Transport and Distribution Management - Coursework Example

TRANSPORT AND DISTRIBUTION MANAGEMENT By Name Course Instructor Institution City/State Date Table of Contents TRANSPORT AND DISTRIBUTION MANAGEMENT 1 Table of Contents 2 Introduction 3 Storage media system 3 Block stacking 4 Adjustable Pallet Racking 5 Material handling system 6 Hydraulic conveying systems 7 Conclusion 8 The role of Effective management of transport function in the creation of company profit 8 Introduction 8 Product movement 10 Temporal resources 10 Financial resources 11 Environmental resources 11 Economy of scale 12 Economies of distance 13 Relation between transportation and distribution 14 Relation between transportation and warehousing 15 Application of technology 15 Adopting different transport systems 16 Partnership 16 Conclusion 17 References 18 Introduction Material handling and storage systems are integrated in operations of companies to try and facilitate the production process. These systems can at times pose challenges in their use especially when dealing with material handling systems, which is due to the production process they undertake. In an effort to facilitate exploration and refining of oil, oil companies have also integrated these systems in their operations. Saudi Aramco is one of the many oil companies, which has adopted the use of material handling systems in its operations. It is located in Saudi Arabia, and is probably one of the largest oil companies in the world. The official name of the company is Saudi Arabia Oil Company, and originally it only took part in exploration of crude oil but with the rise in demands it opened up refineries and started refining its crude oil. It has several wells spread out in the kingdom to facilitate refining of the crude oil mined. The company’s main customer is the United States due to the partnership that exists between Saudi Arabia oil company and Storage media system Storage media system is integral in each and every company as it determines how company’s products reach their customers. An effective storage media system also ensures that the products of a company are not damaged as they await distribution to the customers. There are various systems that Saudi Aramco can incorporate in the storage of their products. It can use storage media systems to store both raw material and finished products. In relation to raw material, a proper storage system would ensure that the company is capable of coming up with a better and product of high quality. Additionally, the fact that Saudi Aramco is an oil based company means that the company should select a storage system that can store liquid form products. However, for a company to pick a storage media system there are certain factors that it has to put into consideration. These factors ensure that companies select the best possible storage system that will meet its operations. Some of the factors that companies should consider are: a company should look at the available space it has, and the amount of space a particular system would occupy. This ensures that a company does not adopt a storage system only to find out that there is no available space to accommodate the adopted system. Additionally, a storage media system adopted should facilitate movement of stock in and out. This ensures that a company is capable of meeting demands for its product, within the stipulated time and are also able to restock once delivery has been made. Also, the storage media system adopted should be flexible, meaning that it should have the ability to accommodate any future changes that a company face. After considering these factors, there are several storage media systems that could come in handy and prove beneficial for Saudi Aramco. These storage media systems include: Block stacking Block stacking is one of the storage media systems that companies can adopt in the storage of their products both raw and finished products. According to Gopalakrishnan (2004, p.16), block stacking refers to whereby loads are stacked on top of one another. However, the loads can only be stocked up to a certain height, which is determined by authority making bodies. The main reason for this is to try and minimize the possibilities of injuries, in case the load falls on the employees. In addition to these, block stacking is also subject to certain factors. Some of these factors are; stability of the products being stored. In relation to this, it is common knowledge that refined oil is normally packed in barrels. Barrels have a circular base which makes them stable, and therefore, suitable for block stocking. Additionally, the cylindrical nature of barrels also make it easy for the company to stock the company the barrel horizontally. Also, the height of the warehouse is considered in the adoption of this system since loads are stocked going upwards, unlike other storage systems. Block stocking, on the other hand, is considered flexible meaning that companies are able to undertake their operation with a lot of ease especially when they are moving their products for distribution. Additionally, block stocking is cheaper to establish as it does not require a lot of technological applications, and therefore suitable for storage of oil products of Saudi Aramco. Adjustable Pallet Racking Additionally, Saudi Aramco can adopt adjustable pallet racking as a storage media system for the storage of their refined oil. Adjustable pallet racking system is adopted for industry products that are normally stored in containers. As earlier stated, Saudi Aramco stores its refined oil in barrels, which makes this system very suitable for the storage of such products. The use of adjustable pallet racking system allows total selectivity of products, meaning that a company is able access their products with ease. This facilitates the movement of the products in regards to distribution instances of products to the customers. Adjustable pallet racking system is also versatile, meaning that it can adopt storage of more than one type of load (Bose 2004, p.180). This means that Saudi Aramco can use the system to store any other product such as byproducts of crude oil. Additionally, this system is dynamic meaning that it is able adapt to any changes that the company may wish to make in its storage system. Therefore, a company can assemble and disassemble this system at any time to facilitate any other activities it wishes to undertake. Therefore, Saudi Aramco should consider the adoption of this system in storing its products. Material handling system Material handling has over the years become an integral part in the production system of most companies. This can be attributed to the growth of and demand for industrial products. Additionally, in the past companies used to suffer losses even before the completion of the production process, which was attributed to the poor management of materials used in the production process (Heragu 2006, p200). Therefore, material handling systems are used to move materials from one point to another. Also, material handling systems are used to move materials from one stage of production to the next stage of the production process. Based on these, it is right to state that material handling does increase the production rate of any company, and with increased production a company can realize profits easily. Material handling systems have also reduced instances where materials were damaged during the production process. In other instances, materials in the production system were misused leading to wastage but with the introduction of material handling systems companies experience little wastage of materials (Gopalakrishnan 2004, p 250). Material handling systems have also found their way into the oil and gas companies. Saudi Aramco is one such company, which deals with the exploration and refining of crude oil. Saudi Aramco has incorporated material handling systems in its operations, which has made it easier for the company to drill more crude oil. Material handling systems have also increased the volume of crude that the company moves to the refineries. Some of the material handling systems used by the company include; pipelines, tankers, cranes and conveyers. Pipelines are used to transport and direct crude oil to the refineries. This has increased the amount of oil reaching the refineries, while at the same time in a shorter time span. Saudi Aramco also uses tankers to move crude oil from oil wells found in the sea. The company uses tankers since it would be costly to lay down pipelines for moving the crude oil. Cranes on the other hand are used to load and offload ships for transport of their products. Additionally, the company uses conveyors to move barrels within the storage facilities (Saudi Aramco, 2013) Despite the company applying material handling systems, it would be more beneficial if the company incorporates further material handling systems so as to increase its production. The most suitable material handling system that the company could incorporate is hydraulic conveying system. Hydraulic conveying systems According to Arora (2002, p, 179) this system is recommended for the movement of liquids that high viscosity. This, therefore, means that the liquid is unable to flow on its own or flows at a very low pace. To facilitate movement, the system incorporates the use of water to enhance movement of liquid through the system. This is quite beneficial in regards to movement of oil since oil and water do not mix thereby facilitating movement of oil. To further aid the system pumps are placed throughout the system, and this is to apply pressure on the liquids to facilitate movement of the slurry. The best suitable pump for this system is the double duplex piston pump. This pump is characterized by two valves on each side, which allows the pump to draw in crude oil and at the same time force the oil through the pipelines. This, therefore, increases the volume of oil moving through the hydraulic system compares to the conventional conveying systems. However, for this system to be adopted the company has to put in to consideration certain factors such the material used. The material used for construction of pipelines ensures that the pipelines are long lasting and corrosive resistant. This is especially significant since pipes are usually exposed or laid into the ground thus exposure to corrosive agents. Saudi Aramco should also consider the maintenance cost of the pipes. Despite these factors hydraulic conveying systems have proven to be cheaper to set up, and have the ability to increase the volume of oil flowing into the refineries. Conclusion In conclusion, material handling system and storage media systems have over the years become integral parts in the production process. This can be attributed to the fact that they increase productivity of companies, and therefore if Saudi Aramco was to adopt these systems then it would increase the production of crude oil and refined oil. Additionally, use of effective material handling systems enables the company to realize profits resulting from increased productivity. Use of effective storage system also The role of Effective management of transport function in the creation of company profit Introduction Transportation is probably one of the factors that contribute to the realization if profit by a company. This is because in modern times transportation has been integrated with other business functions. Cost of transportation is deemed as one of the costly logistic items in any given company as illustrated in figure 1. Therefore, transport has to be managed effectively if a company is to realize any profit. For instance, for effective inventory planning transportation facilities have to be considered. This ensures that the company is capable of meeting orders requested by the consumers. In addition to this, distribution of products is probably one of the main challenges facing companies. However, with an effective transport system companies are able to decide the best location for their warehouse in order to facilitate distribution. Where the transport function is properly managed, then a company can easily realize profits. Transportation involves the movement of goods from one destination to another. However, this is not quite easy for companies as they have to put into consideration various factors that may affect the movement of goods from one point to another. Therefore, companies do put a lot of the concerns on the transportation sector since it is probably one of the visible logistic operations. This means that a company is capable of assessing the effects of transportation merely looking at its transportation system. Therefore, transportation function has grown to a position of strategic importance in a company, to extent that it considered as one of the factors that could increase profits of a company (Mentzer 2002, p. 250). In looking at how transport can create profit making opportunities for a company, one should look at the two main roles played by transportation. Fig. 1. Cost ratio of logistic items Product movement Product movement refers to the movement of raw materials, semi –finished goods or finished goods through the stages of the manufacturing process or closer to the customers. Therefore, this shows that a company cannot do without transportation, and it has to put into consideration the financial cost. It is, therefore, necessary to move product only when it is necessary and enhances the product value of a company’s product. However, to understand the implication of transportation better, one has to look on the resources being used (Bose 2004, 370). Temporal resources Transportation of goods will normally utilize temporal resources. This is attributed to the fact that the good is usually inaccessible while in transit despite, the goods being in transit, they also affect the supply chain management. This can be witnessed whereby a consumer has made an order but at the same time the company is expecting the good in order to facilitate meeting the order. Also, goods in transit affect the inventories that have to be kept in distribution centers for emergency purposes (Bose 2004, 372) Financial resources Transportation of goods also requires finances, which means the company also incurs the cost during transportation. This cost could arise from payment of drivers, cost in company incurred for fueling of the vehicle and maintenance of the vehicle. In the other instance, a company may incur losses where a product is lost or damaged through transit. Therefore, this shows that transportation does indeed affect the expenses of a company (Bose 2004, 374). Environmental resources During transportation, a lot of energy is used to facilitate movement of trucks. The expenses incurred directly affect the company, and in an effort to reduce such expenses companies have started using trucks that use less fuel but at the same time they are efficient. (Bose 2004, 373). Therefore, during product movement a company tries to ensure that the product is moved to its required destination, in the right shape but at the same time they ensure they incurred minimum cost. If they are able to achieve this, then they are able to realize profits (Bose 2004, 370). Transportation also plays a role of storage, especially where companies do not have enough space in their warehouse to store the product. Rather than hiring or renting other storage facilities, companies can use transport as a mode of storing their products. Vehicles are also used as storage facilities in instances that involve frequent movement of products. Use of transport facilities as a means of storage eases the burden of any company in acquiring storage facilities such as warehouses (Kapoor & Kansal 2004, 50). Fig. 1 Product storage However, for companies to manage transportation effectively they should understand the principle of transportation function. These principles depict what factors companies should put into consideration when transporting their goods from one point to another (Bose 2004, p. 397). These principles are: Economy of scale The principle puts into consideration the amount of the product being transported by companies. The principle recommends that for a company to effectively the cost of transportation it is necessary to transport goods in bulk. Transporting goods in bulk ensures that this company does not have to incur extra cost as witnessed during transportation of goods in halves. This is well demonstrated in figure 1which show the changes in cost, in comparison to transport of bulky goods (Bose 2004, p. 400). Fig. 1 Economy of Scale Economies of distance The principle, on the other hand, looks at the distance covered during the transportation if goods. It states that; the longer the distance, the lower the cost of transportation. This attributed to the fact that the cost of transportation facilitates as more distance is covered, and also due to, the fact that cost of transportation is evenly distributed. Therefore, by employing this principle companies are, therefore, able to transport more goods over longer distances while at the same time minimizing the cost of transportation. This principle can be understood properly by looking at the figure 2 which demonstrates how cost if transportation reduces with an increase in distance covered (Bose 2004, p. 405). Fig. 2 Economy of Distance Relation between transportation and distribution Saudi Aramco is always under constant pressure to ensure that it makes delivery to its customers. Therefore, this requires an effective distribution system to meet both global and local market for its products. However, for it to achieve its objectives, it requires a proper transport system which can cater for both markets without compromising the operations of the company. An effective transportation system makes it easy for the company to keep a proper inventory, which ensures that the needs of the customers are captured. In an attempt to address distribution Saudi Aramco uses pipelines which cover long distance from the refineries to the distribution centers. The use of pipeline ensures that there is constant transportation of oil, which means that the company can transport more oil. Relation between transportation and warehousing Warehouses are storage facilities used by companies to store the product before they are delivered to the actual consumer. Sometimes warehouses are used to raw material to be used in the production process. This therefore shows that there is a need for constant movement of materials from the warehouse to the customer and also to the production system. To facilitate this, a company has to establish a transport system that is effective and at the same time easy to maintain. In the case of Saudi Aramco, they have adopted the use of pipelines to move their product in and out of the storage facilities. This ensures that the company does not incur a lot of expenses if it were to rely on road transport. The use of pipelines allows the company to move more volumes of oil within a stipulated time, in comparison to the use of trucks whereby it would be required to make several trips. An effective transport system also enables a company to keep proper records of stocks that move in and out the storage facilities. Application of technology In an attempt to improve transport effectiveness companies have integrated technology in their transport systems. The use of technology has demonstrated to be potentially variable in the transportation system. Therefore, by applying technology companies are able to establish the best routes that could be used in the transportation of their products. These routes ensure that the companies encounter minimal hardships thereby making transportation effective. Saudi Armco is based on remote areas and, therefore, the availability of the best possible route for transportation of the companies’ oil products could come in handy. Also, the use of technology also allows companies to track the movements of their vehicles. This knowledge destruct drivers from veering of their intended routes which could lead to the company incurring more expenses. However, the use of technology poses a challenge for employees who lack knowledge and skills in controlling technologies (Mason et al 2003, p. 145) Adopting different transport systems Sometimes adopting different transport systems could allow a company to realize profits. This is because a company can transport its products with a lot of ease. At the same time, it increases the load that is being transported. For instance, Saudi Aramco could adopt the use of the railway system in transportation of it oil products. Railway systems have the capacity to transport bulky loads when compared to road systems, which means that the company will be able to transport more products. Therefore, for any company involved in production of bulky produced it is advisable that they incorporate a transport systems that increase the weight ratio. Therefore, in doing so, a company will be abiding by the principle of maximum vehicle unit, which depicts that if companies use vehicles with smaller loading capacities they are likely to incur the cost. (Kapoor & Kansal 2004, p. 70). In addition to this Saudi Aramco has worked on increasing the capacity of its pipeline, which amounts to an increase in profits while at the same time effectively managing it transportation system (Saudi Aramco, 2013) Partnership At times, companies can enter into an agreement with other companies for the transport of their product from their production unit to the consumers. This reduces the burden of companies, in that they do not have to concentrate much on the purchase and maintenance of transport facilities. The amount that was to be used in transportation could be of benefit to other functions within the company (Berk 2010, p. 90). For instance, Saudi Aramco has partnered with Vela International Marine Limited which will oversee transportation of oil overseas. This has made it easier for Saudi Aramco to increase their exploration and production of oil based products. This is attributed to the fact that, it is using funds that would otherwise have gone to transportation, to further other activities such as hiring storage facilities for its crude oil as witnessed in Japan (Saudi Aramco, 2013) Conclusion In conclusion, transport plays a role in determining whether a company realizes its full potential or not. This is because transport system determines whether the consumers receive a company’s product and the state at which they receive the product. Therefore, a company should make it their objective that their transport system is the best suited for them. The decision can be arrived at by looking at the lifespan of the company’s product, financial ability and amount of production for the said product. Where a company is involved in perishable goods, then it has to incorporate a transport that is fast, and at the same time efficient. However, they also have to put into consideration their ability to maintain such transport system. For Saudi Armco, oil industry requires an effective transport system since oil is regarded as one of the determiners of economies of any given country. In an effort to ensure that their transport system is effective they have signed contracts with other transport companies to transport their products. This has reduced the burden of transport enabling them to concentrate on their primary objective which is the production of oil. Also, the adoption of transport alternative has led to effective management of transport function, which also makes it possible for the company to realize profits from its products. Therefore, for companies to realize profits it has to develop a transport system that is suited to their financial abilities. References Arora, KC & Shinda, VV 2002, Aspects of Material Handling, Firewall Media, New Delhi. Berk, J 2010, Cost Reduction and Optimization for Manufacturing and Industrial Companies, John Wiley & Sons, New York. Bose, DC 2004, Principles of Management and Administration, PHL Learning Pvt Ltd, New Delhi. Heragu, SS 2006, Facilities Design, iUniverse, Indiana. Kapoor, SK & Kansalm, P 2004, Basics of Distribution Management: A Logistical Approach, PHL Learning Pvt Ltd, New Delhi. Mason, SJ, Ribera, PM, Farris, JA & Kirk, RG 2003, Integrating the warehousing and transportation functions of the supply chain, Transportation Research Part E: Logistics and Transportation Review, vol. 39, no. 2, pp. 141-159. Mentzer, JT 2001, Supply Chain Management, 2nd edn, SAGE, New York Meyes, FC & Stewart, JR 2002, Motion and time study for Lean Manufacturing, 2nd edn, Prentice Hall, New Jersey. Saudi Aramco, 2013, Saudi Arabian Oil Co. viewed 22 March 2013 http://www.saudiaramco.com/en/home.html Stephens, MP & Meyers, FP 2010, Manufacturing Facilities and Material Handling: International Edition, 4th edn, Pearson/Prentice Hall, New Jersey. Ulrich, KT & Eppinger, SD 2003, Product Design and Development 3/E, 3rd edn, McGraw-Hill education (India) Pvt limited, New Delhi. Read More