11F05 SCM 8 ex BG

8/6/2019 11F05 SCM 8 ex BG

http://slidepdf.com/reader/full/11f05-scm-8-ex-bg 1/15

By. Prof. Bharat Goel

8/6/2019 11F05 SCM 8 ex BG


Transport economicsy Transport economics and pricing are concerned with the

factors and characteristics that determine transport costs

and rates. Transport economics is influenced by sevenfactors. These factors are important while developingtransportation rates. The specific factors are:

Distance

Density

Stowability ( To place or arrange, especially in a neat, compact way)

H andling

Liability

Market Factors

8/6/2019 11F05 SCM 8 ex BG


Total Transportation Costsy In addition to the basic cost charged for movement of

goods, the total transportation cost reflects a large

number of other factors, such as transit time costs,obsolescence and deterioration (To diminish or impair in quality, character, or value )costs, protectivepackaging costs, and transit insurance costs, etc.

8/6/2019 11F05 SCM 8 ex BG


Transportation Infrastructurey Transportation infrastructure can broadly be classified

as hardware and software. Hardware consists of

physical assets that comprise terminals, storagefacilities, right of way for movement and vehicles/equipment. Software, which is essentially theservice superstructure, consists primarily of maintenance, operations and value added services.

8/6/2019 11F05 SCM 8 ex BG


The selection of the mode of transportation

is based on these criteria.

y R oad network

y R oad freight has the advantage of transporting cargo

from point to point without stopovers. As roadnetworks improve, road freight plays a moresignificant role in the transportation of goods.

y India has one of the largest road networks in the world

(over 3.3 million km in 2002). The road network hasexpanded from 0.4 million km to 3.3 million km,interms of length during 1951 to 2002.

8/6/2019 11F05 SCM 8 ex BG


Railwaysy The characteristics of railways as a transportation

mode are as follows:

1. R ail network has a capability to transport largeshipments economically with more frequency.

2.R ailroad operations incur high fixed costs because of expensive equipment, right-of way (the railways

maintain their own track), switching yards andterminals.

3.R ailways have relatively low variable operating costs.

8/6/2019 11F05 SCM 8 ex BG


4. The replacement of steam by diesel power hasconsiderably reduced the variable cost per kg/km and

electrification has further provided for morereductions.

5. Bulk industries and heavy manufacturing use railwaysmore frequently.

6.R

ailways can improve the effectiveness of transportation by having alliances with other modes.

8/6/2019 11F05 SCM 8 ex BG


Water Transporty W ater-based transport is effective as generally

speaking, operating costs of fuel are low and

environmental pollution is lower than forcorresponding volumes of movement by road, rail orair. A major advantage is that the main infrastructure -the waterway - is often naturally available.

8/6/2019 11F05 SCM 8 ex BG


Pipelinesy Pipelines form a unique mode of transportation. They

can move large quantities of certain types of

commodities, mainly fluids, over long distances atrelatively low cost.

y Compared to normal surface mode like railways and

road vehicles, the following advantages are particularly

attractive:

8/6/2019 11F05 SCM 8 ex BG


Cont.i. They do not require the return of 'empties' to the starting

point and as such are ideal for unidirectional traffic.

ii. They are insensitive to surface conditions such as storms,inclement weather, etc.

iii. Operating costs are low.

iv. Capital cost being the major cost of transportation;

inflationary influences have a small effect on transport

cost.

v. They are environment friendly.

8/6/2019 11F05 SCM 8 ex BG


Airportsy Air freight is the newest but least utilized mode of

transport. Its significant advantage lies in the speed

with which a shipment can be transported. Theprohibitive aspect of air transport is its high cost. Thetrade-off is its high speed, which allows otherelements of logistical design, such as warehousing or

inventory, to be reduced or eliminated. Air transportstill remains more of a potential opportunity than areality.

8/6/2019 11F05 SCM 8 ex BG


Cont.y In the case of perishable products like fruits and

vegetables, the total time from production toconsumption is critical and needs to be minimized.

y There are more than 20 international airports located within India. Besides these airports, several otherdomestic airports are located in India. In total, thereare more than 334 (2002 est.) civilian airports in India.

y The Indira Gandhi International Airport at Delhi andthe Chatrapati Shivaji International Airport atMumbai handle more than half of the air traffic inSouth Asia.

8/6/2019 11F05 SCM 8 ex BG


Animal Drawn Transporty The importance of R ural Transport (RT) to economic

and social development where three fourth of India's 1billion plus population live in six lakh villages.

y RT is concerned with transporting goods and people within the village, between villages and urban areas,linking village roads with district roads, state highwaysand national highways.

y During the last three decades, improved carts (ICs)using pneumatic tyre, fitted with smooth bearings,steel wheels and axles have become popular in semi-urban areas and for sugarcane transport.

8/6/2019 11F05 SCM 8 ex BG


8/6/2019 11F05 SCM 8 ex BG


C ont.

Mode Nature of Traffic

R ail Extracting industries, heavy manufacturing, and agricultural commodities.

R oad Medium and light manufacturing, distribution between wholesalers and retailers.

W ater Mining and basic bulk commodities, chemicals, cement, some agricultural products

Pipeline Petroleum, natural gas, coal slurry

Air Emergency, perishable goods, limited marketing period, high value premium products

Animal-drawn R ural distribution

Operating Characteristics R ail R oad W ater Pipeline Air Animal Drawn

Speed 3 2 4 5 1 6

Availability 3 2 5 6 4 1

Dependability 4 3 5 1 6 2

Capability 2 3 1 5 4 6

Frequency 4 3 6 1 5 2

Composite score 16 13 21 18 20 17

Summary of nature of traffic and mode selection

R elative Operating Characteristics of Transportation Modes

Documents

11F05 SCM 8 ex BG