Management of In Transportation of Cargo - Case Study Example

Management of In Transportation of Cargo from Subic Bay to Curtis Island Author Course Tutor Date Introduction Construction of the Liquid natural Gas plant in Curtis Island in Queensland, Australia depends on transportation of fifty sub assemblies weighing thirty tones each across the ocean and on land from the Hajin Shipyard on Subic Bay in the Philippines a distance of 3767 nautical miles. This transportation has to be done over a period of six months. Each sub assembly is ten meters in diameter to make a decision on the best logistical system to adopt while transporting them from their point of origin to their final destination. Consideration has to be made for the fact that this transportation is across two different countries and also other issues including management of the logistics involved. The activities of logistics management include management of transport to and fro, fleet management, material handling, warehousing order fulfillment, network design, inventory management etc (Chang 1988; Ballard and Howell 1998). Point of origin Subic Bay, where the sub assemblies will originate forms a part of Luzon Sea about 100 kilometers northwest of Manila Bay. The bay has a commercial area which is referred to as the Subic Bay Freeport Zone which is governed under the Subic Bay Metropolitan Authority. In the bay is the Port of Subic, this is port is very strategically placed and it has a very fine harbor. There is an international airport in the bay; Subic International airport and there are good roads in the area. The sub assemblies will be got from the Hanjin ship yard on the bay. Hanjin is a Korean based corporation that is engaged in shipbuilding, construction and also plant technology, the shipyard from which the sub assemblies are to originate is held on a land lease by the corporation. Logistics methodology In order for the logistical arrangement to be effective, methodology needs to be framed to cover all possible areas (Gibson, Hanna, and David 2004; Golicic, Donna, and McCarthy 2005). In the case of these sub assemblies, it is imperative that there be a clear mode of communication between different players. After consideration of all the possible logistical challenges the transport solutions will be customized for the sole purpose of this exercise. There will be need for collaboration with Hanjin Heavy Industries Construction Corporation; this will ensure that after the sub assemblies have been fabricated, they have been properly warehoused in their ship yard thus ensuring their safety. Loading procedures for the sub assemblies should be such that they get to their destination while still in perfect shape to perform the role for which they were fabricated. Considering that the sub assemblies will be transported over long distances over water and land a combination of modes of transport will be necessary. The modes of transport will have to be chosen carefully because they account for the biggest cost of logistics; according to (Chang, 1988), the cost of transport accounts for 6.5% of all market revenue and 44% of logistics costs. BTRE (2001) stated that Australia’s value added of the transport sector was 5.6% of GDP. An Air Transportation Association analysis shows that transport is the highest cost of logistic costs accounting for 29.4 % of all costs (Chang, 1988). The costs considered in this analysis include means of transportation, containers, pallets, labour, terminals, time and corridors. The first option is to use maritime transport from Subic bay to the port of Gladstone, this option has the advantage of being low priced and it has a high carrying capacity, however, its transportation time is longer and this may be a problem considering the short period of time in which these deliveries are required. To further complicate matters, ship schedule is usually vulnerable to weather changes. Should a decision be made to use maritime transport, it will be necessary to consider tracking as a way of connecting from the port of Gladstone to the ferry landing and helicopter lift from Curtis island beach to the site. Security for the cargo is assured since the sea route in which it the sub assemblies will be transported has no cases of piracy. There, however, is going to be need for security arrangements to be made as outlined in the Australian Government’s guidelines. The sub assemblies’ point of origin is a shipyard at the Subic Port it is from here that they will be shipped to the port of Gladstone. If the ship, during this transportation goes at a speed of 10 knots per hour it will take 15.7 days. If it goes at 7 knots per hour it would take 22.4 days at, 40 knots per hour it would take 3.9 days. The average speed of a bulk cargo carrying ship is 10-15 knots each shipment would take 10.5 days. If a provision is made for a short stop along the way the transportation might take 12 days. To transport 50 sub assemblies within six months will require that around nine of them be transported each month for the first five months, and five to be transported in the last month. Air transport would also be possible this is because there is an airport near Hanjin Shipyard; Subic International Airport there is also an airport at the port of Gladstone near Curtis Island (Gladstone Airport). There is a ferry landing on the port of Gladstone, the ferry goes to Curtis Island, from Gladstone Airport to the ferry landing is a distance of eighteen kilometers , in this stretch the sub assemblies will be transported by road using trucks, each truck to carry one sub assembly per trip. Once the sub assemblies have reached the landing, they will then be ferried across to the Island. Before transportation, sub assemblies will have to be held in storage for some time at Gladstone airport. Owing to the fact that there is no logistical infrastructure in Curtis Island, the sub assemblies will be lifted by helicopter from the ferry landing at Curtis island to the construction site. To avoid having to get warehousing on the port of Gladstone and again in the Island, they will be ferried across at the channel as fast as the helicopter can lift the ferried ones to the site. Storage on completion Once the sub assemblies have been fabricated, they will be housed at the Hanjin Heavy Industries Grounds until they have been transported to their final destinations. It will also be necessary for them to be held at Gladstone Airport. Since the purpose of this transportation is to ensure that the sub assemblies get to the construction site on time. It is critically important for warehouses to be there in strategic locations. From Gladstone Airport, the other warehouses should be at the site where the cargo will be held awaiting assembly to prevent the possibility of damage or vandalism. Air freight If air transport was to be considered, the sub assemblies would be transported by water from the Hanjin heavy construction industries shipyard to Subic International airport across the bay by use of a ferry. From the Subic Airport, they would be airlifted to Gladstone airport. The advantage of this is the speed with which the sub assemblies will be delivered. To their destination, the cost factor though will be high and a decision to use it will have to put into consideration the weight value of the cargo and how important it is for it to get to its destination on time (Reynolds-Feighan 2001). Logistics Management System According to CSMP, (2009, P.3); Kovács, and. Spens (2005) Logistics management can be described as part of supply chain management that plans, implements and controls and effective forward and backwards movement and storage of goods and information related to them between the point of origin to their final destination. Supply chain management on the other hand is the management and planning of all activities related to sourcing and purchase, conversion and also logistics management activities In this case, the supply chain management system has to be looked at as a construction industry problem. The issues to be considered include environmental constrain, in this case the requirement for a deep water habour and almost unrestricted shipping access while still ensuring access to supporting infrastructure including airports and rail facilities. Although in this case these facilities are there at the point of origin, the same cannot be said about the sub assemblies’ final destination. They have to be shipped to the port of Gladstone after which they must be ferried to the island. From the Curtis Island ferry landing to the construction site, there is no supporting infrastructure which means a way has to be found to transport the containers sub assemblies to site. The sub assemblies can only reach Curtis Island after a landing at Gladstone; they would then be ferried to using Curtis Ferry Services to the beach. Due to lack of infrastructure inside the island, the sub assemblies will have to be transported to site using a cargo helicopter which will lift them to site, one at a time an Mil Mi-26 would do the lifting perfectly. The other alternative would be to construct roads or railways in Curtis Island; this would take a lot of time which makes the helicopter option the best to ensure delivery of the cargo on time. Risk Whether delivery of the sub assemblies gets to their destinations on time depends on whether the weather will be calm at the times when transportation is scheduled. To ensure that delays do not adversely affect the project, it would be prudent to have a backup plan where the cargo would be transported by air up to Gladstone. Considering the high cost of air transport, this backup should only be used as a last resort. Custom requirements in Australia will have to be fulfilled in order for the goods to be transported from Philippines. This will include registering as a client in the Australian Integrated Cargo System (ICS) this will help in lodging import declarations. The mentioned registration can be done through the services of a licensed customs broker who would deal with the customs department on behalf of his client. Because the sub assemblies exceed the $ 1000 threshold, it will be necessary for an import declaration to be made with the ICS. Conclusion The management of the logistics of transporting this cargo is a cross functional integration of activities that involve different disciplines and involving different modes of transport. They transcend geographical and political boundaries (Sushil, Verma, and Victorino 2006). Despite the expanse in scope and area involved in this transport, facilities to ensure that the job is done are mostly in place making it possible to deliver in time and cost effectively for the project. The most cost effective mode of transport from Subic Bay to the Port of Gladstone would be by water. This is due to its cost effectiveness and the fact that the monthly shipment of nine sub assemblies can be shipped in a single vessel over a period of fifteen days. Although it is possible to ship twice per month, such a move would escalate the costs of warehousing at Gladstone as the cargo waits ferrying to Curtis Island. The downside of shipping is that in light of the short period of time allowed for this transportation and the real possibility of shipping being disrupted by water using it might lead to failure to meet the set deadline. References Ballard, G. and Howell, G, 1998 “Shielding Production: Essential Step in Production Control.” Journal of Construction Engineering and Management, Jan/Feb, 11-17. BTRE 2001 Logistics in Australia: A Preliminary Analysis. Bureau of Transport and Regional Economics, Canberra, . Chang, Y.H. 1998 Logistical Management. Hwa-Tai Bookstore Ltd., Taiwan. Dekker, H.C. and A.R. van Goor 2000, Supply Chain Management and Management Accounting: A case study of Activity Based Costing. International Journal of Logistics: Research & Applications, volume 3, nr.1, pp.41-52. Gibson, B.J, Hanna, J and Menachof, D 2004, “Periodical Usefulness: An International Perspective,” International Journal of Logistics: Research and Applications, Vol. 7, No. 3, pp. 297-311. Golicic, S, L., Donna F, and McCarthy 2005, “A Balanced Approach to Research in Supply Chain Management,” in Herbert Kotzab, Stefan Seuring, Marin Müller, and Gerald Reiner (eds.), Research Methodologies in Supply Chain Management, New York: Physica, pp. 15-29 Gupta, S, Verma, R and Victorino, L 2006, “Empirical Research Published in Production and Operations Management (1992–2005): Trends and Future Research Directions,” Production and Operations Management, Vol. 15, No. 3, pp. 432-448. Kovác, G and Spens, M 2005, “Abductive Reasoning in Logistics Research,” International Journal of Physical Distribution and Logistics Management, Vol. 35, No. 2, pp. 132-144. Reynolds-Feighan, A.J. (2001) Air freight logistics. In A.M. Brewer, K.J. Button and D.A. Read More