but most economical for large overseas
consignments
Pipeline - primarily for oil and gas
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II. Carrier in house or out sourced whether product owner
performs the function or out sources it.
- Private carrier, contract carrier, public carrier, exempt carrier
III. Trade off situations
Cost of transportation and cost of inventory
Cost of transportation and cost of responsiveness to customer
IV. Carrier Selection
2. Constitution of the carriers organization3. Business turn over
4. Area of operation
5. Branch offices or associates offices
6. Strength of fleet
7. List of clients- current & former, for ascertaining reliability
8. Nature and volume of business
9. Normal transit time quoted by carrier
10. Record of claims settlement by carrier
11. Reference from banks, carriers association
V. Route and network selection
Route is the path the product takes and network is locations and
routes along which a product can be shipped
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A logistics managers options for scheduling and routing decisions
Direct shipment network
From shipper directly to retailers.
Features:
1. Warehouses are eliminated
2. Long route, hence low cost
3. Simplicity of operation
4. Time of transportation is short
5. Decision points are quantity and mode
Direct shipping with milk runs
1. Single supplier to a number of retailers deliver like a milkman.
2. From a number of suppliers deliver to a single retailer. eg. Toyota
plant in US
Features:
1. Movement consolidation
2. Truck utilization
3. Transport cost reduction
Direct shipping with milk runs
1. Single supplier to a number of retailers deliver like a milkman.
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2. From a number of suppliers deliver to a single retailer. eg. Toyota
plant in US
Features:
1. Movement consolidation
2. Truck utilization
3. Transport cost reduction
Shipping via Distribution Center Using Milk
Runs small lot sizes to large number of retailers from
DC.
Features:
1. Consolidation of small lots - reduction of outbound transportation
cost
Tailored NetworkTailor made to the company needs
Features:
1. Matches the needs of the company
2. Coordination is complex
Intermodal transport
Intermodal movements combine the cost and/or service advantages
of two or more modes in a single product movement
The more popular combinations are TOFC
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[Trailer On Flat Car] and COFC [Container On Flat Car].
Benefits of long haul, short time & flexibility are optimized for
achieving overall cost reduction
Co-ordination of different modes of transport to avoid wasteful
competition
Single window service to the customers
Encouraging containerization both for internal as well as
import/export cargo
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COFC
TOFC
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Transshipment
Transportation goods and materials to the destination using one or
more intermediate destinations
A technological requirement
Air travel to US
A means of logistical cost reduction
Containerization
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Containers were introduced in US during 1955 and in India during 1960
Features of a container:
1. Robust but still light for inter modal transportation2. Equipped with fittings to facilitate safe and easy handling3. Easily be stuffed or unstuffed in a short time4. Water tight and air tight outer shell5. Internal lining that doesnt buckle under temperature and can be
easily cleaned
6. Watertight flooring, air tight door seals and locks7. Insulation to protect refrigerated cargo.8. Interior washable to required hygienic standard9. Construction to allow circulation of air around cargo
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Basic types of ISO containers
Dry or cube containers are front loaded, completely enclosed and
suitable for general-purpose transportation.
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Insulated Containers are available in 20 and 40 foot lengths, and
contain a layer of foam insulation between the interior and exterior
surfaces of the walls, floor and roof.
An insulated container with a built-in refrigeration unit, the Reefercontainer maintains a set temperature and stabilizes theenvironment
within the container to prolong the life of the cargo in the most
arduous of environments.
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Flatrack Containers:
Flatrack containers are used for heavy and oversized cargo, which
cannot be loaded into container with fixed walls and needs loading from
top or side. Can be delivered with both fixed and collapsible end walls.
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Open top containers are shaped like a box and loaded from either the
top or end. They are designed to carry heavy, tall or hard to load
materials such as coal or grain.
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Tank containers are built to the same standard dimensions as other
ISO containers, but are cylindrical vessels mounted in a rectangular
steel framework. Typically, these containers are used to transport
liquid or bulk materials.
Universal advantages of container as a packaging unit
1. Reduction in loss, pilferage and damage of goods2. Reduction in paper work3. Expedites door to door pickup and delivery4. Eliminates multiple handling of contents as this is shipped as a
single unit
5. Consolidation of movement of small lots
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6. Standardization of handling methods and equipment7. Reduction in packaging cost as container itself acts like a package8. Optimizes the services of various modes9. Container can easily be transshipped.
Major benefits of containerization to business
1. Integration of various modes of transport2. Reduction in handling time and thereby turnaround time of
vehicles
3. Standardized size of containers reduces reduce capital as well asoperational costs
4. Reduction in packaging cost as container itself is a robustpackaging
5. Need for enclosed warehouses redundant6. Transport service is reliable
Infrastructure for Containerization
Deep water ports
Mechanized handling equipment- Equipment used to load and unload
are container cranes called straddle carriers, side loader forklifts.
Obviously this equipment is very expensive
Inland container depots
Container ships- are built for optimum utilization of space, easy
stowing in the holds, to facilitate fast & easy loading and unloading of
container.
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Container ships
Roll On/Roll Off ferries [RORO]: the truck rolls on to the and rolls off
at the end of the voyage.
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Roll On/Roll Off ferries
LASH [Lighters Aboard a SHip]: when a ship is loaded on the high seas
from barges, instead of loading the cargo lifted from the barge, entire
barge is lifted and loaded on the ship. At the end of the voyage barge
is put back on water.
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LASH
Nodal points
Railways network
Growth of economy is the responsibility of state
Bulk movement of supplies from production centers to consumption
centers boosts economy
Traffic could be consolidated and moved in full train loads/wagon
loads
Bulk material transported is like coal, steal, fertilizer, cement
State also has the responsibility to distribute essential commodities
through the public distribution system [PDS]
Hence the responsibility for logistics of those items falls on the
state.
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State owns the net work of railways, net work that is the cheapest
mode of transport for bulk.
Nodal points in the value chain of such commodities can provide
movement consolidation.
State owned rail net work can link these nodes to\ the best
advantage of state and thereby to that of national economy.
Some characteristics of nodal points are as
under
1. Nodal points should be closer to consumption points.2. Number of nodal points would depend on volume of distribution.
Neither too many nor too less
3. Nodal points should be well connected by rail net work.4. Terminal and shunting facilities are required at these places.5. Facilities for loading, unloading & inter modal handling.6. Shipments from the nodal points would be by road in trucks or
rail
7. Nodal points should be connected to consumption centers byroads
8. Normally, nodal points are district headquarters for necessaryoperational support
9. Strategic role by central and state governments. Strategicdevelopment of such nodal points in the country strengthensthe logistical operations for essential commodities and bulk
materials