Transportation and delivery strategy

Transportation and Delivery strategy

Transportation Strategy

Transportation is a very key element of the logistics process and the supply chain which runs from vendors to customers.

It involves the movement of product, service/speed and cost which are three of the five key issues of effective logistics.

It also impacts with the other two logistics-- movement of information and integration within and among suppliers, customers and carriers.

A transportation strategy, to be effective in supply chain management, is not playing one carrier off against another. It is not beating down rates. Rather it is a way to respond to the dynamics of business, its customers, suppliers and operation.


The strategy, regardless of whether domestic or international, is much more and should recognize--

Customer requirements. transportation program must reflect and meet the customers needs. The time and service aspects of transportation are vital.

Shipments must move timely. Customers shipments be delivered as they require,on the date needed, by the carrier preferred, in the proper shipping packaging method and complete, both shipped complete and delivered complete and in good order. A transportation program which can do this provides customer satisfaction and give a competitive advantage.

Mode selection: the mode, transit time, inventory and service impact vis a visfreight charges are the consideration.

Carrier relationships. Volume creates carrier/forwarder attention. and competitive interest .and develop carrier alliances to meet the supply chain service requirements


Measuring/benchmarking Measuring means comparing performance versus standards. Freight cost data tied with sales and shipping data makes a great data base for budgeting and managing costs. . It provides data for negotiations, , developing good freight costs for sales and accounting, for studies and other purposes. Benchmarking means learning what other companies do--the best practices.

Regulatory impact

Carrier mergers and alliances and closings

Flexibility . Recognize that change will occur. Keep an open ear and mind to other modes and carriers. The times they are a changing--and so will your strategy


Develop a Holistic, Integrated Approach to Transportation Management

Centralizing transportation management, particularly planning and measurement, is key to gaining better understanding and management of supply chains. Centralization plan should include technology, data, management, processes and localesGain Visibility into your Global Supply Chain

system should allow to track and locate any shipment using reference points, such as booking number, container number, order number, part number and shipment references. Also be able to receive proactive alerts on possible issues, such as delays and deviations, consider visibility as a starting point towards improving supply chainSystem to Drive Integration with Partners

Building a trading partner with connectivity to a global partner network allows to connect to the network to gain seamless connectivity between internal systems and extended supply chain.


Leverage y Human Resources

Effective transportation management involves people as well as technology and systems. Recruiting qualified people, retention and education are a must for developing a best in class transportation management process.

Consider the Financial Implications of your Transportation NetworkContract and rate management, carrier selection and freight auditing are all part of the financial supply chain that needs to run in tandem with the movement of goods.

Transportation Methods

TRANSPORTATION CARRIERS:

Transportation sectors are essentially deregulated, with shippers able to negotiate rates, terms, services, and routes with service providers.

Common carriers offer transportation service to all shippers at published rates, in a non-discriminatory basis, between designated points. Under deregulation, however, common carriers have considerable flexibility in establishing rates and routes.

A contract carrier is a for-hire carrier that provides service to a limited number of shippers and operates under specific contractual arrangements that specify rates and services. Generally, rates for contract carriers are lower compared to common carriers because volumes are typically predictable.

A private carrier provides transportation for its company’s own products and the company owns (or leases) all related equipment and facilities. The five basic modes of transportation are motor, rail, air, water and pipeline.


Motor Carriers: Motor carriers or trucks, are the most flexible mode of transportation offers the advantage of point-to-point service, over any distances, for products varying weight and size. Services is fast and reliable, with low damage and loss rates. Motor carriers can be divided into three categories (1) less-than-truck-load (LTL), (2) truck load (TL) and (3) small parcel, ground.

Rail Carriers and Intermodal: Rail carriers are relatively inflexible and slow and have higher loss and damage rates, compared to motor carriers. But has the advantage of lower variable operating costs, which makes it attractive for hauling large tonnage over long distances.Intermodal freight services are divided between containers on flatcars (COFC) and truck trailers on flatcars (TOFC), sometimes referred to as piggyback systems. Air Carriers: Advantage of airfreight is the speed. Airfreight is costly and also must be combined with trucks to provide door-to-door service.low.


Water Carriers:Inexpensive compared to other modes, water carriers are slow and inflexible. Similar to rail, water way transportation is best suited for hauling large tonnage over long distances and is frequently used for bulk commodities such as coal, grain and sand. Many waterway shipments involve the use of containers. Containers also can be transported via truck or rail from the point of origin and to the final destination.

Pipelines: Pipelines can only transport products in either a liquid or gaseous state, the use of this mode of transport is quite limited. However, once the initial investment in the pipeline is recovered, the variable costs of operation are relatively

Selection of Mode and Carrier:The factors to be considered when selecting mode of shipment, carrier and routing are:Required delivery time

Reliability and service quality

Available Services : like warehousing and inventory management in addition to transportation services.

Type of item being shipped. Special container requirements may indicate only certain carriers who have the unique equipment to handle the job.

Shipment size

Possibility of damage

Cost of transport service

Selection of Mode and Carrier:

Carrier financial situation. If any volume of freight is moved, some damages will be incurred, resulting in claims against the carrier. Should the carrier get into financial difficulty, or even become insolvent, collection on claims becomes a problem.Handing of claims: Prompt and efficient investigation and settlement of claims is another key factor in carrier selection.

Private Fleets: A private carrier does not offer service to the general public. Many companies have elected to contract for exclusive use of equipment. The use of a private fleet is a type of make-or-buy decision. Maintaining a private fleet gives the firm greater flexibility in scheduling freight services.

Rates and Pricing:

Transportation costs increase as distance, quantity and speed increase.

The two categories of carrier rates are line haul rates and accessorial rates.

Line haul rates are charged for moving products to a nonlocal destination and can be grouped into four categories.

1.Class rates 2. exception rates 3. commodity rates and (4. miscellaneous rates.

Today, most rates between shippers and carriers are negotiated and the distinctions between rate classifications have become blurred.

Rates and Pricing:

Four basic types of rate discounts have developed; the buyer in some instances can take advantage of one or more of them and possibly enjoy substantial savings.

Aggregate tender rates provide a discount if the shipper will group multiple small shipments for pick up or delivery at one point.

Flat percentage discounts provide a discount to the shipper if a specified total minimum weight of less-than-truckload shipments is moved per month, encouraging the shipper to group volume with one carrier.

Increased volume-increased discount percentage is applied if a firm increases its volume of LTL shipments by a certain amount of over the previous period’s volume.

Specific origin and destination points provide a specified discount if volume from a specific point to a specified delivery point reaches a given level.

Demurrage charges (sometimes also called detention charges for motor carriers) often are incurred by shippers or receivers of merchandise.

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Transportation and delivery strategy