Transportation is a significant contributor to the economy and a competitive force in business. It is the activity that physically connects the business to its supply chain partners, like suppliers and customers, and is a major influence on the customer’s satisfaction with the business. This chapter illustrates the role of transportation in the logistics role, the distribution chain, and the larger market.
Transport is one of the vital financial activities for a business. By transferring goods from places where they’re sourced to places where they are demanded, transportation provides the crucial service of connecting a business to its suppliers and clients. It’s a vital task in the logistics function, supporting the economic utilities of time and place.
Place utility infers that clients have product available where they need it. Time usefulness suggests that clients have access to product when they need it. By working in close cooperation with inventory planners, transportation professionals try to ensure that the business has product available where and when clients seek it out.
Transport is sometimes to blame for a company’s inability to properly serve customers. Late deliveries may be the source of support issues and complaints. Such over, brief, or damaged (called OS&D) imports may frustrate customers, too, leading to dissatisfaction and the decision to buy from a competitor for future purchases.
However, when a business performs on time with complete and undamaged deliveries regularly, this can enhance customer confidence and gain business for the company. When a provider instills confidence in service functionality, it may make clients reluctant to succumb to rivals’ bids to steal business away through smart promotions and reduced prices.
Apart from its support ramifications, shipping may also represent a substantial price for the company. The expense of transportation can occasionally determine whether or not a customer trade results in a profit or a loss for your business, depending on the expense incurred in providing transportation to get a customer’s order.
Faster modes of transport generally be more expensive than slower modes. So although shipping an order overseas by airplane is much quicker than transporting by ship, it can cost as much as 20 times more. This type of cost difference might not justify the use of the quicker way of transporting the merchandise.
Supply chain managers should therefore carefully consider the cost of transporting products when determining whether to proceed product and the way to move merchandise in the most economical manner.
This publication supports the learning objectives of the Transportation Management module (Learning Block 5) of the Council of Supply Chain Management Professionals (CSCMP) SCPro Level 1 certification.
Describe the key elements and procedures in managing transportation operations and how they interact. Describe the critical role of technologies in handling transportation operations and merchandise flows.
The publication is organized into three sections. Section 1, “Transport: The Basics,” provides a foundation for transportation operations, such as a survey of transportation modes, the economics of transport, along with the array of transportation service providers.
Section 2, “Transportation for Managers,” provides a customer’s perspective on transport, including insights on designing a logistics network, picking services, and assessing performance.
Content is provided on key facets of transportation management, including strategy formation, technology deployment, and international supply chain operations. Section 3, “Transport in 2013 and Beyond,” is devoted to contemporary problems in logistics, such as sustainability, and offers an outlook about the future of transport.
Throughout the text we comprise important terms and concepts that are essential for supply chain professionals that are responsible for transportation activity to comprehend. In this first chapter, we continue by demonstrating the role of transport in the logistics function, the supply chain, and also the larger market.
Transportation and Logistics
Logistics is described as “that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related data from the point of origin to the point of consumption in order to meet clients’ requirements.” A transportation is represented within this term through the term flow.
Inbound logistics entails the procurement of goods and materials from provider places. Outbound logistics involves the distribution of goods and materials to client locations. Therefore, transportation is necessary on the inbound and outbound sides of the company.
Inventory occasionally flows in the reverse direction. So transportation not only provides products and material to customers, but also moves reusable and recyclable material to firms that can use it.
Transport is but a task in charge of providing time and place utilities via inbound and outbound logistics. Logistics also entails forecasting demand, planning inventory, and saving goods as well as delivering them.
Optimized logistics performance usually means that these activities are working closely together so that the client of this logistics agency is satisfied with the support, yet the cost the company incurs is minimized.
This optimal performance requires an comprehension of how the different logistical decisions and activities affect service for clients and total price. Consider, for example, that a business attempts to minimize its investment in inventory. The company elects to maintain all its inventory in one central warehouse location, for it was proven that consolidated inventory reduces inventory investment.
Warehousing cost should also be lessened because the provider is keeping just a single facility instead of many places. Clients located close to the central warehouse will be pleased with this decision because the company must travel just a brief space to deliver items to those nearby customers.
But, customers located farther from the central warehouse are very likely to be let down. They’ll ask for quicker transportation to decrease the order lead times. This may involve using quicker means of transporting the goods, and that, as noted, tends to cost more than using slower modes.
In sum, holding inventory in one central place may reduce inventory and warehousing costs, but it is going to increase transportation expenses. The business might also be in danger of losing sales to competitors who can offer shorter and more dependable order lead times.
Additionally, a supply chain strategy that seeks to minimize transportation cost will likely not represent an optimal solution for the company. This might call for shipping orders to customers in massive volumes and utilizing slow way of transportation.
Requiring large order amounts and using slow forms of transportation are two more methods to disappoint clients and risk losing business to competitors. So although transport is usually a sizeable expense for a business, and frequently the largest expense in the purpose of logistics, supply chain managers should think about the interrelationships among the many logistical actions and prices.
Trade offs are frequently associated with these choices, and the company’s clients are also influenced. The popularity of interrelationships among transport, inventory, warehousing, information exchange, and customer service is the embodiment of a systems strategy.
The manager attempts to optimize the performance of the logistics system rather than optimizing a singular part of the machine. This book, therefore, treats transport as one significant element of the logistics system.