Importance of Transportation

Transportation is the most important part of Logistics and Supply Chain Management. All costs associated with movement of products from one location to another constitute of transportation cost. The average transport costs ranges from 5 to 6 percent of the recommended retail price of the product. Inbound and outbound Transportation is the movement of products, materials and services from one area to another. It can also be termed as movement from one node of the supply chain to the other.

The Indian Army has an efficient transportation system with a motto, ‘wherever you are we reach you, in time, and in the best and cheapest mode available’. Indian Army uses the aerial, land, sea and rail routes to maintain its forces strewn all over the country and abroad. The logistics is enormous and the various modes of transport are used such as, aircraft, train, trucks, animals, and human beings. It transports supplies, ration, fuel, oil lubricants, arms, ammunition, clothing and personal loads over vast distances and over varied terrain and climatic conditions.

Basic considerations influencing transportation are

• Customer Communications: In order to prevent any delays in transportation and handling of logistics, the suppliers and distributors are relying more and more on electronic transfer systems, like internet. This helps in having time efficiency and effect better cooperation between the chains.
• Market Coverage: The size of markets covered is highly influenced by transportation costs. The main considerations are costs, flexibility, reliability and availability. A low volume and high value product will be able to support higher costs example diamonds, which means extended delivery distances and increase in delivery frequency. Whereas, a low value product cannot afford a higher cost.
• Sourcing Decisions: The transportation cost from the source destination is highly critical. Or in other words, the geographical dimension of the source markets can be influenced by low cost transportation system. Therefore it is advisable for companies therefore to consider a tradeoff between price & quality and the costs involved in delivering to the processing point, i.e. volume & cost of transportation.
• Manufacturing Operations: The cost of transportation has a direct bearing on the location of the manufacturing market center. That is the reason why, extraction based units are close to the source of raw materials and the products related to customer satisfaction are near to the customer hub center. For example, sugar mills are generally located near sugarcane farms.
• Pricing Decision: product costs directly depend on transport cost. Therefore, selection of the appropriate transportation mode will have a direct bearing on the product costs, but with more relevance to exports. Product price increases with an increase in transportation cost.
• Customer Service Decisions: along with transportations comes the customer service as well and hence decisions taken on both are inter dependent. Rather, the type of market also plays an important role in taking the decision and will vary considerably. Therefore, it is important to overrule the cost factor while servicing the medical emergencies, since speed is more important than cost in selecting the mode of transport.