Transportation

Definition:is the movement of products from one location to the other . Functions:
Provides a lubrication to run the chain smoothly Permits wider and deeper penetration of new markets far from pt of production Permits distributors to leverage economy of scale by lowering the unit cost of transporting the product Enables distributors to reduce selling price by holding costs down . Provides other business functions with essential information regarding product, market, costs etc for effective enterprise planning and operational execution.

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Transportation Infrastructure 39% of total cargo movt is by road, followed by rail (35%) , remaining is shared by inland water, air and sea. (billion km-ton) million tonnes Road 800 580* Rail 334 510 Sea --287 Air 5.33 0.90 Pipelines ---30.5 Source --CMIE 2002-03 * Estimate

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Road agriculture & industrial advancement of the country Adv: Door to Door delivery, Flexibility , reliability , reach to remote places & speed Railways: Essential commodities 6896 railway stations, 62800 kms of length, route density of 138 km per 1000 sqkm, 44200 kms is broad gauge lines out of which 85% cargo movt) Goods movt- 2,53186 wagons total carrying capacity of 10.6 million tones , 96% of IR cargo is coal, iron ore, steel , finsihed steel and petroleum Container service and now truck carriers in Konkan railway

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SEA tankers, dry bulk carriers , container ships and special vessels 55 shipping companies , 19 in coastal trade, 29 overseas trade, remaining in both 510 ships , 240 overseas, and 270 coastal (2000-01 272 million tonnes handled) Crude oil, oil products, coal, food grain, and steel AIR : least hazardous, costly and used for perishable goods and those having short life. IWT cost effective ( a km of highway cost Rs 6 crore while more than 100 kms of waterways can be developed at same cost) India has 1,45,000 kms of inland water transportation infrastructure. Cargo movt in india is 1% against 10-12% in Uk, eurpoe and china. Pipelines: Initial cost is high but operational cost is lower .mostly for oil Cost reduces with passage of years (opp of road or rail) Cost of transportation of oil by New pipleine Rs 1.15 km per tonne verus 0.87 for old pipelin. (new pipeline laying is Rs 15 million per km ) Oil transportation cost -Road Rs 2.50 per tonne per km, Rail -2.00 Intermodal or multimodal trasnportation; More than one mode to transport to move a shipment ot its destination.

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Two Players in Transportation A) Shipper and B) Carrier Shipper Party requiring movement Carrier Party that moves the product Factors affecting carrier decisions 1. Vehicle related cost 2. Fixed operating cost 3. Trip related cost 4. Qty related cost 5. Overhead cost

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Factors affecting shipper decisions Transportation cost Inventory cost Facility cost Processing cost Service level cost

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Factors influencing transportation efficiency Customer Communications Market Coverage Sourcing decisions Manufacturing operations Pricing decisions Customer service decisions

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Criteria for Carriers Selection 1. Current performance 2. Acceptance of responsibility 3. Flexibility 4. Comprehensive services offer 5. Information systems 6. Financial stability 7. compatibility

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Factors influencing Freight cost Volume Distance Product density Product shape Product handling Product type Market dynamics

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Transportation Networks Point to Point Mulitple delviery points Trans shipment points & Cross docking Nodal network Hub and spoke network

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Key Points to be considered Trade off between Transportation and Inventory costs Trade off between Transportation cost and Customer responsiveness Route Planning-Transportation models Containerisation system