Transportation is an integral part of Logistics. A company cannot function well without being able to ship products across the supply chain. It also allows companies to cross geographic lines between where products are produced and where they are consumed. In logistics, transportation can be defined as a function of planning, scheduling and controlling activities related to mode, vendor, and movement of inventory into and out of an organization.
On average, traffic managers commit and manage over 60 percent of a firm’s total logistics spend. A traffic manager must decide whether the shipper should own and operate its own transportation fleet or utilize for-hire carriers. Either way, a manager should be aware that there are various forms of transportation can be used to move goods. Commodities can be transported by land, air, water and pipeline.
However, it is undeniable that selecting a mode of transportation is a tough decision to make. There are various criteria such as accessibility, transit time, reliability,… that must be taken into consideration. However, a shipper can eliminate some selections based on factors including: shipment’s size, delivery due date and product durability.
1. Product size
Among the three factors, product size is one of the most important. Managers must be aware of the weight, density and shape of the products as well as its packaging. For instance, lightweight products such as electronic components can be transported by land or air, while heavier products like iron ore are suited for railroads or waterways. Shape is another factor to be considered, since land and air transportation require certain dimensions limit. A shipping method’s capacity must match the shipment’s total weight and dimensions.
Additional factors to consider during transportation mode also include:
Origin and destination points
Specified routes that effect modal accessibility
2. Product durability
Another consideration for manager is product durability. Fragile freight like glass or electronic devices require special packaging with a smooth ride. Temperature-sensitive products: food or pharmaceuticals goods, demand specific packaging with a transportation mode than can withstand the cold and heat of the weather
3. Product value and transportation speed
Product value and transportation speed are other considerations in selecting a suitable mode of transportation. The more a company have to spend on transportation, the less competitive the prices are. Delivery speed is a determinant factor for mode selection, since it affects the cost applied to a shipment. The delivery date is considered more crucial than the shipment size.
In order to choose a transportation mode with different product costs and delivery speeds, managers must consider the value density vs the packaging density. This also means calculating the value of units being transported per cubic meter over the amount that can be packed per cubic meter. In fact, items with a higher value density tend to be shipped by a faster transport and in contrast, items with a lower value density are mostly sent by a slower method and then held in inventory. Managers need to keep in mind that the more units handled per cubic meter, the more the need for automated materials handling.
To simplify this method, take a postal organizations for example. They do not own the letters and packages, so the value density is equal to zero. The letters and packages are collected from the letterboxes and then brought to a hub. At this hub, the letters are sorted according to the street address. The packaging density is high regarding that there are more than 10000 letters per cubic meter, so the organization should focus on automatic materials handling.
Another example with low value density and low package density is brick. The value per brick is low, and the packaging density is also low because they are sent on pallets. For this type of product, the suitable strategy is to load the pallets at the manufacturing plant and directly transport them to the customer using a low-cost transportation mode.
Copy machines and digital cameras on the other hand are products with low value density and high value density. In the US, both products are preferred to be shipped in containers. The emphasis on those products is how to recover the invested money as quick as possible. So there is a high chance that companies would choose air transport.