Chapter 6

Transport

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 Learning Outcomes
After reading this chapter you should be able to:

6.1 Define transport

6.2 Compere the modes of transport

6.3 Discuss the use of intermodal transport

6.4 Compere alternative forms of transport ownership

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 Definition of Transport
As we know, logistics has a far wider meaning, transport is certainly one of
its main components. In the last chapter we saw that materials handling is
concerned with movements within a facility. Here we will look at transport,
which is concerned with the movement of goods between facilities.

TRANSPORT is responsible for the physical movement of materials between

points in the supply chain.

In practice, organisations do have more influence, as they can make a series

of decisions about the form of transport. What mode of transport is best?
Should we run our own transport or use a third-party carrier? What kind of
vehicles should we use? How do we deal with international transport? What
routes should we use? Every organisation faces these questions, but they
come to different answers that depend on particular circumstances. We can
give some general advice and will start by looking at the question of the
transport mode.

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Modes of Transport
The mode of transport describes the type of transport used. There are
basically five different options – rail, road, water, air and pipeline.
Each mode has different characteristics, and the best in any particular
circumstances depends on the type of goods to be moved, locations,
distance, value and a whole range of other things.

Rail
Rail transport is most commonly used for heavy and bulky loads over
long land journeys. Trains can maintain a consistent, reasonably high
speed, and can link with other modes to carry containers and bulk
freight.

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Rail services are organised in different ways. They are almost
invariably public carriers (giving a service to all other
organisations) rather than private carriers (carrying goods for
one organisation). This public service is often considered so
important that it is run by the state. The number of carriers is
inevitably small when compared with, say, road transport. The
main reason for this is the large investments needed for tracks,
rolling stock and terminals.

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Advantages of rail
1- It has very high capacity as a track built by one organisation between two
points, will generally have enough capacity to meet all demand.

2- The unit transport cost is low, so it can be used to move large volumes of
relatively low-priced materials, such as coal and minerals.

Disadvantages of rail

1- Inflexibility, all train services have to be timetabled in advance, so that

they can all fit onto the same tracks.

2- Trains can only travel along specified routes between fixed terminals, and
cannot stop at intermediary points. Most customers are some distance away
from these terminals, so they have to transfer goods by road at both ends of
the journey. These transfers add time, and they can leave rail as a fairly slow
alternative.
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Road
Road is the most widely used mode of transport and is used – at least
somewhere – in almost all supply chains. Its main benefit is flexibility,
being able to visit almost any location.

Advantages of road
1-Road transport has the advantage of being able to use extensive road
networks. Also, vehicles do not have to keep to such rigid timetables, so
they can go on journeys at short notice and with little planning.

2-Road transport is characterised by a large number of carriers working in

the same areas. With so many operators competition is likely to be more
intense and pricing more flexible.
Disadvantages of road
1-Road transport is generally used for shorter distances.
2-You are more likely to see road transport used for delivering finished
goods than bulky raw materials.
3-Another problem is that lorries are particularly vulnerable to congestion
and traffic delays.

Water
Both rail and road transport have the obvious limitation of only being used
on land. Most supply chains use shipping to cross the oceans at some point,
and over 90% of world trade is moved by sea. water transport is the most
common mode for international transport. There are basically three types of
water transport – rivers and canals (usually called inland waterways),
coastal shipping (moving materials from one port to another along the
coast) and ocean transport (across the major seas).

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There are many different types of vessel for various cargoes. Ships get
considerable economies of scale, so many aim at moving big loads at low
unit costs.

● General cargo ships are the standard design, with large holds that carry
any type of cargo. Most of these are loaded by crane.
● Bulk carriers carry large quantities of cheap bulk materials in large
holds, such as grain or ores.
● Tankers carry any liquid, but by far the biggest movements are oil.
● Container ships are specially designed to carry standard containers and
their capacity is commonly rated in TEUs (20-foot equivalent units) or
FEUs (40-foot equivalent units).
● RO-RO (roll-on roll-off) vessels that carry road vehicles over relatively
short distances.
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Advantages of water
1-Low unit cost
2- All carriers in a given area agree to charge a common price and regulate
the frequency of their service.

Disadvantages of water
1-Inflexibility in being limited to appropriate ports. Journeys from suppliers
and to customers inevitably need a change of mode, even if they are close to
ports.
2-The other problem with shipping is that it is relatively slow, and needs
time to consolidate loads and transfer them at ports.
Air

Airlines carry a significant amount of freight, for products where

speed of delivery is more important than the cost. In practice, this
limits airfreight to fairly small amounts of expensive materials.
Perhaps the most common movements are documents and parcel
delivery, with carriers such as Federal Express and UPS.

There are three main types of operation. The first type is regular
service, where major airlines use the cargo space in passenger
aircraft that is not needed for baggage. The second type is cargo
service, where operators run cargo planes on regular schedules.
These are public carriers, moving goods for any customers. The
third type is charter operations, where a whole aircraft is hired for
a particular delivery.

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Advantages of air
1. It is the fastest mode of transport.
2. Air transport can be used to carry goods to the areas which are not
accessible by other means of transport.

Disadvantages of air
1. High costs, They have a combination of high fixed costs (aeroplanes
are expensive to buy) and high variable costs (due to fuel, landing
fees, staff, and so on).
2. Unsuitable for Bulky Goods as it has Small Carrying Capacity.

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Pipeline
The main uses of pipelines are oil and gas together with the utilities of
water and sewage. They can also be used for a few other types of
product such as pulverised coal in oil.

Advantages of pipeline
1- Moving large quantities over long distances.
2- Pipelines are the cheapest way of moving liquids – particularly oil
and gas – over long distances.

Disadvantages of pipeline
1-Slow (typically moving at less than 10 km per hour)
2- Inflexible (only transporting between fixed points)
3- There is the huge initial investment of building dedicated pipelines.
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Choice of mode
In practice, the choice of mode depends on a variety of factors. Perhaps the
main ones are the nature of materials to move, the volume and distance.
Other factors include:
● value of materials, as expensive items raise inventory costs and encourage
faster modes
● importance, as even low-value items that would hold up operations need
fast, reliable transport.
● transit times, as operations that have to respond quickly to changes cannot
wait for critical supplies using slow transport
● reliability, with consistent delivery often being more important than
transit time
● cost and flexibility to negotiate rates
● reputation and stability of carrier
● security, loss and damage
● schedules and frequency of delivery
● special
14 facilities available.
Table 1 shows a ranking for the cost, speed, flexibility and load limits of
different modes of transport. The modes are ranked in order, with 1 being the
best performance and 5 being the worst.
Table 1

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Intermodal Transport
We have seen some factors that affect the choice of transport mode, but
organisations do not have to use the same mode for an entire journey. Their
best option is often to divide the journey into stages and use the best mode
for each stage. This does, of course, depend on factors like the length of the
journey, the relative costs and the penalty of moving between modes.

Intermodal Transport refers to journeys that involve two or more

different modes of transport.

The aim of intermodal transport is to combine the benefits of several

separate modes, but avoid the disadvantages of each; perhaps combining the
low cost of shipping with the flexibility of road, or getting the speed of air
with the cost of road. The main problem is that each transfer between
modes causes delays and adds costs for extra handling.
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At the heart of intermodal transport are the systems for transferring
materials between modes. The aim is to give a virtually seamless
journey, and the best way of achieving this is to use modular or
unitised loads. In effect, all materials are put into standard containers,
and the equipment is arranged to move these containers.

Some of the benefits of containerisation include:

● Simplified transport and flow of goods
● Easier and faster handling
● Genuine door-to-door service
● Faster deliveries
● Reduced loss due to damage
● Reduced packing costs
● Lower
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Ownership of Transport

In Chapter 4 we saw how an important decision for warehousing is

the ownership of facilities. The choice is essentially between privately
owned, public or a combination of the two. With transport we again
meet this decision. Is it better for an organisation to run its own
transport fleet, to use public transport, or a combination of the two?
With transport the more common terms are in-house or own account
transport compared with third-party transport.

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Own account transport
This has an organisation using its own transport fleet to move its materials.
The most common form of private transport has large companies running
their own fleets of trucks. This has the advantage of flexibility, greater
control, closer integration of logistics and easier communications. Transport
can also be tailored to the organisation’s needs, with the best type of
vehicles, fleet size, delivery schedule, customer service, and so on.

Own account transport can be expensive and an organisation should only

run its own fleet when it is cheaper than using a specialist third-party carrier.
Only larger organisations can afford the capital investment and costs of
running their own fleet.

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Third-party carriers
Specialised transport companies offer a range of services to other
organisations. The advantage of this arrangement is that specialised
companies run the transport, leaving the organisation to concentrate
on its core operations. By using their skills and expertise the
transport operators can give better services, or lower costs than own
account transport. They might also be large enough to reduce costs
through economies of scale, and they can get a number of
operational benefits.

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Choice of ownership
There are several factors to consider when choosing the best type of
ownership:

● Operating cost
● Capital costs
● Customer service
● Control
● Flexibility
● Management skills
● Recruitment and training
There are many factors to consider in the final decision, but overall –
in common with warehousing – there is a clear trend towards third-
party carriers.

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 Thanks for listening

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