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Modes of Transportation in Supply Chain

There are 4 main modes of transportation for supply chains: ship, rail, truck, and airplane. Ships and rail are most cost efficient but slowest, while airplanes are very fast but most expensive. Trucks offer flexibility but have fluctuating fuel costs. Managers must design optimal transportation routes based on these factors and facility locations. A supply chain connects all activities through information sharing. The more accurate and timely the information, the better decisions each company can make. A supply chain has producers, distributors, retailers, customers, and supporting service providers. Companies must align their supply chain strategies with their business goals to effectively serve different customer markets needing responsiveness versus efficiency.

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JEROME PARFAN
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1K views

Modes of Transportation in Supply Chain

There are 4 main modes of transportation for supply chains: ship, rail, truck, and airplane. Ships and rail are most cost efficient but slowest, while airplanes are very fast but most expensive. Trucks offer flexibility but have fluctuating fuel costs. Managers must design optimal transportation routes based on these factors and facility locations. A supply chain connects all activities through information sharing. The more accurate and timely the information, the better decisions each company can make. A supply chain has producers, distributors, retailers, customers, and supporting service providers. Companies must align their supply chain strategies with their business goals to effectively serve different customer markets needing responsiveness versus efficiency.

Uploaded by

JEROME PARFAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Modes of Transportation in Supply Chain

There are 4 basic modes of transport that a company can choose from:

1. SHIP which is very cost efficient but also the slowest mode of transport. It
is limited to use between locations that are situated next to navigable
waterways and facilities such as harbors and canals.

2. RAIL which is also very cost efficient but can be slow. This mode is also
restricted to use between locations that are served by rail lines.

3. TRUCK are a relatively quick and very flexible mode of transport. Trucks
can go almost anywhere. The cost of this mode is prone to fluctuations
though, as the cost of fuel fluctuates and the condition of roads varies.

4. AIRPLANE are a very fast mode of transport and are very responsive. This
is also the most expensive mode and it is somewhat limited by the
availability of appropriate airport facilities.

Given these different modes of transportation and the location of the facilities in
a supply chain, managers need to design routes and networks for moving
products.

INFORMATION

Information is the basis upon which to make decisions regarding the other four
supply chain drivers. It is the connection between all of the activities and
operations in a supply chain.

To the extent that this connection is a strong one, (the data is accurate, timely,
and complete), the companies in a supply chain will each be able to make good
decisions for their own operations.

Participants in the Supply Chain

In its simplest form, a supply chain is composed of a company and the suppliers
and customers of that company. This is the basic group of participants that
creates a simple supply chain. Extended supply chains contain three additional
types of participants. First there is the supplier’s supplier or the ultimate
supplier at the beginning of an extended supply chain.

In any given supply chain there is some combination of companies who perform
different functions. There are companies that are producers, distributors or
wholesalers, retailers, and companies or individuals who are the customers, the
final consumers of a product. Supporting these companies there will be other
companies that are service providers that provide a range of needed services.

1. Producers or manufacturers are organizations that make a product. This


includes companies that are producers of raw materials and companies
that are producers of finished goods.

2. Distributors are companies that take inventory in bulk from producers


and deliver a bundle of related product lines to customers. Distributors
are also known as wholesalers. They typically sell to other businesses and
they sell products in larger quantities than an individual consumer would
usually buy.

3. Retailers stock inventory and sell in smaller quantities to the general


public. This organization also closely tracks the preferences and demands
of the customers that it sells to. This organization also closely tracks the
preferences and demands of the customers that it sells to.

4. Customers or consumers are any organization that purchases and uses


a product. A customer organization may purchase a product in order to
incorporate it into another product that they in turn sell to other
customers. Or a customer may be the final end user of a product who buys
the product in order to consume it.

5. Service Providers are organizations that provide services to producers,


distributors, retailers, and customers. Service providers have developed
special expertise and skills that focus on a particular activity needed by a
supply chain. Some common service providers in any supply chain are
providers of transportation services and warehousing services. These are
trucking companies and public warehouse companies and they are known
as logistics providers.
Aligning the Supply Chain with Business Strategy

A company’s supply chain is an integral part of its approach to the markets it


serves. The supply chain needs to respond to market requirements and do so in
a way that supports the company’s business strategy. The business strategy a
company employs starts with the needs of the customers that the company
serves or will serve. Depending on the needs of its customers, a company’s
supply chain must deliver the appropriate mix of responsiveness and efficiency.

Example of Aligning the Supply Chain with Business Strategy

 Let’s consider two companies and the needs that their supply chains must
respond to. The two companies are 7-Eleven and Sam’s Club, which is a
part of Wal-Mart. The customers who shop at convenience stores like 7-
Eleven have a different set of needs and preferences from those who shop
at a discount warehouse like Sam’s Club.

 The 7-Eleven customer is looking for convenience and not the lowest price.
That customer is often in a hurry and prefers that the store be close by
and have enough variety of products so that they can pick up small
amount of common household or food items that they need immediately.

 Sam’s Club customers are looking for the lowest price. They are not in a
hurry and are willing to drive some distance and buy large quantities of
limited numbers of items in order to get the lowest price possible.

Clearly the supply chain for 7-Eleven needs to emphasize responsiveness. That
group of customers expects convenience and will pay for it.
On the other hand, the Sam’s Club supply chain needs to focus tightly on
efficiency.

The Sam’s Club customer is very price conscious and the supply chain needs to
find every opportunity to reduce costs so that these savings can be passed on to
the customers.

Both of these companies’ supply chains are well aligned with their business
strategies and because of this they are each successful in their markets.
There are three steps to use in aligning your supply chain with your
business strategy.

1. The first step is to understand the markets that your company serves.
2. The second step is to define the strengths or core competencies of your
company and the role the company can or could play in serving its
markets.
3. The last step is to develop the needed supply chain capabilities to support
the roles your company has chosen.

Module Summary
A supply chain is composed of all the companies involved in the design,
production, and delivery of a product to market. Supply chain management is
the coordination of production, inventory, location, and transportation among
the participants in a supply chain to achieve the best mix of responsiveness and
efficiency for the market being served. The goal of supply chain management is
to increase sales of goods and services to the final, end use customer while at
the same time reducing both inventory and operating expenses.

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