Chapter 11: Strategic Leadership Chapter 15 The transport system

Chapter 11: Strategic Leadership The transport system This chapter covers the following topics: Operational characteristics of the various modes of freight transport Terminals The goods carried in the transport system Freight transport service providers The freight transport user Government as stakeholder in the transport system

Chapter 11: Strategic Leadership Air transport Operational overview: – Fast (short transit time) – Long-distance service – High-value freight

Chapter 11: Strategic Leadership Air transport (continued) Strengths: – Short transit times – Long distance – Reliable – High goods security – Low packaging cost

Chapter 11: Strategic Leadership Air transport (continued) Limitations: – Not door to door (terminal-bound) – Low carrying capacity – Low frequency (relative to road) – Terminal congestion – Sensitive to inclement weather at terminal – Low accessibility (market coverage) – High unit costs

Chapter 11: Strategic Leadership Air transport (continued) Air freight is determined by: – Type of commodity – Demand of characteristics – Nature of distribution

Chapter 11: Strategic Leadership Road transport Operational overview: – Comprehensive – Flexible – Versatile – Reliable

Chapter 11: Strategic Leadership Road transport (continued) Strengths: – Door-to-door service – Accessible (good market coverage) – Secure (few transfers) – Fast on door-to-door basis – Flexible/adaptable – Frequent

Chapter 11: Strategic Leadership Road transport (continued) Limitations: – Carrying capacity – Environmental impact – Vulnerability to external factors – High energy consumption – Shared right of way Freight characteristics: – Able to carry comprehensive range of goods – High-value finished products

Chapter 11: Strategic Leadership Rail transport Operational overview: – Limited to fixed routes – Terminal-to-terminal service

Chapter 11: Strategic Leadership Rail transport (continued) Strengths: – Able to carry comprehensive range of goods – Bulk carrier over long distance – Efficient over long hauls – Exclusive right of way – Not affected by inclement weather – Rolling stock cannot easily be stolen

Chapter 11: Strategic Leadership Rail transport (continued) Strengths (continued): – Dedicated unit trains can achieve short transit times – Possibility of private sidings can improve accessibility – Energy-efficient – Low accident rate

Chapter 11: Strategic Leadership Rail transport (continued) Limitations: – Not door-to-door (terminal-bound); needs to be supplemented – Needs robust packaging; high damage record – Inconsistent service – Requires high capital investment – Vulnerable to pilferage of goods – High degree of empty running Freight characteristics: – Suitable for carrying large, high-density commodities and bulk consignments over long distances at low cost

Chapter 11: Strategic Leadership Pipeline transport Operational overview: – Infrastructure also the carrying unit – Return journey (pumping) avoidable – Product intake, haulage and discharge a single process – Different commodities can be pumped consecutively – Not labour-intensive

Chapter 11: Strategic Leadership Pipeline transport (continued) Strengths: – Environmentally sound – Large volume over long distance at low cost and risk – Reliable and secure – Low unit cost – Tank-to-tank service (no transfers)

Chapter 11: Strategic Leadership Pipeline transport (continued) Limitations: – Limited range of commodities – Fixed routes and terminals – Inflexible service – High investment cost Freight characteristics: – Limited variety: gas, fluids and slurrified material

Chapter 11: Strategic Leadership Sea transport Operational overview: – The most cost-effective way of transporting high-bulk commodities over long distances – Most widely used international shipment method – Has become highly specialised since the 1960s: Bulk carriers (dry goods) Tankers (fluids) Roll-on/roll-off (ro-ro) ships Oil-bulk-ore (OBO) vessels Container vessels

Chapter 11: Strategic Leadership Sea transport (continued) Strengths: – Low-cost unit – Large volumes over long distances – Little congestion on open sea – Safe and secure service

Chapter 11: Strategic Leadership Sea transport (continued) Limitations: – Terminal-to-terminal service only – Transhipment of freight unavoidable – Vulnerable to inclement weather/rough seas – Slow and low-frequency service Freight characteristics: – Wide variety of freight at relatively low cost – Vast majority of shipments not sensitive to short delivery times

Chapter 11: Strategic Leadership Terminals A terminal is an area at the end of a route – or where routes meet, branch out or cross – where goods are transferred. A node is a fixed point in the logistics chain where goods come to rest (e.g. airport; seaport; tank farm; rail terminal; road terminal). Functions of terminals: – Freight consolidation – Bulk breaking – Warehouse and transfer services – Vehicle services

Chapter 11: Strategic Leadership The goods carried in the transport system Three broad groups: – Raw materials – Semi-finished goods – Finished goods Five factors concerning goods influence transport costs: – In-transit care necessary – Density – Size and divisibility – Stowage ability and ease of handling – Potential liability of goods

Chapter 11: Strategic Leadership Goods carried in the transport system

Chapter 11: Strategic Leadership Freight transport service providers Background: – Accessibility – Mobility Transport operators: – Private transport operators (first party) – Professional carriers (third party)

Chapter 11: Strategic Leadership Freight transport service providers (continued) Non-operating service providers (fourth party): – Freight forwarders – Freight brokers The freight transport user: – The user is the sender/shipper/ Consignor. – The sender (i.e. first party) delivers to the receiver or consignee (the second party).

Chapter 11: Strategic Leadership Government as stakeholder in the transport system Reasons for government involvement in transport: – Control of excessive competition – Co-ordination of transport – Integration of transport with economic policy – Maintenance of safety, security and order – Provision of costly infrastructure – Provision of public goods

Chapter 11: Strategic Leadership Government as stakeholder (continued) Reasons for government involvement in transport (continued): – Recovery of the true resource cost of transport inputs – Regulation of harmful conduct and externalities – Restraint of monopoly power – Social support