CHAPTER 1

OVERVIEW/ FOUNDATIONS OF
TRANSPORTATION

1
Chapter objectives
• After studying this chapter, students should be able to:
 Define transportation
 Discuss the roles of transportation
 Discuss the major participants in transportation operations
 Differentiate the transport principles
 Discuss the different modes of transportation
 Highlight transportation policy
 Highlight transportation planning
 Highlight transportation management

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1.1. An overview of Transportation
• From the beginning of history, human compassion has
revealed an urge for mobility leading to a measure of
society's progress in civilization.

• For any country to develop with right momentum,

modern and efficient transport as a basic infrastructure
is a must.
• It has been seen throughout the history of any nation
that a proper, extensive and efficient road transport has
played a major role.
• Where roads are considered as veins and arteries of a
nation, passenger and goods transported are likened to
blood in circulation.
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Cont’d…
• Transport is the essential convenience with
which people not just connect but progress.

• Throughout history, people's progress has been

sustained on the convenience, speed and
safety of the modes of transport.

• Road transport occupies a primary place in to-

day's world as it provides a reach unparallel by
any other contemporary mode of transport.

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 Definition of transportation
• Transport (British English) or transportation (American
English) is the movement of people and goods from one
place to another. The term is derived from the Latin terms
Trans ("across") and portare ("to carry").
• Transportation is defined as movement of fright, people
and information from one place to another.
• It refers to the movement of everything from raw material
to finished goods between different facilities in a supply
chain

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 Definition Cont’d
• Transportation refers to the movement of product from one location to
another as it makes its way from the beginning of supply chain to the
customer.
• Transportation is an important supply chain driver because products are
rarely produced and consumed in the same location.
• The important common element in any definition of transportation is
movement.

• Movement is changing of physical location of freight, passenger or

exchange of information. Products must move to the location where they
are needed from where they are produced.

• Any supply chain’s success is closely linked to the appropriate use of

transportation

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Cont’d…
• Transportation function divided in to passenger and freight

transportation. Freight transportation is the economic movement of

commodities and products and the effect of such movement is on the

development and advancement of business.

• Now days most sections of the global economies are operating in an

environment which is much more complex and competitive than it was

before.

• This situation is aggravated by a rapid rate of change which is being

driven by external forces that have changed the economic landscape.

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 Cont’d…
• Businesses and other organizations are striving to be more efficient (reducing
their cost of doing business) and more effective (improving customer service)
to survive in this complex and competitive new environment.

• A critical element for achieving these two objectives simultaneously is the

supply chain organizations, and transportation is a critical ingredient for
overall supply chain performance.

• It can be argued that transportation is the glue that holds the supply chain
together.

• The five external forces driving the change are: i) globalization, ii) technology,
iii) supply chain integration and consolidation, iv) consumer empowerment,
and v) government regulation and policy.

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 Transport Fundamentals
Most important component of logistics cost.
Usually 1/3 - 2/3 of total cost.

• Transport involves
– equipment (trucks, planes, trains, boats, pipeline),
– people (drivers, loaders & un-loaders), and
– decisions (routing, timing, quantities, equipment size, transport mode).
When deciding the transport mode for a given product there are several
things to consider:
• Mode price
• Transit time and variability (reliability)
• Potential for loss or damage.
NOTE: In developing countries we often find it necessary to locate production close to
both markets and resources, while in countries with developed distribution systems
people can live in places far from production and resources.
 Key Dimensions of Transportation
Dimension

Historical Changes brought by transport technologies. Rise of civilizations.

Development of modern nation states. Globalization.

Economic Transport and economic development (indirectly and directly). Factor

in the production and added-value of goods and services. Facilitates
economies of scale. Influences land (real estate) value. Contributes to
the specialization of regions.

Social Access to healthcare, welfare, and cultural events. Shape social

interactions.

Political Nation building and national unity. National defense. Rules and
regulations. Subsidizing mobility (e.g. public transit or highways).

Environmental Important environmental impacts. Pollution, exploitation of natural

resources. Climate change.
 1.2. Roles of Transportation
• The role of transport is to facilitate the movement of goods.
• This may be from points of manufacture, storage or
prepositioning, to points of use; or between hubs and
distribution points; or hubs to end use; or distribution points
to end use; or return from end use back to hub and
prepositioning points or manufacturers.
• The source and destination may be in the same country, or
one may be in a different country requiring international
movement.
• Transportation is a very visible element of logistics.
• Transportation has the following roles:
1. Transport contributes in growth of industries whose
product requires quick marketing. Perishable articles like
fish and green vegetables are carried to various consumers
quickly even in distant markets through transport.
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Cont’d…
2. Transport helps in increase in the demand for goods.
 Through transport, newer customers in newer places
can be easily contacted and products can be
introduced to them. Today markets have become
national or international only because of transport.

3. Transport creates place utility. Geographical and

climatic factors force industries to be located in
particular places far away from the markets and places
where there may not be any demand for the products.
Transport bridges the gap between production and
consumption centers.

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Cont’d…
4. Transport creates time utility. It has been made
possible by virtue of the improvements in the speed
of transport. It helps the product to be distributed in
the minimum possible time that means arrival of
goods and services at right time.

5. Transport helps in stabilization of price. Transport

exerts considerable influence upon the stabilization of
the prices of several commodities by moving
commodities from surplus to deficit areas. This
equalizes the supply and demand factors and makes
the price of commodities stable as well as equal.

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Cont’d…
6. Transport ensures even flow of commodities into
the hands of the consumers throughout the period of
consumption.

7. Transport enables the consumers to enjoy the

benefits of goods not produced locally.
 This increases the standard of living, an essential
factor for further development of marketing and
economy. This is because of without a good
transport system the reach of the market is limited to
areas immediately surrounding the point of
production.

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Cont’d…
8. Transport identifies competition, which in turn,
reduces pries. Prices are also reduced because of the
facilities offered by transport for large-scale
production. Advantages of large-scale production is
possible only due to transport.
9. Transport increases mobility of labor and capital.
It makes people of one place migrate to other places
in search of jobs. Even capital, machineries and
equipment are imported from foreign countries
through transport alone.
10. For success of war: for defended foreign
aggression.
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The Role of Transportation in Logistics
• In 2009, as a percentage of sales, transportation
was 3.24%, warehousing 1.84%, customer
service 0.48%, administration 0.38%, and
carrying cost 1.52%.
• Outbound transportation was clearly the largest
component of total physical distribution costs.
• Cost trade-offs abound in transportation and
are typified by trading lower inventory costs for
higher transportation costs.
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 Role of transportation in supply chain
management

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Core Components of Transportation
Modes
Conveyances (vehicles) used to move passengers
or freight.
Mobile elements of transportation.

Infrastructures
Physical support of transport modes, such as routes
and terminals.
Fixed elements of transportation including
superstructures.
Networks
System of linked locations (nodes).
Functional and spatial organization of
transportation.

Flows
Movements of people, freight and information over
their network.
Flows have origins, intermediary locations and
destinations.
1.3. Participants in Transportation Operations
• The transportation environment impacts the range of
decisions that can be implemented in a logistical system.
• Unlike most commercial transactions, transportation
decisions are influenced by six parties:

1) Shipper (consignor)
2) Destination (consignee)
3) Carriers and agents
4) Government
5) Internet and
6) The public
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Cont’d…
1. Shipper and Consignee: The shipper and consignee have a
common interest in moving goods from origin to
destination within a given time at the lowest cost.
Services related to transportation include specified
pickup and delivery times, predictable transit time, and
zero loss and damage as well as accurate and timely
exchange of information and invoicing.

2. Carriers: Carriers are people, businesses or organisations

that operate and offer transportation services for shippers to
maximize its revenue for movement while minimizing
associated costs.
• To achieve this objective, the carrier seeks to coordinate
pickup and delivery times in an effort to group or
consolidate many different shippers’ freight in to
movements that achieve economy of scale and distance.

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 3. Government
• Government maintain a high interest level in the transaction
because of the transportation’s impact on the economy.
• Government desires a stable and efficient transportation
environment to sustain economic growth.
• Transportation enables the efficient movement of products to
market throughout the country and thus promotes product
availability at a reasonable price.
• Many governments are more involved with carrier activities and
practices that with other commercial enterprises.

• Involvement my take the form of;

 Regulation
 Promotion or
 ownership
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Cont’d…
4. Internet: A recent development in the
transportation industry is a wide assortment of
internet based services.

• The primary advantage of Internet-based

communication is the ability of carriers to
share real time information with customers
and suppliers.

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Cont’d…
5. Public: The public, is concerned with transportation
accessibility, expense, and effectiveness as well as
environmental and safety standards.
• The public indirectly creates transportation demand by
purchasing goods.
• While minimizing transportation cost is important to
consumers, concerns will be also paid for
environmental impact and safety. For instance the
effect of air pollution and oil spillage is a significant
transportation-related social issue because the cost of
environmental impact and safety is ultimately paid by
consumers.
• Generally, the formation of transportation policy is
complex due to interaction between these six parties.
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 1.4. Transport principles
• There are two fundamental economic principles that impact
transportation efficiency :
i. Economy of scale and
ii. Economy of distance
i. Economy of scale
• In transportation is, the cost per unit of weight decrease as the size of a
shipment increases.
E.g. large capacity transportation vehicles such as rail and water are
less costly per unit than smaller capacity vehicles such as truck and
air.
• Transportation economies of scale exist b/c fixed cost associated with
moving a load is allocated over the increased weight.
• Fixed costs include; administration related to scheduling, cost of
equipment, time to position vehicles for loading and unloading and
invoicing.
• Such costs are considered as FC b/c they do not vary with shipment size.
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ii. Economy of distance

- Refers to decreases in transportation costs per unit of

weight as distance increases .
eg: a shipment of 800 miles will cost less to perform
than two shipment of the same weight each moving
400 miles.
- Transportation economy of distance is often referred
to as the tapering principle.
- The rationale for distance economies is similar to
economies of scale.
- Specifically, longer distance allow FC to be spread
over miles, resulting in lower per mile charges.

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 The Transport Selection Decision
• Firms need to recognize that the lowest cost carrier does not
necessarily guarantee that this carrier will result in the lowest
landed cost.
• Therefore, firms need to keep the big picture in mind when
attempting to select a carrier.
• Carrier Selection Determinants
– Transit time
– Reliability
– Capability
– Accessibility
– Security
– Others such as nature of goods, government, and safety

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 1.5. Basic Modes of Transport

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 Basic Modes of Transport Cont’d
• There exist different means of transporting freight over
the network, each of which is referred to as a mode of
transport.
• Transportation modes can be differentiated with respect
to the way, the type and specification of the vehicle used
the underlying technology, the relevant infrastructure
and the nature of the associated operations.
• The three main modes of transport are air (e.g., cargo
planes), land (including road, rail and off-road) and
water (e.g., ships in oceans, barges in rivers).
• Other modes of transport, such as pipelines (e.g., to
transport gas) and cable transport (e.g., elevators and
cable-cars), also exist.
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Cont’d…
Modes of
transport

Land Water Air

Transport Transport Transport

Rail way Ocean/sea Passeng

Path Road Inland Cargo
way way water Transport ers
Transport

Passenger Goods/f
Head Animal reight Coastal
Shipping Over
for
cargo&
Seas
Passenge Shipping
Non Canal River rs
Vehicular Transp
Vehicular Transport
ort

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 Transportation Modes and Usage
• Highway: More than 250 million vehicles generate nearly 4 trillion passenger miles and
1.3 trillion motor carrier ton miles annually on 4 million miles of roadways.

• Air: 7,800 commercial aircraft generate 550 billion passenger miles annually between
major airports.

• Transit: 7.5 percent of work trips in the largest metropolitan areas; 22 billion passenger
miles by bus and trolley transit; commuter and urban rail transit generate 30 billion
passenger miles annually on almost 11,000 miles of track.

• Walking and cycling: Nearly 12 percent of daily trips are by walking or cycling, a total in
excess of 45 billion trips annually.

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 Cont’d…
• Rail: 24,000 Class I locomotives pull more than 1 million cars,

generating 1.3 trillion ton miles on 96,000 miles of freight railroad

track.

• Ports and waterways: More than $1 trillion in commerce moves in the

nation’s 12 largest ocean ports. More than 9,000 vessels and 30,000

barges move 157 billion ton miles annually on 25,000 miles of

navigable channels of the Inland Waterway System.

• Pipeline: More than 175,000 miles of crude oil and 325,000 miles of

gas transmission lines move two-thirds of the nation’s energy supplies.

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Cont’d…
1. Modes of Land Transport
a. Pathways: In remote villages, forest and hilly
areas pathways are still an important amongst
the different modes of transport.
– It further be subdivided into Head loads (is also
known as human transport. It is used in the hilly
areas where even animals cannot reach) and
Pack animals (is also known as animal
transport.
– It is used in the backward areas. The animals
like horse, pony, donkey, buffaloes, camel,
elephant, sheep etc. are used for this purpose.
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 Cont’d…
b. Roadways:
• Road has been, and continues to be, the most
widely used mode of freight transport, both
nationally and globally.
• One of the main reasons behind its popularity is
the ability of road transport to offer a very quick
service and often be available on demand.
• Its main benefit is flexibility, being able to visit
almost any location.
• Flexible, small loads [Products: Medium and light
manufacturing, food, clothing, all retail goods]
• Trucks can go door-to-door as opposed to
planes and trains.
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Cont’d…
• Road Transport is one of the most
important modes of transport.
• Road Transport further subdivided into;
Vehicular Transport (Cars, Trucks, Buses,
Lorries, Bullock Carts, and Hand Carts etc.)
and
Non-vehicular Transport (Animals like
Camel, Donkey, Elephant, Horse, Mules,
Oxen etc.)

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Cont’d…
c. Railways:
• Rail transport is most commonly used for heavy and bulky loads over
long land journeys. Trains can maintain a consistent, reasonably high
speed, and can link with other modes to carry containers and bulk
freight.
• Low cost, high-volume [Products: Heavy industry, minerals, chemicals,
agricultural products, autos, etc.]
• Improving flexibility
• intermodal service
• The main advantages:
 The capability to efficiently transport large tonnage over long
distances
 low unit transport cost is, so it can be used to move large volumes of
relatively low-priced materials, such as coal and minerals.
• The main disadvantage of rail is its inflexibility. All train services have
to be timetabled in advance, so that they can all fit onto the same
track.
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Cont’d…
2. WATER TRANSPORT
• One of oldest means of transport
• Low-cost, high-volume, slow
• Bulky, heavy and/or large items (Products:
Nonperishable bulk cargo - Liquids, minerals,
grain, petroleum, lumber, etc )]
• Standardized shipping containers improve service
• Combined with trucking & rail for complete
systems
• International trade

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Cont’d…
• Both rail and road transport has the obvious
limitation of only being used on land.
• Most supply chains use shipping to cross the
oceans at some point, and over 90% of world
trade is moved by sea.
• The main drawback with water transport is its
inflexibility in being limited to appropriate ports.
• The other problem with shipping is that it is
relatively slow, and needs time to consolidate
loads and transfer them at ports.

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Cont’d…
3. AIR TRANSPORT
• Air transport is the gift of twentieth century to
the world. It is the latest means of transport.
• The first flight in the air was made in 1903 only
for twelve seconds.
• Successfully it was used as a means of transport
after the First World War (1914-1918).
• The first air service was started in 1919 between
London and Paris.
• Air Transport can again be subdivided into
passenger and cargo.

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Cont’d…
• Airlines carry a significant amount of freight for
products where speed of delivery is more important
than the cost.
• Lightweight, small items [Products: Perishable and time
sensitive goods: Flowers, produce, electronics, mail,
emergency shipments, documents, etc.]
• Quick, reliable, expensive
• Often combined with trucking operations
• The major problem for airlines is their costs, over which
they have very little control.
• They have a combination of high fixed costs
(aeroplanes are expensive to buy) and high variable
costs (due to fuel, landing fees, staff, and so on).
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 Cont’d…
4. Pipeline
• Primarily for oil & refined oil products
• Slurry lines carry coal or kaolin
• High capital investment
• Low operating costs
• Can cross difficult terrain
• Highly reliable; Low product losses
• Unfortunately, they have the disadvantages of:
 Being slow (typically moving at less than 10 km per hour)
 Inflexible (only transporting between fixed points)
 Only carrying large volumes of certain types of fluid
 Huge initial investment of building dedicated to pipelines.

• Despite this initial investment, pipelines are the cheapest way of

moving liquids particularly oil and gas over long distances.

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 Performance Rating of Modes

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 Legal Classifications of Carriers
A. Common Carrier
• For-hire carrier that serves the general public
at reasonable rates and without discrimination.
• Carrier is liable for damages to products
carried.
• Exceptions to liability include acts of God, acts
of the public enemy, acts of the shipper and
defects inherent in the goods.
• Backbone of the transportation industry

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 Cont’d
B. Regulated Carrier
• Regulated carriers are found in motor and
water carriage.
• Regulations including entry controls, reasonable
rates, and nondiscrimination provisions.
• Must provide safe and adequate service.

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 Cont’d
C. Contract Carriers
• For-hire carrier that does not have to serve
the general public.
• May serve one or a few shippers exclusively.
• May offer specialized equipment.
• Other aspects of the carrier/shipper
relationship are made a part of the contract
between the two parties.
• Rates usually lower than common or
regulated carriers.
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 Cont’d
D. Private Carriers
• Private carriage is the firm’s own transportation.
• Not for-hire and not subject to Federal regulations.
• May not be the firm’s primary business but can charge a
intracompany fee for transportation services.
• Almost exclusively motor, but some rail, air and water
also exist.
• Firms gain ultimate control over shipments and achieve
maximum flexibility in moving goods.
• Backhauls are usually empty or return materials to the
firm’s plants and/or warehouses.
• Requires a large capital investment.
• Requires management time and expertise.
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 Inter Modal Transportation

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 Cont’d
• Refers to use of two or more modes of
transportation cooperating on the movement of
shipment by publishing a through rate.
• Logistics managers are looking for the best way
to move shipments and these often attempt to
take advantage of multiple modes of
transportation, each of which has certain useful
characteristics.
• Certain types have been fairly well developed,
such as rail/water, motor/water, rail/motor, and
motor/air.
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 1.6. Transportation policy
• Policy is a guiding principle used to set direction and addresses
questions such as ‘What‘ and ‘why’

• Transport policy deals with the development of a set of constructs and

propositions that are established to achieve particular objectives relating
to social, economic and environmental development, and the
functioning and performance of the transport system.

• The goal of transport policy is to make effective decisions concerning the

allocation of transport resources, including the management and
regulation of existing transportation activities

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 The Relevance of Transport Policy
• Transport policies arise because of the importance of
transport in virtually every aspect of economic, social and
political activities of nation states. Such as:-
• National security:-Policies are developed to establish
sovereignty or to ensure control over national space and
borders
• Public safety and the environment:-Issues of public safety
have for a long time led to the development of policies
requiring driving licenses, limiting the hours of work of
drivers, imposing equipment standards, establishing speed
limits, mandating highway codes, seat belts and other
accident controls.
• More recently, environmental standards and control
measures are being instituted, in response to the growing
awareness of the environmental impacts of transport
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 Cont’d…
• Prevent or control the inherent monopolistic tendency of many transport
modes
• To limit foreign ownership
In recent years, four trends had significant consequences over the context in which
transport policy takes place:
• Globalization increased interactions at the international level, both for freight
and passengers. This lead to the emergence of large actors managing a portfolio
of modes and infrastructures across international jurisdictions and therefore
dealing with a variety of transport policies and regulations.
• Deregulation and privatization have been ongoing in many transport markets.
This has enabled the transfer of ownership and operation of many transport
modes to the private sector and favored the entry of new actors. This was
particularly the case of the airline industry.
• A broader focus of policies, particularly in light of intermodalism and
multimodalism as well as logistics. This has enabled a better coordination of
investments improving the efficiency of interconnected transportation networks
and the related supply chains.
• A move towards social and political issues behind transport projects as opposed
to technical and engineering issues. Policy is becoming more responsive towards
public concerns over issues such as environmental externalities and social
equity. However, this has also been linked with additional costs, delays and
controversy of many large transportation projects
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Policy Instruments
• Public ownership:-The direct control by the state of transportation
infrastructure, modes or terminals is widespread. Most common is the
provision by public agencies of transport infrastructure such as roads,
ports, airports and canals
• Subsidies:-Many transport modes and services are capital intensive,
and thus policies seeking to promote services or infrastructure that the
private sector are unwilling or unable to provide may be made
commercially viable with the aid of subsidies.
• Regulatory control
• Research and development
• Labor regulations pertaining to conditions of employment, training,
and certification may not be directed purposefully at influencing
transport, but as a policy they may exert a significant effect over the
industry since it has an impact on its operating costs
• Safety and operating standards, such as speed limits, may have a
similar effect
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 1.7 Transportation Planning
• Transportation planning is the process of defining future policies, goals,
investments and designs to prepare for future needs to move people and
goods to destinations.

• Transportation planning is the process that includes careful

consideration of problem, incorporation of alternative viewpoints of
analysis and evaluation, development of goals, objectives and a
statements of desirable transportation system performance and
completion of technical analysis needed to determine impact of
alternative

• Transport planning deals with the preparation and implementation of

actions designed to address specific problems.
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Cont’d…
• Transportation planning is the process of answering four basic
questions
1. where are now? (such as trends, and conditions relating to population,
the transportation system, and general state of the urban area

2. Where do want to go?( Major issues, obstacles and opportunities)

3. What will guide us?(goals objectives, inputs and performance measures

4. How will we get there?( Revenue estimation, policy changes, program

implementation

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 :
cont’d…
• There are several specific types of transport planning which reflect
various scales and objectives
– Traffic impact studies evaluate traffic impacts and mitigation strategies
for a particular development or project.
– Local transport planning develops municipal and neighborhood transport
plans.
– Regional transportation planning develops plans for a metropolitan
region.
– State, provincial and national transportation planning develops plans for
a large jurisdiction, to be implemented by a transportation agency
– Strategic transportation plans develop long-range plans, typically 20-40
years into the future.
– Transportation improvement plans (TIPs) or action plans identify specific
projects and programs to be implemented within a few years.
– Corridor transportation plans identify projects and programs to be
implemented on a specific corridor, such as along a particular highway,
bridge or route.
– Mode- or area-specific transport plans identify ways to improve a
particular mode (walking, cycling, public transit, etc.) or area (a campus,
downtown, industrial park, etc.).
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 1.8. Transportation management
• TM refers to the buying and controlling of
transportation service by either a shipper or
consignee
• The management of transportation operations is
comprised of all types and modes, including
tracking and managing every aspect of vehicle
maintenance, fuel costing, routing and mapping,
warehousing, communications, EDI
implementations, cargo handling, carrier selection
and management, and even accounting.

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Contemporary Transportation Management
• Transportation managers also involved in other
operations of the firm
– Marketing
– Manufacturing
– Outbound shipping
– Purchasing
 End!

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