Transport Chapter 3 Part 1

• Transport function


  The movement of goods from one place to another (aka- freight transport)
• Transport function


  • It is the largest cost in logistics process
  • It adds place and time value (where and when it's needed)
• Transportation costs remain the most important logistics function as they account for more than half of the logistic costs (58%)
• Transportation costs


  The costs related to the operation and maintenance of transportation, modes and terminals used in the supply chain, and the costs related to moving goods between where they are manufactured and where they are distributed and consumed
• Inventory carrying costs


  The variable costs (the quantity of stock) of maintaining inventory in a warehouse, including the costs of holding goods in inventory as well as the physical handling of goods, including tasks such as packaging and labeling
• Warehousing costs


  The fixed costs of owning or leasing warehousing space, including maintenance and utilities
• Administrative costs


  Managerial overheads such as customer service, receiving and processing orders, and managing the workforce, as well as information technologies such as computer equipment and software
• Types of goods


  • Raw materials (e.g. timber, iron, coal, water)
  • Semi-finished goods (e.g. parts, components)
  • Finished goods (e.g. furniture, appliances, canned foods)
• Basic forms of transport

  • Air
  • Land
  • Water
  • Pipeline
• Land and water transport can be sub-divided into

  • Land (road, rail, pipeline)
  • Water (sea, rivers, canal)
• Air transport


  Only 1% of companies use air freight due to high cost, used for urgent, long distance, highly perishable items, documents, or valuable items
• Strengths of air transport

  • Quick delivery for long distances
  • Reach customers globally, hence increase sales
  • Does not face road transport issues like traffic, bad road conditions, accidents
  • Generally safe movement of goods
• Limitations of air transport

  • Expensive (5 times more than road, 16 times more than sea)
  • Size and type of goods can be limited due to space on plane
  • Goods are moved to airport, not direct to customer
  • Congestion at airports can cause delivery delays
  • Affected by weather
  • Airports can be located far from end-users or customers
• When to use air transport: Perishable items, high value items (cars, pets, fashion, flowers), products with short life span, required in short notice, valuable relative to weight (e.g. jewellery), expensive to handle or store
• Road transport


  • Can move goods of various sizes, masses and types over long distances (raw materials, semi-finished goods to finished goods)
  • More flexible than other modes of transport
  • Can offer point to point service (direct to the customer)
  • Offers reliable service, less chance of damaged and/or lost products delivered
  • Able to compete with air for small shipments and with rail for large shipments
  • Faster than rail and as good as air on short distances
• Road transport is faster than air on short distances because the goods may need to be at the airport 3 hours before the plane leaves, and upon arrival it may need up to 2 hours to offload, whereas road transport can go direct to the customer
• Strengths of road transport

  • Door to door service - direct to customer (no terminals, checks, customs)
  • Accessibility (most countries have adequate road infrastructure)
  • Goods are "safer" (no terminals, less opportunity for theft)
• Limitations of road transport

  • Can carry only so many goods, weight and speed regulated by government
  • Contribute to noise and air pollution
  • Theft, hijackings, weather, traffic, accidents can impact reliability of service (e.g. delivery times)
  • Heavy fuel costs (more than rail and sea), cost per item moved is less with rail and sea
  • Exposure to safety issues when transporting hazardous materials (fuel, chemicals)
• Fuel price in 2024 is R24.13 cents per litre
• When to use road transport: High value finished products (cars, furniture, appliances, canned foods), perishable goods can be moved via refrigerated trucks over short distances, small deliveries (e.g. Takealot using "Tuk Tuk" vans or Pick n Pay)