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How Does Transportation Affect Logistics?

Updated: Sep 30, 2020

Transportation is an inseparable component of logistics. While the sights of trucks and trains carrying products of a company or parked at a business facility are common, few people understand how much the economy depends on economic and reliable transport.

A freight port
A freight port

1. What is transportation?

Transportation is one of the largest industries in the world. It refers to the movement of products and raw materials from one destination to another. This process begins with the supply chain to the shipping of the finished product to the consumer.

Transportation is a key element in the logistic chain. It joins together those components that are considered to be separated. Transportation systems connect supply chain components and must be properly managed and controlled for transportation and logistics to work together successfully. This means complete visibility and strong communication between all members of the chain. The success of any supply chain can be judged by its transportation management. Transportation and logistics can account for as much as 7-14% of sales, depending on the industry.

Road transport
Road transport

2. Effects of transportation on logistics

Transportation affects logistics in the following ways:

  • Transportation costs are influenced by a corporation’s plants: Warehouses, vendors, retail locations, and customers or consumers.

  • Mode of transport affects inventory requirements: High-speed or high-priced transportation systems may require smaller amounts of inventory, while slower, less-expensive transportation systems may require larger amounts of inventory.

  • The selection of a low or high-speed mode can alter the delivery schedule or how freight is packaged.

  • Carrier classification rules and transport modes can influence the packaging.

  • Contract negotiations may change how transportation modes operate.

Transportation affects logistics
Transportation affects logistics

There are different modes of transportation. The role of each mode of transportation in logistics is as follow:

  • Roadways: Highly flexible, can be applied to door-to-door service. Roadway transport assists in delivering goods to locations that are far from ports, stations or loading points.

  • Railways: Plays an important role in transportation. Railway transportation can deliver large volumes of goods, with stability and lower costs compared to roadways.

Different modes of transportation
Different modes of transportation

  • Air transport: Advantageous for high-value shipments, as it is commonly recommended to ensure quality. The fast delivery speed has minimized risks in transportation, thus, improved the overall quality of logistics services and reduced the cost due to the loss of goods in the supply chain.

  • Water transport: This is the most common type of transportation used in logistics as it has numerous advantages: large capacity, low transportation costs, etc. Water transport is mostly used in international trading.

3. Transportation strategies in logistics

Transportation plays a crucial role in the conversion of resources into practical goods. The ultimate goal is to minimize cost and maximize service, which constitutes the purpose of business logistics. When carefully planned, transportation can be a leading competitive strategy for a firm.

For example, Walmart has succeeded in using the simple technique of cross-docking to make the entire transportation system more responsive and streamlined. Efficient transportation also supports the logistics chain in the globalization of products. This is the result of facilitating transportation of goods from countries with cheap labor like China and India. (Distribution Management Software System BlogSpot, 2012)

Effective transportation strategy of Walmart
Effective transportation strategy of Walmart

Transportation costs and customer responsiveness are the two most important elements that need to be optimized. In order to achieve these goals, there are certain conditions that firms may have to fulfill in making effective transportation decisions:

  • Align transportation strategy with competitive strategy.

  • Maintain an appropriate combination of in-house transportation and outsourced transportation to meet the company’s goal.

  • Be compatible with e-commerce.

  • Use information technology to decrease transportation costs and increase response in transportation networks.

4. Conclusion

Transportation is of great importance in the success of a logistics plan. The operation of transportation determines the efficiency of delivering products.

Regarding current conditions, a strong system requires a clear framework for logistics and a proper transport strategy to enhance producing procedures. Logistics managers, researchers and transportation planners need to understand the varied applications of logistics and the integrated relationship between logistics and transportation.

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