International Supply Chain Management - Multimodal Transportation - Term Paper Example

International Supply Chain Management (Multimodal Transportation) Report by: Presented to: Index Summary 1. Introduction 2. Role of transportation in the supply chain 3. Multimodal transportation 4. Benefits of multimodal transportation 5. Forms of multimodal transport operations 6. Multimodal transportation: examples 7. Conclusion Summary Firms today compete strategically on the basis of service, cost, and time. Ensuring that the customer gets a defect-free faster and more reliably than the competition is no longer considered a competitive advantage, rather it is considered as a basic requirement to be in the market. Transportation plays a crucial role in the integration of supply chain structures. Multimodal transport, allows for more effective management of the transport chain through the integration of all modes of transport under a single transport document Here, we see the benefits of multimodal transportation with the help of two examples. These examples help understand the various aspects involved in multimodal transportation. 1. Introduction An increase in global cooperation and focus on vertical disintegration and core activities are responsible for giving rise to the notion that individual firms are links in a networked supply chain. This strategic point of view has resulted in the challenge of effectively coordinating both upstream to downstream activities, i.e. activities along almost the entire supply chain. (Chen & Paulraj, 2004) Transportation is a very important component of the supply chain. The increase in the ability to source commodities and finished goods from just about any location in the world has expanded the domain of transportation much beyond traditional definitions. Firms today compete strategically on the basis of service quality, cost, and time. (Clinton, 1997) Ensuring that the customer gets a defect-free product faster and more reliably than the competition is no longer considered a competitive advantage, rather it is considered as a basic requirement to be in the market. Customers expect that their products will be consistently delivered faster, exactly on time, and in the best condition with absolutely no damage. All of these expectations make it necessary for suppliers and distributors to closely coordinate their activities. (Mentzer et al, 2001). In this report, we analyze the role of transportation, particularly multimodal transportation in the supply chain. With the help of examples, we see how multimodal transportation helps in the transportation of goods and thereby servicing customer in a cost effective and timely manner while ensuring that the quality of the product is retained. 2. Role of transportation in the supply chain Given the rapid expansion in international trade, global outsourcing of manufacturing, significant growth in internet and E-Commerce and increasing demand for ‘Just-In-Time’ (JIT) deliveries, shippers are increasingly demanding door-to-door delivery instead of the traditional port-to-port system. (Al-Muhaisen, 2005) The entire ‘transport chain’ from origin of the product to be transported until the delivery of the final destination is now regarded as a whole rather than considering the individual components separately in order to be able to compare alternatives realistically. (Al-Muhaisen, 2005) Thus, new transport patterns and practices have emerged in order to ensure that the transportation chain is efficient and in order to gain operational control over the chain. Transportation plays a crucial role in the integration of supply chain structures. In order to minimise total costs involved and maximise value for customers, the integration of transportation within the supply chain is essential. (Clinton, 1997) Integration in transportation involves ensuring that the right assortment is delivered throughout the supply chain to the right place and at the right time in perfect condition. Transportation capabilities including flexibility, just-in-time delivery, standardization, time compression, reliability, information systems support and customization depend on how the supply chain is defined and managed. (Clinton, 1997) Thus, the supply chain structure is often considered to represent the organizational efforts by three or more firms to manage and integrate material and related information flows in order to get closer to customers. (Bowersox and Morash, 1989; Mercer Management Consulting, 1995 ) Both the ‘internal’ and ‘external’ customer should be the focus of attention of the firm. (Morash, Droge & Vickery, 1996) Various factors influence the competitiveness of products that are traded internationally. These factors contribute to the overall transportation costs. The cost that is associated with the transfer of physical goods is an important component during an international trade transaction. (Carter & Ferrin, 1995; Bertazzi et al. 1997) Transit time forms another important component. (Allen et al, 1995; Blummenfeld et al, 1985; Tyworth and Zeng 1998) Thus, multimodal transportation has evolved as a result of the demand for reliable, efficient and rapid delivery of products. (Andersson & Hasson, 1998) Accordingly, the demand for efficient and prominent multimodal transport operators will increase. (Al-Muhaisen, 2005) 3. Multimodal transportation A multimodal transport system involves transportation by two or more modes of transport with smooth interchange between each mode. (Zaheer, 2008) Multimodal transport has now become the backbone of international trade. It is imperative for all trading nations to develop and foster multimodal transport system in their respective countries to allow for reduction in the overall transport and handling costs to shippers and consignees. (Zaheer, 2008) Multimodal transport, allows for more effective management of the transport chain through the integration of all modes of transport under a single transport document. It is helping countries respond to the ever increasing demand for just-in-time door-to-door services. (Zaheer, 2008) 4. Benefits of multimodal transportation Multimodal transport can be generally considered as the most efficient way of handling an international door to door transport operation from both a legal viewpoint and from an operational perspective. (Zaheer, 2008) This is so because it allows in one voyage the combination of specific advantages of each mode involved, such as the flexibility of road haulage, the larger capacity of railways and the lower costs of water transport in the best possible fashion. Multimodal transport also allows for the shipper to rely on only a single counterpart, the multimodal transport operator, who is the architect of the entire journey and the only person responsible from pickup of the goods to be transported to delivery. (Zaheer, 2008) Competitive and reliable multimodal transport services can give rise to not only new trading opportunities but also increased competitiveness. (UNCTAD, 1994) Cost, time, distance, transport mode and intermodal transfer are the main elements that are to be considered in multimodal transportation decision making. (Banomyong, 2001) Time and cost are the two most important factors to consider when making transportation choices for goods. Both these factors are usually considered together and one of these is usually traded off against the other. (Wang, 2007) For example, transportation by ship is cheap but time consuming. Air transportation is the fastest but it is very expensive. The choice between the road and rail mode is difficult because it is usually difficult to balance the time and cost. Multimodal transportation helps overcome this problem; it can help achieve the balance between time and cost. (Wang, 2007) Different results are obtained depending on the combination of transport options chosen. The UK-Greece corridor is an excellent example for this. Combining the right modes of transport and the right route allows traders to transit whisky from UK to Greece in a cost efficient and effective manner. (Beresford & Savides, 1997) 5. Forms of multimodal transport operations (UNESCAP) Currently, there are several different types of multimodal transport operations in existence and these involve different combinations of transportation routes and modes. Some of these are listed below: 5.1 Land-Sea-Land The following is an example of this form of transport: An empty container is picked up from the line’s container yard in Singapore and trucked to shipper’s factory in Malaysia for stuffing. Subsequently, the full container load (FCL) is trucked to Singapore and transported by an ocean vessel to New York. Truck from vessel to rail-head New York Rail from New York to rail-head ChicagoTruck from Chicago rail-head to consignee’s warehouse Several additional links can exist, for example, if the container was carried by rail from, say for example, Kuala Lumpur to Singapore. Where less-than container load (LCL) cargo is concerned, individual shipments would be delivered to the freight forwarder’s CFS or the shipping line’s CFS and subsequently consolidated into an FCL. This is then trucked from Chicago to the CFS from where it is then picked-up by the consignee’s truck. (UNESCAP) 5.2 Road/Air/Road A combination of air carriage and truck transportation is a frequent method of multimodal service. (UNESCAP) 5.3 Sea/Air/Sea This involves a combination of the economy of sea transport and the speed of air transport. (UNESCAP) 5.4 Rail/road/inland waterways/sea This multimodal route is commonly used when goods have to be moved from one country to another by sea and when one or more inland modes of transport such as rail, road or inland waterways need to be used for the movement of goods from an inland centre to the seaport in the country of origin or from the seaport to an inland centre in the destination country. (UNESCAP) 5.5 Mini bridge This involves the movement of containers, under a through bill of lading issued by an ocean carrier, by a vessel from a port in one country to a port in another country and then by rail to a second port city in the second country, terminating at the rail carrier's terminal in the second port city. (UNESCAP) 6. Multimodal transportation: examples 6.1 Transportation of carpets The following is another example demonstrating how multimodal transport has an impact on time and cost and the reasons for international supply chains depending on multimodal transport. Carpets from Nepal are exported into Europe via the Calcutta port. (Wang, 2007) Containerization of the carpets is done at Birganj, which is approximately 165 kilometers from Kathmandu, the capital of Nepal. These container trucks have to first get Nepalese customs clearance and, following an overnight hault at the Nepal-India border, they are allowed to enter Raxaul to get clearance from the Indian customs. The entire duration of the road trip from Kathmandu to Calcutta port, in addition to the time at the port is an average of approximately eight days, which also includes a two-day waiting period to enter the port. Four additional days are required for customs clearance and loading of the goods onto the vessel. Subsequently, the cargo is shipped east to Singapore for transshipment into a larger ocean vessel that will then head west to Europe. The freight forwarders in Nepal have been proposing the use of the Jawaharlal Nehru Port Trust that is located on the western coast of India as an alternative to Calcutta following the start of operations of Bhairawa ICD. This would allow direct shipments to Europe. The new route would involve transportation by truck from Kathmandu through Bhairawa to Nautanwa, India, for containerization of the cargo. This would be followed by transportation to the ICD at Moradabad and then rail shipment to Mumbai and the JNPT container terminal. Although the distance for land transport is three to four times the distance to the Calcutta port, the ocean route offers considerable savings in freight rates and shipping times. (Wang, 2007) The following table offers a comparison between the two different routes of multimodal transport. The table shows the cost and time comparison of the two routes. An approximately 14 percent reduction in cost is observed for the route via the JNPT; however, a more substantial benefit observed is a reduction of almost 30 percent (38 days to 26 days) in travel time. (Wang, 2007) 6.2 Multimodal transportation of human remains In the event that a person dies in a country or place other than his/her home town or home country, the family of the deceased first needs to contact an undertaker who can take on the responsibility of the entire process of international transportation. The body is handed over to the undertaker who then prepares it for embalming and sealing. Undertaker then needs to obtain all certificates (death, embalmment, sealing) and the passport. The undertaker also simultaneously contacts the Freight Forwarder (FF) for a quote for the transportation. After the quote is accepted the FF liaises with the airlines. After confirming the schedule with the undertaker, the FF submits all the necessary documentation to the airlines. The airline contacts the receiving party (consignee) for a confirmation. The undertaker then delivers the body to the airport and FF seeks the necessary clearance. This is the case for outbound transportation. In the case of inbound transportation, the kin of deceased contact an undertaker. The undertaker also simultaneously contacts the Freight Forwarder (FF) for a quote for the transportation The undertaker passes the FF opposite party arrival notice and supporting documentation. The FF then prepares the import permit. The FF submits the airway bill (AWB) with all certificates and supporting documents to the customs officials for clearance prior to arrival. The undertake receives the body from the airlines and delivers it to the deceased’s family. Liasioning with the airlines includes the following: Planning of route (transit time of airplane and transshipment point, if any) to get to designated destination in the shortest time Obtaining the best price based on flight availability Checking flight schedule Using the tracking system for more accurate ETA (estimated time of arrival) Sending the necessary documents to the appointed airline for confirmation Ensuring that a confirmation is received from the airlines Documentation required The AWB which is equivalent to the term air consignment note refers to the document entitled ‘Waybill/Consignment Note’ that is made out by or on behalf of the shipper. This document evidences the contract between the shipper and carrier for transport of the cargo over routes offered by the carrier. The airway bill along with the embalming, sealing, permission to export and death certificate are needed for transportation of human remains in and out of Singapore. Special considerations Logo Up labeling is required for coffin head & leg Special care is necessary with regard to the size of the casket due to airplane cargo spaces. On some planes, the casket can take up as much as 25% of the cargo space in the plane. Caskets need to be crated up for IATA 1. Human remains are considered as special cargo because special handling is required. These are shipped in the cargo compartment of passenger airplanes with space allocated specially for them. Loading and discharging are based on LIFO (Last in, First out). Challenges involved in transportation Escape of terrorist: In one instance where a terrorist had escaped, custom officers were required to do a physical check on every casket by actually opening each and every casket that was being exported to ensure that the terrorist was not hiding inside any casket. Thus, the clearance time also increased. Transportation via sea mode: As there is no mechanism available onboard a ferry, manual handling is required to load/unload the casket. By failing to check the sea tide level, handlers encountered difficulties unloading the casket from ferry due to low sea tide. The rocking of the ferry could also make the unloading of casket more tedious onto the platform from the boat. Multimodal transportation in rural areas: Due to the absence of even basic facilities at the destination, the delivery of the human remains of a foreign worker back to his hometown was a major challenge for the freight forwarder. It was a race against time as the embalming drugcould only last for 1 week. Freight forwarders need to have good knowledge of the infrastructure at the point of destination in order to conduct a smooth delivery. SARS and H1N1: Due to the infectious disease SARS in 2002 and the current spread of H1N1, additional precautions are required when handling human remains. The embalmer needs to take the necessary precautions. Once the embalmment is done, the coffin is required to be tightly sealed with a sealant to avoid germs or bacteria from entering or exiting the casket. The freight Forwarder also needs to take precautionary measures and ensure the casket is properly sealed before sending it to the airport custom. 7. Conclusion Thus, it is important for the transporter to know the nature of the product/item when transporting goods from one place to another. Precautionary measures are necessary during the transportation period. Every country has different rules and regulations for the import and export of different products/items. It is crucial to know the required procedures and necessary documentations in order to effect the shipment. 8. REFERENCES Allen, B, Mahmoud M, McNeil, D 1985, ‘The importance of time in transit and reliability of transit time for shippers and carriers’, Transportation Research B, vol. 19B, no. 5, pp. 447–456 Al-Muhaisen, SA 2005, ‘Overview of Trends in Multimodal Transport’, In: World Free Zone Convention-IZMIR 2005 International Conference, April 22, 2005, Turkey. Andersson, T, Hasson, P 1998, ‘Why integrated transport systems?’, OECD Observer, no. 211, pp. 27-31. Banomyong, R 2001, ‘Mltimodal Transport: The Case of Laotian Garment Exporters’, International Journal of Physical Distribution & Logistics, vol. 31, no. 9, pp. 663-685 Bertazzi, L, Speranza, MG, & Ukovich, W 1997 ‘Minimization of logistic costs with given frequencies’, Transportation Research B, vol. 31, no. 4, pp. 327–340. Blummenfeld, DE, Burns, LD & Diltz DJ 1985 ‘Analyzing Trade-offs between Transportation, Inventory and Production Costs on Freight Networks’, Transportation Research, vol. 19B, pp. 361-380. Bowersox, D J & Morash, EA 1989, ‘The Integration of Marketing Flows in Channels of Distribution’, European Journal of Marketing, vol. 23, no. 2, pp. 58-67. Beresford, AKC, Savides, K 1997, ‘The UK-Greece Transport Corridors: A Case Study on the Logistics of Whisky Movement’, Department of Maritime Studies and International Transport, Cardiff University, Cardiff, Occasional Paper No. 45 Carter, JR & Ferrin, BG 1995, ‘The impact of transportation costs on supply chain management’, Journal of Business Logistics, vol. 16, no.1, pp.189. Chen, IJ & Paulraj, A 2004, ‘Understanding supply chain management: critical research and a theoretical framework’, International Journal of Production Research, vol. 42, no. 1, pp.131–163. Mentzer, JT, DeWitt, W, Keebler, JS, Min, S, Nix, NW, Smith, CD, Zacharia, ZG 2001, ‘Defining Supplychain Management’, Journal Of Business Logistics, vol. 22, no. 2, pp. 1-24. Mercer Management Consulting 1995, ‘Integrated Supply Chain Management’, American Shipper: International Logistics, vol. 37, no. 5, pp. 68-70. Morash EA, Droge, C & Vickery, S 1996, ‘Boundary Spanning Interfaces Between Logistics, Production, Marketing, and New Product Development’, International Journal of Physical Distribution and Logistics Management, vol. 26, no. 8, pp. 43-62. Tyworth, JE, Zeng, AZ 1998, ‘Estimating the Effects of Carrier Transit-Time Performance On Logistics Cost And Service’, Transportation Research (A), vol. 32, no. 2, pp.89-97. UNCTAD 1994, ‘Multimodal transport and Trading Opportunities’, UNCTAD/SDD/MT/5, UNCTAD Geneva UNESCAP date unknown, ‘Multimodal Transport Operations training modules’ [Online] Available at: http://www.unescap.org/ttdw/CapBuild/Module%20-Multimodal%20Transport%20Operations.pdf [Accessed August 7, 2009]. Wang G 2007, ‘A Primary Study on Making the Decision of the Selection of Multimodal Transport A Primary Study on Making the Decision of the Selection of Multimodal Transport’, Modern Applied Science, vol. 1, no. 4, pp. 11-14. Zaheer, R 2008, ‘Multimodal Transport and Logistics: Best Practices, Achieving Greater Efficiency and Challenges’, In: 1st Arab Logistics & Multimodal Transport Conference, May 20-22, 2008 Amman, Jordan. Read More