Transport is one of the main logistical functions. In addition to representing the largest share of logistical costs in most organizations, it has a fundamental role in the performance of various dimensions of Customer Service. From the cost point of view, it represents, on average, about 60% of the logistics expenses, which in some cases can mean two or three times the profit of a company, as is the case, for example, of the distribution sector. fuels.
The main functions of transportation in Logistics are basically linked to the dimensions of time and place usefulness. Since the beginning, the transport of goods has been used to make products available where there is potential demand, within the term appropriate to the needs of the buyer. Even with the advancement of technologies that allow the exchange of information in real-time, transportation average remains essential in achieving the logistical objective, which is the right product, in the right quantity, at the right time, in the right place at the lowest possible cost.
Many American companies have been seeking to achieve this goal in their operations.
“Logistics is the most Assertive Investment, says CEO of Blackstone fund“
With that, they see in Logistics, and more specifically in the transport function, a way to obtain competitive differential. Among the initiatives to improve transportation activities, we highlight the investments made in information technology that aim to provide companies with better planning and control of the operation, as well as the search for intermodal solutions that enable a significant reduction in costs. There are countless examples of companies with initiatives of this type, including Souza Cruz, Coca-Cola, Alcoa, OPP-Trikem, Brahma, UPS, Martins, Dow Química, among others.
Throughout this article, the transport function will be treated initially from the perspective of integration with other logistical functions. Then, the five different types of modes will be classified from the perspective of costs and service. Issues that make the American transportation matrix sing up unbalanced will also be addressed. The article ends with a discussion of the impacts that information technology, more specifically the Internet, has been causing in transport management.
2. Integration With Other Logistic Functions
One of the main pillars of modern Business Logistics is the concept of Integrated Logistics, which is represented in Figure 1. Through this concept, the logistics functions are no longer seen in isolation and are perceived as an operational component of the Marketing strategy. As a result, the transportation average has a fundamental role in various strategies in the logistics network, making it necessary to generate solutions that enable flexibility and speed in responding to the customer, at the lowest possible cost, thus generating greater competitiveness for the company.
Among the main trade-offs that affect the transport function, we highlight those related to Inventory and Customer Service.
Shipping x Stock
The central point of this trade-off is the relationship between transport and inventory policies. Within a non-integrated view, the inventory manager commonly has the objective of minimizing inventory costs, without analyzing all logistical costs.
This type of procedure negatively impacts other logistical functions, such as, for example, a production that requires greater flexibility (with smaller and more frequent batches, resulting in a higher cost) and transportation management characterized by more fractional transport, generally increasing the unit cost of transport.
It is important to make it clear, that this policy may be the most appropriate in situations where strategies based on time are used, such as JIT, ECR, QR. These strategies aim to reduce inventory from an integrated view of Logistics, requiring the speed and consistency of the transport function to meet batch sizes and delivery times. In addition, in many cases, the delivery must be made in a time window that can be one shift or even an hour.
Another important issue related to this trade-off is associated with the choice of modes. Depending on the modal chosen, the transit time may vary in days. For example, a typical transport from São Paulo to Recife by road takes around 5 days, while rail can take around 18 days. The choice will obviously depend on the level of service desired by the customer, and the costs associated with each option. The total cost of this operation must include all costs related to door-to-door transport plus inventory costs, including stock in transit. For products with higher added value, the use of more expensive and faster speeds may be interesting.
Transportation x Customer Service
Customer Service is a fundamental component of Integrated Logistics. All the logistical functions seen in figure 1 contribute to the level of service that a company provides to its customers. The impact of transportation on Customer Service is one of the most significant and the main requirements of the market are generally linked to the punctuality of the service (in addition to the travel time itself), the ability to provide a door-to-door service; flexibility, when it comes to handling a wide variety of products; managing the risks associated with theft, damage and damage and the carrier’s ability to offer more than a basic transport service, making it capable of performing other logistical functions.
3. Classification of Transport Modes
The five basic modes of transport are rail, road, waterway, pipeline and air. The relative importance of each modal can be measured in terms of the system’s mileage, traffic volume, revenue and the nature of the traffic composition. Table 1 summarizes the structure of fixed-variable costs for each modal, while Table 2 classifies the operational characteristics of each modal in terms of speed, availability, reliability, capacity and frequency. These characteristics will be discussed below.
Speed refers to the elapsed time of movement on a given route, also known as transit time, being the air modal the fastest of all.
Availability is the capacity that a modal has to serve any source-destination pair of locations. Road carriers have the greatest availability since they are able to go directly to the points of origin and destination, featuring a door-to-door service.
Reliability refers to the potential variability of expected or disclosed delivery schedules. The pipelines, due to their continuous service and the restricted possibility of interference due to weather and congestion conditions, occupy a prominent place in the item reliability.
Capacity refers to the possibility of a transport mode to handle any transport requirement, such as size and type of cargo. Transport by sea/river is the most suitable for this task. The final classification refers to the frequency, which is related to the number of scheduled movements. Again, the pipelines lead the frequency item due to its continuous service performed between two points.
As shown in Table 2, the preference for road transport is partly explained by its prominent classification in all five characteristics. Road carriers operating world-class road systems occupy the first or second place in all categories, except for the capacity item.
In the United States, there are still a series of barriers that prevent all modal, multimodal and intermodal alternatives from being used in the most rational way. This is a reflection of the low level of investments seen in recent years in relation to the conservation, expansion and integration of transport systems. Despite initiatives such as the Brasil em Ação plan and the privatization process of ports and railways, little has changed in the American matrix, as can be seen in Table 3. The strong predominance in the road modal harms the competitiveness in terms of the cost of several products, as is the case with commodities for export.
4. Impacts of the Internet on Transport
The Internet as well as other information technologies have not only created specific needs but have also created new opportunities for the planning, control and operation of transport activities. Among these needs and opportunities, we could mention the growing demand for more dispersed deliveries, the emergence of transport and the potential for real-time vehicle tracking.
Spraying of Deliveries: Direct delivery by manufacturers
Through the Internet, it has become possible for manufacturers of high added value products, such as computers, to sell directly to consumers, eliminating the need for intermediaries such as distributors and retailers from the supply chain. Previously, the transportation of products between manufacturers and their main customers was marked by greater concentration and stability in shipments, since the destinations of customers were known and they sought to renew their stocks periodically.
In the US, Gateway and Dell dominate the market for direct sales of personal computers over the Internet. These computers are distributed by carriers that have a high degree of penetration in different markets. In transport management, more and more companies that carry out a highly dispersed distribution are looking for systems such as scriptwriters to assist them in structuring routes. Transport is marked by short transit time and great flexibility in delivery, usually between 1 and 2 days.
The Emergence of Transport
The Internet is also enabling the emergence of new virtual businesses linked to the purchase and sale of freight. In reality, the Internet is being structured that intermediate between carriers and shippers. This type of business model is characterized by hiring spot transport. This allows articulating the transport need of a shipper, characterized by origin, destination and type of loading, with the available offer. In other words, the seeks a carrier that is interested in transporting the cargo, while trying to obtain the best conditions for the shipper.
One of the great advantages that the Internet offers in improving the quality of service is the possibility of tracking shipments. Courier companies, shipping agencies, road hauliers, railways and logistics operators are increasingly using the Internet to make shipment status available to their customers. FedEx, one of the largest American couriers with revenues in excess of US $ 13 billion, structured a highly sophisticated order tracking system in the early 1990s, recently benefiting from the ease that the internet provides. Similarly, American Cargo companies, such as Varig Cargo, are also providing information on the status of cargo via the Internet.
This article addressed the impacts of the transport function on companies and the economy of countries with a relatively high degree of development. Specifically, in the business environment, transport relations with other logistical functions were explored: inventories and customer service. Then, in terms of fixed and variable costs and dimensions of logistical service, the characteristics of the five main modes of transport were explored: road, rail, air, pipeline and waterway. In the United States, despite initiatives such as the privatization of ports and railroads, road transport is still dominant in the transportation matrix. This fact, depending on the characteristics of the product, can be an impediment to reaching a higher level of competitiveness in terms of cost.
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