Project - Logistics

8/8/2019 Project - Logistics

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TRANSPORTATION IN LOGISTICS

SUNITHA V

GREAT EASTERN MANAGEMENT SCHOOL, CHENNAI

2010-2011


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CERTIFICATE

This is to certify that the Project work TRANSPORTATION INLOGISTICS is submitted to the college by the candidate Miss

Sunitha V bearing Reg. No. HAE068BC7A7C5A2N is the product of

bonafide research carried out by the candidate under my supervision in

Logistics Management.

(GUIDE)

Mr. KARTHIKEYAN

Lecturer, LOGISTICS MANAGEMENT

Great Eastern Management School


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ACKNOWLEDGEMENT

The Project work was carried out under the remarkable guidance of

Mr. Karthikeyan Lecturer, Great Eastern Management School. I am

grateful for his guidance, valuable suggestions and for the constant

encouragement and co-operation.

I also express my sincere gratitude and thanks to all the subjects

participated in the study.


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The most visible of all functions of logistics and high contributor tologistics costTransportation functionality: Functions of transportation1. Product movement:

What is moved?Raw Material, Semi Finished items, WIP, Finished goods, packagingmaterial, rejected material movement is required up or down the supplychainHow is this done? What resources are used?Resources used by transportation:a. Time, Temporal Costs - product is locked up during transit, hence

inaccessibleb. Money, Financial Costs- Administration Costs, salaries, maintenance, etc Product loss and damage Cost of fuel for prime moverc. Nature, Environmental Costs - Guzzles natural fuels India consumes about 90% of the total available

and imported oil for transportation

Transportation Creates congestion, air pollution and noise pollution.

Environmental cost is tangible and substantially intangible.

As transportation utilizes temporal, financial and environmental

resources, items must be movedonly when product value is raised

2. Product Storage:

Temporary storage when loading and unloading is expensive

Storage space is not available or limited

Vehicles kept moving on circuitous route


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Airplanes hovering

Principles of transportation

1. Economy of scale

Bulk shipping brings down per unit transportation cost

2. Economy of distance

Cost per unit kilometer decreases as the distance moved increases

Principles of transportation are fundamental in evaluating

transportation strategies.Transportation Environment & Transportation decisions

Who are participants in most of the commercial decisions?

What makes transportation environment different?

Who are the participants in transportation decisions?

Shipper

Consignee

Carrier

The government

Public

Roles and perspective of each party Shipper

What does shipper want?

Predictable and minimum transit time


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Minimum cost

Specified pick up times

Zero loss and damage

Timely exchange of information and invoicing

What does consignee want?

Specified delivery times

Carrier:

What does carrier want?

Revenue maximization

Cost minimization [labor, fuel and vehicle costs]

Flexibility in pickup and delivery times to consolidate moves

Government:

Keen interest in flourishing national economy and hence in

transportation

Effective and efficient Public Distribution System

Control on carrier rates and licenses

Own carrier service

Infrastructural support - net work of roads,

Airports and ATC, Ports and Harbors

Public


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Trigger transportation activity by demanding products

Demand easy accessibility transport

Demand goods and services from all over the world at minimum cost

Demand safety - accidents of various kind, road, rail, air and water

(oil spills)

Demand safe environment - atmosphere, water, noise

When these parties with separate and distinct interests interact

transportationenvironment is created

What is transportation mode?

Mode identifies transportation method or form


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Impact of transport mode on costs of transportation

Transport time

Inventory

Transit capital

Obsolescence

Packaging

Insurance - air, high insurance

Breakage

What constitutes Transport Infrastructure?

[Transport elements]

Factors that affect the smooth functioning of transport?

3. Terminal facilities - well maintained loading unloading facilities,

space for movement of vehicles, platforms, railway yards

4. Vehicles- trucks, ships or wagons. Their size, shape & speed

1. Rights of way- cost of right to use passage.

Rails, roads, airways

2. Routes and sectional capacity-number of lanes

3. Limit on speed, weight, height

4. Weigh bridge facility

5. Nature of product


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6. Carrier organizations

What are various features of modes or modal characteristics?

How do we measure relative weight of each mode?

System mileage, traffic volume, revenue, nature of traffic

composition

Railways Rail network

Stands out in terms of tonne-kilometres moved

226 billion tonne-kilometres and 55.8% of total Tonne-kilometersmoved in 1982 in India

449 billion ton-kilometers and 51.7% of total tone kilometers now

moved in India

Facing very stiff competition from roadways

(as in US after II World War)

High capital investment due to right of way, switching yards,

terminals, locomotives and rolling stock, but low operating costs

Focus on specific products than on broad range

Raw material extractive industries away from water ways.

Developments in this area

Recent customer friendly attitude

Inter modal transport through alliances and acquisitions as in US,

providing single window service to customers


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Development of Specialized Equipment to suit the needs of bulk

volume of customers

Unit trains

Container trains

Double stack containers

Enclosed tri-level automobile car


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A unit train, also called a block train

Double stack containers


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RORO service to road transport konkan railway

Private container trains -Adani logistics, boxram

Container corridors

Private participation in developing ICDs

Road transport

High flexibility and speed

Ultimate mode of transport

Rapid growth, post war

Low capital cost as compared to railways

179.2 billion tonne-kilometres and 44.2% of total tonne kilo-metres

moved in 1982 in India

585 billion tonne-kilometres and 56% of total tonne kilo-metres

moved in India nowOperating costs are higher

Ideal for small shipments over short distances

Labor intensive

Occasional fuel shortages

Availability of good quality vehicles

Availability & cost of maintenance and spares

Bad and unsafe road conditions


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Carrier organizations and their disputes with government

Octroi

Old MVA

Restrictive permits


Entry of several manufacturers of trucks-entry of Daimler to

produce Mercedes CVs

Trailer-tractor sets

National grid of highways

Road widening schemes, bypass to cities

Pay and use roads private road builders

Express ways

The Golden Quadrilateral


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Trailers


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Water transport

Sailing vessels, steamships-1800, diesel driven ships-1920


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Limited scope for deep water transport

Limited extent of navigable inland water transport -lakes, rivers,

canals

Main advantage of water transportation is extremely large shipments

& low cost

Importance of deep water vessels & deep water ports to fully realize

benefits of water transport

Diesel towed barges

Tug-barge combinations

Diesel towed barges


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Diesel towed barges- high flexibility, disadvantages are range of

operation (not for long distance) and slow speed

Ferries- for small water bodies like rivers and bays.

Inland water Transport is not used to its full potential in India

although we have usedvmechanized IWT since early 1800.

Main hurdles appear to be

3. Low priority in policy

4. Construction of dams

5. Receding water levels in the rivers

6. Tough competition by other modes


Construction of deep water ports: JNPT

Construction of ports with private investmentPort Pipavav, India's first port in the private sector is operated by

APM Terminals, one of the largest operators of container terminals in

the world

A consortium led by P&O Australia is setting up a $200 million

Container terminal on BOT basis at Jawaharlal Nehru Port Trial

operation started in April 1999

Agreement signed for construction of a captive Coal Jetty at

Mumbai by Tata Electrics.

Pipelines


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What is transported in a pipe line?

Liquids - oils, crude, petroleum products

In India, extensively used for transporting crude and petroleumproducts

More than 5,000 km of pipeline exists in India for crude and

petroleum products

Slurries - coal slurry, iron ore, lime

Huge quantity of water is necessary which is a concern for

environment

In India pipe line is used for transporting iron ore.

Pipelines


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Gases and vapors- natural gas, LPG, in India

LPG pipe line is in existence

Pulverized dry bulk material - cement by hydraulic suspension

Main features of this mode of transport

Reliable all weather means of transport

Low energy consumption

Pipeline being underground space occupation is minimal

Pipe line operates all the time except when it is shut down formaintenance

No empty container or wagon to be brought back

Highest fixed costs, right of way and laying of pipeline, and lowest

operating costs

Not labour intensiveNot flexible by nature. Pipe lines are stationary

Physical state of the commodity is a limitation.

This mode of transport can release capacity of other modes for

transport of essential commodities

Rope ways

Hilly and otherwise inaccessible area

Steep gradients

Cause minimum ecological imbalance


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Point of supply and demand can be connected by shortest route

Logistics of fruits in Himachal Pradesh

Rope way

Air transport

Speed of transport is highest


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Fixed costs are lower than rail or road or pipe line. But operating

costs are highest

Air transport brings distant markets closer - perishables market in

gulf countries

Over comes the hassle and cost of setting up depots and service

centers overseas

Full potential of peak seasonal demand can be taken

Test marketing is easy. Products can be shipped directly from the

factory

The Indian Air cargo Market

The growth of air cargo in India has also been manifold though it might

not have kept pace with the progress made all over the world.

Freight Rate Structure & Principles:

1. Cover actual cost of transportation.

Factors influencing cost of transportation

A. Fixed costs:

Interest on capital

Depreciation

Insurance premium

Administrative overheads

Expenses on fixed facilities like buildings


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B. Semi fixed costs:

Salaries of the staff

Facility for servicing, periodic maintenance etc

C. Variable costs

Cost of fuel and lubricants

Maintenance directly attributable to a particular trip breakdown

Damage to the vehicle and also the cargo. Eg. hilly roads, bad roads,

war effected sea routesD.Vehicle utilization

Carrier likes to gain maximum mileage out of his vehicle

Run the vehicle at top speed to cover max. distance at min time

Quote higher rates if following are not conducive to the above

Road conditions

Terminal detentions [congestion, formalities, loading/unloading etc.]

Obtaining a return load [market factors]

Nature of goods, hazardous, corrosive [liability, insurance]

Density, consignment light by weight

Stowability, shape and size of the product

2. Traffic Bearing Capacity

Value addition by transportation.


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Transportation cost should not upset the value added

3. Public use

Items to satisfy basic needs of common man

should be moderately charged

4. Government Policy freight rates are controlled by the state for

Promotion of certain type of trade

Development of certain type of industry

Freight rates are hiked or depressed by state

5. Profit

Margin for reasonable return on investment

Entrepreneurial time and efforts

Funds for future development of business

Components of transportation decisions

I. Mode Selection

Air - most expensive, but very fast

Road - relatively quick and inexpensive, highly flexible

Rail - An inexpensive mode for large quantities

Water - the slowest but most economical for large overseas

consignments

Pipeline - primarily for oil and gas


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II. Carrier in house or out sourced whether product owner

performs the function or out sources it.

- Private carrier, contract carrier, public carrier, exempt carrier

III. Trade off situations

Cost of transportation and cost of inventory

Cost of transportation and cost of responsiveness to customer

IV. Carrier Selection

2. Constitution of the carriers organization3. Business turn over

4. Area of operation

5. Branch offices or associates offices

6. Strength of fleet

7. List of clients- current & former, for ascertaining reliability

8. Nature and volume of business

9. Normal transit time quoted by carrier

10. Record of claims settlement by carrier

11. Reference from banks, carriers association

V. Route and network selection

Route is the path the product takes and network is locations and

routes along which a product can be shipped


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A logistics managers options for scheduling and routing decisions

Direct shipment network

From shipper directly to retailers.

Features:

1. Warehouses are eliminated

2. Long route, hence low cost

3. Simplicity of operation

4. Time of transportation is short

5. Decision points are quantity and mode

Direct shipping with milk runs

1. Single supplier to a number of retailers deliver like a milkman.

2. From a number of suppliers deliver to a single retailer. eg. Toyota

plant in US

Features:

1. Movement consolidation

2. Truck utilization

3. Transport cost reduction

Direct shipping with milk runs

1. Single supplier to a number of retailers deliver like a milkman.


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2. From a number of suppliers deliver to a single retailer. eg. Toyota

plant in US

Features:

1. Movement consolidation

2. Truck utilization

3. Transport cost reduction

Shipping via Distribution Center Using Milk

Runs small lot sizes to large number of retailers from

DC.

Features:

1. Consolidation of small lots - reduction of outbound transportation

cost

Tailored NetworkTailor made to the company needs

Features:

1. Matches the needs of the company

2. Coordination is complex

Intermodal transport

Intermodal movements combine the cost and/or service advantages

of two or more modes in a single product movement

The more popular combinations are TOFC


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[Trailer On Flat Car] and COFC [Container On Flat Car].

Benefits of long haul, short time & flexibility are optimized for

achieving overall cost reduction

Co-ordination of different modes of transport to avoid wasteful

competition

Single window service to the customers

Encouraging containerization both for internal as well as

import/export cargo


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COFC

TOFC


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Transshipment

Transportation goods and materials to the destination using one or

more intermediate destinations

A technological requirement

Air travel to US

A means of logistical cost reduction

Containerization


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Containers were introduced in US during 1955 and in India during 1960

Features of a container:

1. Robust but still light for inter modal transportation2. Equipped with fittings to facilitate safe and easy handling3. Easily be stuffed or unstuffed in a short time4. Water tight and air tight outer shell5. Internal lining that doesnt buckle under temperature and can be

easily cleaned

6. Watertight flooring, air tight door seals and locks7. Insulation to protect refrigerated cargo.8. Interior washable to required hygienic standard9. Construction to allow circulation of air around cargo


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Basic types of ISO containers

Dry or cube containers are front loaded, completely enclosed and

suitable for general-purpose transportation.


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Insulated Containers are available in 20 and 40 foot lengths, and

contain a layer of foam insulation between the interior and exterior

surfaces of the walls, floor and roof.

An insulated container with a built-in refrigeration unit, the Reefercontainer maintains a set temperature and stabilizes theenvironment

within the container to prolong the life of the cargo in the most

arduous of environments.


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Flatrack Containers:

Flatrack containers are used for heavy and oversized cargo, which

cannot be loaded into container with fixed walls and needs loading from

top or side. Can be delivered with both fixed and collapsible end walls.


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Open top containers are shaped like a box and loaded from either the

top or end. They are designed to carry heavy, tall or hard to load

materials such as coal or grain.


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Tank containers are built to the same standard dimensions as other

ISO containers, but are cylindrical vessels mounted in a rectangular

steel framework. Typically, these containers are used to transport

liquid or bulk materials.

Universal advantages of container as a packaging unit

1. Reduction in loss, pilferage and damage of goods2. Reduction in paper work3. Expedites door to door pickup and delivery4. Eliminates multiple handling of contents as this is shipped as a

single unit

5. Consolidation of movement of small lots


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6. Standardization of handling methods and equipment7. Reduction in packaging cost as container itself acts like a package8. Optimizes the services of various modes9. Container can easily be transshipped.

Major benefits of containerization to business

1. Integration of various modes of transport2. Reduction in handling time and thereby turnaround time of

vehicles

3. Standardized size of containers reduces reduce capital as well asoperational costs

4. Reduction in packaging cost as container itself is a robustpackaging

5. Need for enclosed warehouses redundant6. Transport service is reliable

Infrastructure for Containerization

Deep water ports

Mechanized handling equipment- Equipment used to load and unload

are container cranes called straddle carriers, side loader forklifts.

Obviously this equipment is very expensive

Inland container depots

Container ships- are built for optimum utilization of space, easy

stowing in the holds, to facilitate fast & easy loading and unloading of

container.


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Container ships

Roll On/Roll Off ferries [RORO]: the truck rolls on to the and rolls off

at the end of the voyage.


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Roll On/Roll Off ferries

LASH [Lighters Aboard a SHip]: when a ship is loaded on the high seas

from barges, instead of loading the cargo lifted from the barge, entire

barge is lifted and loaded on the ship. At the end of the voyage barge

is put back on water.


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LASH

Nodal points

Railways network

Growth of economy is the responsibility of state

Bulk movement of supplies from production centers to consumption

centers boosts economy

Traffic could be consolidated and moved in full train loads/wagon

loads

Bulk material transported is like coal, steal, fertilizer, cement

State also has the responsibility to distribute essential commodities

through the public distribution system [PDS]

Hence the responsibility for logistics of those items falls on the

state.


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State owns the net work of railways, net work that is the cheapest

mode of transport for bulk.

Nodal points in the value chain of such commodities can provide

movement consolidation.

State owned rail net work can link these nodes to\ the best

advantage of state and thereby to that of national economy.

Some characteristics of nodal points are as

under

1. Nodal points should be closer to consumption points.2. Number of nodal points would depend on volume of distribution.

Neither too many nor too less

3. Nodal points should be well connected by rail net work.4. Terminal and shunting facilities are required at these places.5. Facilities for loading, unloading & inter modal handling.6. Shipments from the nodal points would be by road in trucks or

rail

7. Nodal points should be connected to consumption centers byroads

8. Normally, nodal points are district headquarters for necessaryoperational support

9. Strategic role by central and state governments. Strategicdevelopment of such nodal points in the country strengthensthe logistical operations for essential commodities and bulk

materials

Documents

Project - Logistics