1. Global Supply Chain Management
Logistics A378
Fall 2004

2. Global Transportation Systems
Chapter #5
Global Transportation Systems

3. The Logistics System
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4. Overview
We will examine the five principal modes of transport used in the logistics operation and a couple of others just emerging onto the logistics scene
We will briefly discuss deregulation and privatization of transportation
We will examine government’s role in transportation
Finally, we will take a quick look at inter-modal transportation
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5. Introduction
To most people, transportation is the single most visible part of a logistics systems
Until recently, logistics was primarily concerned with the transport function
Historically, governments have exercised significant control over transportation through direct ownership, China, Great Britain, etc. and through laws that dictated how privately held transport companies ran their business
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6. Classic Modes of Transportation
Traditionally, when we think of transportation, we think of one or more of the five classic modes of transportation:
Rail
Road
Pipeline
Water
Air
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7. Rail Rail transport is characterized by: Cost-effectiveness
Energy-efficiency
Moving large amounts of product over long distances
Capable of moving large loads and huge quantities
Constrained by accessibility making it a poor choice for JIT systems generally
On time delivery
Frequency of service
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8. Rail
Along their routes, railroad companies are essentially monopolistic although they do compete with other modes of transport
In many instances, rail requires changes of carriers and sometimes transfer of loads at borders
Different regulations
Different safety requirements
Physically different equipment
Etc.
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9. Rail Quality of service varies from country to country
In those countries with competitive carriers, transfer from one carrier to another has become a common practice essentially extending the network
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10. Rail
Once the backbone of transportation in this country, rail has given way to other forms of transport for many goods
As part of an intermodal system, rail service has an important role world-wide today
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11. Road
In most of the world, road transportation is the most visible form of transport
Provides the shipper with more flexibility than any other form of transport
Road systems reach virtually all of our markets (with the exception of areas of Alaska, Siberia, and numerous other remote locations around the world)
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12. Road Road systems are typically created and maintained by governments
Typically used for:
Higher-value cargo
Lower volume cargo
When compared to rail transport
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13. Road
Cross border transport has increased significantly in recent years with new trade agreements like NAFTA
As with rail, laws and safety regulations make cross border transport an interesting issue
Social and environmental impacts are of increasing concern in developed countries
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14. Pipelines
Pipelines are the most efficient mode of transport for suitable commodities
Like railroads, however, pipelines are constrained by their physical network and are generally custom built for a particular application
Product
Customer/Customer Set
Generally offer only one-way service
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15. Pipelines
Cost effective and environmentally friendly…for the most part
Future use of capsule transport may give pipelines a bigger role in general transport
i.e. cargo moving pneumatic capsule systems
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16. Air The most expensive mode of transport, but very suitable for
Low-volume/high-value items
Short life products
Situations where customer service issues justify the cost
Provides the logistics manager fast, on-time service world-wide...even to remote Alaskan villages
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17. Air
Industry is mostly privately owned and operated with a few government run companies
Low concern for environmental impact with the possible exception of noise in and around large urban areas
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18. Water Includes ocean and inland waterways transport of goods
As a logistics transport mode, water is most suitable for use:
Low-value/High-volume goods
Time insensitive products
When cost or transport is more important than speed
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19. Water
In some countries with large navigable river and canal systems, water transport competes with rail transport of bulk goods
Industry is regulated by each country
Many large and small private carriers world wide
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20. Water
International maritime industry has evolved to operate in carrier-supported organizations known as conferences
Links shippers and vessel operators together
Shippers get lower rates for using conference vessels
Conferences guarantee a shipping schedule supported by a combination of all conference shippers
Conference levels revenues on a periodic basis
Deregulation and increasing lower price competition is weakening the conference system
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21. Deregulation
Most nations have historically regulated transportation similar to a public utility
Recently, we have begun to understand that regulation is
Ineffective
Costly to customers
Stifling to innovation
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22. Deregulation
For the past two decades there has been an increasingly world-wide move by governments to deregulate their transport industries
Result is a more efficient and cost effective industry
Most of the deregulation to date has been internal
Cross border transport is still highly regulated
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23. Deregulation
Cross border issues usually handled by international agreements
Open-skies for airlines
NAFTA
European Union
Etc.
Most of the cross border/open border agreements have been made in the past decade
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24. Deregulation Big issue for governments is Cabotage
Cabotage is the transport of cargo or passengers within a country by a foreign carrier
JAL picking up passengers in Anchorage and taking them to Chicago
Foreign flag vessels transporting oil from the Valdez terminal to California
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25. Deregulation
Cabotage was originally intended to protect a nation’s transport industry
Today, Cabotage works against minimal cost logistics system implementation
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26. Privatization
Another aspect of the changing transport landscape is Privatization
Many nations owned and operated some or all of their nation’s transport industries
Trend is to privatize these industries
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27. Privatization
The transition is not necessarily pretty as many of these carriers, as a result of government subsidies, are not:
Cost efficient or
Customer service oriented
And thus not very attractive to private investors
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28. Future Trends Deregulation and Privatization will continue
Deregulation is still limited to countries internally or in alliances…not in general
Multilateral transportation accords are inevitable as countries form economic unions-weakening of cabotage will occur
Deregulation does not imply unregulated
Enforcement of a competitive market place
Safety, environmental impact, etc.
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29. Future Trends
Governments will continue to be involved in the transport industry for a variety of reasons including:
Huge source of employment
National pride
Military transport requirements
So…deregulation will continue, but regulation and subsidy support is likely to continue, albeit on a more selective level
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30. Government's Role
We have already discussed regulation and state ownership…what other roles do governments typically have with respect to the transportation industry?
Infrastructure
Physically with roads, airports, ports, etc. including construction, maintenance and operation
Transport related with weather service, air traffic control, customs services
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31. Government's Role Governments enact and enforce laws
Safety
Environmental impact related
Citizens ultimately pay for these government services
Through taxes
Through higher prices for goods whose transport included the use of these services paid for by fees
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32. Government's Role
Questions of fairness arise when the cost is carried by citizens and the industry is essentially a pass through as is often the case in the global market place, e.g. consider the nature of inter-modal transport in a bridging mode
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33. Summary of Transportation Modes
Characteristics
Rail
Road
Water
Air
Pipeline
Door-to-door
Sometimes
Yes No
Price
Low
High
Very Low
Very High
Speed
Slow
Fast
Very Slow
Very Fast
Reliability
Medium
Packaging Needs
None
Risk of Loss & Damage
Flexibility
Environmental Impact
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34. Intermodal Transportation
Intermodal transportation is the movement of a shipment from origin to destination utilizing two or more different modes of transportation
More specifically, items are transferred from one mode to another in unit loads, e.g. standard 20 foot ISO container transferred from a ship to a trailer chassis to a rail car to a ship, etc.
Denotes a systematic transfer of goods from one mode to another in such a way as to minimize handling and total transit time
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35. Intermodal Transportation
Without this systematic transfer, we use the term multi-modal to describe transport using more than one type of transportation
Most of the intermodal transportation today centers around the ISO standard metal container
8x8.5 and either 20 or 40 feet long
Ship capacities measured in “TEUs”, i.e. Twenty Foot Equivalent Units
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36. Intermodal Transportation
Containers are carried by ship, truck and railroads
Allow for a high degree of mechanization in the transfer
Allow for standardization in equipment
Allow for packaging considerations to minimize cost and damage
Higher degree of security
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37. Intermodal Transportation
In global logistics, intermodal transportation is increasingly important
Combinations of transport to reach final destination
Land as a bridge between ocean legs
Some intermodal by air transport as well
Containers designed to fit in aircraft and transfer to trucks
No real effort to connect with ocean or rail
Would defeat the purpose of using the high-cost but fast air transport
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38. Summary Transportation is undergoing a great deal of change
Market place based
Deregulation
Increasing intermodal opportunities
New opportunities for logistics managers
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