international trade logistics, role of transport logistics
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INTERNATIONAL TRADE LOGISTICS
UNIT III
ROLE OF TRANSPORTATION IN LOGISTICS
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ROLE OF TRANSPORTATION IN LOGISTICS
Transportation cost absorb around 40% of total logistics costs
An effective and inexpensive transportation system contributes to thefollowing:
Greater competition in marketplace
Making goods available at the right time from the right place leading tomarket penetration
Greater economics of scale in production
Wider markets can result in lower production cost. It also permitsdecoupling of market and production sites.
Reduced prices for goods
Inexpensive transportation also contributes to reduced prices.
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ROLE OF TRANSPORTATION IN LOGISTICS
inferred that the demand for the commodity is notthe same as demand for transport.
per unit distance transportation costs within thecountry always account for the final node of volumeof trade than the same exportable items of other
countries (Rauch ,1991)
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Service Choices
There are five basic modes of transportation,namely, water, air, rail, road, and pipeline
Any one or combination of these can be usedfor transportation of goods from one place toanother
Selection of modes of transportation is madebased on best balance between quality ofservice and cost.
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Characteristics of Transportation
(Alderton, 1994)
Price
Average transit time
Time variability
Loss and damage
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Price
The cost of transportation for shipper includes the following:
Line haul rate
For hire service
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The cost of different services
Cost of service varies from one type of
transport service to another. The hierarchy of
cost for different transport services is as
follows:
Air > truck > rail >water > pipeline
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cost comparison
Cost of movement of goods through trucks is
seven times that by rail
Cost of movement of goods through rail is four
times that by water or pipeline
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cost comparison
Actual cost comparison should be made on
actual charges that reflect the following:
Commodity being shipped
Distance and direction of movement
Any special handling required
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TRANSIT TIME and VARIABILITY
Average delivery time and delivery time variability rank at the top asimportant transportation performance characteristics.
For comparing carrier performance, it is best to measure transit time of door-to-door, even ifmore than one mode is involved.
Variabilityrefers to the usual differences that occur between shipments byvarious modes.Even if transported by same means variability may be due to effects of weather, traffic,congestion, and number of stop-offs and differences in time to consolidate shipments.
Transit time variability is the measures of uncertainty in carrierperformance.
The performance of a particular type of carrier is a function of distance, variability and loss anddamage.
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PERFORMANCE WITH RESPECT TO THE DISTANCE
Distance greater than 600 miles:
Air freight is the fastest mode followed by truck load, then less truck loadand then comes rail.
Distance less than 600 miles:
Air and truck are comparable
Distance less than 50 miles:
`Transit time is influenced by pick up and delivery operation
than line haul transit time
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Variability
The variability of different modes of transport is
as follows:
Rail has the highest delivery time variability
Air has the lowest delivery time variability
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Loss and damage
This becomes factor for selection of a carrier
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MODES OF TRANSPORT
CHARACTERISTICS WITH RESPECT TO:
DISTANCE
SPEED
QUANTITY and VOLUME OF CARGO
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RAIL
Rail: a long hauler,
slow mover
of refrigerated material, raw materials and
low valued bulk commodities, manufacturedproducts like new automobiles etc.
A carload quantity refers to predetermined
shipment size usually approaching orexceeding average capacity of a rail car to
which particular rate is applied.
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RAIL
Other services include :
various stop off privileges which permit partial
loading and unloading
pick-up and delivery,
diversion and re-consignment which allows
flexibility in routing and changes in the finaldestination of a shipment while en-route
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RAIL
Fixed Cost is High while Variable Cost is low
Variable cost includes loading, unloading,
billing, collecting, yard switching and multipleshipment costs
The cost per unit is lower for increased
shipment volume.
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Truck
Best suited for semi finished and finished goods withan average lengths of freight haul of 646 miles fortruck load and 274 miles for less truck load.
The shipment size smaller than rail. It isadvantageous for door-to-door service (less materialhandling, better availability and frequency of service)
Trucking has a service advantage in the smallshipment market.
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Air
Air freight is twice truck charges and sixteen times rail charges.
The appeal of air transportation is its unmatched origindestination speed, especially over long distances (maximumdelay in surface freight handling and movement in door-to-door delivery time)
Delivery time variability is low in absolute magnitude, eventhough air service is quite sensitive to mechanical break down,weather conditions and traffic congestions
Compared to water, average delivery time variability is high asa result one can rank air as one of the least reliable modes.
Loss and damages are less
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Water
Slowest, can handle liquid and bulk cargoes
also high valued cargo in containers,
loss and damage in general low
But for valued good substantial packing is needed to
protect from rough handling of goods.
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WaterwaysWaterways are better means of transport following types
of goods:
Transported across the border i.e. for
international trade
Low cost, containerizable, non-perishablegoods
Liquid cargo, in large quantities
Capable of withstanding longer lead times insupply
Distribution and less careful handling.
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Waterways
now-a-days almost all types of cargo
including cars and vehicles (roll-on - roll-off
ships as well as conventional carriers) finished goods,
raw materials,
small sized or large shaped cargo aretransported through waterways.
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SPEEDVOLUME TRADE-OFF
Speed of flow of goods has been madepossible with introduction of concepts of
multi-modal transportations and feeder-
mainland shipping routes (Frankel, 1990).
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Pipeline
Pipeline parallels the railroad in cost
characteristics
Fixed cost is high and the variable cost (Power
and cost of operation) vary greatly with line
throughput and diameter of pipe
The cost per ton mile is low.
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MULTI-MODAL TRANSPORTATION
(ALSO REFERRED AS INTER-MODALTRANSPORTATION)
CONCEPT
DEFINITION
ISSUES
POLICIES
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