Module IV Transportation Network Design
Transportation network design involves a structured process to create efficient systems for moving
people or goods, typically involving network planning, route layout, frequency determination, and
scheduling. It optimizes infrastructure by analyzing demand, geography, and logistical costs. Key
phases include identifying nodes/links, analyzing transportation modes, and selecting routing
strategies (e.g., direct shipping or intermediate centers).
Key Stages in Transportation Network Design
Network Planning and Definition: Establishing the overall structure, including nodes (facilities) and arcs
(connections), often based on long-term projections.
Route Design and Stop Layout:
Implementing specific physical pathways and defining stop locations within the network structure.
Frequency Determination: Defining how often services (e.g., buses, trucks) will run on each
route based on demand.
Time tabling and Scheduling: Constructing schedules for vehicle departures and arrivals to meet
demand efficiently.
Capacity Management/Traffic Assignment: Modeling how traffic will flow through the network
(user equilibrium vs. system optimum) and assigning vehicle capacities.
Design Options for a Supply Chain Transportation Network
The design of a transportation network affects the performance of a supply chain by establishing the
infrastructure within which operational transportation decisions regarding scheduling and routing are made.
A well-designed transportation network allows a supply chain to achieve the desired degree of
responsiveness at a low cost.
1. Direct Shipment Network to Single Destination
With the direct shipment network to a single destination option, the buyer structures the transportation
network so that all shipments come directly from each supplier to each buyer location. With a direct
shipment network, the routing of each shipment is specified, and the supply chain manager needs to decide
only the quantity to ship and the mode of transportation to use.
The major advantage of a direct shipment transportation network is the elimination of intermediate
warehouses and its simplicity of operation and coordination. The shipment decision is completely local, and
the decision made for one shipment does not influence others. The transportation time from supplier to buyer
location is short because each shipment goes direct. A direct shipment network to single destination is
justified only if demand at buyer locations is large enough that optimal replenishment lot sizes are close to a
truckload from each supplier to each location. Home Depot started with a direct shipment network, given
that most of the stores it opened until about 2002 were large stores. The stores ordered in quantities that were
large enough that ordering was managed locally within the store and delivery to the store arrived directly
from the supplier. The direct shipment network to single destination, however, proved to be problematic as
Home Depot started to open smaller stores that did not have large enough orders to justify a direct shipment.
2. Direct Shipping with Milk Runs
A milk run is a route on which a truck either delivers product from a single supplier to multiple retailers or
goes from multiple suppliers to a single buyer location. In direct shipping with milk runs, a supplier delivers
directly to multiple buyer locations on a truck or a truck picks up deliveries destined for the same buyer
location from many suppliers. When using this option, a supply chain manager has to decide on the routing
of each milk run.
Direct shipping provides the benefit of eliminating intermediate warehouses, whereas milk runs lower
transportation cost by consolidating shipments to multiple locations on a single truck. Milk runs make sense
when the quantity destined for each location is too small to fill a truck but multiple locations are close
enough to each other such that their combined quantity fills the truck. Companies such as Frito-Lay that
make direct store deliveries use milk runs to lower their transportation cost. If frequent small deliveries are
needed on a regular basis and either a set of suppliers or a set of retailers is in geographic proximity, the use
of milk runs can significantly reduce transportation costs. For example, Toyota uses milk runs from
suppliers to support its just-in-time (JIT) manufacturing system in both Japan and the United States. In
Japan, Toyota has many assembly plants located close together and thus uses milk runs from a single
supplier to many plants. In the United States, however, Toyota uses milk runs from many suppliers to each
assembly plant, given the large distance between assembly plans.
3. All Shipments via intermediate Distribution Center with Storage
Under this option, product is shipped from suppliers to a central distribution center, where it is stored until
needed by buyers when it is shipped to each buyer location, as shown in Figure Storing product at an
intermediate location is justified if transportation economies require large shipments on the inbound side or
shipments on the outbound side cannot be coordinated. In such a situation, product comes in large quantities
into a DC, where it is held in inventory and sent to buyer locations in smaller replenishment lots when
needed
The presence of a DC allows a supply chain to achieve economies of scale for inbound transportation to a
point close to the final destination, because each supplier sends a large shipment to the DC that contains
product for all locations the DC serves. Because DCs serve locations nearby, the outbound transportation
cost is not very large. For example, W.W. Grainger has its suppliers ship products to one of nine DCs
(typically in large quantities), with each DC, in turn, replenishing stores in its vicinity with the smaller
quantities they need. It would be expensive for suppliers to try to serve each store directly. Similarly, when
Home Depot sources from an overseas supplier, the product is held in inventory at the DC because the lot
size on the inbound side is much larger than the sum of the lot sizes for the stores served by the DC.
4. All Shipments via intermediate Transit Point with Cross-Docking
Under this option, suppliers send their shipments to an intermediate transit point (which could be a DC),
where they are cross-docked and sent to buyer locations without storing them. The product flow is similar to
that shown in Figure, except that there is no storage at the intermediate facility. When a DC cross-docks
product, each inbound truck contains product from suppliers for several buyer locations, whereas each
outbound truck contains product for one buyer location from several suppliers. Major benefits of cross-
docking are that little inventory needs to be held and product flows faster in the supply chain. Cross-docking
also saves on handling cost because product does not have to be moved into and out of storage. Cross-
docking is appropriate when economies of scale in transportation can be achieved on both the inbound and
outbound sides and both inbound and outbound shipments can be coordinated.
Walmart has used cross-docking successfully to decrease inventories in the supply chain without incurring
excessive transportation costs. Walmart builds many large stores in a geographic area supported by a DC. As
a result, the total lot size to all stores from each supplier fills trucks on the inbound side to achieve
economies of scale. On the outbound side, the sum of the lot sizes from all suppliers to each retail store fills
up the truck to achieve economies of scale.
5. Shipping via DC Using Milk Runs
As shown in Figure ,milk runs can be used from a DC if lot sizes to be delivered to each buyer location are
small. Milk runs reduce outbound transportation costs by consolidating small shipments. For example,
Seven-Eleven Japan cross-docks deliveries from its fresh-food suppliers at its DCs and sends out milk runs
to the retail outlets because the total shipment to a store from all suppliers does not fill a truck. The use of
cross-docking and milk runs allows Seven- Eleven Japan to lower its transportation cost while sending small
replenishment lots to each store. The use of cross-docking with milk runs requires a significant degree of
coordination and suitable routing and scheduling.
The online grocer Peapod uses milk runs from DCs when making customer deliveries to help reduce
transportation costs for small shipments to be delivered to homes. OshKosh B’Gosh, a manufacturer of
children’s wear, has used this idea to virtually eliminate LTL shipments from its DC in Tennessee to retail
stores.
6. Tailored Network
The tailored network option is a suitable combination of previous options that reduces the cost and improves
the responsiveness of the supply chain. Here, transportation uses a combination of cross-docking, milk runs,
and TL and LTL carriers, along with package carriers in some cases. The goal is to use the appropriate
option in each situation. High-demand products may be shipped directly to high-demand retail outlets,
whereas low-demand products or shipments to low- demand retail outlets are consolidated to and from the
DC. The complexity of managing this transportation network is high because different shipping procedures
are used for each product and retail outlet. Operating a tailored network requires significant investment in
information infrastructure to facilitate the coordination. Such a network, however, allows for the selective
use of a shipment method to minimize the transportation as well as inventory costs.
Comparison of Different Transport Networks
Transport networks form the backbone of any country’s economic and social infrastructure. In India, the
interconnected systems of roads, railways, waterways, airways, and pipelines have played a transformative
role in regional development. These networks not only facilitate the movement of goods and people but also
contribute to economic integration, accessibility, and balanced regional growth. This article explores each of
these modes of transport in detail and their complementary roles in shaping India’s regional development.
I. Road Networks: The Lifeline of Regional Connectivity
Road transport is the most widely used mode of transportation in India, accounting for over 60% of freight
and 85% of passenger traffic. The country boasts an extensive road network of over 6.3 million kilometers,
comprising national highways, state highways, district roads, and rural roads.
Contribution to Regional Development:
1. Economic Integration: Roads connect rural areas with urban centers, facilitating the transport of
agricultural produce, raw materials, and manufactured goods.
2. Employment Generation: The construction and maintenance of roads provide significant employment
opportunities.
3. Social Inclusion: Improved road connectivity enhances access to education, healthcare, and markets,
reducing regional disparities.
Key Initiatives:
Golden Quadrilateral (GQ): Links the major metros of Delhi, Mumbai, Chennai, and Kolkata.
Pradhan Mantri Gram Sadak Yojana (PMGSY): Focuses on connecting rural areas with all-weather roads.
II. Railway Networks: The Backbone of Freight and Passenger Movement
India has one of the largest railway networks in the world, covering over 67,000 kilometers. The Indian
Railways not only carries millions of passengers daily but also handles a significant portion of freight traffic,
particularly bulk goods like coal, iron ore, and fertilizers.
Contribution to Regional Development:
1. Freight Corridors: Dedicated Freight Corridors (DFCs) enhance the efficiency of goods movement,
reducing logistics costs.
2. Urbanization: Railways support the development of urban centers by linking them with peripheral
regions.
3. Tourism Development: Heritage and luxury trains like the Palace on Wheels boost tourism in specific
regions.
III. Waterway Networks: Reviving Traditional Transport
India’s inland waterways, though underutilized, hold immense potential. The country has over 14,500
kilometers of navigable waterways, including rivers, canals, and backwaters.
Contribution to Regional Development:
1. Cost Efficiency: Waterways are significantly cheaper for bulk cargo transport compared to road and rail.
2. Environmental Benefits: Reduced carbon emissions make waterways an eco-friendly transport option.
3. Rural Connectivity: Waterways enhance trade in regions along riverbanks, particularly in states like
Assam and West Bengal.
Key Initiatives:
National Waterways (NW): India has designated 111 waterways as national waterways to boost inland
transport.
Sagarmala Project: Aims to modernize ports and enhance coastal shipping.
IV. Airway Networks: Accelerating Growth and Connectivity
The aviation sector in India has witnessed exponential growth, with over 150 operational airports and
ambitious expansion plans under the UDAN (Ude Desh ka Aam Nagrik) scheme.
Contribution to Regional Development:
1..Economic Growth: Aviation hubs stimulate trade and attract investments.
[Link] Boost: Air connectivity enhances the accessibility of remote tourist destinations.
3. Emergency Services: Air transport is critical for disaster relief and medical emergencies.
Challenges and Solutions:
High Costs: Reducing fuel taxes and increasing regional connectivity can make air travel more accessible.
Infrastructure Development: Modernizing airports in Tier-2 and Tier-3 cities is essential for balanced
growth.
V. Pipeline Networks: The Silent Transport Revolution
Pipelines offer an efficient and economical mode for transporting liquids and gases. India’s pipeline network
extends over 34,000 kilometers, covering crude oil, petroleum products, and natural gas.
Contribution to Regional Development:
[Link] Access: Pipelines ensure the supply of critical energy resources to industries and households.
[Link] Savings: They reduce the dependency on road and rail for transporting fuels.
4. Industrial Growth: Regions with pipeline infrastructure attract energy-intensive industries.
Key Pipelines:
Hazira-Vijaipur-Jagdishpur (HVJ) Gas Pipeline: Enhances the distribution of natural gas.
Mumbai–Manmad Pipeline: Transports petroleum products efficiently.
Complementary Roles in Regional Development
The synergy among these transport modes is crucial for holistic regional development. Here’s how they
complement each other:
[Link] Connectivity: Efficient logistics hubs integrate road, rail, air, and water transport, reducing
costs and delays.
2. Balanced Regional Growth: Improved transport networks ensure equitable development by connecting
remote areas to economic hubs.
3. Sustainability: Combining modes like rail and waterways minimizes environmental impact.
List of Points Highlighting Complementarity:
Roads provide last-mile connectivity for goods transported by railways and waterways.
Airports serve as gateways for high-value, time-sensitive cargo, complemented by road networks.
Pipelines reduce the load on other modes for transporting fuels, ensuring energy security.
Transport networks are the arteries of regional development in India. Each mode—road, railway,
waterway, airway, and pipeline—plays a unique role, and their integration ensures economic growth, social
inclusion, and environmental sustainability. By investing in modernizing these networks and enhancing their
inter connectivity, India can achieve balanced regional development, reduce disparities, and unlock its full
economic potential.