[MUSIC] Welcome back to our lesson on transportation modes.
Upon completion of this lesson, learners should be able to provide a general definition of transportation. Describe the various freight transportation flow types. Discuss the criteria that are involved with making a shipment mode decision. And discuss the cost components associated with different shipment modes. Transportation involves the physical movement of people and goods between origin and destination points. If we focus on the commercial view of transportation, transportation links facilities geographically separated and links partner organizations in the extended supply chain. These partners include customers, suppliers, distributors, plants, warehouses and retail outlets. Transportation enables the extended supply chain by moving inventory with trucks, trains, planes, ships and pipelines.
Transportation operations involve ensuring the flow of inventory from points of origin in the supply chain to points of use and consumption, or destinations. And primarily involved three components, inbound, outbound, and reverse logistics.
Sometimes people refer to interfacility moves between locations in a company as being transfer logistics. So in addition to inbound, outbound and reverse, you may sometimes here of transfer transportation. Inbound logistics supports the procurement of materials and goods from supplier locations. Outbound logistics supports the distribution of materials and goods to customer locations. And reverse logistics supports product returns, recycling, re-use of material, and waste disposal.
Each time product or materials are sent, consideration should be given regarding the best specific transportation mode for the shipment. The specific characteristics of each motor transportation has an impact on overall supply chain performance.
One dimension that has an impact is transport speed.
Over the ocean transport, may take multiple weeks to transport goods. While air transport may move a shipment across a continent in a few hours. And over the road transport move shipments at an intermediate speed between may vary from a few hours to up to week to cross
whether it’s a local shipment or a cross continent move.
Faster modes of transportation are likely to be more expensive in terms of freight costs. One thing to consider in the digital age is that goods that were once transported in physical form, such as music, are now transported in electronic form via the Internet. With transport via the Internet being far less expensive than physical transport.
While speed may cost more in terms of freight cost, it may enable a supply chain with lower inventory costs. As the time and process between links and flows between points will be less with less capital cost tied up in inventory that modes of transport that require inventory to be flowing between points for several days or weeks.
Additional considerations in making transportation mode decisions include considerations of the physical capabilities, requirements, and needs of the product or material to be shipped. This includes the product size, its fragile nature, infrastructure required to handle the product. If it’s a wide load, say construction equipment, specific over-the-road transport-made equipment may be required, and special permitting to move the goods. Hazardous materials may be limited, may not be able to travel via air, may require special handling, special containerization, and not be appropriate for certain modes. Now the consideration is reliability. Some modes of transportation are very precise in their timing such as air flights which may be scheduled to the minute, while others may vary with a day or two or more variability on arrival time such as ocean freight
Note while air may be scheduled to the minute there does exist variability with all modes of transportation including air.
Another consideration is security.
Transportation modes with fewer handling points, fewer individuals involved in moving and transporting the goods are more secure than those with multiple touch points. So the air for example, is fairly direct from point to point once the goods have been delivered to the aircraft for shipment. However LTL shipments which we’ll learn about them have multiple handling points. Money is an example of transportation of goods that requires extreme security.
Armored cars transport money to the Federal Reserve here in Atlanta, right on the edge of Georgia Tech’s campus. And the armored cars bring in the money for counting, sorting, damaged bill removal etc. And guards with guns provide a high level of security for this transport.
Track and trace capabilities and status updates may be very important or not so important for given commodities. So and the capability to provide this information may vary from mode to mode. Some modes such as parcel shipments provide pretty detailed information regarding the package, and where it’s at and each stage of the process. While other modes, it’s a bit of a black box regarding where exactly the product is at any given point in time.
And we have a question.
For your consideration. Suppose a television production company filming a television series in Atlanta, say, like The Walking Dead, needs a part for a camera from it’s studios in Hollywood.
They need it fast, because without it, the crew is idle and the production company will incur many costs without any production taking place.
In this case, would it make sense to ship this part via air?
Let’s take a brief eye level overview of the various transportation modes that may be considered. And in the next few lessons we’ll dive into each of these modes in greater detail. First, pipeline. Pipeline ownership and maintenance leads to very high fixed costs, but provides very low variable costs. We’ll learn further, what types of products characteristics are applicable for potential consideration in pipeline moves. Air transport has high fixed costs and relatively high variable costs. Water transport high port and equipment fixed costs and very low variable costs. Rail transport has high fixed costs due to the rail ownership, maintaining the rail lines, etc., and comparatively low variable costs. Over the road transport is characterized by lower fixed costs set to the shipper. You don’t need to own or maintain the roads that are maintained by the government, etc. But over the road transport generally has higher variable unit costs than rail and other modes do to the lower capacity per truck that’s being moved.
In this lesson, we have provided a general definition of transportation. Described the various freight transportation flow types. Discussed the criteria that are involved with making a shipment mode decision. And discussed the cost components associated with different shipment modes.
Thank you for watching, and we’ll see you on the next lesson. [MUSIC]
[MUSIC] Welcome back to our lesson on transportation modes.