Professional Documents
Culture Documents
Transportation
[Ref. Bowersox page 311]
The most visible of all functions of logistics and
high contributor to logistics cost
Transportation functionality: Functions of
transportation
1. Product movement:
What is moved?
Raw Material, Semi Finished items, WIP, Finished
goods, packaging material, rejected material-
movement is required up or down the supply chain
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How is this done? What resources
are used?
Resources used by transportation:
a. Time, Temporal Costs - product is locked up
during transit, hence inaccessible
b. Money, Financial Costs-
• Administration Costs, salaries, maintenance, etc
• Product loss and damage
• Cost of fuel for prime mover
c. Nature, Environmental Costs -
• Guzzles natural fuels
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• India consumes about 90% of the total available
and imported oil for transportation
• Transportation Creates congestion, air pollution
and noise pollution.
• Environmental cost is tangible and substantially
intangible.
As transportation utilizes temporal, financial and
environmental resources, items must be moved
only when product value is raised
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2. Product Storage:
Temporary storage when loading and
unloading is expensive
Storage space is not available or limited
Vehicles kept moving on circuitous route
Airplanes hovering
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Principles of transportation
1. Economy of scale
• Bulk shipping brings down per unit
transportation cost
2. Economy of distance
• Cost per unit kilometer decreases as the distance
moved increases
• Principles of transportation are fundamental in
evaluating transportation strategies.
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Transportation Environment & Transportation
decisions
Who are participants in most of the commercial
decisions?
What makes transportation environment
different?
Who are the participants in transportation
decisions?
• Shipper
• Consignee
• Carrier
• The government
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Roles and perspective of each party
Shipper
What does shipper want?
• Predictable and minimum transit time
• Minimum cost
• Specified pick up times
• Zero loss and damage
• Timely exchange of information and invoicing
What does consignee want?
• Specified delivery times
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Carrier:
What does carrier want?
• Revenue maximization
• Cost minimization [labor, fuel and vehicle costs]
• Flexibility in pick up and delivery times to
consolidate moves
Government:
Keen interest in flourishing national economy
and hence in transportation
Effective and efficient Public Distribution
System
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• Control on carrier rates and licenses
• Own carrier service
• Infrastructural support - net work of roads,
Airports and ATC, Ports and Harbors
Public
Trigger transportation activity by demanding
products
Demand easy accessibility transport
Demand goods and services from all over the
world at minimum cost
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Demand safety - accidents of various kind, road,
rail, air and water (oil spills)
Demand safe environment - atmosphere, water,
noise
When these parties with separate and
distinct interests interact transportation
environment is created
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What is transportation mode?
Mode identifies transportation method or form
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Impact of transport mode on costs of
transportation
Transport time
• Inventory
• Transit capital
• Obsolescence
Packaging
Insurance - air, high insurance
Breakage
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What constitutes Transport Infrastructure?
[Transport elements]
Factors that affect the smooth functioning of
transport?
3. Terminal facilities - well maintained loading
unloading facilities, space for movement of
vehicles, platforms, railway yards
4. Vehicles- trucks, ships or wagons. Their size,
shape & speed
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1. Rights of way- cost of right to use passage.
Rails, roads, airways
2. Routes and sectional capacity-number of lanes
3. Limit on speed, weight, height
4. Weigh bridge facility
5. Nature of product
6. Carrier organizations
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What are various features of modes or modal
characteristics?
How do we measure relative weight of each
mode?
• System mileage, traffic volume, revenue, nature of
traffic composition
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Railways – Rail network
Stands out in terms of tonne-kilometres moved
226 billion tonne-kilometres and 55.8% of total
tonne-kilometers moved in 1982 in India
449 billion tonne-kilometres and 51.7% of total
tonne kilometers now moved in India
Facing very stiff competition from roadways
(as in US after II World War)
High capital investment due to right of way,
switching yards, terminals, locomotives and
rolling stock, but low operating costs
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Focus on specific products than on broad range
Raw material extractive industries away from
water ways.
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Developments in this area
Recent customer friendly attitude
Inter modal transport through alliances and
acquisitions as in US, providing single window
service to customers
Development of Specialized Equipment to suit
the needs of bulk volume of customers
Unit trains
Container trains
Double stack containers
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Enclosed tri-level automobile car
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A unit train, also called a block train
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Double stack containers
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RORO service to road transport - konkan
railway
Private container trains -Adani logistics,
boxram
Container corridors
Private participation in developing ICDs
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Road transport
High flexibility and speed
Ultimate mode of transport
Rapid growth, post war
Low capital cost as compared to railways
179.2 billion tonne-kilometres and 44.2% of
total tonne kilo-metres moved in 1982 in India
585 billion tonne-kilometres and 56% of total
tonne kilo-metres moved in India now
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Operating costs are higher
Ideal for small shipments over short distances
Labor intensive
Occasional fuel shortages
Availability of good quality vehicles
Availability & cost of maintenance and spares
Bad and unsafe road conditions
Carrier organizations and their disputes with
government
Octroi
Old MVA
Restrictive permits
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Developments in this area
Entry of several manufacturers of trucks-entry
of Daimler to produce Mercedes CVs
Trailer-tractor sets
National grid of highways
Road widening schemes, bypass to cities
Pay and use roads – private road builders
Express ways
The Golden Quadrilateral
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Trailers 33
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Water transport
Sailing vessels, steamships-1800, diesel driven
ships-1920
Limited scope for deep water transport
Limited extent of navigable inland water
transport -lakes, rivers, canals
Main advantage of water transportation is
extremely large shipments & low cost
Importance of deep water vessels & deep water
ports to fully realize benefits of water transport
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Diesel towed barges
Tug-barge combinations
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Diesel towed barges
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Diesel towed barges- high flexibility,
disadvantages are range of operation (not for
long distance) and slow speed
Ferries- for small water bodies like rivers and
bays.
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Inland water Transport is not used to its full
potential in India although we have used
mechanized IWT since early 1800.
Main hurdles appear to be
3. Low priority in policy
4. Construction of dams
5. Receding water levels in the rivers
6. Tough competition by other modes
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Developments in this area
Construction of deep water ports: JNPT
Construction of ports with private investment
Port Pipavav, India's first port in the private
sector is operated by APM Terminals, one of the
largest operators of container terminals in the
world
A consortium led by P&O Australia is setting
up a $200 million Container terminal on BOT
basis at Jawaharlal Nehru Port Trial operation
started in April 1999
Agreement signed for construction of a captive
Coal Jetty at Mumbai by Tata Electrics. 40
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Pipelines
What is transported in a pipe line?
Liquids - oils, crude, petroleum products
In India, extensively used for transporting crude
and petroleum products
More than 5,000 km of pipeline exists in India
for crude and petroleum products
Slurries - coal slurry, iron ore, lime
Huge quantity of water is necessary which is a
concern for environment
In India pipe line is used for transporting iron
ore.
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Pipelines
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Gases and vapors- natural gas, LPG, in India
LPG pipe line is in existence
Pulverized dry bulk material - cement by
hydraulic suspension
Main features of this mode of transport
Reliable all weather means of transport
Low energy consumption
Pipeline being under ground space occupation is
minimal
Pipe line operates all the time except when it is
shut down for maintenance
No empty container or wagon to be brought back
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Highest fixed costs, right of way and laying of
pipeline, and lowest operating costs
Not labour intensive
Not flexible by nature. Pipe lines are stationary
Physical state of the commodity is a limitation.
This mode of transport can release capacity of
other modes for transport of essential commodities
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Rope ways
Hilly and otherwise inaccessible area
Steep gradients
Cause minimum ecological imbalance
Point of supply and demand can be connected
by shortest route
Logistics of fruits in Himachal Pradesh
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Rope way
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Air transport
Speed of transport is highest
Fixed costs are lower than rail or road or pipe
line. But operating costs are highest
Air transport brings distant markets closer -
perishables market in gulf countries
Overcomes the hassle and cost of setting up
depots and service centers overseas
Full potential of peak seasonal demand can be
taken
Test marketing is easy. Products can be
shipped directly from the factory
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The Indian Air cargo Market
The growth of air cargo in India has also been
manifold though it might not have kept pace
with the progress made all over the world.
Table 1 shows how both international and
domestic air cargo traffic has increased,
reflecting an overall year on year growth.
(Source - Transport India 2000)
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Table 1: Trends in cargo traffic at five
international airports in India.
(Figures in '000 tonnes)
Period International Domestic Total Percentage
Cargo Cargo Increase
1972- 47.4 33.6 81 -
73
1982- 165.4 84.6 250 209%
83
1992- 300.5 90.9 391.4 56.56%
93
1999- 494.2 183.0 677.2 73%
2000
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TRANSPORTATION MODES
RAIL ROAD WATER AIR PIPE
LINE
CAPITAL EX II IV III V HIGHEST I
OPERATING III II IV I V
COST
SYSTEM KM 63,000 15,03,000 15544 5000 kms
kms kms kms[IWT]
(Inland
W- ways)
TONNE KM 449 585 Billion 66 BTKM 70 BTKM
Billion Tonne KM (British-T)
Tonne [Costal
KM Shipping]
SPEED III II IV I V
AVAILABILTY II I IV III V
[ABILITY TO
SERVE A SET
OF LOCATIONS]
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Rail Road Water Air Pipeline
Dependability III II IV V I
[minimum deviation
from schedule,
weather, congestion&
other problems]
Capability II III I IV V
[ capacity to tackle any
size of the load]
Frequency [quantity of IV II V III I
scheduled movement]
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Freight rate structure
Freight Rate Structure & Principles:
1. Cover actual cost of transportation.
Factors influencing cost of transportation
A. Fixed costs:
Interest on capital
Depreciation
Insurance premium
Administrative overheads
Expenses on fixed facilities like buildings
B. Semi fixed costs:
Salaries of the staff
Facility for servicing, periodic maintenance etc
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C. Variable costs
Cost of fuel and lubricants
Maintenance directly attributable to a
particular trip – breakdown
Damage to the vehicle and also the cargo. Eg.
hilly roads, bad roads, war effected sea routes
D.Vehicle utilization
Carrier likes to gain maximum mileage out of
his vehicle
Run the vehicle at top speed to cover max.
distance at min time
Quote higher rates if following are not
conducive to the above
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Terminal detentions [congestion, formalities,
loading/unloading etc.]
Obtaining a return load [market factors]
Nature of goods, hazardous, corrosive [liability,
insurance]
Density, consignment light by weight
Stowability, shape and size of the product
2. Traffic Bearing Capacity
Value addition by transportation.
Transportation cost should not upset the value
added
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3. Public use
Items to satisfy basic needs of common man
should be moderately charged
4. Government Policy
freight rates are controlled by the state for
Promotion of certain type of trade
Development of certain type of industry
Freight rates are hiked or depressed by state
5. Profit
Margin for reasonable return on investment
Entrepreneurial time and efforts
Funds for future development of business
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Transportation policy
Components of transportation decisions
I. Mode Selection
Air - most expensive, but very fast
Road - relatively quick and inexpensive, highly
flexible
Rail - An inexpensive mode for large quantities
Water - the slowest but most economical for large
overseas consignments
Pipeline - primarily for oil and gas
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Transportation network options
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IV. Carrier Selection
2. Constitution of the carrier’s organization
3. Business turn over
4. Area of operation
5. Branch offices or associates’ offices
6. Strength of fleet
7. List of clients- current & former, for
ascertaining reliability
8. Nature and volume of business
9. Normal transit time quoted by carrier
10.Record of claims settlement by carrier
11.Reference from banks, carriers’ association
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V. Route and network selection
Route is the path the product takes and
network is locations and routes along which a
product can be shipped
A logistics manager’s options for scheduling
and routing decisions
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DESIGN OPTIONS FOR A TRANSPORTATION
NETWORK
Retail
Retail
stores
Supplier stores
Supplier Retail supplier
stores
Supplie Retail
rs stores
ALL SHIPMENT S
VIA DC
MILK RUNS
FROM DC
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Direct shipment network
From shipper directly to retailers.
Features:
1. Warehouses are eliminated
2. Long route, hence low cost
3. Simplicity of operation
4. Time of transportation is short
5. Decision points are quantity and mode
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Direct shipping with milk runs
1. Single supplier to a number of retailers - deliver
like a milkman.
2. From a number of suppliers deliver to a single
retailer. eg. Toyota plant in US
Features:
1. Movement consolidation
2. Truck utilization
3. Transport cost reduction
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All shipments via Central Distribution
Center
suppliers to Distribution center and Distribution
center to retailers
Features:
1. Supply chain costs reduction when distances
are large.
2. DC stores inventory and acts like a transfer
point
3. Economies of scale in inbound transportation
to DC. Outbound transportation cost is low as
retailers are close to DC
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Shipping via Distribution Center Using Milk
Runs
small lot sizes to large number of retailers from
DC.
Features:
1. Consolidation of small lots - reduction of
outbound transportation cost
• Tailored Network
Tailor made to the company needs
Features:
1. Matches the needs of the company
2. Coordination is complex
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NETWORK PROS CONS
STRUCTURE
DIRECT • NO DC • HIGH INVENTORY
SHIPPING • COORDINATI • SIGNIFICANT RECEIVING
ON EASY EXPENSE
DIRECT • LOWER • INCREASED
SHIPPING TRANSP COORDINATION
WITH MILK COSTS COMPLEXITY
RUNS • SMALLER
INVENTORY
ALL • MOVEMENT • INVENTORY COSTS
SHIPMENTS COSOLIDATI • INCREASED HANDLING
VIA DC WITH ON • INCREASED
INVENTORY COORDINATION
STORAGE COMPLEXITY
ALL • LOW • INCREASED
SHIPMENTS INVENTORY COORDINATION
VIA DC WITH • MOVEMENT COMPLEXITY
CROSSDOCK COSOLIDATI
ON
ALL • LOWER • INCREASED
SHIPMENTS OUTBOUND COORDINATION
VIA DC WITH TRANSORTA COMPLEXITY
MILK RUNS TION COSTS
TAILORED • TRANSPORT • STILL HIGER
NETWORK ATON COORDINATION
SUITES TO COMPLEXITY
INDIVIDUAL
NEEDS
Fig.no.22
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Intermodal Transportation
Intermodal transport
Intermodal movements combine the cost and/or
service advantages of two or more modes in a
single product movement
The more popular combinations are TOFC
[Trailer On Flat Car] and COFC [Container On Flat
Car].
Benefits of long haul, short time & flexibility are
optimized for achieving overall cost reduction
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Co-ordination of different modes of transport
to avoid wasteful competition
Single window service to the customers
Encouraging containerization both for internal
as well as import/export cargo
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RAIL COMMON
PIGGY BACK
ROAD COMMON,
CONTRACT,
FISHY BACK
EXEMPT,
PRIVATE
WATER COMMON,
CONTRACT, TRAIN SHIP
EXEMPT,
PRIVATE
AIR COMMON,
CONTRACT, AIR TRUCK
EXEMPT, [BIRDYBACK]
PRIVATE
LAND BRIDGE
WATER OR AIR WATER OR AIR
LAND [RAIL OR ROAD]
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C
O
F
C
COFC
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TOFC
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TOFC
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LANDBRIDGE 74
Transshipment
Transportation goods and materials to the destination
using one or more intermediate destinations
A technological requirement
Air travel to US
A means of logistical cost reduction
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Containerization
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Containers were introduced in US during 1955
and in India during 1960
Features of a container:
3. Robust but still light for inter modal
transportation
4. Equipped with fittings to facilitate safe and
easy handling
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1. Easily be stuffed or unstuffed in a short time
2. Water tight and air tight outer shell
3. Internal lining that doesn’t buckle under
temperature and can be easily cleaned
4. Watertight flooring, air tight door seals and
locks
5. Insulation to protect refrigerated cargo.
Interior washable to required hygienic
standard
6. Construction to allow circulation of air around
cargo
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Basic types of ISO containers
Dry or cube containers are front loaded, completely
enclosed and suitable for general-purpose
transportation.
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Insulated Containers are available in 20 and 40 foot
lengths, and contain a layer of foam insulation between
the interior and exterior surfaces of the walls, floor and
roof.
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An insulated container with a built-in refrigeration unit, the Reefer
container maintains a set temperature and stabilizes the
environment within the container to prolong the life of the cargo in
the most arduous of environments.
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Flatrack Containers:
Flatrack containers are used for heavy and oversized cargo, which
cannot be loaded into container with fixed walls and needs loading from
top or side. Can be delivered with both fixed and collapsible end walls.
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Open top containers are shaped like a box and loaded from either the
top or end. They are designed to carry heavy, tall or hard to load materials
such as coal or grain
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Tank containers are built to the same standard dimensions as other
ISO containers, but are cylindrical vessels mounted in a rectangular steel
framework. Typically, these containers are used to transport liquid or bulk
materials.
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Universal advantages of container as a
packaging unit
2. Reduction in loss, pilferage and damage of
goods
3. Reduction in paper work
4. Expedites door to door pick up and delivery
5. Eliminates multiple handling of contents as
this is shipped as a single unit
6. Consolidation of movement of small lots
7. Standardization of handling methods and
equipment
8. Reduction in packaging cost as container itself
acts like a package
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1. Optimizes the services of various modes
2. Container can easily be transshipped.
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Major benefits of containerization to business
2. Integration of various modes of transport
3. Reduction in handling time and thereby turn
around time of vehicles
4. Standardized size of containers reduces reduce
capital as well as operational costs
5. Reduction in packaging cost as container itself
is a robust packaging
6. Need for enclosed warehouses redundant
7. Transport service is reliable
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7. Containerization has lead to the building of
modular ships resulting into quick turn around
and de congestion of ports
Infrastructure for Containerization
• Deep water ports
• Mechanized handling equipment- Equipment
used to load and unload are container cranes
called straddle carriers, side loader forklifts.
Obviously this equipment is very expensive
• Inland container depots
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• Container ships- are built for optimum utilization
of space, easy stowing in the holds, to facilitate
fast & easy loading and unloading of container
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Container ships
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Roll On/Roll Off ferries [RORO]: the truck
rolls on to the and rolls off at the end of the
voyage
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Roll On/Roll Off ferries
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LASH [Lighters Aboard a SHip]: when a ship
is loaded on the high seas from barges, instead of
loading the cargo lifted from the barge, entire
barge is lifted and loaded on the ship. At the end
of the voyage barge is put back on water
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LASH
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Nodal points
Railways network
• Growth of economy is the responsibility of state
• Bulk movement of supplies from production
centers to consumption centers boosts economy
• Traffic could be consolidated and moved in full
train loads/wagon loads
• Bulk material transported is like coal, steal,
fertilizer, cement
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• State also has the responsibility to distribute
essential commodities through the public
distribution system [PDS]
• Hence the responsibility for logistics of those
items falls on the state.
• State owns the net work of railways, net work that
is the cheapest mode of transport for bulk.
• Nodal points in the value chain of such
commodities can provide movement consolidation.
• State owned rail net work can link these nodes to
the best advantage of state and thereby to that of
06/24/08 national economy. 96
Some characteristics of nodal points are as
under
2. Nodal points should be closer to consumption
points.
3. Number of nodal points would depend on
volume of distribution. Neither too many nor too
less
4. Nodal points should be well connected by rail
net work.
5. Terminal and shunting facilities are required at
these places.
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5. Facilities for loading, unloading & inter modal
handling.
2. Shipments from the nodal points would be by
road in trucks or rail
3. Nodal points should be connected to
consumption centers by roads
4. Normally, nodal points are district
headquarters for necessary operational support
5. Strategic role by central and state governments
6. Strategic development of such nodal points in
the country strengthens the logistical operations
for essential commodities and bulk materials
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CONTAINER CORPORATION OF INDIA
CONCOR
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CONCOR
Set up in March 1988 under the Companies
Act, to profitably satisfy our customer's needs for
high quality, cost effective logistics services
Commenced operation from November 1989
taking over the existing network of 7 ICDs from
the Indian Railways
A network of more than 40 terminals, offering
scheduled and on demand rapid rail and road
services between the hinterland and ports, and
between major metros.
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Inland Container Depots/Container Freight
Station
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Material Handling in ICD
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Inland Container Depots and Container
Freight Stations
• An ICD is a common user facility with public
authority status
• Equipped with fixed installations and offering
services for handling and temporary storage of
import/ export laden and empty containers
under Customs control
• Customs and other agencies competent to clear
goods for home use, warehousing, temporary
missions, re-export, temporary storage for
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onward transit and outright export 104
• Trans-shipment of cargo can also take place
from such stations
• I C Ds are dry ports
• connect major ports [able to handle container
ships] to hinterland
• facilitate customs clearance, export import
formalities
• ICD to be located after ascertaining export
import potential and good road net work
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• Serve as consolidation facility and should have
handling equipment. Facility to group small
consignments goods transfer from road to rail and
otherwise
• Increase the export potential of industries in the
hinterland
• Decongest major ports
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