The role of transportation in a supply chain:

Movement of product from one location to another

Products rarely produced and consumed in the same location
Significant cost component
Shipper requires the movement of the product
Carrier moves or transports the product.

 Only 3 sectors contributed a larger share to the gross domestic product than transportation:
Housing, health care and food.
4 parts to understand transportation in a supply chain:
1. Carrier (portador):Makes investment decisions ‘’regarding’’ (respecto a) the transportation
equipment (locomotives, trucks), in some cases infrastructure (rail: carril) and then makes operating
decisions to try to maximize the return from theses ‘’assets’’ (bienes).
2. Shipper (expedidor): Uses transportation to minimize the total cost (transportation, inventory,
information, sourcing and facility) while providing an appropriate level of responsiveness to the
customer.
3. Propietary and operators of transport infrastructure
4. Different setting bodies transport policies.
Modes of transportation:
Air, road, rail, maritime, Inland waterways.

 Air:
Air freight is often used for high value and low volume shipments, as you might already know.
Advantages
1. It’s faster.
2. Greater geographical coverage
3. Security
4. Low accident rate
5. Allows intermodality
Disadvantages
1. More expensive.
2. Restrictions on the type of load (dangerous)
3. Limitation of the load by measuring doors and capacity, as well as weight

• Truck:
Truck transportation is the process or business of transporting goods using motored, wheeled, nonrail
vehicles known as trucks.
Designed to transport cargo.
Vary (size, power, and configuration)
It can be configured to mount specialized equipment.
Mainly linked to light industries where rapid movements of freight in small batches are the norm.
 Even if you choose to ship your products by sea or air, a truck is usually responsible for delivering the
goods from the port of arrival to their final destination.
Characteristics:
1. Carrying heavy duty
2. Conecting places.
3. Making easier transportation.
4. Helping in development.
Advantages:
1. "door-to-door" service.
2. It can be cheaper than other modes of transportation for short hauls (less than 640 km).
3. It can be cheaper for small shipments regardless of distance.
4. It can be faster on short hauls.
5. It is highly flexible.
6. It offers a wide variety of equipment.
7. The freight can be loaded and unloaded quickly.
8. Road transport required much less capital Investment as compared to other modes of transport such
as railways and air transport.
9. Road transport is most suited for carrying goods to and from rural areas which are not served by rail,
water or air transport.
10. Less risk of damage in transit.
11. Saving in packing cost.
12. Feeder to other modes of transportation.
13. Easier to track.
Disadvantages:
1. It is more expensive for long hauls than some competing modes of transit.
2. It is limited somewhat as to what it can carry by the size of the vehicles used and by size and weight
restrictions imposed by states.
3. It is affected by weather (seasonal nature) and road conditions.
4. Slow speed compare to others methods in long hauls.
5. Limited transport volume.
6. Not very fuel efficient.
When to choose this mode of transportation?
Everyone can choose trucks when the storage that is going to be supplies is near.
When people wants to have more efficient way to move freight across their countries and towns.
When you want to reach the peak of efficiency.
 When you need to reduce the transportation cost.
Every company has to stay competitive on price, so they won't increase the shipping charges on their
products if they don't have to. That is why trucks are the most common shipping methods around the
world.
• Rail:
Rail carriers incur a high fixed cost in terms of tracks, locomotives, cars, and yards.
Once a train is powered, is expensive because labor and fuel costs are incurred even though trains are not
moving, it account more than 60 percent of railroad expense.
The price structure and the heavy load capability make rail an idea mode for carrying large, heavy, or
high-density products over long distance.
rail is a good idea for heavy and low-value products that are not time sensitive.
The travel time is usually a small fraction of the total time for a rail shipment.
railroad performance is hurt by the large amount of time taken at each transition
Advantages:
1. Reliability
2. Avoids traffic problems
3. High Speed over Long Distances
4. Safety
5. Larger Capacity
6. Suitable for Bulky and Heavy Goods
7. Employment Opportunities
Disadvantages:
1. Unsuitable for Short Distance and Small Loads, service only profitable for long distances
2. Huge Capital Outlay
3. Lack of Flexibility
4. Under-utilized Capacity
5. Not Door to Door Service

• Maritime transportation:
Maritime transport is an activity where people and goods are transported aboard of a boat by sea.
Throughout history the oceans have been important to people around the world as a mode of transportation.
Now days maritime transport is mostly used to transport cargo.
Port operations are a necessary tool to enable maritime trade between trading partners.
Advantages:
1. Less Maintenance Cost.
2. Cheap.
3. Useful for Bulky Goods.
4. Useful During Natural Calamities.
5. Important for Foreign Trade.
Disadvantages:
1. Slow Speed.
2. More Risky.
3. Longer lead/delivery times
  Pipeline
Is used primarily for the transport of crude petroleum, refined petroleum products, and natural gas.
Given the natyre of the costs pipelines are the best suited when relatively stable and large flows are
required.
Pipeline pricing usually consists of two components:
1. A fixed component related to the shipper’s peal usage.
2. To the actual quantity transported.
This pricing structure encourages the shipper to use the pipeline for the predictable component of demand
with other modes often being used to cover fluctuations.

 Package carriers:
Are transportation companies (as FedEx, uPS) which carry small packages ranging from letters to
shipments weighing about 150 pounds.
Package carriers use air, truck and rail to transport time-critical smaller packages.
Are expensive and cannot compete with LTL (less than-truckload) carriers on price for large shipments.
The major service they offer shippers is rapid and reliable delivery.
They also provide other value-added services such as package tracking and in some cases processing and
assembly of products.

Multimodal transport:
Means the carriage of goods by at least two different modes of transport on the basis of a multimodal
transport contract from a place in one country at which the goods are taken in charge by the multimodal
transport operator to a place designated for delivery situated in a different country.

a. Intermodal: it is characterized by a single load measurement (usually containers) in order

to perform faster and more efficiently transfer operations of materials and goods used.

b. Is the movement of cargo where each transport provider or entity responsible, has its own
independent contract.

c. Multimodal : characterized by different load measurements used (including containers,

pallets or similar items used for cargo consolidation). Is the movement of cargo where each
transport provider or entity responsible, has but under a single contract.

d. Transport infrastructure and policies:

e. Goverment has to regulate a monopolistic transportation infrastructure asset. When the

transportation infrastructure asset has competition either with a mode or across modes,
provate ownership, deregulation, and competition seem to work well.

f. Transportation infrastructures often require government ownership or regulation because of

their ently monopolistic nature. In the absence of a monopoly, deregulation and market
forces help créate an effective industry structure. When the infrastructure is publicly owned,
it is important to Price usage to reflect the marginal impacto n the cost to society. If this is
 not done, overuse and congestion result because the cost borne by a user is less tan his or
her marginal impact on total cost.

g. Pros and cons of diferent transportation networks:

1. Direct shipping: The buyer structures the transporttion network to a single destination option, the
buyer structures the transportation network so that all shipments come directly from each supplier to
each buyer location. The routing of each shipment is specified, and the supply chain manager needs
to decide only the quantity tos hip and the mode of transportation to use.

a. Pros: No intermediate warehouse and it’s simple to coordinate.

b. Cons: High inventories (due to large lot size) and significant receiving expense.

2. Direct shipping with milk runs: Can be used from a DC (distribution center) if lot sizes to be
delivered to each buyer location are small. Milks runs reduce outbound transportation costs by
consolidating small shipments.

a. Pros: Lower transportation costs for small lots and lower inventories.

b. Cons: Increased coordination complexity.

3. All shipments via central DC with cross-dock:

a. Pros: Low inventory requirement and lower transportation cost through consolidation.

b. Cons: Increased coordination complexity.

4. Shipping via DC using milk runs:

a. Pros: Lower outbound transportation cost for small lots.

b. Cons: Further increase in coordination complexity.

5. Tailored network: Is a suitable combination of previous options that reduces the cost and improves
responsiveness of the supply chain. Here transportation uses a combination of cross-docking, milk
runs, and TL and LTL carriers, along with package carriers in some cases. The goa lis to use the
apporpiate option in each situation.

a. Pros: Transportation choice best matches needs of individual product and store.

b. Cons: Highest coordination complexity.

h. Transportation options base don customer density and distance:

1. High density:

a. Short distance: Private fleet with milk runs.

b. Medium distance: Cross-duck with milk runs.

 c. Long distance: Cross-dock with milk runs.

2. Medium density:

a. Short distance: Third party milk runs.

b. Médium distance: LTL (Less than truckload)carrier.

c. Long distance: LTL or package carrier.

3. Low density:

a. Short distance: Third-party milk runs or LTL carrier.

b. Medium distance: LTL or package carrier.

c. Long distance: Package carrier.

i. Aggregation strategies based on value/demand:

1. High demand:

a. High value: Disaggregate cycle inventory. Aggregate safety inventory. Inexpensive mode of
transportation for replenishing cycle inventory and fast mode when using safety inventory.

b. Low value: Disaggregate all inventories and use inexpensive mode of transportation fro
replenishment.

2. Low demand:

a. High value: Aggregate all inventories. If needed, use fast mode of transportation for
filling customer orders.

b. Low value: Aggregate only safety inventory. Use inexpensive mode of transportation
for replenishing cycle inventory.