7 Uses of Transportation in Supply Chain Management
Transportation is the most essential component of a supply chain. It involves the delivery of products from the start to the end of a supply chain. For a supply chain to be deemed effective, the transportation segment must be managed efficiently. This involves making sure the transport and logistics strategy is dynamic and responsive to the demands of the market.
The transportation in a supply chain entails ferrying a product from a supplier to a customer or a distribution store by road, rail, pipeline, air or sea. Factors involved in transportation include cost, service/transit time and movement of products. These are the most pertinent issues in an effective supply chain. Others include integration among customers, carriers, and suppliers and information flow.
Transportation is frequently used in the facilitation of a supply chain. Below are seven uses of transportation in supply chain management:
1. Transportation is used to reduce costs.
The transportation in a supply chain can be used to control costs in a business operation. Freight and fuel costs take up most of the logistics budget. Moving products from one location to another using one or a combination of the various modes of transportation is a cost-intensive affair. To control transportation costs and keep them as low as possible, conducting a full freight audit is essential.
Luckily, technologies exist that make it possible to enhance transparency in transport and logistics. Companies that use technology and data can increase their awareness of both the supply chain network in general and how it interacts with the broader transportation ecosystem.
The right data gives shippers insights into freight flows and other variables that are likely to impact transportation costs to various destinations. This gives them a broader insight into the transport ecosystem and how it affects the entire supply chain.
2. Transportation is used to enhance customer service.
The transportation in a supply chain can be used for customer service. As products move from one location to another, and from the supplier to the customer, the needs of the customer must be at the heart of the transportation system. Making sure products reach a customer in the condition they were shipped in and on time are essentials of transportation in a supply chain.
3. Transportation is used to segment shipments in supply chain.
The prioritization of shipments is essential in transportation. The customers, products, time of year, and suppliers, among other factors, determine the urgency and importance of goods in transit.
The transportation in supply chains must be segmented to reflect these often complex realities. This often requires a change in the mode of transport and settling on alternative carriers.
4. Transportation is used to synchronize with supply chain technology.
The daily monitoring of transportation operations is best handled by a transportation management software (TMS). Among activities tracked by a TMS are route planning, fleet management, fuel costing, supplier relations, cargo handling, and customer communications.
A TMS is highly effective in controlling and lowering transportation costs. For instance, according to Forbes, a TMS can reduce freight costs by 8%. While not all shipping companies are using a TMS, its uptake is on the rise as companies embrace the realities of efficient, cost-effective transportation.
5. Transportation is used to provide more supply chain options.
The majority of products rely on multiple modes of transportation as they travel throughout the supply chain. Therefore, various modes of transportation are required for an effective freight transportation system. Such a system is ideally suited to support international and domestic supply chains.
As shown above, trucks are by far the most popular mode of transportation, making road transport a critical part of the supply chain. Pipelines are also highly popular, especially in the transportation of gaseous and liquid products. Items moved by air and road have a higher value per ton, meaning that these two modes have a higher value than the others.
The appropriate mode of transportation in a supply chain must be selected at every point of the transport and logistic cycle. Sometimes it takes a combination of modes of transport for a product to reach an end-user or a distributor.
6. Transportation is used to bypass geographical limitations.
Trucks have, for a long time, been the preferred mode of transportation in supply chain operations. They traverse roads alongside railways to move products across the land efficiently. They feature a chassis, which can hold standard shipping containers. In the US alone, fifty million tons of products are freighted via trucks every day at the cost of more than $50 billion. In Canada, 730.6 million tons of commodities were freighted via trucks in 2014. Compare this to 310.3 million tons of freight transported by railway in the same year.
The reason trucks are the mode of choice when transporting shipments is because they can pass through terrains that other modes of transportation can’t. For instance, trains travel to limited destinations, while air freight has weight and airport limitations. This leaves trucks as the most convenient for moving vast volumes of products cost effectively.
7. Transportation is used to boost the economy.
To freely move products from domestic to international markets and vice versa, an efficient transportation system is a must. The vast distances between farms, mines, urban centres and forests demand a sound transportation system so that manufactured products can reach customers as efficiently as possible.