Chapter 10 Transportation—Managing
the Flow of the Supply Chain
Transportation
involves the physical movement of
goods between origin and destination points.
The transportation system links geographically
separated facilities in a company’s supply chain.
Transportation facilitates the creation of time and
place utility.
Transportation also has a major economic impact on
the financial performance of businesses.
Role of Transportation in Supply Chain
Management
Transportation is a key supply chain process that must be
included in supply chain strategy development,
network design, and total cost management.
Transportation provides the critical links between
supply chain partners, permitting goods to flow
between their facilities.
Transportation service availability is critical to demand
fulfillment in the supply chain.
Transportation efficiency promotes the
competitiveness of a supply chain
Challenges to carrying out transportation’s role
Supply chain complexity
Competing goals among supply chain partners
Changing customer requirements
Limited information availability
Synchronizing transportation with other supply chain
activities
Transportation capacity constraints and rising
transportation rates
Changing governmental requirements that affect cost and
service
Growing safety and environmental regulation
Modes of Transportation
truck
rail
air
water
pipeline
multimodal transportation
Multimodal Transportation
Movement of goods (in the same loading unit) through
successive modes of transport without further handling
Use the best features of different modes
Expands accessibility
Facilitates global trade
Standardized containers promotes multimodal growth
Serves as an effective bridge for rail system gaps
Disjointed rail network
Break of gauge
Multimodal Transportation – Cost/Distance Graph
Terms of Sale & Responsibilities
Modal Characteristics
Accessibility
Motor transportation has advantage over air, rail, and water
Transit Time
Air and motor transportation has advantage over rail, water, and
pipeline
Reliability
Motor carriers and air carriers are generally more reliable than
water carriers and rail carriers
Product Safety
Goods suffered less damage when transported by air and
motor, as compare to rail and water
Cost
Motor and air transportation are more expensive than rail and
water transportation
Modal Selection Criteria
Cost
Speed
Durability of cargo
Cargo value
Route
Cargo security and safety
Equipment availability
Cargo characteristics (e.g. oversize, dangerous
goods)
Difference in border management process (e.g. rail
shipments generally have less cross border delays)
Carrier Selection Trend
Core carrier concept
Long term relations with a small number of
carriers
Leverage purchasing dollars to drive down
transport cost and secure capacity and service
quality commitments from carrier
Reduce carrier management cost and
optimize dock space usage
Improve IT connection, get better track and
trace ability
Transportation Rate & Service Negotiation
Recommendations
Centralize contract negotiations
Leverage volume with a small number of
carriers
Develop contracts for tailored set of
transportation services at specific prices and
specific duration
Achieve mutual productivity improvements, then
get a share of carrier’s gains
Preparing Shipments for Transportation
Corporate transportation routing guide
Ensures compliance with service contracts
Maintain centralized control over internal and external
freight routing & tendering decisions
Cost-saving actions
Consolidate freight
Coordinate shipment deliveries
Take full advantage of equipment capacity
Make accurate freight count
Inspect and note cargo loss & damage
Freight Documents
Bill of lading
Originates the shipment
Provides all the information the carrier needs
Stipulates the contract terms, including carrier’s
liability for loss and damage
Acts as a receipt for the goods the shipper tenders to
the carrier
Certificate of title to goods in some cases (Order Bill
of Lading)
Freight bill
Carrier’s invoice for services provided
Lists shipment origin & destination, address of
shipper & consignee, itemizes cargo, total weight &
total charges
Freight claims form
Filed with the carrier to recoup monetary losses if carrier
fails to properly protect the shipment.
Carriers are not liable for freight claims if the damage is
attributable to:
Natural disaster or some other “act of God”
Military attack or similar “act of public enemy”
Government seizure of freight or “act of public
authority”
Failure to adequately package the freight or other
negligent “act of the shipper”
Extreme fragility, perishability, or similarly problematic
“inherent nature of the goods”
Transportation Performance Metrics
Keyperformance indicators (KPI) are used to
evaluate
current performance versus historical results
internal goals
carrier commitments
Challenge lies in narrowing down available
metrics to a manageable number of KPI
KPI should encompass service quality and
efficiency
Common metrics for monitoring carrier performance
Transportation Management System (TMS)
Critical applications include the following:
Routing and shipment scheduling
Proper routing & scheduling impact customer
satisfaction & supply chain performance
Load planning
Preparation for safe, efficient deliveries
Load tendering
Delivery appointment scheduling
In-Transit Visibility
Maintain In-Transit Visibility
Manage key events as product moves across
the supply chain
Information technology facilitates the ability to
monitor product movements
Visibility tools must be linked to other
capabilities and processes to have an impact on
supply chain event management
