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LOGISTICS MANAGEMENT

Chapter 6: Physical Transportation

Management

Reference

 Prescribed textbook:
Coyle, J. J., Langley, C. J. & Bardi, E. J. 2003, The Management of Business Logistics: A Supply
Chain Perspective, 7th edn, Thomson Learning, Canada.
 Reference textbook:

Bloomberg, D.J., Murray, A. and Hanna, J.B. 1998, The Management of Integrated Logistics: A
Pacific Rim Perspective, 2nd edn, Sprint Print, Prentice-Hall.
Bowersox, D.J. Closs, D.J. and Cooper, M.B. 2002, Supply Chain Logistics Management, McGraw-
Hill/Irwin, New York.
Christopher, M. 1998, Logistics & Supply Chain Management, 2nd edn, Pearson Education. Essex.
Cooper, J. 1994, Logistics & Distribution Planning, Kogan Page, London.
Coyle, J.J., Bardi, E.J. and Langley, C.J. 2003, The Management of Business Logistics, West
Publishing Company, New York.
Greasley, A. 2006, Operations Management, John Wiley & Sons Ltd, Chichester, England.
Johnson, J.C. 1999, Contemporary Logistics, Prentice Hall, Upper Saddle River, N.J.
Stock, J.R. and Lambert D.M. 2001, Strategic Logistics Management, 4th Edn, Irwin/McGraw-Hill,
Boston.
Rushton, A., Croucher, P. and Baker, P. 2006, The Handbook of Logistics and distribution
Management, 3rd edn, Kogan Page, UK.
Lambert, D. M., Stock, J. R. and Ellram, L. M. 1998, Fundamentals of Logistics Management,
McGraw Hill, USA.
 List of additional readings:
Chacon-Hurtado, D., Kumar, I., Gkritza, K., Fricker, J. D. and Beaulieu, L. J. 2020, ‘The role
of transportation accessibility in regional economic resilience’, Journal of Transport Geography, Vol. 84,
pp. p.102695-18.

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Topics

6.1 The functions of transport

6.2 The importance of time in transport
6.3 The transport chain
6.4 The role of transport in logistics
6.5 Economic and service characteristics of the modes of
transport
6.6 Intermodal transport systems and containerisation

Some Food for Thought…

“Good roads, canals and navigable rivers, by

diminishing the expense of carriage, put the
remote parts of the country more nearly upon a
level with those in the neighbourhood of the town.
They are upon that account, the greatest of all
improvements.”

(Adam Smith 1983, in The Wealth of Nations)

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6.1 The Functions of Transport

• It is difficult to conceive of a situation where

transport does not play a major role

• Transport exists for the purpose of bridging

spatial gaps that can be expressed not only in
terms of distance but also of time and of cost

• Economic growth is increasingly linked with

transportation improvement and development

6.2 The Importance of Time in Transport

• Transport achieves its function better when the

movement is performed quickly
• Thus, there should always be a consideration of
time in any transport investment
– time is largely equated with speed of movement,
– the saving of time (which cuts down costs) is
associated with two other factors or conditions:
• overcoming of certain obstacles or hindrances to movement
• Reducing turn-round time, e.g. avoiding time-consuming
problems such as queuing, slow loading and unloading and
lack of mechanised handling

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6.4 The Transport Chain

• The transportation of cargo or loads is often an

intermodal affair involving a chain
– Cargo is accepted for transport, carried from a point of
origin to a point of destination and then distributed
• An intermodal or combined transport service entails
the use of more than one mode of transport offered
by a single operator acting as principal.
• Any mode of transport – road, rail, inland waterway,
sea or air – may be involved in a multimodal
transport operation.
• The efficiency of the whole transport journey
depends on each link in the transport chain being
efficient and effective.

The Transport Chain (C)

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6.5 The Role of Transport in Logistics

• A company’s integrated logistics system can be

conceptualised as being a series of fixed points
located spatially between the buyer and seller
• The role of transport is to facilitate the flow of
goods between these fixed points; the physical
link connecting the firm to its suppliers and
customers
• It also adds value to the product by providing
time and place utility for the firm’s goods
– Value is not created unless products are transported &
delivered to consumers where & when they are wanted

The Role of Transport in Logistics (C)

• In an integrated logistics system, the choice of

transport service directly impacts on inventory
and storage costs
• Ex: if a company switches from rail to air
transportation to move finished goods from a
factory to the customer
– it would incur lower inventory and storage costs
– this advantage will of course be at the expense of
higher transportation costs
– hence, the company has to make the transportation
decision taking into account the total cost or systems
approach

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6.6 Economic and Service Characteristics of the

Modes of Transport
• Air: very high-value, low-volume, time-sensitive
products
• Truck: moderately high-value, time-sensitive
products including semi-finished & finished
• Rail: low-value products including many raw
materials
• Water: very low-value products moved
domestically; high-value if moved internationally
• Pipeline: generally limited to petroleum products
& natural gas; sometimes minerals (with water)

Economic and Service Characteristics of the Modes

of Transport (C)

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Economic and Service Characteristics of the Modes

of Transport (C)

Economic and Service Characteristics of the Modes

of Transport: Rail
• Railroads are primarily long-
distance, large-volume movers
of low value high-density
goods, such as coal, grain,
paper, wood and other bulk
products
• They are basically long haulers
of domestic goods
• Most of rail systems in the
world are managed by the
government

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Economic and Service Characteristics of the Modes

of Transport: Rail (C)

• Accessibility can be a problem

• Transit times are generally long

• Premium intermodal services, e.g.

piggyback , double stacks, etc.

Economic and Service Characteristics of the Modes

of Transport: Road (Truck)
• It is the second fastest mode of freight transportation
and have the major advantages of door-to-door
flexibility, ability to meet delivery schedules
• Moving freight with smaller average shipment sizes
than rail and offer reasonably fast and dependable
delivery for less-than-truckload (LTL) shipments
• Primary disadvantages are the high cost of service
and inability to handle all types of freight owing to
highway safety restrictions that limit the dimensions
and weight of shipments

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Economic and Service Characteristics of the Modes

of Transport: Road (C)
• Used by almost all logistics
systems
• High accessibility
• Transit time is faster than
rail or water
• Reliability can be affected
greatly by weather
• Relatively high cost
compared to rail and water;
trade-off is faster service

Economic and Service Characteristics of the Modes

of Transport: Air
• The primary advantage of air
transportation is speed

• Transit times are fastest of the

modes, but rates are highest

• Seek goods with a high value to

weight ratio

• Accessibility is low

• Reliability subject to weather

more than other modes

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Economic and Service Characteristics of the Modes

of Transport: Water
• Ships are the primary mode of international transport
for bulk commodities, general cargo and containers
because of the low per-unit cost structure and their
ability to carry almost any type of product
• They suffer from several limitations, such as slow
speed, safety and, at times, unreliable delivery
schedules
• Main costs for ship operators are harbour and dock
dues, and terminal handling costs, which include the
costs for loading and discharging of the goods
• The cost of water transportation reduces significantly
with distance and size of shipment

Economic and Service Characteristics of the Modes

of Transport: Pipeline
• Accessibility is very low
• Cost structure is highly fixed with
low variable costs, e.g. fixed costs
associated with the installation of the
pipelines and pumping equipment, as
well as the construction of terminals
• Therefore, to be competitive with
other modes of transport, they must
work on high volume so as to recover
these high fixed costs
• The costs per ton-mile decreases
substantially with larger pipes,
provided there is adequate cargo

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6.7 Intermodal Transport Service

• The movement or transfer of freight and/or

passengers on two or more transportation
modes
• Handled as one continuous through-shipment
under authority of a single bill of lading/airway
bill
• Goal: Provide that movement in a such a way
which is as seamless and continuous door-to-
door as possible

Intermodal Transport Service (C)

Source: Coyle et al. (2003)

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Intermodal Transport Service: Advantages

• Advantages:

– “One-stop” shopping
– Less handling
– Applicable to the “systems approach” to doing
business
– Can be more cost efficient to the customer
– Increased safety and security

Types of Intermodal Transport Service

• The common intermodal combinations involve rail,

road and water transport
• The standardised ISO container is transferable to all
surface transportation modes with the exception of
the pipeline
• Containerisation offers a door-to-door service without
the necessity of handling goods in the container at
any point
– Reduces theft, damage, multiple handling costs and
intermodal transfer time
– Changes materials handling from labor intensive to capital
intensive

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Types of Intermodal Transport Service: Land

Bridge
• A unique type of intermodal service
using containers is the land bridge

• “Land bridge” concept may apply

for international
shipments where oceans are
separated by a large land mass

• For example, containers moving

from Australia to the East Coast of
USA have two options; containers
moving to West Europe also have
two options

Types of Intermodal Transport Service: Others

• Trailer-on-Flat-Car (TOFC):
– Trucks ride on rail cars
– Takes advantage of motor
flexibility and rail’s long haul
economic advantage
– “Piggyback”

• Double-stack train

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Types of Intermodal Transport Service: Design

Requirements
• Standardisation of physical form and
dimensions of cargo units such as pallets, trailers,
containers, etc.
• Provision of effective transfer equipment at
intermodal terminals which allows maximum
direct transfer between transport modes
• Adequate buffer storage capacity to allow for
storage of cargo at intermodal terminals due to
differences among interfacing modal transport
links

Types of Intermodal Transport Service: Design

Requirements (C)
• Provision of effective capacity to minimise
turnaround of modal transport carriers at
intermodal terminals

• Standardisation of cargo and unit load codes,

and recording information

• Coordination of transport service schedules and

operations to achieve as close as possible ‘just in
time’ arrival of shipments

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Containerisation

• Considered as one of those innovations which has

had a revolutionary effect on transport

• Its development has been so rapid since 1965, and

the effects have been so far-reaching

• If all containers in the world were lined up, it

would have a length of 108,000 km
(www.Maerskline.com)
– This is a third of the way to the moon, equivalent to 18
times the length of the Great Wall or 2.7 times around
the earth at the Equator

Containerisation (C)

• In 1967 an international agreement was

unanimously reached by the International
Standards Organisation (ISO) with respect to
standard sizes of containers

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