Introduction to Transport and Logistics Systems 144 A2

Topic Six: Transport and Distribution

Transport:

 (Full) Truckload: quant. of freight tht = leg enough to fill an entire trailer (filled w/ goods
from 1 sender)
 Less-than-truckload: transportation of goods that don’t require full truckloads, smller
shipments = grouped together (usually on pallets) & transported on 1 truck to destination)

Containers =
- system which containerised freight = transported
- led to improved efficiency by reducing handling time
- container capacity = TEU (20 foot equivalent unit)
o 1 TEU= 1 std. 20ft container
o FEU= forty foot equivalent unit = 2x TEUs
- TYPES: dry cargo, reefer, ventilated, insulated, tank, flexitank

Intermodal Transport: (transportation of a load from its origin to its destination by a sequence of @
least 2 transportation modes, the transfer frm 1 mode to the next being performed at an intermodal
terminal)

 Intermodal trade = mostly use: AIR & MARITIME transport

 Need other modes to get to and frm the ports
 Containers = technology that supports intermodal transport not only for international
movement but also domestic movements

Types of Freight Facilities

- Fabrication: assembly of goods out of parts, fabricating parts out of raw materials/ changing
physical characteristics
- Storage: holding goods in inventory for some time- release on demand BUFFER (inventory
buffer is additional inventory kept on-hand in case of emergencies, transportation delays or
surges in demand)
- Distribution: consolidating deconsolidating, sort or changing load unit THROUGHPUT
Main diff. btwn storage and distrib. = functions/ facilities relate to time the inventory spends w/in the
facility

Fulfilment of Orders
- After production, mvmnt takes place for various purposes:
 B2C (Business-to-consumer): smll sized orders (direct shipment)
 B2B (business-to-business): large orders, shipped directly to business customers, wholesalers
& retailers
 Intra-company transfers: fulfilling orders delivered to other business units w/in the same
parent org.

The fulfilment process describes the activities associated w/ fulfilling customers’ orders for products,
incl. scheduling order delivery, picking, packing, shipping, assembling, installing, commissioning and
invoicing.

F1.1- receive B2C product frm source/ transform

- Record product receipt, determine put-away location, put away, record location
F1.2 – receive order signal
 - Reserve inven. for a specific order, schedule delivery date, if customer picks up own product-
then indicate date of order availability
F1.3 – pick product
- Picking a product frm the allocated location
F1.4 – pack product
- Sorting & combine products, packing & apply labels & barcodes
F1.5 – stage product
- Place in temporary holding area for loading
F1.6 – schedule transportation
- Plan product deliveries, route planning and delivery schedules
F1.7 – notify & confirm shipment window
- Keep customers up-to-date on order status, agreement of delivery date & time
F1.8 – load vehicle & generate shipping documents
- Load product for transportation, generate documentation (ie. Invoice)
F1.9 – ship products
- ship product to customer
F1.10 – assemble/ install product
- ensure product = fully functional
F1.11- obtain proof of delivery/ customer acceptance
- customer receives product, verifying order = complete, & meets the delivery terms
Topic Seven: Returns & Reverse Logistics
E-commerce/ online retail:
 a e-shopper = customer shopping online
 e-teller/ online retailer= business tht sells products online & owns goods they sell (inventory)
 mrktplaces = businesses tht don’t own goods they sell (amazon marketplace/ eBay)

 online shopping = growing significantly

o most shopped item: clothing (in terms of # of items bought)
 Returns- highest returns of online shopping products
o On ave. 25% of all clothing items
o Up to 40%-50% of high fashion items

Retail Clothing Sector:

1. “pure” (online only – zando, shein)
2. “Bricks and mortar” (only retailers – mainly sml, single shop retailers: PEP stores)
3. “mixed retailers” (H&M, Bash – hv both onlie and physical stores & sell mainly clothing)
4. Generalist e-tailers: (Amazon and Takealot- sell clothes online but don’t specialise in
clothing)
5. The retailer of more specialist clothing products: such as sportswear, infant clothes, wrkware
& outdoor clothing (Totalsports)
6. The discount clothing e-tailer: (Boohoo & Shien)
7. The generalist re-tailer which also sells clothes (Tesco, Sainsbury & Takealot)
8. The marketplaces ( eBay, Amazon marketplace & Takealot)

 Increase in online shopping = result of:

o Consumer behaviour
o Technology
o Social media platforms
o Nature of project
o Logistics
Returns: w/ a raising omnichannel retailing (intergration of physical & digital channels) – returns hv
increased – particularly in clothing sector

 Intentional returns increase:

o Customers order several variaties of 1 product & return unwanted ones
o Becoming more extreme & widespread
o Shoppers treat their rooms as online changing rooms
 Products nned to move bck into SC to be returned – this = REVERSE logistics

REVERSE LOGISTICS:
The process of moving goods frm typical final destination for purpose of capturing value/ proper
disposal

- Often restrictions for returns (ie. Time limits, unused/ original packaging)
- Return policy affect its returns & ase of returning a product frm a customer
- Most companies offer free returns – however there is a logistics cost covered in the process
Activities w/in the reverse logistics network:

 Gatekeeping
o Point of entry into reverse logistics system
o Screening return request & returned product
o Determining if valid return in line w/ return policies
 o Critical since its determined whether a product can enter the return process
 Collection
o Collecting the returned products from the end customer
o Two stages:
 Pick-up returned product
 Transportation
 (r)e-tailer
 3rd party logistics provider
 The customer themselves (ie. By returning products to
stores/collection pts)
 Sorting
o Deciding wht to do w/ collected product
o Sorting may not = done in the country where the goods = sold/ ever frm where they =
distributed
 Disposal
o Exit frm reverse logistics system
o Decision on wht to do w/ return:

Topic Nine: Transport, Economy & Society

Introduction
 Transport system = closely related to socio-econ changes
 Mobility of ppl & freight & accessibility = @ core of this relationship
 Importance of transport infrastructure – access to mrkt & resource
 Neg. consequences of transport: congestion, accidents, noise
 Transport = commercial activity
 o Derived frm operational features
 Transport cost, capacity, efficiency, reliability, speed
o Complex set of relationships btwn
 Transport supply ( operating capacity of the network) & transport demand
( mobility requirements of an econ.)

Transport systems Socio-econ. change

 Mobility of people & freight

o Required transport infrastructure

Concept 1: Transport & Economic Development

Econ. Importance of transport:

 NB component of the econ.
o Impacting on development & welfare of popn
o Efficient transportation systems: provide econ. & social opportunities
o Positive multiplier effect:
 Better accessibility to mrkt
 Employment
 Additional investment
o Efficient transportation = reduces costs
o Inefficient transportation = increases costs (40% transport spending)
 Unintended consequences: congestion
 Macroeconomic lvl (importance of transportation for the whole econ.)
 No single transportation mode has been solely responsible for econ. growth
 Globalisation
o Adequate vs inadequate transportation in regions
 Enables development
 Regulatory impediments – impact econ. Development
 Wealth-producing vs wealth consuming transport investments
 Tendency: transport inv. hv declining marginal returns

Econ. Returns of Transport Investment

 Transport inv. has a declining marginal yield
1. High accumulation of current infrastructure
2. Econ. changes
Primary (resource exploration) -> secondary (manufacturing) -> tertiary (distribution & services)
3. Grouping (clustering)
 Role of transport economist – make sure transport inv. = effectively allocated
 Contemporary trends emphasize tht econ development = become less dependent on environ.
& more dependent on relations across space
 Commodity mrkt: transport expanded
 Labour mrkt: improvement in access to labour & reduction in access costs, mainly to
improved transport (local lvl) & the use of lower cost labour (global lvl)
 NB role in competitiveness

Concept 2: Transport & Society

  Mobility: most NB characteristic
 Challenges:
o Mobility gaps
o Lack if income, time, purpose and accessibility
Car ownership = factor supporting mobility gaps
o Cost differences
o Congestion
o Accidents
o Health- pollution

Concept 3: Transport Costs

 Transport systems face requirements to increase their capacity & reduce cost of transport
 Transport costs account for approx. 10% of product value
 Households spend approx. 10% of inc. on transport

Transportation costs= monetary measure of wht the transport provider must pay to produce
transportation services

o Fixed (infrastructure) costs

o Variable (operating) costs

 Transport costs hv significant impacts on structure of econ. activities & international trade
 Transport costs = influenced by respective rates of transportation comps.

- 10% increase in transport costs = 20% decrease in trading volumes

Rates= price of transportation services paid by their users (most public transport systems run on a
loss)

 Rate = adjusted according to supply & demand

o Cost of service: reflect costs directly involved
o Value of service: determined by value of commodity/ service

 Freight transportation private rates tend to vary but profitability = vital - unlike public transit

Cost & Time Components

 Many freight forwarders = primarily guided by direct money costs whn considering the price
factor in modal choice
 Significant conditions affecting transport cost & transport rates

1. Geography
- Distance = basic condition affecting transport cost
- Impact = mainly involve distance & accessibility

4 main categories of friction of distance functions

 No effect of distance
o Local postage, phone calls
 Linear effects of distance
 o Transport cost increase w/ linear distance
 Non-linear effects of distance
o Freight distrib. = growing in no-linear form frm terminal/ distrib. Centre bc of empty
bckhauls
o International air transportation costs = not usually much higher thn regional air
transportation costs
 Multimodal transport chain
o Combo of line haul & terminal costs

2. Type of products
o Packaging, special handling, bulky, perishable
3. Econ. of scale
o Lrger quant. cheaper per unit to transport (containerization)
4. Energy
o Energy intensive transport
o 60% of global oil consumption = attributed to transport activities
5. Trade imbalances
o Imbalances btwn import & exports
o Repositioning of empty containers
6. Infrastructure
o Poor infrastructure imply higher transport costs
7. Mode
o Diff. modes hv diff cost structures
8. Competition & regulation
o Complex competition & regulatory environ of transport
9. Surcharges
o Array of fees: fuel surcharge, security fees
10. Tolls and taxes
o Fuel taxes (RAF)
o N1/N2 tolls
11. Cross-subsidization
o Pvt transport charges subsidize public transport- tolls

Cost & Time Components

 Transport time = NB dimension in evaluation of transport costs

Types of Transport Costs

- International commercial terms (Incoterms)

 EXW ( ex works)
 FCA (free carrier)
 FAS (free alongside ship)
 FOB (free on board)
 CFR (cost and freight)
 CIF (cost, insurance & freight)
 CIP (carriage and insurance paid)
Concept 4: Transport Supply & Demand

 Demand for transport = derived demand bc the demand for 1 good/service in 1 sector
occurring as result of demand of demand frm another
 Users of transport = primarily consuming services not bc of its direct benefits but bc they
wish to access other services

- Transport supply = capacity of transport infrastructure & modes generally over geo. Defined
transport system for specific period
- Transport demand ( needs that = specified)

SUPPLY SIDE of transport mrkt can = divided into 2 categories:

o 3rd party transportation
o Own account transportation

Transport DEMAND = generated by econ. whch generates mvmnt of ppl & freight
o Productive transport ( hv clear econ focus- transport of semi focused goods to final
destination)
o Consumption transport ( generate less visible added value- road trip)
 Transport supply & demand hv reciprocal but asymmetric relationship
o Transport demand cant take place w/out a corresponding lvl of transport supply BUT
o Transport supply can’t exist w/out transport demand

1. ENTRY COSTS
o Maritime, rail & air: v. high entry cost
o Trucking: low entry cost
o High entry cost: oligopolistic transport activities
o Low entry: many competitors
2. PUBLIC SECTOR
o V high public involvement
o Transport infrastructure = gov. funded
o Government control
3. ELASTICITY
o Transport demand = inelastic
o Air transport = significant impact on demand

 Transport demand = derived demand

 Price regulation = doesn’t hv much power to change capacity/ price
 Fare structure = dominant source of income

- 3 requirements
o Fixed transport capacity
o Unused transport capacity
o Willing to pay diff. rates