transportation. modes of transportation road transport – trucks/lorries other commercial vehicles...

Transportation

Modes of Transportation

• Road Transport – Trucks/Lorries other commercial vehicles• Rail Transport – Train Wagons• Air Transport – Aeroplanes for Cargo• Water Transport – Large Ships• Pipeline Transport – Constructed pipes• Ropeways – Ropes/cables entangled to a cabin and hauled

back n forth via a pulley

Advantages and Disadvantages of modes of transportation will be self-study

Transportation In India

Less than Truck Load (LTL

Full Truck Load (FTL

Express

Different Freight Traffic

Also known as Intermodal or Multi-modal Transportation: Use of more than ONE mode of transport• Piggy Back • Fishy Back • Birdy Back• Land Bridge

Piggy back• Combination of rail and road• Transport materials or products over a long distance on land• Rail transport provides benefits of lower cost, higher load capacity• Final delivery is done via road• Two Types: Trailer Over Flat Car (TOFC) or Container Over Flat Car (COFC)

TOFC

COFC

Fishy Back• Combination of water transport with rail/road• Suitable for international or intercontinental movement of bulk quantities at low

cost• After reaching the destination port, the consignment is transported to the final

destination using road/rail transport

Birdy Back• Combination of air transport with rail/road• Advantage: Speed• Disadvantage: Most Expensive

Land Bridge

• Combination of land transport (rail/road) to connect two separate water ways

• A piece of land exists between two ports• Cargo is transported by water is first unloaded

at the port and • Re-transported to the second port by land and

loaded on another ship and transported by water to destination

Land Bridge Example – Thailand-Laos-Vietnam

Transportation Costs

Fixed Costs• Costs of infrastructure (ports, airports, railway tracks, yards, etc)• Costs recovered over a period of time (10 – 20 years)• Costs recovery can be done by Built-Operate-Transfer (BOT)

Principle

A Municipal Corporation appoints company XYZ to build roads and collect tools from the users to recover the costs. When the contract period ends, the company transfers the road to the Municipal Government. Contract period is determined mutually between Municipal Corporation and Company XZ


Variable Costs• Costs directly related with transportation activity• Costs directly proportional to volume of activity

Company ABC owns 25 trucks and bears the costs of maintaining trucks, fuel, employees on job, administration and paper work, etc.


Joint (Back-Haul) Costs• Costs associated with the return journey of a

vehicle after delivering a consignment

Company PQR delivered a consignment from Mumbai to Pune by truck. After delivering the consignment, the truck has to return to Mumbai and if it returns empty then the costs cannot be recovered. To recover the costs, this may have to be added to the actual cost of delivering the consignment


Common Costs• Costs of multiple smaller shipments to a

common destination are consolidated into a single large shipment

Company LMN delivers multiple products (5 to 10 FMCG products) via a truck to a nearby town benefiting themselves and customers through cost-sharing. When this truck breaks down, then it’s costs are proportionately distributed among the customers.

Factors Affecting Transportation Costs

• Product Related Factors

• Market Related Factors

Case Study

In US, 80% of wines come from California. The wine is transported from the (central) valley by 26 stainless tanks transporting 2.5 million gallons to the east coast. California has small regions producing large amount of wine to distribute nation-wide. Wine is shipped either in bottles or in bulk. Bulk wine is shipped by rail from west to east coast then bottled and shipped at higher rates. Bulk wine is also shipped by sea to bottling plants. Ship competes with rail operations


Condition Factors Example

Geography Distance and accessibility

Long distance rates

Type of product Packaging, weight, perishable

Seafood; time sensitive goods

Economies of scale Shipment size Container vs less than container

Trade imbalance Empty travel- “back haul rates”

Wine ship

Infrastructure Quality of Surface Natural disasters

Mode Capacity, limitations, operational conditions

Air cargo; rail bulk; distance limits?


Condition Factors Example

Elasticity of Demand

High value versus Low value goods

Grain vs.

Fabrication in transit

Uniform rate to capture business

Grain to cereal

Infrastrucure Quality of surface Natural disasters; IHS

Competition and regulation

Cost reductions to capture traffic

Rail vs. highway


Product-Related Factor Market-Related Factors

• Product (money) value• Product density

(weight/space ratio)• Susceptibility to

Damage • Special Handling

Requirements• Product Stowability

• Competition• Inbound and

Outbound traffic• Movement Seasonality• Price Discrimination

Product Value

• Product’s value directly proportionate to transportation costs (, warehousing costs, inventory costs, packaging costs, material handling costs)

• High transportation prices reflect risk associated with the movement of goods

• High-valued goods carry more change of damage which transportation provider would have to bear

• Similar explanations for other above mentioned costs

Product Density

• High-density: More weight than space (Cars); Low density: More space than weight (Furniture)

• As density increases, transportation and warehousing costs tend to decrease and vice versa

• Transportation costs are priced in terms of weight they can transport.

Susceptibility to Damage

• Greater the risk of damage to a product, higher the costs of transportation and warehousing

• Higher prices may be charged for the measures taken to prevent damage

Special Handling Requirements

• Related to damage susceptibility• Specifically designed equipment to be handled

specially• For eg: Refrigeration, heating equipment, etc• Transportation costs are high

Product Stowability

• Stowability is the ability to occupy space as completely as possible

• For e.g. sand can occupy complete space of a truck and thus with 100% stowability

• Product with higher degree of stowability, utilizes space better and transport is economical

• Concept also applied in packaging

Factors Affecting Transportation Costs (Market Related)

• Market areas are carved out of space by interactions between supply and demand• If product is standardized each market point will buy from production center that can

supply it most inexpensively• Market areas are shaped by cheap or limited access routes which might expand market

boundary• Example: Inter-coastal trade via Panama Canal- producers located on either coast can ship

to the other coast more cost-effectively than rivals inland. This route is also subject to port jams

• Geographical Price Discrimination – – Extra costs of long distance distribution not reflected in price of commodity– Seller will profit by adjusting or taking control of delivered prices not in accord with

transfer rates– Push down price where competition is high and demand is elastic– Push price upwards where competition is low and demand is inelastic

• Freight Absorption – – Discriminate against near buyers so sellers assume transport costs to distant markets– Sellers often has more intense competition in remote market than at home– Freight absorption usually takes form of uniform price over large areas: toothpaste

• Modal competition• Seasonality

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source

https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/Logistics-in-India-Part-2.pdf

http://www.slideshare.net/YSFSHIPPING/modes-of-transport-in-logistics-12555636

http://www.transport.govt.nz/assets/Import/Documents/_versions/4052/UTCC-Transport-and-freight-logistics-final-report-Aug-11.1.pdf

http://www.tongji.edu.cn/~yangdy/quick/ch2.htm

http://books.google.co.in/books?id=TbuZnzcXGysC&pg=PA55&lpg=PA55&dq=product-related+factors+affecting+transportation+cost&source=bl&ots=HHSqDDuPcc&sig=Fs524DMjscF8ONbgoKKYRpzjCzM&hl=en&sa=X&ei=bP_ZU5uKOtPJuASX2YK4Bw&ved=0CBsQ6AEwAA#v=onepage&q=product-related%20factors%20affecting%20transportation%20cost&f=false








