ADDIS ABABA UNIVERSITY

SCHOOL OF COMMERCE
DEPARTMENT OF MARETING MANAGEMENT
February 8

201
Modes of transportation, Third party transpor

9
PREPARED BY:- MICHAEL ABEBE
ID NUMBER:- BER/5792/07
R3MM
Assignment I

SUBMISSION DATE:- FEB 8, 2019

SUBMITTED TO:- MR.ABDULSHEKUR
1, Transportation Modes
Transportation mode is an option for moving products from one place to another place.
And there are five basic modes of transportation modes Road, rail, air, water, and pipelines.
Any one or more of these five distinct modes could be selected to deliver products to
customers. However, all transport modes may not be applicable or feasible options for all
markets and products. Some transportation modes are used for liquid products, gas and others
are used for solid products.

Here is a figure that shows the five modes of transportations.

Transportation
Modes

Road Air Rail Water Pipelines

1. ROAD

Road transport is a mode of transportation which uses road infrastructure for product
movements. Road transportation also known as highway, truck, and motor carriage steadily
increased its share of transportation. Road transportation mode has rapidly grown throughout
the world resulted from speed and ability to operate door-to-door. Motor carriers have
flexibility because they are able to operate on all types of roadways.

Motor carriers have relatively small fixed investment in terminal facilities and operate
using publicly financed and maintained roads. Although the cost of license fees, user fees,
and tolls is considerable, these expenses are directly related to the number of trucks and miles
operated.

Advantages Disadvantages
1, flexible 1, variable cost per kilo meter is high
2, versatility 2, only suited for short distances
3, reliable 3, Legislative control
4, fast service 4, driver fatigue
  Types of carriers in road transportation mode

- Common carrier

- Contract carrier

- Private carrier

2. AIR
The newest but least utilized mode of transportation is airfreight. Air transport is a
mode of transportation which uses flying machines/cargo planes/ for product movements.
This mode of transportation offers the shortest time in transit especially over long distances
of any transport mode; most shippers consider air transport as a premium emergency service
because of its higher costs. Shipment via air requires only a few hours contrasted to days with
other modes of transport.

Air transport allows other aspects of logistics such as field warehousing and inventory
to be reduced or eliminated. Air transport capability is limited by load size, weight lift
capacity, and aircraft availability.

Advantages Disadvantages
1, fast transportation 1, low aircraft availability
2, reduction in warehousing 2, low weight lift capacity
3, easily transport high value products 3, high cost
4, provides time sensitive service 4, low load size

 Types of carriers in air transportation mode

- Common carrier

- Contract carrier

- Private carrier

3. RAIL
Rail transport is a mode of transportation which uses Train/other machines/ for
product movements. Rail transportation is relatively slow and quite unreliable, as the loss and
damage ratios of rail transport for many shipments are higher than other modes. As a result,
the railroad is a slow mover of both raw materials and low-value finished goods

Rail system lacks the flexibility and versatility of the road transport. Indeed, rail
carriers offer terminal-to-terminal service rather than the door-to-door service provided by
motor carriers. Therefore, railroads, like water, pipelines, and air transport, need to be
integrated with trucks to provide door-to-door services. Also, railroads offer less-frequent
services compared to motor carriers.

Advantages Disadvantages
1, low variable cost 1, lacks flexibility
2, low cost on weight basis 2, lacks versatility
3, good transport for low-value products 3, less-frequent services
4, good transport for raw materials 4, high ratio of damage

 Types of carriers in rail transportation mode

- Common carrier

- Contract carrier

4. WATER
Water transport is a mode of transportation which uses water bodies for product
movements. In the world, there are two major types of water transport namely: inland water
transport (river, lake, sea) and ocean water transport. Water transport is one of the oldest
modes of transportation. And oldest form of bulk transport and still provide the most cost-
effective means of moving large quantities, whether measured in terms of weight or volume
over large distances throughout the world.

No land route (including tunnels and bridges) is available; water remains the sole
alternative to air for most products and is capable of handling virtually all cargoes. Like rail,
it can suffer from delays at the start and finish of the water sector and at interchanges; it is
nevertheless reliable and relatively cheap.

Advantages Disadvantages
1, Bulk transport 1, no land route
2, cost effective 2, takes longer time to deliver
3, can travel large distance 3, has difficulties in returning the products
4, can carry large volume 4, can occur delays

 Types of carriers in water transportation mode

- Common carrier

- Contract carrier

- Private carrier
5. PIPELINES
Pipeline transport is a mode of transportation which uses pipe/cables/ for product
movements. Gas, water, oil, electricity, etc. are products that lend themselves to the use of
dedicated transport systems. Such systems involve massive initial investment and need high
volumes of movement to justify them.

The basic nature of a pipeline is unique in comparison to any other mode of transport.
Pipelines operate on a 24-hour basis, 7 days per week and are limited only by commodity
changeover and maintenance.

Advantages Disadvantages
1, operates fulltime 1, massive initial investment
2, low inventory cost 2, limited types of products
3, high volumes of movement 3, in most countries pipelines are owned by gov’t

 Types of carriers in pipelines transportation mode

-Common carrier

Intermodal transportation
Intermodal transport means the movement of goods involving two or more means of
transport without handling of the goods themselves in changing modes. It utilizes special
standardized containers to transport cargos. Intermodal transportation is needed to take
advantage of the inherent economies of each mode and thus provide an integrated service at
lower total cost.

There are different types of intermodal transportation such as;-

1. Piggyback (TOFC/COFC)
The best known and most widely used intermodal system is the trailer or con- tainer on a
flatcar. Containers are the boxes utilized for intermodal product storage and movement
between motor freight, railroads, and water transportation. Containers are typically 8 feet
wide, 8 feet high, 20 or 40 feet long, and do not have highway wheels. Generally, Piggyback
means a trailer or container is placed on a rail flatcar and transported from one terminal to
another.
 2. Containerships
Containerships are used to transport containers by sea. These containers are carried by
ships from one coast to another coast .The major advantages of using containerships are
reduced ship time in port, less physical handling of cargos, less damage, improved security
and protection against weather.

3. Air-truck
Another form of intermodal transport combines air and truck. Local cartage is a vital
part of every air movement because airfreight must eventually move from the airport to the
final delivery destination. Air-truck movements usually provide service and flexibility
comparable to straight motor freight. Using this form of intermodal transportation helps to
provide service to extended geographical areas.

 advantages of Intermodal transportation throughout the world as

Advantages
1, offers environmental benefits 5,higher quality service
2, lower diesel fuel consumption 6, easier planning and support for large-scale
projects.
3, easy to deliver
4, reduce high way use

2, Third party transportation service providers

Nowadays, more companies are outsourcing their logistics functions to third-party
logistics service providers, as the emphasis on supply-chain management has increased. Third
party carriers or non-operating carriers are business types that do not own or operate
equipment’s rather they specialize in integrated operation, warehousing and transportation
services which can be customized to customers ‘needs based on market conditions.

A company might choose to use third party service providers because they offer
shippers lower rates for movement between two locations.

Why Companies choose to use third party service providers?

Because most companies consider these service providers as one-stop outsourcing
solutions that can do the jobs more efficiently, allowing the companies to focus on their core
business. Third-party options can lead to cost reductions and customer-service improvements,
especially for those small and mid-sized companies that cannot afford to develop their own
distribution networks.
Types of third party transportation
There are different types of third party transportation service providers and this are
listed below:-

1. Freight Forwarders

Freight forwarders are for-profit businesses that consolidate small shipments from
various customers into bulk shipment and then utilize a common surface or air carrier for
transport. At destination, the freight forwarder splits the bulk shipment into the original
smaller shipments.

strength Weakness
1, warehousing management 1, cannot be digitized easily
2, manual customer clearance 2, time consuming activities
3, art of consolidating shipments 3, high people involvements

2. Shipper associations /Cooperatives and Agents

Shippers associations are voluntary non-profit entities where members, operating in a
specific industry, consolidate small shipments into large movements to gain economies
related to small-shipment purchases.

strength weakness
1, high speed in delivery 1, lack of choice/ providers/

3. Brokers
Brokers are intermediaries who coordinate transportation arrangements for shippers,
consignees, and carriers. They also arrange shipments for exempt carriers and owner
operators.

strength weakness
1, cost effective 1, damage
2, adaptable on internet based transaction 2, delays
3, easily accessible 3, not liable
3, Materials handling
Materials handling means providing the right amount of the right material, in the right
condition, at the right place, in the right position, in the right sequence, for the right cost by
the right methods. And it is the art and science of moving, storing, protecting, and controlling
materials.

Material handling equipment

Anything that relates to the movement, storage, control and protection of materials,
goods and products throughout the process of manufacturing, distribution, consumption and
disposal is part of this category of equipment.. There are different types of materials handling
systems available for a firm and these are:-

1. Mechanized system
In which a combination of labor and handling equipment is utilized to facilitate
receiving, processing, and shipping generally labor constitutes a high percentage of overall
cost in mechanized handling. The types of equipment used are lift trucks, towlines, tractor
trailer devices, conveyors, and carousels.

strength weakness
1, flexibility 1, less speed
2, combines both labor and equipment 2, manual labor

2. Automated system
Minimize labor as much as possible by substituting it with equipment capital
investment.

strength weakness
1, operates faster 1, high capital investment
2, more accurately 2, inflexibility
3, dependency on computer

The strength of automated system is that it operates faster and more accurately. Its weakness
is the high capital investment, development complexity, inflexibility and dependency on
computer.

3. Semi-automated system
Refers to a combination of mechanical and automated systems used to handle material
it includes robots and computerized sorters.

strength weakness
1, flexibility 1, limits in Technology
2, user friendly 2, economic limits
The major types of material handling equipment that can be utilized by a
company.

1. Transport equipment
Is used to move material from one location to another. It includes equipment’s like
conveyors, cranes, and industrial trucks. Materials can also be transported manually using no
equipment.

2. Positioning equipment
Is used to handle material at a single location. It manipulates materials so that they
are in the correct position for subsequent handling, transport or storage. It includes
equipment’s like lift/turn tables, balancers and industrial robots.

3. Unit load formation equipment

Is used to restrict materials so that thety maintain their integrity when handled. It
includes equipment’s like pallets, skids, baskets, cartons and crates.

4. Storage equipment
Is used for holding materials over a period of time. This particular equipment
includes storage rack that can be used to allow multiple stacks of different items to occupy
the same floor space.

The important issues that need to be considered when choosing a materials

handling system and buying a specific materials handling equipment.

1. Environmental concerns
Regarding the impact of materials handling equipment such as lift trucks on pollution
controls also in the handling and disposal of hazardous materials used or stored in warehouse
operations.

2. Rules and Regulation

Includes rules that are set to decrease the number of injuries that occur in warehouses
which has an impact in choosing a system or equipment that is less likely to cause injuries.

3. Geographical issue
The site/location/ may have an impact on the materials handling equipment. Such as if
the company is located in a rural, sub urban or urban area the type of material handling
equipment may vary place to place. And there are many issues regarding in choosing a
materials handling system, I tried to show some of them in my explanation above.
4. Nature of Operations
Selection of equipment also depends on the nature of operations like whether handling is
temporary or permanent, whether the flow is continuous or intermittent and material, flow
pattern-horizontal or vertical.

5. Engineering Factors
Engineering factors such as door, ceiling dimensions, floor space, floor conditions and
structural strengths are also taken in consideration in the selection of equipment.