Transport support international commercial

transactions

Made by : Aripov Karimjon

Content

Meaning & definition Imortance of transportation Transportation functionality Principles & methods of transportation Types of transportation Condition affecting transportation Transportation costs Pricing structure Conclusion

Meaning and Definition

Transport or transportation is the movement of people, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline and space. The field can be divided into infrastructure, vehicles and operations.

Transport infrastructure consists of the fixed installations necessary for transport, including roads, railways, airways, waterways, canals and pipelines.

Transport is a key component of growth and globalization. Transport is a key necessity for specialization—allowing production and consumption of products to occur at different locations. Transport has throughout history been a spur to expansion; better transport allows more trade and a greater spread of people. Economic growth has always been dependent on increasing the capacity and rationality of transport. But the infrastructure and operation of transport has a great impact on the land and is the largest drainer of energy, making transport sustainability a major issue.

Importance of transportation:

Importance of transportation:1) Place Utility.2) Industrial Development.3) Employment Opportunities.4) High Standard of Living.5) Distribution of Perishable

Goods.6) Emergency Transportation.

Transportation Functionality

Functions of Transportatio

n

Product Movement

Product Storage

Product Movement Temporal:

- Product is locked up during transit, hence inaccessible.

- Positive amount of time is spent in transporting material.

- Time is a resource expended in transportation . - During the time product is locked up costs are

incurred in proportion of time. Financial:

- Administration costs, Salaries, Maintenance costs are expended.

Environmental: - Fuel costs are high[Creates air pollution,

congestion, Noise pollution.

Product Storage:

* It is a temporary storage in stationary vehicle. Product storage is expensive in transport vehicle. In some situations Product is done such as:

* When the cost of unloading and reloading the product in the Warehouse is more expensive.

When storage space is limited.

* At other times, temporary storage is used due to diversion. This occurs when an original delivery destination is changed while the inventory is in transit.

Principles of Transportation

Principles of Transportati

on

Economy of Scale

Economy of

Distance

Types of Transportation

1.Road Transport.2. Rail Transport.3. Water Transport.4. Air Transport.5. Pipeline Transport.6. Ropeway Transport.

Road Transport: * Advantages;

1. Door to Door Service.2. Economical over short

distances.3. Flexibility.4.Limited Capital Expenditure.

* Disadvantages;

1. Irregular and Unreliable.2. Unsuitable for Long Distances

3. No Uniformity in Rates.4. Limited Speed.5. Affected by Weather.

Rail Transport:

* Advantages;

1. High Speed.2. Suitable for Long

Distances.3. Bulky Goods.4. Protection.5. Large Carrying Capacity.

* Disadvantages;

1. Huge Capital Expenditure.2. High Overheads.3. No Door to Door Service.4. No Competition.5. Inflexible Mode.

Air Transport:

* Advantages;

1. Flexible.2. Quick service.3. Natural Highways.4. Protection.5. High Speed.

* Disadvantages;

1. High Cost of Construction and Maintenance.2. Costliest.3. Limited Carrying Capacity.4. International Restrictions.5. Unsuitable for Bulky Goods.

Water Transport:

* Advantages;

1. Cheapest Mode of Transport.

2. Large Carrying Capacity.3. Safety.4. Protection to Goods.5. Flexibility.

* Disadvantages;

1. Slow.2. Huge Capital Expenditure.3. High Cost of Maintenance.4. No Door to Door Service.5. Special Packing.

Pipeline Transport

Generally liquids like oils, crude, petroleum products are transported.

More than 6350 KM of Pipeline exits in India.

Currently 27% of petroleum products are moved by pipelines in India.

Ropeway Transport:

Ropeway Transport is used for transporting materials in hilly areas.

In India 16% of total area is hilly, Currently in India nearly 178 Km rope ways are used for transportation.

Conditions Affecting Transportation

Condition Factor Examples

Geography Distance, physiography, accessibility

Shipping between India and banhaldesh vs. shipping between India and US

Type of product Packaging, weight, perishable

Shipping coalShipping flowers or wine

Economies of scale Shipment size

A 747 compared to 737 (passengers) ULCC compared to a VLCC (freight)

Trade imbalance Empty travel Trade between China and the United States

Infrastructure Capacity, limitations, operational conditions The Interstate

Mode Capacity, limitations, operational conditions A bus compared to a car

Competition and regulation

Tariffs, restrictions, safety, ownership

The European Union, NAFTA

17

Transportation Costs

Product related density stowability ease or difficulty

of handling liability

Market related intramode/intermode

competition location of markets nature and extent of regulation balance/imbalance of freight

traffic seasonality of product

movements domestic vs. international

Transportation Cost Structures

Variable: costs vary with services or volume:› line-haul costs of fuel, labor and maintenance› handling› pickup and delivery

Fixed: constant regardless of activity› Facilities, equipment and administration

Joint: “hand-in-hand” costs -- unavoidable› Example: the backhaul move

Common: shared costs (“overhead”)› need for Activity-based costing

Cost Structure For Each Module:

Mode Fixed Costs Variable Costs

Rail High- Equipments, Terminals , Tracks ,etc

Low

Road Low-Highway provided by government

Medium-Fuel , Maintenance, etc

Water Medium-Ships and Equipment

Low-As capacity is huge

Pipeline Highest-Right of the way , construction, Equipment for control station and Pumping capacity

Lowest-Insignificant labour costs

Air Low-Aircraft and cargo handling systems

High- Fuel, labour, Maintenance

Factors Driving Costs

Distance Volume Density Stowability Handling Liability

21

Factors Driving Costs

Stowability- refers to how goods being shipped fit into the dimensions of the container that is used.

Handling- Load & Unload. Liability- product characteristics that

can result in damage & claims.

22

Pricing Structures

Cost-of-service: “cost plus” method

Value-of-service: “market based” method

Combination: a middle of the road approach using cost (minimum) and value (maximum)

Net Rate Pricing: All-inclusive prices specific to customers’ needs (not discount-based)

Fixed and Operating Transport Costs

Mode Fixed/Capital Costs

Operating Costs

Rail or Highway

Land, Construction, Rolling Stock

Maintenance, Labor, Fuel

Pipeline Land, Construction Maintenance, Energy

Air Land, Field & Terminal Construction, Aircraft

Maintenance, Fuel, Labor

Maritime Land for Port Terminals,Cargo Handling Equipment, Ships

Maintenance, Labor, Fuel

Cost Variations in Transport

Elasticity of Demand- goods of high unit value are better able to bear costs of transport than low value goods- “charge what traffic will bear”

Competition between Transport Modes Example: Rail wishes to compete with trucks

on short haul must keep rates down Other examples: Wine ship Angelo Petri

Cost Variations in Transport

Differences in Cost of Services: Loading characteristics- light, bulky goods

demand higher charges than heavy, compact articles

Size of Shipment- large, single consignments permit economies in administration and terminal costs

Susceptibility to Loss and Damage and Risk Liability- a. fragile and/or perishable goods- b. refrigerated, insulation and special packaging

Role of transportation in supply chain management

Cost ratio of logistics items

Inventory Management Transportation Packaging Ordering Warehousing

Cost Ratio 17.5 11 29.5 11.9 5.5 17

2.5

7.5

12.5

17.5

22.5

27.5

32.5

0

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

8,000,000,000

9,000,000,000

2000 2001 2002 2003 2004 2005 2006

air

land

sea

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