Logistics Management - Essay Example

? Logistics Management (4 modes of transportation) Truck, Train, Air and Boat Introduction Logistics management is considered as the important part of the supply chain management which plans, develops, implements, controls and monitors the effective, efficient, reverse and forward flow and storage of products, services and several related data or information between the point of consumption and point of origin in order to meet the demand and needs of customers. Logistics management includes channel management, material management, distribution management and supply chain management. Manufacturing and distribution organizations generally use several modes of transportation in the field of domestic and international logistics management. There are four major modes of transports that are being adopted and implemented by the organizations. Transportation is considered as the important link of domestic or international logistics systems. Vehicles that are used in logistics management should have specific necessary properties. Transportation can be defined as the shipment of goods or services from a point of origin to point of consumption through air, road, rail and sea modes. Logistics and freight transportation is important to the economy of a country. Billions of dollars worth of services or goods is being moved by train, truck, barge or ship at any given point of time through international freight transportation process. Transportation in logistics management concerns the movement of goods or services from a source, such as factory, plant or workshop to a particular destination, such as retail stores, customers or warehouses. This transportation or shipments of goods or services can take place via air, water, road, rail, pipeline or cable routes using boats, trucks, trains or plains. The essay will discuss about four different modes of transportation, such as air, water, road and rail. In addition to this, the essay will determine the legal consideration, financial aspects and government actions that are associated with these four different modes of transportation. Discussion Cargo handling is the major objective of a manufacturing and distributing organization in its logistics management process. Cargo handling includes shipment and delivery of goods and services. This cargo handling process is generally done through four major means of transport, such as waterways, roadways, airways and railways. Roadways Logistics Logistic trucks are used in roadways logistics management process. Roadways logistics generally play a key role in the cargo handling process even in sub urban, area, small towns and rural areas. Organizations generally use large number of logistics trucks having different shipment capacities. Global business environment has become highly competitive as several manufacturing and distributing organizations are implementing unique operation strategies in logistics management process. Earlier, the organizations were focusing on only high revenue generation and profit maximization. Now-a-days, several leading organizations are focusing on sustainable strategy development process in order to avoid several external and internal issues and challenges, such as environmental issues, legal issues and workplace conflicts. Organizations used to keep logistics trucks with different shipment capabilities in order to supply the shipments of different size. The organizations use trucks with different shipment size based on the amount of orders of several business clients and customers. The operating cost associated with the trucks in the logistics management depends upon the distance of places, size of shipments, size of trucks and amount of equipments used in trucks. Now-a-days, the organizations are using fuel efficient trucks in order to reduce the level of fuel consumption and carbon emission. Fuel consumption and carbon emission are closely interrelated. Hugh consumption of fossil fuel can increase the carbon emission level. Air pollution and several critical human diseases are the major consequences of high carbon emission. Looking into these aspects, governments of several countries have developed strict rules and policies for the organizations in their logistics management process. An organization has to consume limited amount of fuel in order to reduce the emission level of carbon (Ismail, 2008). On the other hand, the organizations have to think about substitute energy resources in logistics management to maintain sustainable business performance. In addition to this, governments of several countries encourage the organizations to reduce the consumption level of natural resources in order to maintain effective environmental and ecological balance. Several leading organizations around the globe are implementing advanced technology in their logistics trucks. Adoption of advanced navigation technology and improved PDA system helps the logistics trucks to deliver the goods and services to required location within a given period of time. Several truck manufacturing organizations are introducing fuel efficient trucks to meet the market demand. On the other hand, the organizations are using the long headed fuel efficient cars in order to reduce the logistics management cost. Truck manufacturers are implementing advanced technology in the manufacturing process to introduce environment friendly trucks as the organizations are seeking for these types of trucks to meet environment standards and legal aspects. The cost of trucks depends on the mileage of the trucks, size of trucks, shipment capability of trucks and area of operation. However, use of fuel efficient trucks helps to reduce less amount of fuel. The price of fossil fuel is increasing at a rapid pace. In addition to this, low consumption level automatically reduce the level of carbon emission as it is known to all that burning of fossil fuel results high carbon emission and air pollution. These sustainable business practices help the organizations to develop significant reputation and high brand image. There are several advantages and disadvantages of using trucks in the logistics management process. Truck is one of the popular modes of transport which is used by the business units and suppliers to deliver the orders of goods and services. Cost effectiveness is the major advantage of using trucks in the logistics management process. Organizations can deliver products and services or the shipments within a quick period of time (Sheffi, 2013). This mode of logistics is considered as ideal mode for the short distances, national or mainland country. In addition to this, it is quite ideal mode of transportation for the shipments of perishable goods, such as vegetables and fruits. Use of advanced technology in the trucks helps the truck ndr5ivers to monitor and location or destination. There are several disadvantages of using trucks in the logistics management process that can affect the entire logistics management process. Transport subject to breakdown and traffic delays can create negative brand image. This particular mode of transportation cannot operate according to the expectation in the bad weather. Driving regulations, inadequate driving skills and several unwanted natural or man-made disruptions can affect the logistics management process of an organization. Railways Logistics Railways generally play an important role in the cargo handling process which is considered as the major part in the logistics management process. High speed logistics trains are being used by the organizations in order to handle cargo from the sea p[ort to the different parts of a country. Trains have unique wagons to carry the cargos. Major objective of railways logistics is to handle and transport large volume of cargo in shorter period of time. This mode of transportation can move more number of goods and services to desired destination in quick period of time to appropriate destinations comparing to the roadways mode of transportations. Both private and public sector organizations can use trains in their logistics management process. First of all, the organization has to take the approval from the government to use this mode of transportation. It is important to take approval as the organizations have to use electricity or fuel as the major energy resources. Now-a-days, railways have been privatized in several countries. Therefore, it is important for the organizations to take approval from the governing bodies. Similar to the roadways transportation, the organizations has to follow developed policies by government in this mode of transportation (Straube, Ma & Bohn, 2008). The operation cost in this type of logistics management is higher comparing to the roadways transportation modes. Trains need more energy and can move more number of shipment goods comparing to trucks. In addition to this, trains can cover large distance in quick time comparing to the long headed logistics trucks. The organizations cannot move extra goods or services according to the developed legal legislations. Cost of energy in railways logistics is higher comparing to roadways logistics. However, governments of several countries generally support the organizations regarding this railways transportation mode as trains that are used in logistics are run by substitute energy resources of fossil fuel. Limited consumption of fossil fuel helps to minimize the level of carbon emission. On the other hand, several public and leading private sector organizations can move significant amount of goods and services to different parts of country without affecting much environment and society. This railway transportation mode helps the organizations to generate huge revenue as the trains have the capability to move large number of shipments. The businesses generally use rail transports in logistics management process in order to deliver large shipment and wide range of goods including, coal, steel, post and other heavy materials that are required for industry development process. Major advantage of this mode of transportation is that the trains can give fast delivery to the business clients. It contributes significantly to the growth of a particular industry (Donald & Waters, 2003). Large capacity helps several public and private sector organizations to move large shipments. It actually helps the organizations to reduce the transportation cost. In addition to this, movement of large shipment in one time can reduce entire supply chain management time that helps the organization to reduce business operation cost. Railway is considered as the safe mode of transport. Possibility of accident is quite minimal comparing to other transportation modes. The suppliers, government and other business clients generally prefer this mode of transportation in case of large shipment due to safety and security aspects. Railways is considered as the most reliable transport option as it is time and cost effective The organizations have to rely or depend upon the timetable that is developed by the rail freight operator. It is the biggest disadvantage of railways logistics as it can result unforeseen delays. There are two types of railways transportation modes, such as private and public. Public railways logistics transportation modes generally get the first preference. It can affect the entire logistic and supply chain management process of a private sector organization. The customers or the suppliers always cannot be located near the rail freight depot. It is quite difficult for the customers or suppliers to go to the railway depot and clear the large shipments. It is time consuming and costly. It is one of the major challenges for this railways logistics as it always cannot meet customers’ needs and satisfaction level. Marine Logistics: Marine logistics is generally used when businesses want the delivery of goods from suppliers located in distant places. Sea transportation is mainly done in containers of varying sizes depending on the quantity or volume of goods to be transported. Goods are sorted into container (LCL) or fill a container (FCL).A freighter or cargo ship is a ship or vessel that transports goods and materials from one port to the other. A major part of the international trade is handled by sea logistics. Sea transport is a comparatively economical mode of transportation for bulk and heavy goods. Sea tankers are often used for shipment of goods like coal, grain, oil etc. in huge quantities. The container ship categories are: Ultra Large Container Vessel with a capacity of 14,501 TEU or higher. New Panamax with a capacity of 10,001-14,500 TEU. Post Panamax with a capacity of 5,001-10,000 TEU. Panamax with a capacity of 3001-5000 TEU. Feedermax with a capacity of 2001-3000 TEU. Feeder with a capacity of 1001-2000 TEU. Small feeder with a capacity of up to 1000 TEU. The advantages of Sea Transport are that Sea transport is ideal for heavy goods and bulk goods. Also it is mainly suitable for goods with longer lead time. Sea transportation is the mostly used mode of transportation of heavy goods. Also the construction and maintenance cost of routes is very low as the routes are mostly naturally made.it is also a quite safe mode of transportation with regards to accidents during transit and highly promotes international trade. This is a service which runs without any break throughout the year. The disadvantages of Sea transport are that it is generally costly mode of transportation. It is susceptible to bad weather and it is difficult to track the exact position of the goods in transit. The delivery times are long and strict custom and excise restrictions are followed worldwide. Since this is a time consuming mode, it is not suitable for transportation of perishable goods. Sea Transport companies have to make huge investments on buying and maintaining the ships. Also the navigability and the depth of different sea routes are different which affects the operation of different types of ships and cargos. In case the container leaks, damage may be caused due to sea water or rain. The freight rate often becomes volatile due to external factors. The sea transportation cost is determined by factors such as the seasonality of the products, whether the goods are transported domestically or internationally, the distance from the originating port to the destination port, the volume of the goods, the nature of Government regulations in the originating and destination countries, insurance, loading and unloading services, security or any special service provided by the logistics company. The cost of transportation is inversely proportional to the transit time of the goods i.e. the speed of the transportation service. The fixed costs i.e. the cost for ships and freight handling equipment are on the higher side whereas the variable costs such as the operating costs i.e. cost of labor and fuel are low. The key points to note for conventional marine logistics are: Cost economies: Marine transport is the most economic choice for heavy and large volume goods that are to be transported over long distances. The cost of sea freight becomes very cheap in case the time for delivery is not critical and the transit time can be long. Damage: The process of double handling in conventional ships sometimes makes the products prone to damage. Speed: Sea transportation can be very slow at times. The turnaround time in ports being low and the time of voyage being longer being the main reasons for the delay. Availability: Since sea transport is a major booster of international trade, it has led to the formation of numerous effective shipping companies. Thus, the services are easily available as well as different types of cargos are easy to use for shipping purposes. Double-handling: Sea freight uses slower handling method which makes it less competitive as compared to other modes of logistics and transportation. Delay Factors: There may be few delaying factors in this mode like delay at the originating port, pre shipment delays, and delay due to unexpected climatic reasons which can lead to an interruption in the service and lower the quality of the service. The various types of shipping trade are: Tanker Trade- carries oil, chemical products and gasses in high volumes. Linear Trade- carries manufactured goods through pre-scheduled services. Bulk Trade- carries bulk goods and raw materials. For e.g. Steel, Iron ore. General Cargo trade - is now obsolete and instead containerization is used. In Air cargo industry, the variable costs such as maintenance, labor and fuel costs are highest among all transportation modes whereas fixed costs such as aircraft and freight handling equipment are lower as compared to other modes. The world’s top 10 busiest ports as on 2013 based on twenty-foot equivalent units (TEUs) is as follows: 1. Shanghai-China 2. Singapore-Singapore 3. Hong Kong-China 4. Shenzhen-China 5. Bussan-South Korea 6. Ningbo-Zhou Shan-China 7. Guangzhou-China 8. Qingdao-China 9. Dubai-UAE 10. Rotterdam-Netherlands The most common documents required for international sea transport are export declaration of the shipper, Bill of lading, sea waybill, export and import license, insurance document, certificate of origin, Letter of credit, commercial invoices, packing note, shipping delivery note, export invoice, customs requirement documents. It is very important to do all the documentation accurately as any incorrect document found may lead to delay and subsequently a loss in business. The business challenges faced by the shipping industry in the recent years are the optimization of space use, seasonal recessionary phases, and reduction of excess volume and proper deployment of shipping vessels. Also the proper utilization of the container volume and other resources is a key factor to be looked into in this industry. (Rushton, A. & Baker, P. , 2010). Air Logistics: Air freight is used for supplying goods to long distances in a small span of time. It is a useful mode of transportation for light weight and fragile goods. Sometimes products with high demand and low supply are transported through this mode to meet the demands of the customers in a short time. This is the fastest mode of transportation and thus its use improves the lead time of the supplier. The determining factor for price in this case is the Bulk/Value ratio. The estimated air cargo industry in 2011 is $8.6 Billion which is 0.2% of the total logistics business. The biggest player in the international Air freight industry is United States. This is a premier transportation mode, is usually more costly and frequently used for the transit of high value, non-bulky goods which have a shorter delivery time. The control over Cargo in this mode is high and chances of damage, pilferage and theft is minimum. Another advantage is that due to the abundance of air freight modes, the service level is of notably high quality. Also, since the transit time is low, perishable goods can be transported over long distances. The insurance premium charges are lower compared to other freight modes. The disadvantages are that though this is the fastest mode of logistics, it is also very costly. Airfreight is the costliest mode when compared in costs per ton for the same distance by other. There may be additional handling charges in this type of cargo. But it is only applicable for low volume goods. Sometimes delay may be caused due to cancellation or delay of flights. Customs and restrictions are also very high for this mode. The top 10 airlines transport as in 2012 are as follows: 1. Federal Express 2. United parcel services 3. Korean Air 4. Lufthansa 5. Singapore 6. Cathay pacific 7. China Airlines 8. Air France 9. EVA Air 10. Cargo lux The required documents for the air shipment are Airway Bills (AWB), House airway Bills (HAWB), packing list, and certificate of origin, commercial invoices, and other country specific documents. The cost of transportation is decided considering the following factors: weight or volume of the goods, liability to loss, theft or damage, handling expenses, risk of hazardous goods, security of the package, any special services provided. The major challenge faced by Air cargo is the Government Regulations like IATA’s Dangerous Goods Regulations (DGR) according to which chemicals and explosives are not allowed for transport and other regulations formed keeping in mind the security issues. There also remains the change of increasing capacity which may lead to the development of over capacity. (Christopher, M, 2011). Conclusion In recent times, there has been a transformation in the logistics industry due to various factors like Globalization and competitive forces, Public policies of trade and transport, Deregulation, Liberalization and Competition, Changes in firm and industry structures, Drive for corporate advantage. Adapting with these changes, the Logistic industry has also evolved by introducing new types of transportation and logistics services which improves reliability as well as timeliness. Due to globalization, logistics industry has developed to provide reliable delivery with low cost and high value. Larger information systems and effective coordination throughout the world is essential for timely delivery. All the four modes of logistic transportation i.e. rail, road, water and air are equally important in today’s logistic scenario. The different factors of choosing a carrier depends on various factors like the likelihood of damage, claims handling for loss or damage, the cost involved, volume of the goods to be transported, reliability, transit time, earlier experience with the carrier, equipment availability, ease of shipment tracking, pickup and delivery service quality. The important factors to be considered from the carrier’s perspective are to maximize profit by optimal utilization of the available transportation resources and capacity. Also he takes into considerations the costs involved which are the capital costs such as the vehicle related costs like major maintenance, fleet cost etc. and the Terminal related costs like equipment, personnel, land and rent. The carrier should also to consider the operational costs like freight handling, cost of fuel, planning in advance and scheduling the delivery and strategize and streamline the logistics methods so as to satisfactorily raise the level of the service. References Ismail, R. (2008). Logistics Management. New Delhi: Excel Books. Sheffi, Y. (2013). Logistics Clusters. New York: MIT Press. Donald, C., & Waters, J. (2003). Global Logistics and Distribution Planning. London: Kogan Page. Straube, F., Ma, S., & Bohn, M. (2008). Internationalisation of Logistics Systems. New York: Springer. Rushton, A. & Baker, P. (2010). The Handbook of Logistics and Distribution Management. New York: Kogan Page. Christopher, M. (2011). Logistics and Supply Chain Management. London. FT Press.  Read More