With many people currently locked in doors right now, we know that many are looking for blogs and articles to read during the current situation. That’s why we are making the first chapters from a selection of our learning materials available to read on our Blog free of charge.
This week, we will be providing access to five first chapters from different subject areas, including Supply Chain, Warehousing and Transport. Our third article this week is an introduction to Transport, taking a look a where Transport fits into the Supply Chain and why Transport Management is important.
WHERE TRANSPORT FITS IN THE SUPPLY CHAIN
Transport involves the movement of goods from supplier to the ultimate consumer with the objective of ensuring delivery of the correct goods in the required condition, to the right place, at the right time and at minimum cost. Transport is involved in all links in the supply chain, handling movement of raw materials to production as well as the distribution of the finished product to customers. With the growth of the “global market” this can involve the international movement of goods.
Distribution can represent a substantial proportion of company costs; depending upon the nature of the company product, distribution can account for up to 30% of costs, more where a high bulk, low value product is involved. Within this, transport can typically account for the major part of this spend.
The major business philosophy developments of recent years concerning Supply Chain Management, Quality and Just In Time all specify an integrated approach, which emphasises the importance of reliable transport operations. Transport is therefore an integral part of any supply chain and its supporting logistics system, as it provides the important link, handling flows of finished goods and raw materials, between suppliers and consumers.
Transport is optimising movement from source to consumption within the supply chain, selecting the appropriate mode of transport to achieve that goal and meeting legal requirements related to the operations involved in the carriage of goods, the construction and use of equipment and the training and licensing of staff. In essence, Transport is about delivering the right goods, to the right place, at the right time and in the right condition at minimum cost”.
WHY IS TRANSPORT MANAGEMENT IMPORTANT?
Transport management is important in that it provides the physical links in the supply chain between the supplier and the ultimate consumer. Transport adds value in the supply chain through the utility of place, that is the movement across space or distance. What is critical is that this movement is executed in a way that delivers consistent and reliable service to the intermediate customers in the supply chain and the ultimate consumer.
In order to do this there are decisions that need to be made at three different levels. These are:
- Strategic: The longer term view, perhaps looking 3 – 5 years ahead.
- Tactical: The medium term view, perhaps looking 12 – 18 months ahead.
- Operational: The short-term view looking at tomorrow and next week.
Strategic Decisions
The need to be aware of the expected development of the business in terms of future production, suppliers, customers and volumes are all essential to enable transport management to make recommendations, measure the impact and plan the necessary actions to meet the long term requirements.
Decisions on what transport modes to use, how to organise the structure of the distribution network in order to achieve the continuing optimisation of investment cost and service level, should be an on-going process
Tactical Decisions
Information is needed on the expected changes in the medium term in such factors as seasonality, volumes, required service levels, product and operational costs. This is within a medium term time frame to allow transport management sufficient lead-time to establish and implement any changes to the processes and/or control of the transport methods.
Operational Decisions
Operational decisions are those that impact on the factors, which create, in the short term, constraints or opportunities within the transport process. They are generally concerned with specific actions taken, or which are required to be taken to meet changes in the levels or form of activities not previously identified within the medium term planning cycle.
HOW DOES A TRANSPORT OPERATION WORK?
There are several different types of transport. These include:
Rail
Rail usually involves the movement of bulk goods, such as petrol, sand and cement etc. Container traffic is moved, between inland terminals and to maritime terminals at ports.
The major cost benefit of rail traffic is over longer distances. Without a dedicated railhead a company needs to deliver to a transhipment point. Where the total delivery distance is not high, less than 400 kilometres, this is usually an uneconomic option. However, rail requires a major infrastructure investment.
For long distance international transport the container option is often attractive. Containers are built to an international (ISO) standard size and can be easily handled between road transport, rail trains and container ships. Rail proves a cost effective method of intermodal transport if both land and sea distance is long.
Sea
Costs are very low per tonne; speed is relatively low and reliability limited by outside environmental factors. Loads, unless containerised, are generally limited to full load high volume, low value traffic e.g. coal, grain.
Where transport is of the short route international variety, roll-on roll-off (RORO) of road and sometimes rail trucks will be found. This provides an interface between sea and road modes and speeds the transit of goods between international locations.
Inland Waterways
Inland waterways comprise river and canal traffic typically of a high volume low value nature such as coal. Much of the traffic is moved by barge and in general offers a very low cost, albeit slow mode of transport.
Air
Air transport has considerable advantages of speed over all other distribution methods, although the high cost makes it most appropriate for high value, low volume goods. Airfreight has become a fast growing. Major advantages of using air transport are seen to be:
- Faster replenishment of stocks.
- More efficient servicing of time limited markets.
- Improvements in cash flow through faster payment.
- Greater safety and security of consignments.
- Reduction or elimination of packaging.
In some cases the speed advantage of airfreight might prove decisive. Where a breakdown caused by the failure of a small component is halting production, speed is likely to be the overriding consideration.
Pipeline
Where liquid or gas commodities, or indeed solid ones converted to slurry, are to be carried over a long distance fixed network, pipelines are often the best option. Although pipelines require enormous capital costs to establish, if the network is at least semi permanent the investment will usually prove worthwhile in the long run. Some advantages are seen to be:
- Continuous operation.
- No empty return trips.
- Little labour requirement once set up.
- No on-going inflationary costs.
- Continuous supply, no inventory costs.
- Round the clock operation.
- Environmentally safer, quieter and less disruptive.
Road
For national distribution of most general traffic, road transport is usually the main option. Road transport has the advantage of a universally widespread infrastructure, a road network that links customers and suppliers without need for transhipment. While this flexibility in network and unit of carriage is the prime advantage of this mode, factors of volume and distance may be disadvantageous. Where distance is very high, over 800 kilometres, for instance, or where unit load volume exceeds the legal maximum weight, road transport may be inappropriate.
We hope that you enjoyed this first chapter. If you are interested in learning more about Transport, why not consider studying one of our LLA Online Short Courses? We are currently providing a 10% discount for all of our Short Courses until 31st May 2020. Prices start from just GBP340.00 (reduced to GBP306.00) for our Introductory Transport short course. For more information, visit our Short Course page or email enquiry@logisticslearningalliance.com.
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