Transport Functionality, Principles, and Participants
Operations Management
Transport Functionality, Principles, and Participants
Transportation is a very visible element of logistics. Consumers are accustomed to seeing trucks and trains transporting product or parked at business facilities. Few consumers fully understand just how dependent our economic system is upon economical and dependable transportation.
Transport Functionality, Principles, and Participants
The Value Chain
It is a network of facilities and processes that describes the flow of materials, finished goods, services, information and financial transactions from suppliers, through the centres and processes that create goods and services, and those who deliver them to customers.
Transport Functionality, Principles, and Participants
Transport Functionality
Transportation enterprises
provide two major services:
Product Movement
Product Storage
Transport Functionality, Principles, and Participants
Transport Functionality – Product Movement
Whether in the form of materials, components, work-in-process, or finished goods, the basic value provided by transportation is to move inventory to the next stage of the business process.
The primary transportation value proposition is product movement up and down the supply chain.
Transport Functionality, Principles, and Participants
The Supply Chain
Is the portion of the value chain which focuses mainly on the physical displacement of goods and materials and in the support of information flows and financial transactions through the processes of supply, production and distribution.
Transport Functionality, Principles, and Participants
Transportation also plays a key role in the performance of�
Reverse Logistics.
Distribution or reverse logistics is a stage of the supply chain in which the product returns from the point of sale to the manufacturer or distributor for recovery, repair, recycling or disposal.
Transport Functionality, Principles, and Participants
Transportation uses time resources because product is generally inaccessible during the transportation process. Product captive to the transport system is referred to as in-transit inventory.
Naturally, when designing logistical systems, managers strive to reduce in-transit inventory to a minimum.
Transport Functionality, Principles, and Participants
Transportation also uses financial resources. In the United States approximately 59 percent of total logistics cost consists of transportation services.
Transportation cost results from driver labor, vehicle operation, capital invested in equipment, and administration. In addition, cost results from product loss and damage.
Transport Functionality, Principles, and Participants
Transport Functionality – Product Storage
A less visible aspect of transportation is product storage. While a product is in a transportation vehicle, it is being stored.
Transport vehicles can also be used for product storage at shipment origin or destination, but they are comparatively expensive storage facilities.
A trade-off exists between using a transportation vehicle versus temporarily placing products in a warehouse.
Transport Functionality, Principles, and Participants
Transport Functionality – Product Storage
Another form of temporary product storage is diversion. Diversion occurs when a shipment destination is changed while product is in transit.
For example, the destination of a product initially shipped from Chicago to Los Angeles may be changed to San Francisco while in transit.
Transport Functionality, Principles, and Participants
Transport Principles
There are two fundamental economic principles that impact transportation efficiency:
Economy of scale.
Economy of distance.
Transport Functionality, Principles, and Participants
Transport Principles – Economy of scale
Economy of scale in transportation is the cost per unit of weight decrease as the size of a shipment increases.
Transportation economies of scale exist because fixed cost associated with moving a load is allocated over the increased weight.
Transport Functionality, Principles, and Participants
Transport Principles – Economy of scale
Fixed costs include administration related to:
Such costs are considered fixed because they do not vary with shipment size. In other words, it costs as much to administer a 100 pounds shipment as one weighing 1,000 pounds.
Transport Functionality, Principles, and Participants
Transport Principles – Economy of distance
Economy of distance refers to decreased transportation cost per unit of weight as distance increases.
For example, a shipment of 800 miles will cost less to perform than two shipments of the same weight each moving 400 miles.
Transport Functionality, Principles, and Participants
Transport Participants
The transportation environment impacts the range of decisions that can be implemented in a logistical system. Transportation decisions are influenced by six parties:
Transport Functionality, Principles, and Participants
Transport Participants
Transport Functionality, Principles, and Participants
Transport Participants
Participant | Description |
| The shipper and consignee have a common interest in moving goods from origin to destination within a given time at the lowest cost. Services related to transportation include specified pickup and delivery times, predictable transit time, and zero loss and damage as well as accurate and timely exchange of information and invoicing. |
| |
| The carrier, a business that performs a transportation service, desires to maximize its revenue for movement while minimizing associated costs. As a service business, carriers want to charge their customers the highest rate possible while minimizing labor, fuel, and vehicle costs required to complete the movement. |
Transport Functionality, Principles, and Participants
Transport Participants
Participant | Description |
| The government has a vested interest in transportation because of the critical importance of reliable service to economic and social well-being. Government desires a stable and efficient transportation environment to support economic growth. |
| The primary advantage of Internet-based communication is the ability of carriers to share real time information with customers and suppliers. |
| The final transportation system participant, the public, is concerned with transportation accessibility, expense, and effectiveness as well as environmental and safety standards. The public indirectly creates transportation demand by purchasing goods. |
Transportation Regulation
Transportation Regulation
Since transportation has a major impact on both domestic and international commerce, government has historically taken special interest in both controlling and promoting transportation.
Control takes the form of federal and state government regulation as well as a wide range of administration and judicial administration.
Transportation Regulation
Types of regulation
Government transportation regulation can be grouped into two categories:
Economic regulations.
Safety and social regulation.
Transportation Regulation
Economic regulations
Regulation of business practices is the oldest form of government control. To provide dependable transportation service and to foster economic development, both federal and state governments have actively engaged in economic regulation.
Transportation Regulation
Safety and social regulation
Since its inception in 1966, the federal Department of Transportation (DOT) has taken an active role in controlling the transport and handling of hazardous material and rules related to maximum driver hours and safety. The form of regulation was institutionalized by the passage of the Transportation Safety Act of 1974, which formally established safety and social regulation as a governmental initiative.
Transportation Regulation
Safety and social regulation
The Hazardous Materials Transportation Uniform Safety Act of 1990, which provided federal government control over equipment design, hazardous material classification, packaging, and handling, took precedence over state and local environmental regulations.
Additional emphasis on transportation safety has increased due to environmental and related liability lawsuits.