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Transportation

The Logistics of Transportation

logistics photo Photo courtesy of Logistics ManagementOpens in new window

One of the most important aspects of a logistics chainOpens in new window is receiving raw materials and dispatching finished goods. Transportation is the key component in the movement of raw materials to the factory to be processed, or the movement of finished goods to the warehouseOpens in new window (distribution centre / retailer or customer). Transportation accounts for between one-third and two-thirds of total logistics costs; for most firms, it is the most important single element of logistics costs.

Transportation is the movement of raw materials, parts, supplies, and finished goods from the point of origin to the point of consumption. It moves products over vast distances and adds value in that it brings the goods to the customers.

A productOpens in new window has very little value to a prospective customer unless it is moved to the point where it will be consumed. Transportation achieves this movement. It transfers the goods to the place where the customer will consume them.

Transportation makes it easy for the customers to purchase a commodity where it suits them. Take the case of a tourist, for example, who recently went on a tour to a small island in the South Pacific called Pee Pee Island. It is one of the most beautiful islands in the region, situated like a pearl set in Thailand’s crystal Andaman Sea.

While the tourist was on the island he had a Coca-Cola, an exquisite meal in the restaurant, and an Ola ice-cream at the end of a hot day. Did all of these items just fly into his hands? Just consider the following:

  • Pee Pee Island does not have an airport.
  • It does not have roads.
  • It has no railway.
  • It has no harbor.

How then does the Ola ice cream reach this isolated place? Firstly, the ice cream is manufactured about 1500 kilometers away, in Bangkok. It is then transported by air to Phuket, in a refrigerated containers. From Phuket it is transferred to the harbor by road in refrigerated containers.

From the harbor it is sent to the island, and then by long-tail boat (similar to a canoe) from one side of the island to the other and into the fridge of the small shop. Despite all this, the ice cream never melted once, and cost less than $1. This is an excellent example of efficient transportation and distribution.

Managing the movement of products includes activities such as selecting the method of shipment (airOpens in new window, railOpens in new window, waterOpens in new window, pipelineOpens in new window, roadOpens in new window), choosing the specific path (routing), complying with various local, provincial and national transportation regulations and being aware of both domestic and international shipping requirements. Transportation is often the single largest cost in the logistics process, an important component that must be managed effectively.

We are more dependent on transport than we often realize, whether it be freight transportation (raw materials and finished goods like groceries and vegetables) or transportation of people. Certain companies specialize in transporting people back and forth between cities and countries.

British AirwaysOpens in new window transport people from London to Johannesburg internationally, and on to Cape Town via ComairOpens in new window. TransluxOpens in new window transports people to Durban, and even as far as Maputo, by bus. NASAOpens in new window even transports wealthy people on trips to the moon nowadays! Interestingly, one might think that trains would be a lucrative method of transporting people, but this is not the case. The railways make much more profit from transporting goods than from transporting passengers. This is a common trend worldwide.

An industrialized society without an efficient transportation system seems a contradiction in terms. We often assume that products will move from where they are produced to where they are consumed with a minimum of difficulty in terms of either time or cost. But this is not the reality.

Have you ever been stuck on the highway behind a huge truck transporting a popular drink like Coca-Cola? It can be a most frustrating experience! But transportation plays a major role in the distribution of goods. We devote the next post to explore the various modes of transporting and distributing goods.

Transportation, of course, primarily involves time and place utilities. The mode of transportationOpens in new window must suit the place where goods are headed, and the customer’s urgency requirements (the time requirements) must be taken into account. Business decisions affect the choice of transportation:

  • Commonsense decisions — what is the most sensible option available (excluding the cost, etc.)?
  • Product decisions — the physical form of the product will influence the mode of transportation to be used. If it is oil, you would be best to choose a pipeline; if it is heavy raw materials which are required overseas, then it would be best to send them by water.
  • Market decisions — where are the customers and what mode would be best for getting the goods to them?
  • Location decisions — where is the retailer located and is there an accessible railway line?
  • Pricing decisions — what is the most important factor here? Keeping the cost low, or speed of delivery?
See also:
  1. J.C. Johnson, D.F. Wood, D.L. Wardlow, P.R. Murphy, Contemporary Logistics, seventh ed., Prentice Hall, Upper Saddle River, NJ, 1999, pp. 1 – 21.
  2. A. Rushton, P. Crouche, P. Baker, The Handbook of Logistics and Distribution Management, third ed., Kogan Page, London, 2006.
  3. S.C. Ailawadi, R. Singh, Logistics Management, Prentice Hall of India, New Delhi, 2005.
  4. R.H. Ballou, Business Logistics/Supply Chain Management: Planning, Organizing, and Controlling the Supply Chain, fifth ed., Pearson-Prentice Hall, Upper Saddle River, NJ, 2004.
  5. J.R. Stock, D.M. Lambert, Strategic Logistics Management, fourth ed., Irwin McGraw-Hill, New York, 2001.
  6. G. Ghiani, G. Laporte, R. Musmanno, Introduction to Logistics Systems Planning and Control, John Wiley & Sons, NJ, 2004, pp. 6 – 20.
  7. M. Hugos, Essentials of Supply Chain Management, John Wiley & Sons, Hoboken NJ, 2003, pp. 1 – 15.
  8. H.T. Lewis, J.W. Culliton, J.D. Steel, The Role of Air Freight in Physical Distribution, Division of Research, Graduate School of Business Administration, Harvard University, Boston, MA, 1956, p. 82.
  9. D. Riopel, A. Langevin, J.F. Campbell, The network of logistics decisions, in: A. Langevin, D. Riopel (Eds.), Logistics Systems: Design and Optimization, Springer, New York, 2005, pp. 12–17.
  10. M. Browne, J. Allen, Logistics of food transport, in: R. Heap, M. Kierstan, G. Ford (Eds.) Food Transportation, Blackie Academic & Professional, London, 1998, pp. 22–25.
  11. J. Drury, Towards More Efficient Order Picking, IMM Monograph No. 1, The Institute of Materials Management, Cranfield, 1988.
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