Chapter 2 Transportation

2.3 Introduction to Transportation

Transportation refers to the physical movement of goods from one point to another point.  It includes specific activities such as selecting appropriate transport mode, choosing the particular route, selecting the right carrier, and complying with various local transportation regulations. An industrialized society without an efficient transportation system seems a contradiction in terms. We often assume that products will move from where they are produced to where they are consumed with a minimum of difficulty in terms of both time and cost. As the most costly logistics activity, transportation may account for 40%-60% of a company’s total logistics cost.

Transportation can add time and place utility. A product produced at one point has very limited value to the prospective customer unless it is moved to the point where it will be consumed. Transportation achieves this movement. The movement across space or distance creates place (value) utility. Transportation is also a factor in time utility since it determines how fast and how consistently a product moves from one point to another. This is known as time-in-transit and consistency of service. If a product is not available at the precise time it is needed, there may be expensive repercussions, such as lost sales, customer dissatisfaction, and production downtime. Most logistics managers are familiar with the problems created by late arrival of needed items.