Materials management: embraces all aspects of materials flow from determination of requirements and capacity planning through purchasing, source ad selection, and scheduling – the latter including the planning and control of production processes, applicable most commonly when manufacturing is central to the business. Tools employed to achieve effective planning and execution may include Manufacturing Resource planning (MRPII), Just-In-Time (JIT) and Optimised Production Technology (OPT), as appropriate to the individual needs of the business.
Inventory Management: determination of stocking policy to ensure continuity of suppliers with minimum investment costs, including the effective control and executing of that policy.
Storage and Materials Handling: covers the safe, secure and disciplined handling of materials as initial receipts, as parts awaiting processing, as work in progress during manufacture, and subsequently as finished product. It embraces packaging design, utilisation and the full range of simple to sophisticated aids to storage.
Distribution: includes warehousing and both inbound and out bound transportation, all strongly influenced by demands for higher levels of customer service, JIT requirements and the evolution of contract distribution.
Not all elements in this mix will essentially coincide with all business interests. The logistics concept, however, actively concentrates on those elements that do. For example, retailer or FMCG (Fast Moving Consumer Goods) sourcing and distribution are likely to be key elements, because retailers need to present their products in desirable location, in desirable quantity. For manufacturer, purchasing and production planning are naturally more dominant, because manufacturer is primarily concerned with size of his plant, and building strong supplier relationships.
It is rare for all elements of logistics to be of equal importance to the business.
- When the traffic/transportation manager evaluates potential carriers, what factors are taken into consideration in making final decision?
It is difficult for the Transport Manager to identify and quantify those factors, which influence the selection of the transport requirements, particularly when transport costs may be traded off against other component costs within the distribution system. When the requirements have been identified and defined, then these have to be matched with the characteristics offered by each transport mode, where many attributes may be difficult to measure and compare.
In order to be able to identify the “optimum” transport mode, it will be necessary to:
- Identify the significance of the choice by determining the impact of transport on the distribution system
- Identify the factors which determine the choice of the transport mode
- Identify a method of choice
- Subsequent feedback that the choice is correct.
There are numerous individual factors, which determine the choice of the transport mode. However, These factors could be divided into 3 distinct groups:
- Operational factors – covering the operating environment, the product, the company and its customers.
These operational factors, which have a bearing upon the transport mode, include:
- National
- International
- Characteristics of alternative transport modes
And combined together, these factors give to the potential customer service level and operating costs.
Each operational factor should be considered in terms of its potential impact upon the transport operation, and the important factors clearly defined. (Figure 1-2)
- Customer characteristics
- Environmental characteristics
- Product characteristics
- Company characteristics
The risk of change for each factor should also be considered over the maximum time span of any capital committed or likely to be committed, to provide or support the transport mode.
- Characteristics of alternative transport modes – identifying the features of each alternative mode of transport.
It is important to determine accurately the operating characteristics of each available transport mode, to establish whether it would suitably match the important operating factors. The important features are:
Useful Load – physical ability and maximum load as a percentage of gross weight
Density – cargo density 9weight per cubic unit)
Overheads – fixed costs as a percentage of total cost (as an indicator or risk for price increases and support management)
Productivity – calculated in ton miles per direct man hour.
Figure 1-1
(National and International Operating Characteristics)
Here are some examples that indicate these features for a specified variety of each transport mode (the 12 ton lorry offers the highest useful load; the cargo vessel offers the highest density; the freight train has the highest overheads; the cargo aircraft has the highest productivity).
Each mode of transport also has its own individual characteristics, which affect the preparation of product before movement (e. g. packaging for a sea freight must be more substantial than for air freight). These characteristics are particularly important when considering inter-continental traffic utilising more than one mode of transport.
- Channel strategy – covering the alternative approaches to the total distribution system.
The choice of transport mode is not merely a choice between one form or type of transport, but between a system or process of transportation between the manufacturer and the customer or buyer. This process involves separate sectors (e.g. production line to warehouse), material handling interfaces at each terminal facility and documentation which is processed to support to support the product.
Figure 1-2
(operational factors affecting the choice of transport mode)
Each sector throughout the channel may require separate transport methods and it is important that all the operating characteristics for each sector are clearly defined. The important factors to consider when analysing the transport requirements of each sector are:
- Control (ownership, security, financial standing, information processing systems)
- Product movement (mechanical handling interfaces, stock levels required, packaging, safety (for product, capital and manpower))
- Marketing factors (variations in service levels requirements)
- Labour factors (training requirements turnover)
- Risk factors (potential changes, government influence, profit potential)
Now I would like to stress on some important operational factors that affect the choice of the transport mode.
First is legislation. There are probably more acts of Parliament and Statutory Regulations concerning road transport than any other activity. The traffic/transportation manager will need to be aware of these, for example:
- The Highway Acts
- Road Traffic Acts
- Transport Acts
- Vehicles and Driving Licenses Acts
- Heavy Commercial Vehicles (Control and Regulations) Act
- Motor Vehicles (Construction and Use) Regulations
- Goods Vehicles (Plating and Testing) Regulations
A whole host of matters arise from thus legislation, which imposes duties upon traffic/transportation manager. Among this matters, some of the more important are to ensure that:
- Vehicles are not overloaded
- Vehicles are not loaded in such a way that the load is unsafe
- Vehicles are properly maintained to the standard required by law
- Vehicles are correctly tested and plated as stated in the Regulations
- Drivers do not exceed permitted hours of work
- A record of work is kept by all drivers
- Drivers hold a current driving licence of the appropriate class for the vehicle to be driven
- The licensing authority is advised of any change in company ownership
Second is long-term strategic planning (what goods will be transported in the future, and where they will be sent). For example, for long distances and big, bulky goods, it is better to choose the most reliable brand in conjunction with its endurance, for small distances and small goods, the small vehicles will be required.
Third is capital available for spending. It is better to buy the best vehicles the manager can afford, as it will lessen vehicle breakdowns and will help to achieve maximum utilisation of the vehicles operating.
Fourth, is it really necessary to buy your own vehicles? Some companies favour hiring vehicles if they do not use their vehicles very often or need it only for a small number of jobs. Also it is better to hire vehicles if you do not have large capital sums. Hiring vehicles allows you to utilise it without worrying about its maintenance, because it is a function of hiring company, if the vehicle is broken, the new one is provided at no extra cost.
Fifth, design of vehicles. Manager should consider what types of products vehicles will need to carry currently and in the future; distribution area covered; number of journeys; potential changes in distribution patterns; expected life of vehicles, and buy vehicle that will be suitable in size, body quality, equipment and unit load specifications depending on weight volume ratios and any “special” product features. For example, Tesco Home Delivery Service uses small vans with refrigeration system installed to keep all products fresh.
Sixth, maintenance of vehicles. Transportation manager should consider maintenance costs of vehicle and depreciation. Nowadays, a very high degree of maintenance is required to keep a modern transport on the road, maintained properly and according to law. There are two methods available:
- Company garage and workshop: this will require properly equipped premises with all necessary facilities to service and repair vehicles. It also means employing qualified fitters, vehicle electricians and other staff. This method allows flexibility, but is expensive to maintain, so is inconvenient for small fleets.
- Contract Maintenance: this method is not very flexible, but covers regular maintenance and it is much cheaper than own garage.
Seventh, security. One has only to think for a moment of the wide variety of goods moved by road to realise how desirable many of these loads are to thieves. Insurance companies as well as managers are concerned that security should be effective. In fact insurance companies often require certain precautions to be taken by the manager as a condition of providing insurance. Among the points a traffic/transportation manager should consider are:
- Staff working for the company should be checked over the last five years and any gaps investigated.
- Alarms and immobilisers should be fitted and should be checked frequently
- Staff should be instructed not to leave vehicle unattended and not to leave keys in the vehicle at any time.
Improving the choice over time
Throughout the life of any capital assets, there will be a number of changes and it is important to monitor these changes in order to adapt the choice of the transport mode to
the new circumstances, or change the transport mode if necessary. The main areas which should be monitored include:
Technology – particularly of transport and mechanical handling system, in order to change or adapt quickly if cheaper or better alternatives appear.
Environment – the operating environment should be continually monitored to ensure that the system does not infringe laws and maximises upon all available opportunities.
Volumes Carried – particularly if they are moving up or down dramatically, to ensure that the correct volume of capital is being utilised
Competitors – to ensure the correct customer service level is being maintained.
It should be remembered that once choice of transport is made, it is not a simple procedure to change, particularly if a large quantity of capital is employed in vehicles and mechanical handling equipment.
Conclusion
The choice of the transport mode is a complex decision involving many factors and one, which offers many opportunities. The final decision should be made with great care and skilful assessment of all the variables and should lead to perfect transportation method that will deliver quality and quantity to its customers in the right time, place and at the right price.
Reference:
- Logistics: an integrated approach by Michael Quayle & Bryan Jones
- Fundamentals of Logistics Management by Douglas M. Lambert
- Logistics: Principle and Applications by John W. Langford
- Business Logistics by Jr. Glaskowsky