Logistics and Supply Chain Management 22MBA31

Module - 5
Introduction to Distribution Management
Designing the distribution network, role of distribution, factors influencing distribution, design
options, distribution networks in practice. HUB & SPOKE V/S Distributed Warehouses. Mode of
transportation and criteria of decision. Transportation Infrastructure. Factors impacting road
transport cost, Packaging Issues in Transportation, role of containerization, Hazards in
transportation, State of Ocean Transport, global alliances.

Distribution Management:
Distribution management refers to the process of overseeing the movement of goods from supplier
or manufacturer to point of sale. It is an overarching term that refers to numerous activities and
processes such as packaging, inventory, warehousing, supply chain, and logistics.

What Is Distribution Management

Distribution management is the process used to oversee the movement of goods from supplier to
manufacturer to wholesaler or retailer and finally to the end consumer. Numerous activities and
processes are involved, including raw good vendor management, packaging, warehousing,
inventory, supply chain, logistics and sometimes even block chain

What is distribution management process?

It is part of the larger logistics system that includes the planning and creation of processes for
managing supplies of goods and transport. It involves several aspects, such as packaging, routing,
warehousing storage, and fleet management.

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Factors Influencing Distribution Network Design

At the highest level, performance of a distribution network should be evaluated along two
dimensions:
1.Customer needs that are met.
2.Cost of meeting customer needs. The customer needs that are met influence the company’s
revenues, which along with cost decide the profitability of the delivery network.
3.While customer service consists of many components, we will focus on those measures that are
influenced by the structure of the distribution network.
These include:
 Response time
 Product variety
 Product availability
 Customer experience
 Order visibility
 Returnability

Designing the distribution network

Designing a distribution network involves strategically planning and configuring the infrastructure
and processes for the efficient movement of products from manufacturers or suppliers to end
customers. The goal is to optimize costs, lead times, and customer service levels. Here's a step-by-
step guide to designing a distribution network:
 Define Objectives and Constraints: Clearly outline the objectives of the distribution
network design, such as minimizing costs, reducing delivery lead times, or maximizing
service levels. Identify any constraints, such as budget limitations, geographical
considerations, or regulatory requirements.
 Segment the Market: Divide your target market into segments based on factors like
geography, customer density, demand patterns, and product characteristics. This
segmentation helps tailor the distribution network to different customer needs.
 Network Configuration Options: Determine the types of distribution networks that could
meet your objectives, such as centralized, decentralized, hybrid, or multi-echelon
networks. Each option has trade-offs in terms of cost, speed, and responsiveness.

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 Location Analysis: Identify potential warehouse or distribution centre locations based on

factors like proximity to suppliers, customers, transportation hubs, and labour availability.
Use tools like Geographic Information Systems (GIS) for spatial analysis.
 Facility Sizing: Determine the size and capacity of distribution centres based on factors
such as projected demand, SKU (Stock Keeping Unit) diversity, and storage requirements.
 Transportation Strategy: Decide on transportation modes (road, rail, air, sea) and carriers
that align with the network's goals. Optimize transportation routes for efficiency and cost-
effectiveness.
 Inventory Strategy: Define inventory policies, including safety stock levels, reorder
points, and replenishment strategies. Consider factors like demand variability and lead
times.
 Network Optimization: Utilize mathematical models and optimization techniques to
simulate and analyse different network configurations. These models help identify the
optimal number and location of facilities, as well as transportation routes.
 Technology and Automation: Evaluate technologies such as Warehouse Management
Systems (WMS), Transportation Management Systems (TMS), and automation solutions
to enhance network efficiency and visibility.
 Risk Assessment and Contingency Planning: Identify potential risks and disruptions,
such as natural disasters or supply chain interruptions. Develop contingency plans to
mitigate these risks and ensure business continuity.
 Cost Analysis: Calculate the costs associated with different network configurations,
including facility setup costs, operational costs, transportation costs, and inventory
carrying costs.
 Service Level Analysis: Assess the impact of different network designs on customer
service levels, lead times, and order fulfilment accuracy.
 Scenario Analysis: Conduct sensitivity analysis and scenario modelling to understand how
changes in variables, such as demand fluctuations or new market entry, affect the network's
performance.
 Implementation Plan: Develop a phased implementation plan that outlines the steps for
setting up and transitioning to the new distribution network. Consider factors like timeline,
resource allocation, and change management.
 Continuous Improvement: Regularly monitor and evaluate the performance of the
distribution network against the established objectives. Implement adjustments and
improvements as needed based on changing market conditions and business priorities.

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Role of distribution:
The role of distribution within a business or supply chain is multi-faceted and vital for the
successful movement of goods and services from producers to consumers. Distribution
encompasses a range of functions and responsibilities that contribute to efficient operations,
customer satisfaction, and overall business success. Here are some key roles of distribution:
 Product Availability: Distribution ensures that products are readily available and
accessible to customers at the right locations and in the right quantities. This availability is
essential to meet customer demands and preferences.
 Market Reach: Distribution extends the reach of products to a wider market. It enables
businesses to tap into new geographic areas and customer segments, thereby increasing
sales and market share.
 Inventory Management: Distribution involves managing inventory levels to strike a
balance between maintaining sufficient stock to fulfil orders and minimizing excess
inventory costs.
 Order Fulfilment: Distribution facilitates the efficient processing and fulfilment of
customer orders. It involves picking, packing, and shipping products accurately and
promptly.
 Logistics and Transportation: Distribution manages the logistics and transportation
aspects of the supply chain, including selecting optimal transportation modes, routing, and
scheduling deliveries.
 Warehousing and Storage: Distribution includes managing warehouses and storage
facilities where products are stored before distribution. Proper warehousing ensures
efficient inventory management and timely order fulfilment.
 Channel Management: For businesses with complex distribution channels, distribution
involves managing relationships with intermediaries such as wholesalers, distributors, and
retailers.
 Last-Mile Delivery: The final stage of distribution is last-mile delivery, which focuses on
delivering products directly to the end customer. This stage is crucial for ensuring timely
and accurate delivery.
 Reverse Logistics: Distribution manages the process of handling returned products,
repairs, replacements, and recycling, contributing to customer satisfaction and
sustainability efforts.

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 Supply Chain Integration: Distribution interacts with various other functions within the
supply chain, such as procurement, manufacturing, and sales. Coordination and integration
between these functions are essential for smooth operations.
 Customer Satisfaction: Effective distribution contributes to customer satisfaction by
ensuring products are available, delivered on time, and in good condition, meeting or
exceeding customer expectations.
 Cost Management: Distribution plays a role in managing costs associated with
transportation, warehousing, inventory, and order fulfilment. Cost-effective distribution
strategies enhance overall profitability.
 Data and Analytics: Modern distribution relies on data and analytics to optimize routes,
forecast demand, and make informed decisions to improve distribution efficiency.
 Technology Integration: Distribution utilizes technology solutions such as Warehouse
Management Systems (WMS), Transportation Management Systems (TMS), and tracking
technologies for real-time visibility and control.
 Sustainability: Distribution can contribute to sustainability efforts by optimizing
transportation routes, reducing carbon emissions, and adopting eco-friendly packaging
practices.

Factors Influencing Channel of Distribution

(A) Product Considerations:
The nature and type of product helps in determining a decision about channel of distribution.
 Price of Product: A high priced product will have less middlemen because the number of
buyers will be limited. On the other hand, a low-priced product with large number of buyers
will require more channels of middlemen to reach the customers. A manufacturer will not
be able to deal directly with large number of buyers.
 Weight: Heavy and bulky products will have to be sold directly to reduce handling costs.
Coal, stones, cement, etc. are some of the examples. Light products, on the other hand, will
require more middlemen.
 Standardisation: When a product is standardised, it will have universal clientele and may
need more middlemen for reaching far off customers. If a product is non-standardised or is
produced as per the specifications of the buyer then it cannot have more middlemen.

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 Product Nature: A product of perishable nature cannot have more middlemen because it
will have to reach the consumer at the earliest. Bread manufacturers normally have a direct
contact with retailers.
 After Sale Services: A product may require after sale service. The product like motor
vehicles, fridges, televisions require after sale service. The channel of distribution will be
short for such products.
(B) Market Considerations:
The nature and type of market and customers influence a decision for selecting channels of
distribution.
Following factors associated with marketing are important:
 Market Size: If the product is to be sold in a large area, then it will require long channel
of distribution. A product to be marketed in a limited area will not require more middlemen.
 Nature of Customers: The products required for industrial use are directly bought from
manufacturers but products for direct use of customers will require middlemen for reaching
customers.
 Location of Buyers: The location of buyers is also important for selecting the type of
middles. When buyers are located at thickly populated areas then direct selling will be
convenient. When the buyers are dispersed in large areas then the use of wholesalers and
retailers will be essential.
(C) Consumer Considerations:
The quantity to be purchased and the number of customers also influence the selection of a
particular channel of distribution.
Following considerations are discussed:
 Number of Customers: The number of customers also influences the channel of
distribution. When the number of customers is small and they are located at central places
then direct selling will be easy and economical. If the number of customers is large and
they are scattered over different areas then middlemen will be helpful in marketing.
 Quantity to he Purchased: When customers purchase large quantity of goods then they
should prefer to deal with the manufacturers/ producers. On the other hand, if customers
purchase small quantities, then sale through middlemen will be easy.
(D) Middlemen Considerations:
The impact of middlemen’s commission on price and their effect on sales will help in deciding
about the channel of distribution.

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Following factors will have to be kept in mind in this connection:

 Availability: The availability of suitable middlemen is essential for deciding about the
channel of distribution. If proper and reliable middlemen are not forthcoming then the
channel will have to be kept as short. This may happen that suitable middlemen are already
engaged in competitor’s products. In such situations the producer will have to reach the
customer directly.
 Cost: The effect of middlemen’s commission in selling price will have to be taken into
account before deciding about the number of middlemen. If their commission will increase
the product price substantially then middlemen should be minimum. Otherwise, it will
adversely affect the competitiveness of the product.
 Effect on Sales: Whether the middlemen will help in accelerating the sales of the product
or not should be kept in mind. If a long line of middlemen does not help in increasing the
volume of sales then it will be unadvisable to add to the cost of the product by having a
long channel of distribution. It may help in increasing sales by reducing middlemen costs
and lowering the selling price of the product.
(E) Manufacturer’s Considerations:
The objective, size and financial position of the manufacturer also influences the channel of
distribution.
The following considerations may be taken into account in this connection:
 Financial Position: The financial position of the manufacturer helps him is selecting the
channel of distribution. If the manufacturer is financially sound then he can give credit to
big consumers by avoiding middlemen. In case he cannot afford to block money for some
time then he may have to rely on wholesalers.
 Volume of Production: A manufacturer with large volume may prefer to open his own
retail outlets for sales. A small manufacturer, on the other hand, will have to depend upon
middlemen for selling his products.
 Control over Distribution: A firm may like to keep tight control over distribution of its
goods. Such a concern will prefer short channel of distribution. If the firm does not intend
to control distribution, then it may not bother about the number of middlemen.
The factors discussed above cannot be taken separately rather their collective impact will influence
a decision about the channel of distribution. The distribution channel should not be selected in
haste or carelessly because it has long term effect on the sales of the product and the reputation of
the manufacturer.

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Design Options for a Distribution Network

In this section, we discuss distribution network choices from the manufacturer to the end con-
sumer. When considering distribution between any other pair of stages, such as supplier to manu-
facturer or even a service company serving its customers through a distribution network, many of
the same options still apply.
Managers must make two key decisions when designing a distribution network:
1. Will product be delivered to the customer location or picked up from a prearranged site?
2. Will product flow through an intermediary (or intermediate location)?
Based on the choices for the two decisions, there are six distinct distribution network designs that
are classified as follows:
1. Manufacturer storage with direct shipping
2. Manufacturer storage with direct shipping and in-transit merge
3. Distributor storage with package carrier delivery
4. Distributor storage with last mile delivery
5. Manufacturer / distributor storage with costumer pickup
6. Retail storage with customer pickup

1. Manufacturer Storage with Direct Shipping

In this option, product is shipped directly from the manufacturer to the end customer, bypassing
the retailer (who takes the order and initiates the delivery request). This option is also referred to
as drop shipping. All inventories are stored at the manufacturer. Information flows from the
customer, via the retailer, to the manufacturer, while product is shipped directly from the
manufacturer to customers. In some instances like Dell, the manufacturer sells directly to the
customer. Online retailers such as eBags use drop shipping to deliver goods to the end consumer.
eBags does not hold any inventory of bags and has them drop shipped directly from the
manufacturer to the customer.
The performance characteristics of drop shipping along various dimensions are summarized
as follows
• Inventory: Lower costs because of aggregation. Benefits of aggregation are highest for low
volume, high value items. Benefits are very large if product customization can be postponed at the
manufacturer

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• Transportation: Higher transportation costs because of increased distance and disaggregate

shipping
• Facilities and handling Information: Lower facility costs because of aggregation, Some saving
on handling costs if manufacturer can manage small shipments or ship from production line,
Significant investment in information infrastructure to integrate manufacturer and retailer
• Response time: High response time of between 1-2 weeks because of increased distance and two
stages for order processing. Response time may vary by product, thus complicating receiving
• Product variety: Easy to provide a very high level of variety
• Product availability: Easy to provide a high level of product availability because of aggregation
at manufacturer
• Customer experience: Good in terms of home delivery but can suffer if order from several
manufacturers is sent as partial shipments
•Order visibility: More difficult but also more important from a customer service perspective
• Returnability: Expensive and difficult to implement

2. Manufacturer Storage with Direct Shipping and In-Transit Merge

Unlike pure drop shipping where each product in the order is sent directly from each manufacturer
to the end customer, in-transit merge combines pieces of the order coming from different locations
so that the customer gets a single delivery. Information and product flows for the in-transit merge
network. When a customer orders a PC from Dell along with a Sony monitor, the package carrier
picks up the PC at the Dell factory, the monitor at the Sony factory and merges the two together at
a hub before making a single delivery to the customer.
The performance of factory storage with in-transit merge is compared with drop shipping is
as follows
 Inventory: Similar to drop shipping
 Transportation: Somewhat lower transportation costs than drop-shipping
 Facilities and handling: Handling costs higher than drop shipping at carrier, receiving
costs lower at customer
 Information: Investment is somewhat higher than for drop-shipping
 Response time: Similar to drop shipping, may be marginally higher
 Product variety: Similar to drop shipping

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 Product availability: Similar to drop shipping

 Customer experience: Better than drop shipping because a single delivery has to be
received
 Order visibility: Similar to drop shipping
 Returnability: Similar to drop shipping
The main advantage of in-transit merge over drop shipping is the somewhat lower transportation
cost and improved customer experience. The major disadvantage is the additional effort during the
merge itself. Given its performance characteristics, manufacturer storage with in-transit merge is
best suited for low to medium demand, high value items where the retailer is sourcing from a
limited number of manufacturers.

3. Distributor Storage with Carrier Delivery

Under this option, inventory is not held by manufacturers at the factories but is held by distributors
/ retailers in intermediate warehouses and package carriers are used to transport products from the
13intermediate location to the final customer. Amazon.com as well as industrial distributors like
W.W. Grainger use this approach combined with drop shipping from a manufacturer. Information
and product flows when using distributor storage with delivery by a package carrier.
The performance of distributor storage with carrier delivery is summarized as follows
 Inventory: Higher than manufacturer storage. Difference is not large for faster moving
items
 Transportation: Lower than manufacturer storage. Reduction is highest for faster moving
items
 Facilities and handling: Somewhat higher than manufacturer storage. The difference can
be large for slow moving items
 Information: Simpler infrastructure compared to manufacturer storage
 Response time: Faster than manufacturer storage
 Product variety: Lower than manufacturer storage
 Product availability: Higher cost to provide the same level of availability as manufacturer
storage
 Customer experience: Better than manufacturer storage with drop shipping
 Order visibility: Easier than manufacturer storage
 Returnability: Easier than manufacturer storage

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Distributor storage with carrier delivery is well suited for medium to fast moving items. Distributor
storage also makes sense when customers want delivery faster than offered by manufacturer
storage but do not need it immediately. Distributor storage can handle somewhat lower variety
than manufacturer storage but can handle a much higher level of variety than a chain of retail
stores.

4. Distributor Storage with Last Mile Delivery

Last mile delivery refers to the distributor / retailer delivering the product to the customer’s home
instead of using a package carrier. Webvan, Peapod, and Alberston’s have used last mile delivery
in the grocery industry. Unlike package carrier delivery, last mile delivery requires the distributor
warehouse to be much closer to the customer, increasing the number of warehouses required.
The performance characteristics of distributor storage with last mile delivery are
summarized as follows
•Inventory: Higher than distributor storage with package carrier delivery
•Transportation: Very high cost given minimal scale economies. Higher than any other
distribution option
•Facilities and handling: Facility costs higher than manufacturer storage or distributor storage
with package carrier delivery, but lower than a chain of retail stores
•Information: Similar to distributor storage with package carrier delivery
•Response time: Very quick. Same day to next day delivery
•Product variety: Somewhat less than distributor storage with package carrier delivery but larger
than retail stores
•Product availability: More expensive to provide availability than any other option except retail
stores
•Customer experience: Very good, particularly for bulky items
•Order traceability: Less of an issue and easier to implement than manufacturer storage or
distributor storage with package carrier delivery
•Returnability: Easier to implement than other options. Harder and more expensive than a retail
network

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5. Manufacturer or Distributor Storage with Consumer Pickup

In this approach, inventory is stored at the manufacturer or distributor warehouse but customers
place their orders online or on the phone and then come to designate pickup points to collect their
orders. Orders are shipped from the storage site to the pickup points as needed. Examples include
7dream.com operated by 7 Eleven Japan, which allows customers to pick up online orders at a
designated store. A B2B example is W. W. Grainger where customers can pick up their order at
one of the Grainger retail outlets. In the case of 7dream.com, the order is delivered from a
manufacturer or distributor warehouse to the pickup location. In the case of Grainger, some items
are stored at the pickup location while others may come from a central location.
The performance characteristics of manufacturer or distributor storage with consumer
pickup sites are summarized as follows
•Inventory: Can match any other option depending on the location of inventory
•Transportation: Lower than the use of package carriers, especially if using an existing delivery
network
•Facilities and handling: Facility costs can be very high if new facilities have to be built. Costs
are lower if existing facilities are used. The increase in handling cost at the pickup site can be
significant
•Information: Significant investment in infrastructure required
•Response time: Similar to package carrier delivery with manufacturer or distributor storage.
Same day delivery possible for items stored locally at pickup site
•Product variety: Similar to other manufacturer or distributor storage options
•Product availability: Similar to other manufacturer or distributor storage options
•Customer Experience: Lower than other options because of the lack of home delivery. In areas
with high density of population loss of convenience may be small
•Order visibility: Difficult but essential
•Returnability: Somewhat easier given that pickup location can handle returns
The main advantage of a network with consumer pickup sites is that it can lower delivery cost,
thus expanding the set of products sold as well as customers served online. The major hurdle is the
increased handling cost at the pickup site. Such a network is likely to be most effective if existing
locations such as convenience or grocery stores are used as pickup sites because such a network
improves the economies from existing infrastructure. Unfortunately, such sites are typically
designed to allow the customer to do the picking and will need to develop the capability of picking
a customer specific order.

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6. Retail Storage with Customer Pickup

In this option, inventory is stored locally at retail stores. Customers either walk into the retail store
or place an order online or on the phone, and pick it up at the retail store. Examples of companies
that offer multiple options of order placement include Albertsons.com. Albertsons uses part of the
facility as a grocery store and part of the facility as an online fulfilment centre. Customers can
walk into the store or order online. A B2B example is W. W. Grainger where customers can order
online, by phone, or in person and pick up their order at one of the Grainger retail outlets.
Albertson’s stores its inventory at the pickup location itself. In the case of Grainger, some items
are stored at the pickup location while others may come from a central location. Local storage
increases inventory costs because of lack of aggregation.
•Inventory: Higher than all other options
•Transportation: Lower than all other options
•Facilities and handling: Higher than other options. The increase in handling cost at the pickup
site can be significant for online and phone orders
•Information: Some investment in infrastructure required for online and phone orders
•Response time: Same day (immediate) pickup possible for items stored locally at pickup site
•Product variety: Lower than all other options
•Product availability: More expensive to provide than all other options
•Customer experience: Related to whether shopping is viewed as a positive or negative
experience by customer
•Order visibility: Trivial for in store orders. Difficult, but essential, for online and phone orders
•Returnability: Easier than other options given that pickup location can handle returns

Distribution Networks in Practice:

 The ownership structure of the distribution network can have as big an impact as the
type of distribution network. The bulk of this chapter deals with different types of
physical networks and subsequent flows to distribute products successfully. However,
equally important is who owns each stage in the distribution network. Distribution
networks that have exactly the same physical flow but different ownership structures can
have vastly different performance. For example, a manufacturer that owns its distribution
network can control the network's actions. However, if the manufacturer does not own the

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distribution network, as is more often the case, a wide variety of issues need to be taken
into account to optimize over the network.
 The choice of a distribution network has very long-term consequences. The structure
of the distribution network is one of the most difficult decisions to change. The impact
often lasts for decades, amplifying the importance of the choice.
 Consider whether an exclusive distribution strategy is advantageous. Another
impor-tant choice is whether to distribute exclusively or not. For instance, a manufacturer
of consumer electronics such as Sony could choose to have relationships with many
distributors such as Best Buy, Circuit City, and Wal-Mart. In this case, Sony would be
interested in increasing the avail-ability of its products to customers and would certainly
not mind if its distributors competed with each other to sell Sony products to customers.
An alternative, which is more plausible for a manufacturer of very-high-end stereo
equipment, is to form an exclusive relationship with a distributor. In this case, customers
can buy this brand's products only from a single retailer.

 Product price, commoditization, and criticality affect the type of distribution system
preferred by customers. Interactions between a buyer and a seller take time and resources.
Many buyers would like to establish a relationship with a single enterprise that can deliver
a full line of products. This can be accomplished by a manufacturer with a broad line of
products. However, this is often accomplished more effectively by a distributor carrying
products from many manufacturers. A customer's desire for a one-stop shop depends not
just on the convenience of the relationship, but also on the type of product he or she is
buying. The more differentiated an item is, the more likely that a customer will be willing
to have a relationship solely around that particular product.

"HUB & SPOKE" and "Distributed Warehouses"

"HUB & SPOKE" and "Distributed Warehouses" are two different approaches to organizing the
storage and distribution of goods in a supply chain. Each approach has its advantages and
disadvantages, and the choice between them depends on various factors like the company's size,
the nature of its products, geographical distribution, and customer demand patterns.

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Hub and spoke is a term used to describe any process that resembles the
wheel of a bicycle, where paths (spokes) shoot out from a central location
(the hub). In the logistics industry, a hub and spoke distribution model is
used to disperse inventory to multiple fulfillment centers from a large
distribution center.
Here are some examples of companies or industries that commonly use
the HUB & SPOKE model in their supply chain and distribution
operations:
• Package Delivery Companies
• Airline Industry
• Retail Chains
• E-commerce Fulfillment
• Postal Services
• Beverage Companies

V/S

Distributed Warehouses
The term "distributed warehouse" refers to a distribution strategy
where a company maintains multiple warehouses or distribution
centers in different geographic locations. Each warehouse acts as a
regional or local hub for receiving, storing, and distributing products
to customers in its vicinity. This approach allows the company to have
a decentralized network of storage and distribution points rather than
relying on a single central hub.

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Hub and Spoke

• Inventory is concentrated in a central hub and then distributed to the spokes as per demand.
• Longer lead times for customers farther from the central hub.
• Vulnerable to disruptions at the central hub, which can impact the entire supply chain.

V/S
Distribution Warehouse
• Inventory is dispersed across multiple warehouses, each catering to a specific region or
customer base.
• Shorter lead times for customers due to warehouses being closer to their locations.
• More resilient as disruptions at one warehouse have a limited impact on the rest of the
network.

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Concept of Transportation
Transportation is the most essential component of a supply chain. It involves the delivery of
products from the start to the end of a supply chain. For a supply chain to be deemed effective, the
transportation segment must be managed efficiently. This involves making sure the transport and
logistics strategy is dynamic and responsive to the demands of the market.
The transportation in a supply chain entails ferrying a product from a supplier to a customer or a
distribution store by road, rail, pipeline, air or sea. Factors involved in transportation include cost,
service/transit time and movement of products. These are the most pertinent issues in an effective
supply chain. Others include integration among customers, carriers, and suppliers and information
flow.
Firms uses different combinations of transportation modes and routes that allow the inventories to
move between the different locations in the supply chain. The movement of goods and persons
from place to place and the various means by which such movement is accomplished. Both speed
and cost of transportation is being affected by the type of transportation used by the firm.
Transportation is the metal link that holds the supply chain together. Every step of the process is
connected through transportation, since raw materials re moved from the dealers or here they are
purchased from, to the place where they are manufactured, and finally to the end customer.

Role of Transportation
Transportation plays a crucial role in modern society, serving as a vital infrastructure that
facilitates the movement of people, goods, and services from one place to another. Its significance
extends across various sectors and has far-reaching impacts on economic, social, and
environmental aspects. Here are some key roles of transportation:
Economic Growth and Trade: Transportation enables the movement of goods between
producers, suppliers, and consumers. It supports national and international trade by connecting
markets and facilitating the exchange of goods and services, thus contributing to economic growth
and prosperity.
Supply Chain Management: Transportation is an integral component of supply chains, ensuring
that raw materials, components, and finished products are delivered efficiently to various points
within the production and distribution network.
Access to Markets and Opportunities: Transportation provides access to job opportunities,
education, healthcare, and essential services. It enhances mobility, allowing people to reach places
that offer better prospects for employment, education, and quality of life.

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Tourism and Hospitality: An effective transportation system supports the tourism industry by
making it easier for travellers to reach destinations, explore new places, and experience different
cultures. This sector contributes to economic growth and job creation.
Urbanization and Regional Development: Well-planned transportation systems can drive
urbanization and regional development. They connect urban centres with rural areas, improving
access to markets, services, and opportunities for marginalized communities.
Logistics and Distribution: Transportation plays a critical role in optimizing the flow of goods
within a supply chain. Efficient transportation systems reduce lead times, inventory costs, and
distribution challenges.
Job Creation: Transportation systems create direct and indirect job opportunities in various
sectors, including infrastructure development, vehicle manufacturing, logistics, and maintenance.
Globalization: Transportation has facilitated the globalization of economies, enabling businesses
to source materials, products, and services from around the world. This interconnectedness has
transformed the global economy.
Emergency Response and Disaster Relief: In times of emergencies or natural disasters,
transportation systems are essential for delivering supplies, resources, and aid to affected areas
quickly.
Cultural Exchange: Transportation fosters cultural exchange and knowledge sharing by allowing
people from different regions to interact, learn, and exchange ideas.
Environmental Impact: Transportation has significant environmental implications due to factors
like emissions, energy consumption, and infrastructure development. The shift toward sustainable
transportation options is crucial for mitigating environmental impact.
Innovation and Technology: The transportation industry drives innovation in areas like vehicle
design, propulsion systems (electric, hybrid, autonomous), navigation technologies, and smart
infrastructure.
Public Health: Access to transportation enhances public health by enabling timely access to
medical facilities, healthcare services, and emergency care.
Government Revenue: Transportation systems often generate revenue for governments through
taxes, tolls, and fees associated with vehicle ownership, fuel consumption, and infrastructure use.

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Mode of Transportation:
Rail, highways, water, pipeline, and air are the five main modes of transportation. Apart from these
the recently emerged forms of transportation are package carrier, ropeways, and inter-modal
system. Traffic volume, revenue, system mileage, and the nature of traffic composition are the
factors that can be used to determine the comparative significance of each mode. With respect to
these measures, each mode of transportation is explained below :

1) Roadways :
For the agricultural and industrial development of any nation, the most important mode can be
seen as the road transport. This method is quite useful in reaching to short and medium distances,
even to those places where other modes of transportation do not have their reach. The facility of
door-to-door service, which is not possible by other modes, is provided by road transport. In order
to bring the trade from the remote and rural areas to the urban and semi-urban areas, road
transportation can be used. With the help. of road transportation the basic infrastructure can be
built to ensure the connectivity of far-off villages with the rest of the nation. Because of the
increased demand and a huge development in industrial and agricultural sector, the significance of
road transportation is quite vital for making the product available at the place and time of
consumption. In the transport network of the country, the role of road transportation is quite
dominant.
2) Railways :
One of the principal carriers of men and material in the country is railways which plays a very
significant role in the trade and commerce activities of the country. It supplies essential
commodities. to different locations by transporting across the length and breadth of the country.
The industrialisation and development of many nations have been carried forward with the help of
railways. During the initial phase of industrialisation many countries were depending upon the

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railways as it was the main source of transportation which was available for moving the raw
material and finished products from one place to another. Chemicals, heavy material, farm
products, automobiles, and also the low value products are transported by railways. They have
greater efficiency in case of truckloads which can be shipped at a relatively cheaper price through
railways in comparison to smaller modes of transportations. A relatively lesser handling is required
in transporting the goods through railways. In order to facilitate easy loading and unloading of
material, different firms establish their facilities near to the rail lines.
3) Waterways/Sea :
In order to ship heavy, non-perishable, and low value goods (such as coal, grain, ore, and petroleum
products), the cheapest mode of transportation can be seen as waterways. There is a huge capacity
in case of water carriers. Products weighing a minimum of ten times the weight of one rail car can
be transported by waterways powered by towboats, tugboats, barges which move in inter coastal
canals and inland rivers. In fact the vessels which run in oceans can have thousands of containers.
There are a number of markets which are not connected with the waterways without the use of
railroad or trucks. The waterway shipping industry is segmented into various parts which are as
below :
Dry bulk carries, container ships, tankers, and special vessels are included in the shipping fleet
around the world. In India, approximately 32% of the total GRT (Gross Registered Tonnage) of
the shipping fleet is contributed by the dry bulk carriers and 33% of total fleet is accounted by the
tankers.
4) Airways :
Among all the other modes of transport, the least hazardous mode can be considered as the airways.
The cost of air transportation is quite high; thus, it is mainly used for the transportation of high
valued perishable products with limited life span. The facility of air cargo is mainly concentrated
near the gateway airports e.g, Delhi, Mumbai, Kolkata, Chennai, and Bangalore. About 87% of
the total air cargo is handled by these airports in India. Anticipating the growing needs of cargo
airways and passenger airways, the Government of India is inviting the interested private players
in the air transport services and its associated services such as airports.
5) Pipelines :
The use of pipeline for transportation of petroleum was first done by Samuel Van Syckel in the
year 1870 in Pithole, Pennysyivania. The face of transportation was changed after twenty years by
Standard Oil Company of North-Western Pennysylvania. The pipeline transportation was first use
for transporting the petroleum but its scope is enhanced by using it for transporting many
commodities such as coal in slurry form, chemicals, natural gas, iron ore fines in slurry form, etc.
Although the initial cost of setting up the network of pipelines is quite high but later it helps in
reducing the operating costs. Almost all public and private sector petroleum refineries use the
pipelines for the transportation of petroleum products. These can be thought of as the most

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automated mode of transportation which mainly carries the products of a shipper as it belongs only
to a certain shipper. Mainly chemicals or petroleum products are transported by the pipelines.
There are numerous environmentalists who have. their concerns regarding the effect of pipeline
on the environment such as harm to plants and animals due to installation and leaks.
6) Ropeways :
Out of the total geographical area of India, over 16% is comprised of hilly locations. The problem
of transportation is quite prominent in these locations due to the long circuitous paths. Sometimes,
the transportation of essential commodities and other materials is quite vital due to their strategic
significance in the defence programs of the nation. Ropeways can be seen as the economical and
faster mode of transportation in the hilly areas, especially when the oil shortage is going on. The
various merits of ropeways are as follows :
 Lesser harm to the ecology.
 Shorter routes can be used to reach to the remote hilly locations.
 The cost of ropeway transportation is lesser than the other modes.
 Over short distance, thee transportation of bulky products is quite fast.
7) Package Service :
The country, in last few decades, has faced a huge problem related to the availability of
transportation for small-shipments. Due to the different costs associated with the terminal and line
haul operations, the small-shipment service providers charged quite high prices. The providers
cannot decrease the prices as different overheads impose certain minimum charges on them
irrespective of the size of shipment and the distance of destination. Due to such obstacles, some
private companies realised the potential of specialised services for package-service or small-
shipment market.
8) Inter-modal Transportation :
Taking the economic advantages of two or more modes of transportation by combining them with
each other to facilitate the transportation service at a least possible total cost is known as inter-
modal transportation. In order to combine the various modes of transportations, various efforts are
carried out over the years. The concept of inter modal transportation is not a new concept, it has
originated during the early years of 1920s but in order to control the monopoly practices, different
restrictions were imposed on the cooperative practices. During 1950s, this mode started gaining
popularity as the advantages of road and rail transportation were combined to fora an inter-modal
transportation known as piggy back service. The flexibility of motor or road transport for low
distances and the low line-haul cost of rail for longer distances were combined to form this
common inter-modal transportation. In order to gain the higher efficiency and effectiveness of

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transportation, the popularity of inter-modal transportation has increased significantly in recent

years.

Decision Criteria for Mode of Transportation

Choosing the appropriate mode of transportation involves considering various factors based on the
specific context and requirements of the journey. Here are some decision criteria to consider when
selecting a mode of transportation:
Distance: The distance to be covered is a critical factor. Short distances might favor walking,
biking, or using public transport, while longer distances could necessitate air travel or long-
distance trains.
Speed and Time: If time is crucial, modes like airplanes and high-speed trains are often preferred
for their efficiency in covering long distances quickly.
Cost: Different modes vary in cost. Public transportation might be more economical for short
distances, while personal vehicles, especially for long trips, can be more expensive due to fuel,
maintenance, and tolls.
Convenience and Accessibility: Consider the ease of access to transportation options. Public
transportation might be readily available in urban areas, while remote locations could require
alternative modes or private vehicles.
Environmental Impact: Environmental concerns can influence the choice of transportation.
Modes like cycling, walking, and electric vehicles are more eco-friendly compared to conventional
gasoline-powered vehicles.
Comfort: The comfort of travel is essential, especially for long journeys. Airplanes and trains
typically offer more comfort than buses or crowded subways.
Luggage and Cargo: The amount and type of luggage or cargo you're carrying can affect your
choice. Cargo ships, trucks, and large vehicles are suited for transporting goods.
Health and Safety: Consider health and safety factors, especially during the ongoing pandemic.
Some modes might offer better ventilation and distancing options.
Infrastructure and Routes: Availability of transportation options and routes can impact your
decision. Airports, train stations, and bus stops need to be accessible.
Flexibility and Mobility: Personal vehicles offer more flexibility, enabling you to choose your
schedule and route. Public transport might have fixed schedules and routes.
Traffic and Congestion: In urban areas with heavy traffic, public transport or biking might be
faster and more reliable than personal vehicles.

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Cultural Experience: Some modes of transportation can provide unique cultural experiences.
Taking a scenic train ride or a leisurely boat cruise could enhance the journey.
Special Needs: If you have mobility challenges or specific needs, consider modes with
accessibility features.
Weather Conditions: Weather can impact certain modes, such as biking or walking in inclement
weather, or flight delays due to storms.
Technology and Innovations: Emerging transportation technologies, like hyperloops or electric
scooters, could provide novel and efficient travel options.
Economic Considerations: Economic factors, such as the availability of discounts, promotions,
or subsidies, can influence your decision.
Company or Group Travel: Traveling alone versus in a group can impact the feasibility and cost-
effectiveness of different modes.
Legal and Regulatory Factors: Different regions might have regulations that affect certain modes
of transportation, such as restrictions on drones or electric scooters.
Ultimately, the choice of transportation depends on a combination of these factors, and the decision
might involve trade-offs. It's important to evaluate your priorities, the specific travel context, and
any constraints before making a decision.

Functions of Transportation: Transport creates place utility by moving the goods from the place
of production to the place of consumption. While all modes of transport are used for cargo
transport, there is high differentiation between the nature of the cargo transport, in which mode is
chosen.

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1) Movement of Products :
The fundamental function of transportation is to move the products from one place to another. The
upward and downward movements of products in the value chain are facilitated by transportation.
Transportation is important for moving the material to the next stage of manufacturing process and
also closer to the customer. The material can be in the form of components, assemblies, materials,
work-in-progress, finished products.
2) Storage of Products :
Storing the product in the vehicles for temporary purpose can be seen as another function of
transportation. It can be seen as a costly source of storage but it is less expensive than the cost of
unloading the material in a warehouse for few days and again loading it. Vehicles are used as
temporary storage facility because sometimes the need of storing the in-transit shipment, generally
for few days, arises. Another situation where the transportation vehicle can be used as a storage
facility is when the space in the warehouse is limited.
3) Economic Utility:
As per the economic theories, creating place utility (right place) for the products, distributed and
produced by the firm, can be seen as the main function of transportation. When the goods are
placed where they are to be consumed, it is regarded as place utility. Apart from having the
products at the right place, it is also important to have the product at the right time (time utility)
and in right form (form utility). Moreover, the products should be owned by or in custody of the
person who really wants to consume these products creating 'possession utility'. All the discussed
utilities depend the efficiency and effectiveness of transportation.
4) Geographic Specialisation :
When the products are produced in that nation, region, or city which suits best as per the capital,
talent, labour, raw material, and other resources of the company, it as regarded as 'geographic
specialisation'. Some level of economic inefficiency can be resulted when such specialisation does
not occur. In other words, when a certain region, nation, or city is not able to produce certain
products because of its misfit with some of the factors then the extra resources and efforts need to
be applied.
For example, if area A is specialised in product X then it needs to depend on other areas for
fulfilling its need of things other than the product A.
5) Large-Scale Production :
In order to enable the large scale production, any firm will be requiring the collection of different
types of raw material, spare parts, equipment, items from number of sources and from number of
locations. Similarly, after producing the product it should be distributed to a large geographical

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market at a reasonable cost. Therefore, transportation is a very crucial element for carrying out a
large-scale production.

Transportation Infrastructure:
The quality of transportation infrastructure is an essential component in international
Competitiveness that mostly depends on the government for Provision and maintenance. It is
expected to promote enhanced development in countries based on networking effects and the
efficiency of the intermodal system.
Transportation plays a crucial role in the flow of goods, which can be affected by low quality
Infrastructure, reducing the country’s opportunities to integrate into the world economy ,a well-
developed infrastructure minimizes these adverse effects between regions It provides better
locations for economic activities, lower transportation , and complements production factors of
labour and capital .
1. Quality of Roads
Freights are brought to seaports and airports through inland freight mode whose quality is relevant
for timely deliveries, especially for sensitive goods.
Beyond the socio-economic requirements of a country, roads have turned into a critical mode of
transport especially for countries highly dependent on trade agreements, Low quality roads may
represent additional transportation costs, such as higher fuel consumption and transit time.
2. Quality of airports
Airport infrastructure in developing economies differ from that of advanced countries While
developing countries have a good number of airports, they face constraints, such as poor quality,
limited commercial services, and inadequate workforce.
These factors affect the process of exporting time-sensitive products and intermediate inputs
exchanged within production networks. the contributions of air transportation infrastructure in the
trade of goods have grown, Previous research confirmed its relation to economic development,
explicitly considering airport extensions to different economic stimuli such as timely delivery and
shifts in production networks.
However, research analysing its effect on developing economies seems scarce. By controlling the
impact of population size, industry structures, and human capital, they found that airports had a
positive effect on regional development, which was mainly driven by the movement of people and
cargo. the extensiveness of airports became more relevant as they increased in size. More actions
could be performed through the airport facility, which according is ideal for reducing transit Costs
in landlocked economies

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3.Quality of ports
The quality and efficiency of ports are essential for the development of a country. Containerization
is at the forefront of the globalization of markets, with its different connections and options for
transhipments. After the containerization revolution of the mid-1960s, ocean Shipping (UNCTAD,
2006) and specialized ships provided transportation to far-reaching destinations (Fink, 2002).
Maritime transport is considered a key component in international trade, and is typically used for
high volumes and restricted commodities that cannot be shipped via air.
4. Quality of railroads
Railroads are considered an efficient mode of inland transport, mostly for heavy freights over
Considerable distances. Railways particularly allow more benefits through economies of scale
such as smoother access to inputs, raw materials, and intermediate goods required by producers.

Factors impacting road transport cost

Transportation costs can impact crucial areas of business. They can affect the pricing of products
as well as the competitiveness of an organization in the market. Let’s take a look at different factors
affecting transportation costs.
1. Handling – Damaging goods and products in transport can result in unnecessary costs to
an organization. Sensitive or perishable products require more shipping costs as they need
to be handled and packed carefully.
2. Delivery Area – The cost of transportation is dependent on the delivery area covered by
an organization. A local delivery service can be cost-effective by covering short distances
with larger volumes. Whereas a nationwide delivery system will require a lot of strategic
planning and resources to be cost-effective.
3. Inefficient Routes – Setting up a cost-effective route is the core of any transportation
strategy. An inefficient route can affect the cost of transportation. Nowadays, organizations
are using digital tools like vehicle route optimization software to automate the process of
route planning cost-effectively.
4. Inefficient Schedules – Inefficient schedules can lead to more time on the road resulting
in extra fuel and toll costs. This can be a real bottleneck during pick-ups and disrupt both
the supply chain and last-mile delivery.
5. Urgency – Urgency of delivery will always hike up the transportation cost. Usually,
organizations try to cover some extent of the cost of urgency by the customer.

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6. Vehicle Capacity – Vehicle capacity can affect the cost of transportation. It determines
the number of pick-up stops to complete a delivery consignment. The increased number of
trips will result in additional fuel as well as labour costs.
7. Distance – Distance is the main reason behind a higher transportation cost. A good way to
control this factor is the optimization of routes adopted by the transportation system and
reducing the distance between various pick-up and drop-off points.

Hazards in transportation
Workers in the transportation industry face many challenges. Whether in the form of inclement
weather or the risk of accidents, truckers encounter problems. It’s important to recognize these
issues to help truckers become aware of potential mishaps. Keep reading to learn about the top five
safety hazards in the transportation industry today.
• Distracted Driving: Driving for extended periods of time can lead to distracted driving.
Some truckers believe they can multitask, take small breaks, or look at their phone while
on the road. However, this is a significant safety hazard. Keeping your eyes on the road is
only a portion of driving. Truckers must mentally register weather conditions, other drivers,
and obstacles on the road, meaning there is no room for distractions.

• Slips and fall: Slips and falls are a big problem in the transportation industry. Given that
truckers operate large vehicles, it can be difficult to enter or exit the truck. As a result, slips
and falls can occur. Fortunately, truckers can follow a written safety program for trucking
companies that covers fall protection and prevention.

• Changing Weather Conditions: Changing weather can affect driving conditions for
truckers. If a trucker is unable to adjust their driving accordingly, it could lead to a
dangerous situation. For example, if a trucker is driving through a mild snowstorm, they
must drive slowly and with caution. Failure to do so may cause the truck to slide on ice and
hit other vehicles. Ultimately, truckers must be aware of weather conditions and prepare
themselves to modify their driving accordingly.

• Ergonomic Injuries: Drivers can experience back, arm, leg, and hand pain from sitting in
uncomfortable positions for extended periods. In addition, when ergonomic injuries occur,
they can affect the driver’s ability to handle and unload cargo. Over time, injuries can delay
delivery and pick-up times and further affect the driver’s body.

• Transportation Accidents: One of the most obvious hazards is transportation accidents.

Truckers drive large vehicles that have significant blind spots and are difficult to
manoeuvre quickly. In addition, drivers are on the road for long hours through different

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weather conditions; the risk of accidents increases when truckers face bad road conditions
or encounter reckless drivers.
Workers in the transportation industry face many challenges and hazards. It’s essential to
recognize hazards to keep truckers aware of potential accidents. We hope our top five safety
hazards in the transportation industry were helpful to you. If you’re interested in written safety
programs for your trucking company, you should consider Industrial Compliance and Safety.
We offer a wide range of safety programs and manuals to help keep truckers safe

State of ocean transport

Ocean transportation is any movement of goods and/or passengers using seagoing vessels on
voyages that are undertaken wholly or partly at sea. With Twill, you can transport ocean freight
via our ocean transportation services in more than 150 countries and to and from over 300 ports.
1.Logistics managers reliant on ocean cargo shipping have been confronted with a series of
calamities and close calls this year, note industry analysts.
2.The pandemic led to global changes in consumption and shopping patterns, including a surge in
e-commerce. This was followed by increased import demand for manufactured consumer goods—
most of which are moved on container vessels.
3.With the lessening of lockdown measures and varying speeds of recovery worldwide—as well
as stimulus packages supporting consumer demand—inventory-building and frontloading
contributed to a further increase in containerized trade flows. Finally, the recent obstruction of the
Suez Canal by a grounded container ship contributed to another escalation of freight rates.
4.The United Nations Conference on Trade and Development (UNCTAD) recently released a
paper titled “Container Shipping in Times of COVID-19: Why Freight Rates Have Surged.”
5.It notes that the underlying causes of skyrocketing expenses are complex and include capacity
management by carriers and a severe shortage of containers. Pandemic-related delays in
intermodal connections further cloud the picture.
6.“The impact of the container shortage is greater on longer and thinner trade routes to developing
regions than on the main east-west routes
7.At the outset, the disruptions resulting from the pandemic, trade imbalances and changing trade
patterns led to shifts in the geography of container trade. Empty boxes were left in places where
they were not needed, and repositioning was not planned. Moreover, as carriers introduced “blank
sailings,” or skipped port calls, a mismatch between supply and demand for empty containers was
exacerbated, as empty boxes were left behind and failed to be repositioned.

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Global alliances
Shipping alliances have become the big thing for many shipping lines. As the alliances make it
possible to have lower prices and offer a larger variety of services. Do you want to know more
about three of the major shipping alliances worldwide and their benefits?
Recently, shipping alliances have been in the news:
“Hyundai Merchant Marine (HMM) is to join THE Alliance when its slot charter agreement with
2M expires next April”, according to the Loadstar.
Three major shipping alliances (2M, THE Alliance, and Ocean Alliance) were formed in 2017.
They were formed to facilitate two elements that ocean carriers compete on: low prices and broad
service coverage. These three alliances account for 80% of the global container market, according
to Alphaliner’s ranking of all the shipping lines.

Benefits of shipping alliances

Shipping alliances can help carriers facilitate low prices and broad service coverage through
economies of scale and economies of scope. The high fixed-cost structure of shipping lines is one
of the main arguments for shipping lines to collaborate. A weekly liner service between different
ports requires investment in a set of ships. They will sail irrespectively of their utilization rates.
Collaboration between carriers, for instance, through a vessel sharing agreement (VSA) can
mitigate this risk and increase utilization rates.
Shipping lines are under high pressure to offer low prices to their customers as container
transportation. Their business is mainly a commodity since containerization has brought down
transport costs.
Ship size significantly increased to mega-ships of more than 20,000 TEUs to generate lower costs
per transported container. Variable costs that can be reduced through the usage of shared resources
include many things not only ships. But also ports, terminals, and networks. In the end, shipping
alliances are tools used to acquire bigger ships together. As well as to share vessels to guarantee
high utilization rates. Because substantial cost savings (economies of scale) can only be achieved
if partners are willing to collaborate. Networking gives better services.
Moreover, collaboration helps carriers to improve service offerings to their customers through a
more comprehensive global shipping network. Research shows that extending coverage and
providing more routes is the most important motivation for participating in strategic alliances.
Why? Most shipping companies are stronger in certain areas. This usually happens with a lot of
experience and partnerships between carriers. Carriers, who are strong in complementary regions
with a broader network, increase service offerings to their customers.

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Entering alliances seems to be a good fit for smaller (extended service coverage) and larger
shipping lines (rationalization of resources). But, in the end, every carrier makes its own strategic
choices. This becomes clear when you look at the different strategies of MSC and their German
competitor, Hapag-Lloyd. For a long time, MSC focused on organic growth by acquiring ships
rather than shipping firms. It did not engage in alliances until 2015. In contrast, Hapag-Lloyd has
been collaborating in partnerships since 1989 and acquired various carriers, but never bought
mega-ships.

Packaging issues in transportation

• Packaging is instrumental in getting the merchandise to the destination a safe, presentable
condition.
• International shipping requires better packaging compared to domestic packaging.
• Packaging should be environmentally friendly and eco responsible.
• Intermodal containers must be encouraged.
• Cost attention should be considered for international packaging.

Importance of Packaging In Logistics

The world best materials in the world will be worthless if they are not able to reach their destination
and not only reaching their respective location is sufficient, but they must also be reached without
getting damaged. And to ensure, that your products are safe in their journey, packaging of the
goods play a vital role. In here we are discussing the importance of packaging in logistics.
1.Products Are Protected: Products that get damaged in the transportation process can create
significant difficulties. It will not only cost you the value of the damaged product and shipping
cost but, there is also a possibility you also need to send replacements. Which gives you an
additional cost?
Damaged goods upset clients, and gives the company a poor name. A good logistics packaging
keeps products safe, and ensures that your product arrives at their address in the perfect form and
free from any damage.
2.Give vital information to the customers: A distributor requires a lot of information about the
product. And a transportation packaging is a suitable position to display the same. Numerous
things can be printed on the packaging boxes. Simple things, like which way up the transportation
package required to put, or the products in the package are fragile or not. One can also give detailed
handling guidance, for example, an appropriate temperature range for the products which is getting
delivered.

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3.A good packaging makes storage of goods possible: A suitable packaging allows to store
products easily. It really does not matter what the size of the product, or how delicate a product is
if the right packaging is done.
4.Product packaging can even help you in increasing your sales figures: If the packaging of
your product is retail ready, your goods can be displayed on the counters in their custom display.
By selecting packaging that highlights brand colors, product information, and other information
which is required to know by a customer, the chances of sales goes up are quite bright.

What is containerization in shipping?

Shippers looking to reduce cargo handling, increase security and cut costs often turn to
containerization, the practice of consolidating multiple cargo shipments in a standardized ocean
container for transport as a single unit.
Even if containerization conveys numerous advantages to freight distribution, it does not come
without challenges. The main advantages of containerization are:

Role of containerization in logistics

• Standardization. The container is a standard transport product that can be handled anywhere in
the world (ISO standard) through specialized modes (ships, trucks, barges, and wagons),
equipment, and terminals. Each container has a unique identification number and a size type code,
allowing to be a unique transport unit that can be managed as such.
• Flexibility. Containers can be used to carry a wide variety of goods such as commodities (coal,
wheat), manufactured goods, cars, and refrigerated (perishable) goods. There are adapted
containers for dry cargo, liquids (oil and chemical products), and refrigerated cargo. Discarded
containers can be recycled and reused for other purposes.
• Costs. Container transportation offers lower transport costs due to the advantages of
standardization. Moving the same amount of break-bulk freight in a container is about 20 times
less expensive than conventional means. Containers enable economies of scale at modes and
terminals that were not possible through standard break-bulk handling. The main cost advantages
of containerization are derived from lower intermodal transport costs.
• Velocity. Transshipment operations are minimal and rapid, and ship port turnaround times have
been reduced from 3 weeks to about 24 hours. Because of this transshipment advantage, transport
chains involving containers are faster. Container shipping networks are well connected and offer
a wide range of shipping options. Containerships are also faster than regular cargo ships and offer
a frequency of port calls allowing a constant velocity.

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• Warehousing. The container is its own warehouse, protecting the cargo it contains. This implies
simpler and less expensive packaging for containerized cargoes, particularly consumption goods.
The stacking capacity on ships, trains (double-stacking), and on the ground (container yards) is a
net advantage of containerization. With the proper equipment, a container yard can increase its
stacking density.
• Security and safety. The container contents are unknown to carriers since it can only be opened
at the origin (seller/shipper), at customs, and the destination (buyer). This implies reduced spoilage
and losses (theft).

The main drawbacks of containerization are:

• Site constraints. Containers are a large consumer of terminal space (mostly for storage),
implying that many intermodal terminals have been relocated to the urban periphery. Draft issues
at the port are emerging with the introduction of larger containerships, particularly those of the
post-Panamax class. A large post-Panamax containership requires a draft of at least 13 meters.
• Capital intensiveness. Container handling infrastructures and equipment (giant cranes,
warehousing facilities, inland road, rail access) are important capital investments that require large
pools of available capital. This requires the resources of large corporations or financial institutions.
Further, the push towards automation is increasing the capital intensiveness of intermodal
terminals.
• Stacking. The complexity of the arrangement of containers, both on the ground and modes
(containerships and double-stack trains), requires frequent restacking, which incurs additional
costs and time for terminal operators. The larger the load unit or the yard, the more complex its
operational management.
• Repositioning. Because of trade imbalances, many containers are moved empty (20% of all
flows). However, either full or empty, a container takes the same amount of space. The observed
divergence between production and consumption at the global level requires the repositioning of
containerized assets over long distances (transoceanic).
• Theft and losses. High-value goods and a load unit that can forcefully be opened or carried away
(on a truck) implied a level of cargo vulnerability between a terminal and the final destination.
About 1,500 containers are lost at sea each year (fall overboard), mainly because of bad weather.
• Illicit trade. The container is an instrument used in the illicit trade of goods, drugs, and weapons,
as well as for illegal immigration (rare).

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Asst. Prof. Chandana TC

Department of Management Studies
Sai Vidya Institute of Technology Page 32