7 Transportation
Zohreh Khooban*
Department of Industrial Engineering, Amirkabir University of Technology, Tehran, Iran
of process, end users get their needs met by retailers. In this way, the cost of products may increase because of the existence of intermediaries in the product dis-tribution process, but from a general point of view, comparing to manufacturers, intermediaries profit users by decreasing the transportation unit cost.
The path followed by a shipment from producer to customer is called the distri-bution channel. Distridistri-bution channels can be classified into four groups. In the first group, the channel has no intermediaries, so manufacturers send their products to end users directly. Some kinds of products such as cosmetics and encyclopedias sold door to door and handicrafts sold at local market are brought to the end user in this way through distribution channel 1. In the second distribution channel, retai-lers play intermediary roles (e.g., retairetai-lers in the tire industry buy from manufac-turers and then resell products to their customers).
When manufacturers sell their products only in large quantities and retailers are not able to purchase these large quantities, wholesalers play the role of intermedi-ary between manufacturers and retailers. Channel 3 is typical in the food industry.
Channel 4 is as the same as channel 3, except that a producer contracts with a broker or sales agent who sells products to wholesalers (e.g., in the clothing industry) [1].
Figure 7.1illustrates these four distribution channels.
7.1.2 Transportation Participants
The three basic participants in a transportation system are the shipper, the carrier, and government.
Shipper
One of the best ways to transport freight is to use shipper services. Shippers can move freights from origin to destination at the lowest cost and during a specified time period. The shipper ensures many transportation services such as particular pickup and delivery times, accurate and timely exchange of invoicing and infor-mation, zero loss and damage, and specified transit times. Some Shippers are pro-ducers of goods, this is while some others are just intermediary firms (brokers) which attribute demand to supply[4].
Channel 1 Channel 2 Channel 3 Channel 4
Producer Broker Wholesaler Retailer End-user
Figure 7.1 Channels of distribution[1].
Carrier
Carriers tender transportation services. Railways, shipping lines, trucking compa-nies, intermodal container services, and postal services are different kinds of car-riers. Generally, carriers are classified into three main classes: common carriers, private carriers, and contract carriers. Depending on its market, any manufacturer or distributor can choose from these three choices to transport goods and products.
The best-known common carriers are public airlines, motor carriers, cruise ships, bus lines, railroads, and other freight companies. Common carriers’ routes are defined and published in advance, and rate tables and time schedules for transporting people and goods require the approval of regulators (the government in most countries).
A common carrier is a business that offers its transportation services to the gen-eral public under license or the authority provided by a regulator. A common car-rier holds itself out to provide transportation services to the general public without discrimination for “public convenience and necessity.”
The significant problem in using common carriers is that the numbers of custo-mers cannot be predicted in advance all the time. To get around this problem, firms may have special, private carriers to deliver their own products to end users, mak-ing shipments more predictable. For example, the Wmak-ingman’s grocery store chain owns and operates its own private fleet of vehicles to deliver produce and goods to company stores; private carriers have an advantage over other carriers because of their flexibility and economy.
A contract carrier, on the other hand, is a kind of for-hire carrier agent that serves a limited number of shippers under specific contractual arrangements. According to con-tract, they provide a specified transportation service at specified cost; contract carriers are the same as private carriers except they do not hold serve the general public and in most instances have contract rates that are lower than those of common carriers.
Government
In most countries, public transportation systems and facilities such as rail facili-ties, roads, and ports are planned, constructed, and operated by governments.
Governments also control the shipment of certain items (e.g., hazardous and poisonous products) and tax the transportation industry.
Governments have traditionally been more involved in the practices of carriers than in most other commercial enterprises; their regulations include restricting car-riers to certain markets and regulating prices they can charge.
7.1.3 Delivery Frequency System
In an economic view, carriers must plan the frequency of service between any two points. Finding the best delivery frequency can decrease investment in equipment and facilities. Delivery frequency systems can be chosen between three approaches; they are customized transportation, consolidation transportation, and frequent operation[5].
Customized Transportation
In the customized transportation approach, truckload (TL) vehicles with a driver or driving team are dedicated to a specific customer. This transportation team starts its delivery trip when a customer asks for service. The truck is sent to the customer’s origin site to begin loading. Then it moves to the customer’s specified destina-tion to unload. When driving team finish their tour, call the carrier’s dispatcher to ask for next assignment if there is one. Otherwise the team should wait for next location. The customized delivery system creates a dynamic environment for TL carriers because most of transportation specifications related to customers (such as demand frequently, travel times, waiting delays at customer sites, and waiting delays of TL team until future assignment) are uncertain.
In these conditions, carriers should attempt to use their on-hand resources such as crews, fleets, vehicles, and trailers in the best possible way. To achieve this aim, developing the well-organized resource management and allocation plans should be the core of the carriers’ management procedure in responding to the maximum demands of transportation[4].
Consolidation of Transportation
In the freight-transportation and logistics environment, there are many different ways to save transportation costs. One way is to consolidate transportation. In this way, it is possible to take advantage of economies of scale in transportation by substituting large shipments for small ones. Zhou et al. have delineated three gen-eral policies for transporting goods by vehicles. (i) the quantity policy, according to which the maximum capacity of a vehicle should be used by carrying the maximum number of freight quantity. (ii) the time policy, according to which the time of delivery is the most important factor and shouldn’t exceed a preplaned time limits.
(iii) the quantity and time policy, according to which both capacity and time are critical factors, so a vehicle is sent either when the delivery time limit arrives or when the freight quantity reaches to its maximum bound[6].
Consolidating freight is a way to cover these policies. It means consolidating demands from several points until a transporting vehicle is full. This on-demand approach has many benefits for carriers because the investment in vehicle capacity is much lower than the customized approach; as a result, lower unit transportation costs and high-capacity use are achieved. This approach may, however, be quite undesirable for customers with time-sensitive delivery requirements or who have high-value goods with high associated inventory, security, and holding costs[4].
Carriers must have accurate scheduling in order to plan their services and satisfy the expectations of the largest possible number of customers in the fewest number or series of routes. They must be able to group several services in a schedule and indicate departure and arrival times for stops along the route. To achieve this, car-riers should adjust service-related characteristics such as routes, the capacities and types of vehicles and convoys, and intermediary stops and locations of different customers’ origins and destinations. Carriers who use this system in the best
possible way are ensured that their transport services are performed in a rational, efficient, and profitable way. In this system, carriers plan rules and policies that affect the whole system[4].
Consolidation of small shipments can occur in three ways. First, small shipments that must be transported over long distances or even short ones can be combined, just as when large shipments are transported over long distances (facility consolida-tion). Second, several small shipments can be replaced by a single large shipment by using an adjusted forward or backward shipment schedule (temporal consolida-tion). Third, when there are many pickup and delivery points, using a vehicle on a multistop route can serve less than truckload (LTL) pickup and deliveries associ-ated with different locations (multistop consolidation)[1].
Frequent Operation
Another alternative for delivery services is frequent operations in which carriers provide fixed schedules that match their customers’ shipping requirements. In this fixed schedule, delivery services are organized in advance—e.g., once a day or twice a week. In this approach, unpredictable numbers of customers in each service period cause uncertainty in shipping requirements. To cover the most possible demands, carriers need a higher-capacity investment (as compared to consolidating transport). However, predictability of operation schedules and the accuracy of anticipated shipping arrival dates are among the advantages of frequent service[5].
7.1.4 Long-Haul Consolidated Freight Transportation
[4]Freight-transportation operations over long distances and between terminals and cities may be performed by rail, truck, ship, and so on or any combination of these modes. The structure of long-haul consolidation transportation system consists of a whole network with terminals and related links. Consolidated carriers perform transportation services by using many kinds of trucks: railcars, trailers, containers, and ships, among others. Terminals with different designs and sizes play very criti-cal roles in freight-transportation networks. They may be concentrated in specific operations, given service for only a particular kind of shipment, or presented an entire set of transportation services for any kind of shipment.
The following is a brief look at rail-transportation networks and LTL networks.
Differences between these two types of networks are described in the following sections.
Railway Transportation Network
A railway network is made of single or double track lines that connect several dif-ferent train yards together. When a customer calls for a service, an appropriate number of railcars at the nearest main yard are chosen, inspected, and transported to the freight pickup point. Loaded cars return to the origin yard to be ordered, grouped, consolidated, and assembled into blocks. A block contains a group of
railcars that are considered a single unit with the same origin but perhaps different final destinations. Using blocks in train transportation systems has many economic advantages such as full train loads and the management of longer car strings in yards.
During the long-haul transportation trip, the train may travel on single-track lines, so it is common to meet trains traveling in the opposite direction. In this situ-ation, the train with the higher priority passes first. The train may be stopped in middle train yards where cars and engines are regularly inspected and blocks are separated from one train and put on another. At the final yard, the first blocks are detached from the train and disassembled. Then cars are inspected, put in order, and moved to their final destination to be unloaded. Once a car finishes its delivery trip, it may move to a new pickup point and then be assembled in a new block or it may wait empty for a future assignment.
Managing the main yard’s operations is the most complex activity in a long-haul railway transportation system.
LTL Transportation Network
In an LTL network, small vehicles pick up local traffic at origin points and deliver it to end-of-line terminals. Then local traffic from different parts of the network are grouped and consolidated into larger batches before they begin their long-haul journey. Breakbulks are terminals where arrivals from several origin points are gathered, unloaded, ordered, and consolidated for the rest of the long-haul transport [4]. Breakbulks in LTL networks are the same as main yards in rail-transportation systems. LTL carriers usually have their own terminals, but they use public transportation networks.
Railway and LTL System Differences
The structure of LTL transportation network basically is the same as a rail-transportation network but in simpler scale and with more flexibility in choosing ways to move materials to their destinations. Whereas rail-transportation links are limited, trucks may use any available link of the road and highway network while obeying weight regulations[4]. In LTL systems, terminal operations are generally simple. But in railway systems, more complicated consolidation operations are managed through grouping and consolidation of railcars into blocks and then into trains[7].