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UNIT-3

Sourcing and Transportation Decision in Supply Chain:

Economic uncertainty, fluctuating fuel prices, increased safety and social regulation, escalatingcustomer expectations, globalization, improved technologies, labor and equipment shortages, achanging transportation service industrytodays managers are faced with an array ofchallenges and opportunities that contrast dramatically with those of a decade ago. It is notsurprising, then, that many managers have failed to fully adapt to the changing environment,resulting in performance shortcomings and lost opportunities. Prominent among the list of lostopportunities is fully leveraging the transportation function as a critical strategic element withinthe supply chain. Transportation plays a central role in seamless supply chain operations,moving inbound materials from supply sites to manufacturing facilities, repositioning inventoryamong different plants and distribution centers, and delivering finished products to customers.Benefits that should result from world-class operations at the points of supply, production, and

customer locations will never be realized without the accompaniment of excellent transportationplanning and execution. Having inventory positioned and available for delivery is not enough ifit cannot be cost effectively delivered when and where needed. This article addresses the keydecision levels that need to be addressed for transportation to make its greatest impact in theintegrated supply chain. These levels address long-term decisions, lane operations, choice ofmode or carrier, and dock level operations.

Long-TermDecisionsAt the highest strategic decision level, transportation managers must fully understand totalsupply chain freight flows and have input into network design. At this level, long-term decisionsrelated to the appropriateness and availability of transportation modes for freight movement are

be made. Managers need to decide, for example, which primary mode of transportation isappropriate for each general flow (i.e., inbound, interfacility, outbound) by product and/orlocation, paying careful attention to consolidation opportunities where feasible. Plans shouldindicate the general nature of product flows, including volume, frequency, seasonality, physicalcharacteristics, and special handling requirements. Strategic mode and carrier-sourcing decisionsshould be considered part of a long-term network design, identifying core carriers in eachrelevant mode to enhance service quality commitments and increase bargaining power.Additionally, managers need to make decisions regarding the level of outsourcing desired foreach major product flowranging from providing the transportation through the companys ownassets (e.g., private fleets) to latch-key turnover of transportation operations to third-partyproviders. Network and lane design decisions at the strategic level should examine tradeoffs with

other operational cost areas such as inventory and distribution center costs. In conducting thisanalysis, companies should keep in mind that networks need not be fixed or constant. Rather,substantial service improvements and cost reductions can be achieved by critically examiningexisting networks and associated flows. For instance, it may become apparent that stocklocations can be centralized by using contract transportation providers to move volume freight toregional cross-dock facilities for sorting, packaging, and brokering small loads to individualcustomers. The second level of decision-making regards lane operation decisions. Wherenetwork design decisions are concerned with long-term planning, these decisions focus on daily

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operational freight transactions. At this level, transportation managers armed with real-timeinformation on product needs at various system nodes must coordinate product movements alonginbound, interfacility, and outbound shipping lanes to meet service requirements at lowest totalcosts. Decision-makers who are adept at managing information can take advantage ofconsolidation opportunities, while ensuring that products arrive where they are needed in the

quantities they are needed just in time to facilitate other value-added activities. At the same time,they are realizing transportation cost savings. The primary opportunities associated with laneoperation decisions include inbound/outbound consolidation, temporal consolidation, vehicleconsolidation, and carrier consolidation. If managers have access to inbound and outboundfreight movement plans, they can identify opportunities to combine freight to build volumeshipments. An inbound shipment may arrive from a supplier located in Philadelphia, forexample, on the same day that a production order destined for a customer in Wilmington, Del.,becomes available for movement. If this information is known to transportation planners farenough in advance, arrangements could be made for the inbound carrier to haul the outboundload back to Wilmington. In many cases the inbound carrier would be willing to negotiate lowerroundtrip rates to avoid deadhead miles on the backhaul. This is particularly true if the carrier

and/or driver are headquartered in the Philadelphia area. If this happens to be a heavy trafficlane, the firm may consider strategically sourcing a core carrier in this geographic region tocapitalize on this opportunity. Similarly, less-than-volume-load (LVL) shipments moving to thesame geographic region on consecutive days may be detained until sufficient volumes exists tojustify a full load on one carrier with multiple stops (temporal consolidation). By avoiding theLVL terminal system, the detained freight often arrives at the same time or earlier than theoriginal LVL shipmentand at a lower cost. Multiple, small shipments inbound from suppliersor outbound to customers in the same geographic region scheduled for delivery on the same daymay also be combined on one vehicle at full-volume rates, paying stop-off charges but saving onmultiple LVL rates (vehicle consolidation). Another consolidation opportunity springs from thecore carrier concept. Assigning greater shipping volumes to fewer carriers should result in lowerper-unit transportation costs and higher priority assigned to the shippers increased freight. Inaddition to consolidating the carrier base, the shipper can identify reliable carriers in need ofbackhaul miles. For instance, a plastics distributor identifies carriers that operate a highpercentage of deadhead miles in lanes over which the firm regularly moves freight. The firmnegotiates advantageous rates with these carriers in exchange for guaranteed backhaul revenuemiles. If the plastics firm plans to move significant amounts of product from Texas to Florida,the transportation manager will find a Florida carrier that moves a large volume of product fromFlorida to Texas. Given sufficient planning information, the transportation manager can useguaranteed volumes on the backhaul to negotiate attractive rates.

Choice of Mode and CarrierA third level of transportation decision-making involves the choice of mode and carrierfor aparticular freight transaction. Due to the blurring of service capabilities among traditionaltransportation modes, options that in the past would not be considered feasible may now emergeas the preferred choice. For example, rail container service may offer a cost-effective alternativeto longhaul motor transport while yielding equivalent service. Similarly, package deliverycarriers are competing with traditional LTL operators. Truckload carriers, on the other hand, areincreasingly bidding for low-volume shipments as well as for overnight freight movements. For

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the shipper seeking 24-hour delivery, truckload carriers may offer an alternative to air carriers atsignificantly lower ratesand, quite possibly, higher reliability.

In an integrated mode/carrier decision-making scenario, each shipment would be evaluated basedupon the service criteria that must be met, (for example, delivery date/time or special handling

requirements) as well as the movements cost constraints. All core carriers, regardless of mode,that could possibly meet the service and cost criteria would be pulled from the database.Managers would then choose the carrier from this multi-modal set based on availability andexisting rates.

Dock Level OperationsThe final set of transportation decisions involves dock level operations, such as load planning,routing, and scheduling. These activities encompass the operational execution of the higher-levelplanning decisions. While the fundamental purpose of shipping docks may not have changedmuch over the years, the manner in which work is done certainly has. One obvious change is thecommon usage of advanced IT and decision support systems. These tools help the dock

personnel to make better use of the transportation vehicle space; to identify the most efficientroutes; and to better schedule equipment, facilities and drivers on a given day. Transportationdepartments that avail themselves of better and more timely information can derive significantbenefits from more efficient and effective load planning, routing, and scheduling. For example, ifa vehicle is being loaded with multiple customer orders, dock-level managers must ensure thatthe driver is informed of the most efficient route and that loads are placed in the order of theplanned stops. Transportation managers, even at the dock level, must develop expertise in usingthe information tools available to aid in these decisions. Successful managers today require abroad view of transportation managements role and responsibilities in an integrated supply

chain. Managers will continue to encounter significant challenges as their firms proceed downthe road toward supply chain integration, particularly as external environmental characteristicssuch as fuel costs and the overall economy wax and wane. Regardless of external conditions,however, managers must encourage their firms to avoid the temptation of making transportationdecisions with an eye toward short-term gain. Rather, they need to view the total cost and totalvalue provided by the function not only in relation to operating expenses but also in terms of theimpact on customer service and inventory reduction. The influence on total economic valueadded is significant.

Guide Lines for Sourcing of Supply Chain Management:

OUTSOURCING SUPPLY CHAIN MANAGEMENT - 3 ISSUES TO GO BEYOND

BUYER-SELLER RELATIONSHIPCompanies turn to outsourcing and consulting for manyreasons. They look to reduce costs, shorten cycle time, improve shareholder value, decreaseinventory, focus on core competencies, gain information technology, increase expertise andmore. Likewise transport, warehouse, forwarder and other logistics service providers want toprovide outsource services.They want to improve profits, transition from being a commodityservice provider, gain volumes and throughput by leveraging existing core logistics service,increase revenues and more.This creates a mutual need between the two parties.Yet despite thiscommon interest, half of the outsourcing relationships end unsatisfactorily within three

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years.Half are not able to go beyond a buyer-seller relationship. The responsibility for the failureoften resides with both parties.Reasons for the failures run the gamut and include:

*Poor project design*Lack of metrics or key performance indicators (KPIs)

*Use of improper metrics or KPIs*Not fulfilling expectations of either or both parties*No clear lines of responsibility and accountability*Inability to evolve the relationship from short term to long term and from static to dynamicSome reasons for failure reflect symptoms, not causes.Failures are not unique to outsourcing; butoutsourcing is unique.Outsourcing goes beyond transport or warehouse agreements andservice.Supply chain management is one of largest costs and has significant service impact tocompanies.Some contract logistics projects are critical to a company's supply chain andoperating success.Therefore outsourcing should be designed not to fail, especially with supplychain management.The impact can be significant to the company doing the outsourcing. Much isdiscussed about metrics and service level agreements (SLAs) in defining the outsourcing

relationship.These should be after-the-fact and matter-of-fact results of the project definition anddesign. Whether the two parties are trying to develop the contract logistics relationship or arestriving to make an existing outsourced program succeed, there are three fundamental issues thatmust be addressed.

Define what is being outsourced.This may seem obvious.However the matter may go

much deeper and may obscure the real project and program. Both parties need to fully

understand it.At the minimum, discussion should include:

Is it transaction or process?Transactions reflect assignment of work; process reflects

delegation of responsibility. If the topic is using a forwarder to help with supplier

ocean transport or having a warehouse pick and pack products and deliver them, thenthose are transactions.Supply chain management should be a process.So if the contractlogistics need is for transactions, then it must be clear as to what the transactions are,what triggers them, how they must be performed and, more importantly, how they fit

into the process. However if the topic is managing the import supply or managing

store inventory and replenishment, then those are processes.When supply chain processis being outsourced, then very clear definitions of the process must be developed.

What is the condition of the transaction or process?Whether the outsourcing involvestransactions or process, it should be assessed.The logistics activity must be

understood.Outsource providers need to understand how the activity operates, both as itsfunction and how it fits in the overall supply chain and company operation. They need

to assess as to process, technology and people.Assessment should address internal andexternal gaps and redundancies, interactions, objectives, performance results-both realand perceived-and time requirements and demands.Strengths and weaknesses must beidentified.Not knowing whether the process is flawed can contribute to the risk of

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failure.Identifying a flawed process up front changes the project dynamics to includereengineering to make it work properly.

Mutual question of "why".There is a "why" question.Why does one party want tooutsource part of its supply chain responsibility?Why does the other party want to take on

that activity and accountability?Each needs to define its motives and more exactly define anyhidden reasons.A clear explanation is needed and should go beyond "improve businessperformance", "improve productivity", "improve delivery" or similar, abstract reasons.

Unfulfilled expectations by one or both parties can have dramatic impact on sustaining theprogram.Each needs to know the desired results and how the outsourcing will achieve thedesired result because the answer can directly and indirectly affect the project design andoperation.

What is the desired outcome?Each party wants something tactical or perhapsstrategic.This has to be clearly expressed.Both parties need to be clear to each other.This

helps set the implementation plan, timing and direction. At the same time,expectations should be reasonable.Otherwise the seeds of outsourcing failure may besown. For the company looking to outsource, it can be an attempt to reduce costs orachieve other benefits that it is unable to realize internally.A 15% cost reduction goalmay be attainable; while a 40% may be more difficult and require a different approach asto design, implementation and timing. Or the desired outcome could be very different,such as an effort to transform the business.The company may want to create a valueproposition and capability for customers that it does not perform now.Or it may beseeking to transition away from one business into another or other businesstransformation.Outsourcing may present the means to make a significant shift to leansupply chain management.So the intent goes beyond having a third party perform the

existing activity.It means creating a new operating model, including changemanagement.The "why" can change the type of outsourcing service provider that thecompany should be talking with, such as a 4PL instead of a 3PL. The firm wanting toperform the outsource activity may be looking to increase revenues or profits.It couldwant a certain volume of ocean containers or square feet of warehouse usage foreconomies of scale.The provider could also be looking to shift into other industries orlogistics service niches that have greater growth potential.So the intent goes beyondperforming the existing activity.The provider wants to reposition itself as an outsourceservice company..

Potential for risks can be hidden.These can include:

Expectations are not reasonable.The litmus test of reasonableness should beused to identify risks for each party.Expectations must be known as to where they

are and why. They must be tangible.The timing of occurrence and impact

should reflect transition, ramp up and learning curve.

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Potential conflict may exist initially between buyer and seller.This means

incompatibility with goal congruence. The basic foundation is between buyer

and seller.Moving to mutual beneficial development and direction can behindered-or not-with this basic issue.

Supply chain management is a process that crosses the company.This can putoutsourcing and contract logistics provider in conflict with the traditionalorganization silos.

Corporate culture and other differences may exist between the two parties as torisk aversion which can stifle risk sharing and project success.

Look beyond the initial twelve months. Outsourcing can start well; keeping it going wellcan be difficult.Today's metrics can become outdated.Mutual interests must stay aligned evenas needs and business can change. Otherwise atrophy can set in as the relationship strugglesto go from static, doing the same things repetitively, to dynamic, doing it differently. Change

is a fact; the rate of change is at issue.How to handle change can be a delineator as to the endof the arrangement or moving beyond buyer-seller to relationship management.Theoutsourcing must be able to adapt, to be agile. The SLA is not an end; it should be a vehiclefor ongoing.It must be flexible for collaboration, connectivity, integrated, time compression,six sigma and other demands. Outsourcing of supply chain management should be designed

and developed to succeed. Both parties must take the dialogue deeper.Whether it

develops into a partnership depends on mutuality. The three issues frame and

drive the relationship, its direction, purpose and its continuity. It

should be based on a prudent, rational, open exchange between the firm wanting to outsource

and the firm wanting to handle the outsourcing.There should be no rush to judgment andhave no artificial deadlines for completion.All this increases the chances for success.Supplychain outsourcing is too important to fail.

SCM shall acquire goods or services and dispose of obsolete goods through open and transparentcompetitive bidding, tendering and sole/single sourcing procurement processes.

In cooperation with University departments, Supply Chain Management shall coordinate allprocurement functions related to the acquisition of goods, supplies and services through one thefollowing methodologies:

Competitive Price Solicitation:

A competitive bid process or methodology shall take place for all purchases greater than $25,000(not including GST).

Based on the purchase amount and complexity of the purchase requirement, Supply ChainManagement shall invite competitive bids from suppliers through one of the following methods:

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Purchases between $25,000 to $75,000 - Supply Chain Management to solicit a minimumof three (3) supplier price quotations from the marketplace.

Goods and service purchase requirements $75,000 or more in total must be advertised onthe Alberta Purchasing Connection (APC) electronic tendering website.

Construction purchases greater than $200,000 must be advertised on the AlbertaPurchasing Connection (APC) electronic tendering website or Calgary ConstructionAssociation CoolNET electronic tendering system.

Non-competitive Price Solicitation:

A non-competitive procurement process or methodology takes place when the purchase is placedwith only the supplier without a competitive bid process being undertaken.

Transportation Mode and Selection:

A key decision in logistics management is the selection of the transportation mode andcarrier to move the firms inbound and outbound freight. Managers typically considermultiple attributes when making this decision, often focusing on cost and transit timeas the primary criteria. This is not a trivial decision, however, as the process ofteninvolves multiple criteria, some of which are not readily quantified. Additionally, theimportance of individual factors often differs from industry to industry, company tocompany, and even within a company from one facility to the next. Then too, mode andcarrier selection is often viewed differently for inbound and outbound shipments, evenat the same location. Mode choice and carrier selection are part of the decision-making processin

transportation that includes identifying relevant transportation performance variables,selecting mode of transport and carrier, negotiating rates and service levels, andevaluating carrier performance (Monczka et al., 2005). No doubt, these are all important The roleof transport is to facilitate the movement of goods. This may be from points of manufacture,storage or pre-positioning, to points of use; or between hubs and distribution points; or hubs toend use; or distribution points to end use; or return from end use back to hub and pre-positioningpoints or manufacturers. The source and destination may be in the same country, or one may bein a different country requiring international movement. Transport management in emergenciesis a complex task depending on the nature of the disaster. How it is structured is very dependenton the state of the infrastructure, security in the area of disaster, demand, nature of product etc.More and more, humanitarian organisations are beginning to tap into the joint transport serviceswhen they are offered by the Logistics Cluster during emergencies. The service is based on acollaborative approach and aims to leverage the advantages of centralised coordination andsharing of assets. A transport strategy depends, not only on the needs within the organisation, butvaries from organisation to organisation and from situation to situation. Some factors to considerwhen developing a transport strategy are:

how to identify transport service providers; how to manage the function; i.e. whether to lease, outsource or manage own fleet;

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capacity of transport modes available; quantities requiring movement over a period of time; nature of goods/products/supplies to be transported; distances to be covered; environmental issues such as climate, government legislature, infrastructure, taxes etc;

number of destinations, hubs and pre-positioning locations; origins and routes; available transport modes & their relative costs; human resources; terrain; funding; security; and circumstancessuch as Nature of disaster.

The above factors would be valid for both emergency and non-emergency situations.

Managing transport providers

Occasionally the need arises, or the decision is taken to use external transport providers. In thisevent there has to be a structured approach to the selection (see contracting) and subsequentmonitoring and control of the provider or providers selected. There are a number of importantissues to be considered to ensure that a reputable provider, who will provide the required level ofservice, at an acceptable cost, is sourced.

Point to note

The selection process adopted for the acquisition of all services is covered by the organisation's

approved procurement policy, processes and procedures.Contracting should be done in a competitive manner, on market terms, and negotiationsundertaken in an open and transparent fashion, thus ensuring cost effectiveness and equalopportunities for the appropriate commercial entities.

1. Local transport movement

Local movements within a specific country will usually involve road transport. This may involvemovement of bulk loads from ports, airports and railheads to warehouses and depots, bulkmovements between facilities such as warehouses or depots, or delivery of smaller consignmentsfrom a local warehouse or depot to end users at a number of destinations in an area.

2. International movement

In normal circumstances the local environment will not always be able to provide all theproducts and services required to fulfil the needs identified in an emergency environment.logisticians therefore become responsible for sourcing externally and organising the

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transportation of relief supplies to affected locations. Often the relief supplies come from othercountries and have to go through various processes before they are received. To ensureefficiency and to allow the logisticians to focus on their core job, the organisations seek serviceproviders with expertise and capacity to handle certain aspects of the movement.

The common service providers are:

freight forwarders; clearing agents; inspection services.

Criteria for selection of above service providers:

licensed by the government to conduct customs clearance formalities and be up-to-dateon changes in customs requirements;

offer a wide variety of services, so that you do not need to contract many differentcompanies for different services (e.g. sea and air freight, re-packaging of damagedmaterials, etc.);

own or have access to a bonded warehouse to protect and control shipments in transit; own a trucking fleet for inland transport and have access to specialised vehicles when

needed such as container trucks, low-bed trailers, tankers, etc; have trained, competent, experienced and trustworthy staff; have a proven record of reliability, accuracy, and timeliness, as verified by references

from other groups that have used their services; are flexible in their availability at short notice, also outside of office hours and on public

holidays; have an established reputation and have been in business for a number of years;

have influence in the transport market, with port authorities, etc; are experienced in successfully handling duty exemption arrangements for humanitarian

organisations; have an office in the port area or nearby; are experienced in verifying goods arriving in the port: discharge, storage and loading

operations, checking weights and inspecting shipping packages for visible damage; are experienced in hiring porters and stevedores for cargo handling; have at least a country-wide, preferably a multi-country regional network; and use technology effectively, including a good telecommunications system and, preferably,

a computerised tracking system that allows visibility of where shipments are at a giventime;

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Route Planning and Scheduling

For effective route planning and scheduling, the transport officers need to be involved in thedevelopment of the distribution plan or at least be aware of it and understand it. Vehicle routingand scheduling process needs to fulfil the following objectives:

maximising vehicle payload (by maximising vehicle fill out and back) and maximisingvehicle utilisation (by maximising number of loaded journeys per vehicle);

minimising distance (e.g. by minimising overlapping deliveries) and minimising time(e.g. by minimising non moving time); and

meeting customer requirements, in terms of cost, service and time and meeting legalrequirements, in terms of vehicle capacity and driver's hours.

The nature of the movement can be split into two basic types:

primary movements are those that involve typically bulk movements between twospecific locations. This may be, for example, between two warehouses in a network orfrom a port or railhead to a warehouse; and

secondary distribution relates to movements that may involve multiple deliveries within adefined area, such as a regional or local warehouse to extended delivery points. In bothcases, the emphasis is on achieving full utilisation of the resources used; filling thevehicle to capacity minimising the distance travelled and optimising the hours which thedriver is being paid to work.

Mode of Transport:

A mode of transport is the means by which goods and material are transferred from one point toanother. The basic modes of transport are:

1. Air2. Sea3. Road4. Rail

See below a mode comparison matrix for different modes.

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Mode Selection :

Four key criteria:

the speed which the mode exhibits; the reliability that the mode demonstrates in its ability to fulfil service requirements; the flexibility that the mode exhibits; and the comparative unit costs, which the modes incur.

Speed and reliability will have a major impact on the ability to deliver humanitarian aideffectively and efficiently to where it is needed.

Other considerations in the selection of a transport mode are:

required delivery date; cost of transport service; reliability and service quality; shipment size; transit time; number of transhipment points; item type; possibility of damage; and range of services.

Matching Operational Factors to the Selection Criteria

It is important to use a structured approach to mode selection. It is important to understand the

following points :

opportunities and constraints in the choice of mode will be identified from carefulanalysis of all relevant operational factors;

modes that realistically cannot be considered should be ruled out of the decision processimmediately;

geographical factors should be considered, as they may remove the opportunity to use aparticular mode; and

lack of appropriate infrastructure may also remove the opportunity to use a particularmode.

Table of contents

- Air Tranport

(see alsoOperational Environment)

In emergencies, and especially flooding and conflict situations where road access is difficult, airtransport is often the alternative.

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Air transport can be provided through:

schedules air carriers using world airlines and other global logistics service providers or air charters; where it is possible to charter planes/helicopters or perhaps to have the use of

military aircraft to allow a totally dedicated movement to take place. It is possible to

move goods without being constrained by commercial timetables and specific airportlocations. The charter may be totally ad hoc, that is, a one-off charter to achieve aparticular humanitarian objective. Alternatively it may be a regular event, monthly forexample, in order to transport routine supplies or perhaps members of staff. Logisticiansshould all be familiar with their internal guidelines on the use of military assets.

Factors that influence the decision to charter and the nature of the aircraft chartered:

availability of different types of aircraft; the nature, quantity, weight, size and volume of the cargo Institute All Rights Reserved;

aircraft equipment available for handling at origin and destination; the distance to be travelled and possible constraints on certain airspace; ability of certain airports to handle particular types of aircraft regarding take off and

landing; possible noise restrictions at certain airports; securing landing and over-flight permission.

Sending Goods by Air

The air waybill (AWB) is the most important document related to airfreight. Its completion isregulated by IATA definitions. Each AWB has a unique identifying number, the first part ofwhich is the IATA airline code number. The AWB is the carriers receipt by air, evidence of the

contract of carriage and is usually non-negotiable. It is made out to a named consignee who is theonly party to whom the carrier can deliver.Packaging and labelling for air transport is an important consideration. Transport by all-freightaircraft will usually take place using some form of unit load device, so reducing the need forpackaging. However, the method of loading and unloading and onward transit may still require astrong and durable packaging medium. Ultimately it is the nature of the goods being transportedthat will determine the precise nature of the packaging.

Table of contents

- Road Transport

Use of organisation's own vehicles (own account)

If an organisation decides to acquire its own vehicles, there are a number of areas to beconsidered. The type of vehicle, in terms of the chassis-cab and the body type, needs to be

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determined. The nature of the operation may also require that mechanical handling aids need tobe incorporated into the overall vehicle specification

AdvantagesThe advantages of owning vehicles include:

vehicles can be built specifically to carry a particular product. Special equipment formaterials handling can be attached;

the driver can be specially trained and will fulfil the 'ambassador' role for theorganisation;

vehicles can carry the company livery, perhaps the aid organisations logo and, whereappropriate, the Red Cross; and

management retains total control over the vehicle and its operation.

A major disadvantage

Management of the transport function can occupy a great deal of management time, requiresspecific expertise and significant capital investment. In contrast, third party carriers can oftenprovide more cost-effective transport facilities but careful consideration must be given to thelevel of service required.

Third party advantages and disadvantages:

Even if an organisation owns its vehicles, there may well be occasions when a need arises foradditional capacity, to meet peak activity or other short term needs. This can be met by the use ofvehicles supplied by a commercial transport provider (third party).

The advantages of using third party transport include:

organisations can use commercial providers to meet fluctuating demand requirements; variable loads and journeys can be catered for; the haulier may be able to offer a more cost-effective and a more efficient service; and responsibility for administration of vehicles and drivers is no longer the responsibility of

the organisation, allowing staff to concentrate on more productive areas. There is no

requirement for capital to be invested in transport.

DisadvantagesA measure of control is lost with third party operations. Performance feedback andcommunication with customers needs to remain a strong feature and be controlled by thecontracting organisation.

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Selecting vehicle types

It is important to be able to select the appropriate vehicle for the purpose required even if, at alater stage, it is necessary to revise this choice to reflect availability in the field.See below a description of the main body types and combinations that are available.

Selecting the body type

The specification of the vehicle body will vary according to the goods or materials being carriedand security. There are many variants of body type available; a description of the main bodytypes is shown below.

Table 2: Selecting the body type.

To download the table, 'right click' on it and then choose 'Save Image As' from the menu or go toAnnexes and click on 'Selecting Vehicles Types'.

Platforms

The simplest and cheapest body type is the platform or flat bed. It provides all round access tothe load, but offers little security or protection from the weather. Loads also need to berestrained. This will generally involve roping and sheeting, which is a time consuming operation.

Van body

The van or box body reduces the payload of the vehicle, but provides protection for a perishableproduct and added security. Construction will depend upon the needs for insulation,waterproofing or strength. Access is usually provided by a rear door. Sometimes a door will bebuilt into one, or both, of the body sides.

Curtain sided bodies

Curtain sided bodies overcome the disadvantages of access, since the curtains can be pulled backto reveal the full length of the platform. This improves the speed of loading as well as unloading.Advantages of load restraint and weather protection are maintained, while body weight is lessthan the box body. Other variants will replace the curtains with sliding panels.

Tankers

Tankers are designed to carry powders or liquids. They require a pumping mechanism and pipingto discharge the load.

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Bulk carriers

Bulk carriers are generally built as box bodies without the roof. They will require a tippingmechanism to allow the load to be discharged.

Drawbars

A rigid master truck with a drawbar trailer is the usual configuration. The bodies may be of thedemountable type. Drawbars offer increased cubic capacity for bulky lighter loads.

Road transport documentation

Whether the vehicles being used are owned, hired or are managed by a third party, it is importantto ensure that all local laws relating to the licensing, insurance and regulation of vehicles arebeing adhered to :

normally a licence to operate the vehicle on a public highway is required; for larger trucks there may be an additional licence fee to be paid; vehicles should be insured to at least the minimum required by law; different

organisations will have internal policies regarding the extent to which their own vehiclesshould be insured; and

vehicles may also require documentation relating to the maximum permissible weights interms of gross vehicle weight, axle weight and payload.

- Sea transport

Sea transport is convenient for bulky pre-planned consignments. In the early days of emergencysituations, sea transport is not used to service immediate needs in rapid on-set disasters but moreto pre-position or serve post disaster and longer term needs. The key document used in shippingis the bill of lading (B/L). Logisticians should familiarise themselves with it.

Bills of Lading

The B/L is the transport waybill for a sea freight consignment. It is usually issued in a set ofthree originals and several non-negotiable (N/N) copies. The B/L is signed on behalf of the ship

owner by the person in command of a ship or the shipping agent, acknowledging the receipt onboard the ship of certain specified goods for carriage. It stipulates the payment of freight and thedelivery of goods at a designated place to the consignee therein named.

The B/L is the major shipping document and has three roles.

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It affirms the contract of carriage and sets out the terms thereof. It is evidence of thecontract between the consignor and the shipping line, and on the reverse details theconditions of carriage.

It is the carriers receipt for the carriage of goods by sea and is signed by the master oranother duly authorised person on behalf of the ship owner, acknowledging receipt on

board the ship of certain specified goods that he undertakes to deliver at a designatedplace. Possession of the original B/L gives the title to the goods being carried. It is a negotiable

document of title to the goods. The consignor must make sure that at least one originalB/L reaches the consignee in good time (since he will receive the goods only againstpresentation of at least one original B/L). The carrier usually establishes three originalB/L, which are sent to the consignee under two separate registered mails (it is alsopossible to send one by ship's bag).

The B/L states to whom and on what terms the goods are to be delivered at destination. Withoutan original B/L the goods will not be released. The usual way to get the goods without the

presentation of the original B/L is the establishment (by the consignee's bank) of a bankguarantee covering the value of the goods. Such guarantee can only be cancelled by remittanceof the original B/L to the bank. It is sometimes possible, at the discretion of the carrier, for theconsignee, holding a copy B/L to sign a Letter of Indemnity in return for delivery of cargo. Onreceipt of the B/L it should be passed to the party responsible for clearing the goods. Once thevessel has docked and the goods have been unloaded, the B/L and appropriate customsdocuments will be required to obtain release of the goods for onward transport.

Terms of the B/L

There are three different entries possible in the box headed CONSIGNEE:

To bearer: this means that any person having possession of the B/L may collect thegoods; such person is not required to disclose their identity or to explain how they cameinto possession of the B/L. The mere fact that they have possession of and present theB/L is sufficient. Issuing B/L "to bearer" is not common practice and carries significantrisk.

To order: this is the form of B/L used most frequently in commercial transactions. Aslong as the shipper holding the B/L has not endorsed it, he is entitled to dispose of thegoods. By endorsing it, he transfers his rights to the endorsee, that is, the person to whom

the B/L is assigned by endorsement. Title to the goods is thereby transferred to the newholder of the B/L who may in turn assign it by endorsement to somebody else. To a named party (straight B/L): in contradiction to a B/L "to order", the straight B/L

(one in which it is stated that the goods are consigned to a specified person) does notentitle the shipper to dispose of the goods. That right is vested exclusively in the receiverwho alone has the right to collect the goods, upon presentation of the B/L and proof of hisidentity.

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The Straight B/L may be assigned by means of a document instrument in writing, evidencingthe assignment, which the assignee must present to the master of the vessel together with theoriginal B/L when he collects the goods.

On a straight B/L, the term "to the order of" printed on standard B/L must be crossed out, and thedeletion initialled by both the shipper and the Master.

A Clean B/L is a B/L, which contains nothing in contradiction to qualify the receipt on board ofthe ship, the goods in "apparent good order and condition". Goods may sometimes be receivedalongside, which can result in a delay prior to the physical loading of the goods onto the vessel.

An Unclean B/L is a B/L containing notation that goods received by carrier were defective.

The Through B/L is issued when a shipper wishes the carrier or shipping line to arrange for

transport to a destination beyond the port of discharge. The through B/L, in addition to theagreement to carry goods from port to port, includes a further journey (by sea or land) from theport of ship's destination to a distant place (for instance, a destination inland instead of a port).

- Rail transport

Rail transport is a safe land transportation system when compared to other forms oftransportation. Rail transportation is capable of high levels of passenger and cargo utilization andenergy efficiency, but is often less flexible and more capital-intensive than highwaytransportation is, when lower traffic levels are considered. Rail transport costs less than air orroad transport. It is very suitable for the movement of large load sizes over longer distances, but

it has the following disadvantages:

it lacks the versatility and flexibility of motor carriers since it operates on fixed trackfacilities. It provides terminal to terminal, rather than point to point delivery services;

though it offers an effective method of bulk haulage, it is slow.Documentation for movement by rail is controlled through the rail waybill. The rail waybill is anon negotiable document. It contains the instructions to the railway company for handling,dispatching and delivering the consignment. No other document is required expect forinternational transport across borders, where enquiries should be made locally as to the properdocumentation needed.

- Other modes of transport

Other modes of transport especially valid for emergency situations and remote under-developedareas are:

Animal

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The goods being moved must be packaged in relation to the weight that the particular animalbeing used can carry. For information, the table below shows the animals used most frequently insuch situations and their approximate work rates. These may vary locally because of climatic orother local conditions.

Barges and boats

Where road and rail transport is not possible due to lack of infrastructure it may be necessary totransport goods by river. This mode of transport also suits bulk shipments of commodities. Thiswill often be done using motorised barges or similar vessels. Goods can be loaded and unloadedusing jetties and quayside facilities. In some cases they may be unloaded from seagoing vesselsdirect for onward transit.What size and type of barge (self-propelled or dumb) that may be required will be determined byavailability. Barges are used frequently in the Rhine/Danube basin, the Mississippi basin andMekong Delta and the coastal waters of south-east Asia. It provides a relatively cheap and simplemeans of transport which is not dependent on sophisticated port handling facilities. Barges have

been adapted in the United States and Europe so that they form part of a multi-modal transportsystem where barges are integrated with road and rail movement. Also barges are part of thelighter aboard ship (LASH) / barge system and refers to the practice of loading barges (lighters)aboard a larger vessel for transport. It was developed in response to a need to transport lighters, atype of unpowered barge, between inland waterways separated by open seas. Lighters aretypically towed or pushed around harbours, canals or rivers and cannot be relocated under theirown power. The carrier ships are known variously as LASH carriers, barge carriers, kangarooships or lighter transport ships.

Administration - Safety and security of goods to be moved

Legislation and regulatory frameworks for transport usually include a specific requirement forvehicle safety. Most humanitarian organisations also lay down safety and security policies thatneed to be followed. Requirements will include the vehicle weight, the way it is loaded and howthe load is distributed.

Drivers and operators of vehicles are responsible for using a vehicle on the road with a safe andsecure load. Legislation will often state that, in transit, the drivers have full responsibility for thesafety of their load, even if they did not load it personally. Even if, in some countries, thelegislation is not implemented, respected or followed, every effort must be made to ensure thatthe organisations drivers are following the legislation that has been laid down.

Avoiding in-transit theft

A thief intending to steal a loaded vehicle requires:

knowledge of an attractive load; the opportunity to access it; time to steal it and to get away before detection; a market for the goods; and

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limited or negligible perception of risk.

Main sources of vehicle theft are from depots, from overnight parking areas and from theroadside. Theft can be committed by:

stealing an unattended vehicle; hi-jacking the vehicle; threatening or bribing drivers.

Drivers are central to prevention of this type of loss, and their integrity is essential.

Consequently, careful recruitment and selection of drivers is critical. Training will impress uponthem the need for care, and procedures to follow to avoid risk of theft. Driver identification cardscan be used for added security and to avoid thieves gaining access to vehicles by

misrepresentation when parked on third party premises. However, there is little to preventdeliberate collusion by drivers. Vigilance is essential and attention to any pattern ofdiscrepancies on loads.

Revenue Management in Supply Chain:

The Supply Chain is not a business function, it is a network of companies and Supply

Chain Management is the implementation of cross-functional relationships with key

customers and suppliers in that network. It is a new business model necessary for an

organization's success and every function needs to be involved. In todays environment, thereis the added pressure to be more socially and environmentally responsible and there are riskswhich need to be mitigated and managed. Then, there is the complexity created by everincreasing customer requirements and expectations, globalization, the pressure on cost, and theavailability and access to resources. On top of this, management is expected to improveprofitability, increase revenue growth and capture and protect larger market share. In order tosucceed, management must recognize that the ultimate success of an organization depends on theability to integrate the companys network of business relationships in a mutually beneficial way.

The management of this network of relationships is supply chain management. Successful supplychain management requires cross-functional integration within the firm and across the network

of firms that comprise the supply chain. It is focused the improvements in performance thatresult from better management of key relationships. By understanding the supply chainmanagement processes and how they should be implemented, management will better understandthe value of more integrated supply chains and how this integration will lead to increasedshareholder value and a sustainable competitive advantage. Improving revenue management which includes the management of multi-party trade settlement (sometimes dubbed bifurcatedtrade management)is an equal opportunity for all supply chains. No matter whether you arein a consumer, high tech, life sciences, or chemical supply chain it is a major source of cost,

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waste and frustration. Executives often will ask, Why cant we get this right? I laugh andempathize. What seems so simple is very complex. The revenue management process variesby industry. Each value network shapes demand a bit differently and the contract terms areVERY industry specific. For example, consumer products companies lean heavily on tradepromotions, high tech supply chains focus on new product introductions, life sciences on rebates

and value-based outcomes and the chemical industry on price. Despite the differences there arecommonalities:

Traditional CRM is not the answer. The historic footprint of CRM is sales pipelinemanagement, customer service and call center execution and business development. Thisfootprint lacks the data model for either decision support (Revenue ManagementOptimization (RMO)) or execution (Revenue Management Execution (RME). This CRMdata model is fundamentally flawedfocused on a pipeline data model for saleseffectiveness versus a product/services data model that looks at the process workflows ofbifurcated trade, the inter-relationships of the demand shaping levers (price, promotion,incentives, buzz from the social web, trade and brand marketing and new product launch)

and the visibility of a clear baseline forecast. As a result, the industry is forced to nurtureand evolve small, industry-specific providers to augment and redefine front-officefunctionality.

Complex Workflows with Substantial Opportunity. For the corporate fiscal yearending in 2010, the size of the prize is large. The average consumer products companyspent 22% of revenue on trade promotion management (source Symphony/IRI andAMR Research/Gartner) and for the average life sciences company, rebates represented18% of revenues (source IMS). For either industry segment this can quickly add up toover a billion dollars annually. Yet, no company that I have interviewed in eitherindustry (over 150 companies) believes that their processes are under control. Uniformly,companies see revenue management as an opportunity, but do not know how to seize theopportunity. There is no easy answer. To understand why, read on.

Industry-specific Workflows. Each industry shapes demand differently, has differentcontracting processes with their downstream trading partners (buy-side), and usessubstantially different language/terminology to describe what they do. (Can you imagineif you substituted the acronym BOGO (Buy one Get one Free) from Consumer Products(CPG) sales cycle for Averaged Managed Price (AMP) for life sciences sales cycle?)These processes are VERY industry specific.

This leads to a problem. When buying a solution, where do companies turn? Who can theytrust? There is no perfect solution. Why? Traditional Customer Relationship Management(CRM) technologies are insufficient to solve the problem. In sales cycles, the battle lines in salescycles quickly form. Information Technology departments want one throat to choke and believethat this type of functionality can be sourced from a CRM or ERP provider. Lines of Business(LOB) leaders believe that they need industry-specific functionality from industry-specificsuppliers. They are both right, they are just not good at drawing the battle lines. Companiesneed traditional CRM functionality for business development and contact management, butindustry-specific functionality for predictive analytics, base-line forecasting and bi-furcated trademanagement. The decision on Business Intelligence needs to be based on the total IT portfolio.

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Changing Processes. These are not enterprise, but are inter-enterprise workflows,driven largely by the nature of the relationships in the extended value chain. As a result,they need to be designed from the outside-in not the inside-out. It is not easy. Thetechnologies lack an inter-enterprise system of record and standards. Given the recentshifts in power and the increasing compliance/regulations of these industries, the industry

processes are in flux and the need is greater with even more dollars on the table. Opportunity Abounds in both Planning and Execution. While revenue management

should be a horizontal process focused on demand orchestration, the applications in themarket are largely piecemeal serving organizational silos not end-to-end supply chainprocesses. There are no complete solutions. The choice is fraught with risk, but I haveseen greater success when companies chose industry-specific best of breed providers thantry to adapt the data model through custom development that is required with an ERPsolution. In short, while people want it there is no effective end-to-end solution for anyindustry for revenue management.