MODULE 5 UNIT 1

Management
Transportation

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Table of contents
1. Introduction 3
2. Transportation 3
3. Modes of transportation 4
3.1 Road 5
3.2 Rail 6
3.3 Air 6
3.4 Sea and inland 7
3.5. Pipeline transportation 7
3.6. Digital transfer and blockchain 7
4. Vendor selection 8
5. Conclusion 10
6. Bibliography 10

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 Learning outcomes:

LO1: Describe the economic benefits and impact of transportation on the supply chain.

LO2: Explain the advantages and disadvantages of each transportation mode.

1. Introduction
Transportation plays a critical role in supply chain management (SCM), offering both
advantages and disadvantages. In the context of a supply chain, transportation refers to the
movement of items from one location to another. This movement begins when materials or
initial goods are transported to warehouses or manufacturing plants, and continues through
each link along the supply chain until the goods have been delivered to the customers.

In this set of notes, you will learn about various forms of transportation, their benefits and
drawbacks, and how they are integrated within the supply chain.

2. Transportation
Transportation facilitates the movement of goods between destination points and connects
all parties, including partners and facilities, within the extended supply chain. Supply chain
managers need to ensure that the flow of inventory from one point to another follows one of
three primary directions:

1. Inbound flow: The focus on the procurement of goods from suppliers.

2. Outbound flow: The focus on the distribution of final goods to customers.

3. Reverse logistics: The focus on the flow of goods returns, waste disposal, recycling,
and any reuse of materials.

A major part of the transport system in SCM is the management and scheduling of incoming
and outgoing deliveries in the distribution system. Furthermore, sustainable development in
transportation is a growing consideration in many organisations’ supply chain strategies. A
variety of computer software systems can be used to map out efficient routes, which produce
economic savings and environmental benefits. Additionally, advanced tracking allows for
continuous change to be implemented at a fast pace.

While customers are able to receive goods within a short time frame via the internet, this
responsiveness relies heavily on supply chain efficiency, which can be achieved in a number
of ways. For example, warehouses or distribution centres can centralise the dispatch hub and

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goods from the hub can be sorted alongside other deliveries being distributed to the same
areas. This distribution approach saves time, money, and allows for efficient management.

3. Modes of transportation
The movement of goods in the transportation system is achieved through various transport
modes, such as planes, trains, trucks, cars, and pipelines. The preferred mode is often decided
based on two key factors:

1. Economy: This involves weighing the functional benefits of a mode of transportation

against its associated costs. For instance, a faster mode of transportation is likely to
be more expensive and will add to the final price of an item; whereas a slower mode
of transportation might negatively impact the delivery timeline, but will reduce overall
costs.

2. Efficiency: This involves an assessment of the delivery timeline to determine how long
a particular mode of transportation will take, and whether it is the most efficient
approach for the delivery of goods. This will depend on the goods in question, the
order timelines to be met, and the resources required, such as workers with wages,
fuel, or tax costs.

(Blanchard, 2021)

When choosing a mode of transportation, supply chain managers need to be well-informed

about the advantages and disadvantages of each, as well as the reliability of the
transportation, its security, traceability, and storage capabilities.

Note:

Certain consignments, such as hazardous goods, wide load, and heavy shipments, are
subject to legal requirements that limit how they can be transported.

Figure 1 provides a summary of the fixed and variable costs, type of goods, capacity, and CO2
emissions that can be expected when using various modes of transportation.

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 Figure 1: Cost comparison of the different modes of transportation. (Adapted from: Grant, Chee &
Trautrims, 2017)

The choice of a specific mode of transportation is dependent on an organisation’s goals,

needs, and resources because each transportation mode has different benefits and
challenges.

3.1 Road
Trucking or general vehicle courier is one of the simplest ways to transport goods. Nearly
every shipment transported using different modes of transport is brought to its final
destination by road. Road transport is divided up into less-than-truckload shipments (i.e.
shipments under 68kg (converted from 150 pounds), and truckload shipments (i.e. shipments
above 68kg).

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The advantages of road transportation include:

● The ease of moving goods across borders;

● The use of a singular mode of transport to access multiple delivery points;

● The ability to link several parts of the supply chain without constrictions; and

● The ability to transport goods of various sizes and quantities.

However, the high cost of express deliveries, pollution levels and unpredictable variable costs
from petrol prices, maintenance, drivers’ wages, as well as the cost of delays due to
unforeseen events, such as road accidents and weather conditions, are a few of the common
challenges associated with road transportation.

To reduce costs, organisations adopt truck sharing, which involves paying only for the space
they use in a truck. The drawback of this is that they have to work with a longer delivery
timeline to factor in stops being made for other deliveries.

3.2 Rail
The transportation of large quantities of goods by rail is as relevant today as it was decades
ago. Multiple large-capacity freight cars can also be connected in series to a single locomotive,
making trains one of the most efficient methods of transporting goods over land. Rail
transportation is also the most environmentally friendly transportation method due to its
lower carbon emissions compared to alternatives. It further presents opportunities to utilise
existing infrastructure between major distribution points and carry large, heavy loads. In
contrast to road transportation, it is typically unaffected by external factors, such as traffic,
road accidents, or weather delays, which makes it cost-efficient.

Delivery time and infrastructural constraints present the biggest challenge when using the
railway to transport goods. It is generally a slower mode of transportation, and bespoke
facilities, such as railyards incorporated to warehouses for the offloading of goods, are also
often required. Additionally, in most countries, railway stations and infrastructure are
inadequate, located in isolated parts of the country, and poorly maintained.

3.3 Air
Air transportation is the newest and fastest mode of transportation. It is increasingly in
demand for its speed and the efficiency it brings to SCM. The advantages of air transportation
include unlimited route options, advanced technologies and dependable scheduling, low
security risks for high-value freight, and capacity to transport a high volume of goods at a time.
Its disadvantages are that it is expensive, there are limitations on weight and volume of goods,
and it produces high levels of pollution.

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3.4 Sea and inland
World trade remains deeply reliant on shipping by water, with 90% of all international trade
being placed on cargo ships. The same shipping routes used thousands of years ago are largely
still in use, but new routes are being explored constantly to improve the supply chain.

Shipping is a desirable mode of transportation because of its extensive route position, capacity
to transport large volumes of goods and its lower costs for capacity to transport goods
internationally. Some of the drawbacks, however, include the common occurrence of long
shipment delays, limited ports or unfavourable regulations – which cause further delays – and
high pollution levels, as the carbon emissions of one ship is equivalent to that of 50 million
cars though this is easily offset by comparing their load capacities to that of a similarly sized
fleet of trucks.

Explore further:

Despite its long history, innovations in sea shipping are still underway. For example,
Danish shipping company Maersk opened a new shipping route recently in the Arctic.

3.5. Pipeline transportation

Pipeline transportation is the transportation of materials through pipes, and it is a specialised
mode of transportation that is not suitable to all organisations. It forms a crucial part of how
fossil fuels are transported across long distances. Pipeline infrastructure ownership, and
maintenance, comes with high fixed costs, but it remains a lucrative trade for current industry.

The advantages of pipeline transportation are that it is highly efficient, dependable due to its
minimal exposure to external factors, and optimisable for the effective transportation of a
small, specialised range of products such as liquid and gas fuels. Its disadvantages are that it
is restricted to the transportation of liquids or gases and requires temperature control and a
predictable level of demand.

3.6. Digital transfer and blockchain

Digital transfer is a niche type of transportation. With digital transfer, products that could
previously only be transferred in a physical form can now be transferred electronically. For
example, music used to be stored and shipped as cassettes, vinyl discs, and CDs, however,
music is presently available as a digital internet transfer through download or streaming
services.

Similarly, blockchain addresses some of the challenges that exist in freight tracking, such as
onboarding, payments, and pricing. Blockchain enables organisations to optimise capacity,
routing, and maintenance through technology that oversees data transfer and recording.

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Blockchains can be used to provide live locations that help to streamline processes in the
supply chain and allow for rerouting or maintenance to be carried out more reactively. These
innovations grant technologically savvy organisations the ability to manage shipments, data,
and people all with the assistance of this technology.

These newer modes of transportation are advantageous because of their flexibility, efficiency,
and cost-effectiveness. An important disadvantage of digital transfer and blockchain,
however, is that can only be used to transport digital items.

Explore further:

Organisations are trying to curb the negative environmental impacts of the transportation
of goods both in the governmental and private spheres, by cutting road-freight carbon
emissions. Consider South Africa’s Green Transport Strategy (2018–2050) and
Rheinmetall’s electric vehicle initiative as examples.

4. Vendor selection
The vendor that can move the largest volume of goods, at the fastest speed, over the furthest
distance, and at the lowest price will always be your ideal transportation partner, although
this is not always possible. Efficient transportation is reliant on good vendor relationships. The
following principles can help supply chain managers to nurture a long, beneficial relationship
with vendors:

● Develop a partnership.

● Gain a thorough understanding of your operations and those of your vendor.

● Negotiate fair pricing and increases by understanding the reasoning behind costs.

● Practice clear communication.

● Share opportunities and ideas for improved efficiency.

● Understand the distribution patterns and how to optimise them.

● Measure costs and performances.

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 ● Collaborate on new economical practices.

● Centralise pick-up and drop-off points.

● Synchronise functions.

(Blanchard, 2021)

When selecting a transportation vendor, three basic factors should be prioritised:

1. Acceptable or affordable cost;

2. Vendor’s access to the necessary equipment or transportation modes; and

3. Organisational service requirements.

(Blanchard, 2021)

In Video 1, Brigitte Metz discusses some of the further logistical considerations that go into
selecting a transport vendor.

Video 1: Transport vendor selection. (Access this set of notes on the Online Campus to engage with
this video and download its transcript.)

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5. Conclusion
Understanding an organisation’s priorities can help supply chain managers choose the best
vendors and mode of transportation. Moreover, organisations need to dedicate resources to
being more socially responsible, sometimes at the expense of costs and speed, as more
environmentally friendly transportation modes become available.

Reflect on your learning:

What are your biggest takeaways from this set of notes? Record your reflections in your
journal. Remember that the course-wide journal can be downloaded in Module 1.

6. Bibliography
Bektas, T. 2017. Freight transport and distribution: concepts and distribution. Boca Raton, FL:
CRC Press.

Blanchard, D. 2021. Supply chain management best practices. Hoboken, NJ: Wiley.

Eglese, R. & Black, D. 2015. Optimizing the routeing of vehicles. In Green logistics: improving
the environmental sustainability of logistics. A. McKinnon, M. Browne, M. Piecyk &
A.E. Whiteing, Eds. London: Kogan Page. 229-242.

Grant, D., Chee, Y.W. & Trautrims, A. 2017. Sustainable logistics and supply chain. London:
Kogan Page.

Hugos, M. 2018. Essentials of supply chain management. 4th ed. Hoboken, NJ: Wiley.

Rahimi, M., Asef-Vaziri, A., Harrison, R., Vaughan-Cooke, M., Salamati, K. & Conrad, M. 2008.
Integrating inland ports into the intermodal goods movement system for ports of Los
Angeles and Long Beach. (Research report 2/08/1). Los Angeles: Metrans
Transportation Center.

Savy, M. & Burnham, J. 2013. Freight transport and the modern economy. London:
Routledge.

Transport Geography.org. n.d. Added value functions performed around freight terminals.
Available: https://transportgeography.org/contents/chapter6/function-of-transport-
terminals/added-value-freight-terminal/ [2022, September 7].

van Hoek, R., Waller, M., Davletshin, M. & Fugate, B. 2019. Integrating blockchain into
supply chain management. London: Kogan Page.

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