Case Study MS300

Transportation and Logistics

 

Case author

Ankit Aggarwal, MBA

Learning objectives

After you completed this course module, you will be able to conceptually solve holistic management problems within a case study of the transportation and logistics industry.

Topic

Mainfreight was founded in the year 1978 by Bruce Plested with just NZ$7000 and a 1969 Bedford truck. The firm began its operations in Auckland, New Zealand (NZ), and entered into a highly regulated transport  market. From 1978 to 1981, the firm faced regulation barriers in its operations, but deregulation of land transport in the year 1982 allowed it to take advantage of the growth opportunities in New Zealand's transport market and to capture a large market share. The year 1982 set the foundation stone for a global logistics company "Mainfreight" and no one would have imagined that a small transport firm from an isolated small New Zealand economy would be competing with global logistics companies in the future. In 2011, the global logistics market was estimated to be €981 billion with an average annual growth rate of 2.4 to 3% for the next 5 years.

Workload units 2
Reading extract Transportation/Logistics Case Study

 

Some introducing thoughts about transportation and logistics

Transport of people, animals, and goods can be by air, rail, road, water, and pipeline modes by means of infrastructure, vehicles, and operations. Transport enables trade, which is essential to civilization.

Transport infrastructure consists of roads, railways, airways, natural waterways, canals, and pipelines and terminals at airports, railway stations, bus stations, warehouses, truck depots, refueling facilities, and seaports. Terminals may be for both interchange of freight or passengers and for maintenance.

Vehicles on transport networks may be bicycles, motor vehicles, trains, aircraft, and watercraft. Operations maintain and utilize transport vehicles. In the transport sector, infrastructure operations and ownership can be public or private.

Passenger transport on scheduled services may be public private. Many freight transporters prefer the containerization method, which uses steel containers of standardized dimensions, although bulk transport is still in use for large volumes of durable items. Transport is important to economic growth and globalization but pollutes the air pollution and uses lots of land. Transport planning is essential for efficient commerce and restraint of urban sprawl.

 

Transport Modes

Transport modes make use of particular vehicles, infrastructures, and operations. Transport may involve one mode or several as intermodal or multimodal transport. Each has advantages and disadvantages of cost, capacity, and route.

Animal transport uses working animals to move people and goods. Passengers may ride animals directly, use them to carry goods, or harness them to pull wheeled vehicles or sleds.

Aircraft need areas for landing and airports with infrastructure for maintenance, refueling, resupply, and loading and unloading of cargo, crew, and passengers. The aircraft is the fastest transport vehicle. Commercial jets can fly at up to 600 miles per hour (mph). Civil aviation is very popular for its ability to transport passengers and freight quickly over long distances. The World Health Organization estimates that up to a half-million people are on aircraft at any time. The tradeoff is in high energy costs.

In rail transport trains run on railways or railroads of two parallel steel rails anchored to perpendicular beams on foundations of concrete or compressed earth and gravel in beds of ballast. Propulsion is commonly by a locomotive powered by steam, diesel, or electricity hauling a series of unpowered cars carrying passengers or freight. Train power also can be by horses, cables, and gas turbines. Railed vehicles move with much less friction than do wheeled vehicles on paved roads, making trains more energy-efficient though less so than watercraft.

Modern high-speed rail can reach speeds up to 220 mph but only on specially-built tracks. Regional and commuter trains serve central cities from suburbs and surrounding areas. Freight trains once used box cars requiring manual loading and unloading; now containerized trains move general freight while bulk quantities move by entire, dedicated trains.

Road transport offers complete freedom to transfer vehicles from one road to another according to need and convenience. This degree of transport flexibility in location, direction, speed, and timing is not available in other modes. Door to door service is possible only by road transport.

Wheeled motor vehicles are highly flexible but pollute the air; transport by bus is more efficient but much less flexible. Delivery by truck is often the final stage of freight transport.

Water transport by barges, boats, or ships over bodies of water needs buoyant watercraft, so the hull is a main feature of construction and maintenance. In the 19th century ships first used steam engines to drive paddle wheels or propellers. Now most ships have internal combustion engines running on bunker fuel. Some submarines use nuclear power to produce the steam.

Although relatively slow, modern sea transport is highly economical in transporting enormous quantities of goods. According to a report from the United Nations Conference on Trade and Development, nearly 35,000 commercial vessels transported an estimated 7.4 billion tons of cargo in 2006. Transport by water is much less expensive than by air or land for transcontinental shipments.

Pipelines transport liquids and gasses and pneumatic tubes transport capsules by compressed air. Any chemically stable liquid or gas can move through a pipeline.

 

Infrastructure

Infrastructure which allows transport vehicles to operate consists of a mode or way, a terminal, and facilities for parking and maintenance. Rail, road, and pipeline infrastructure must be constructed. Except for terminals, air- and watercraft can operate without construction of infrastructure as the air- and waterways already exist.

Airports, seaports, lake ports, river ports, and stations are terminals where passengers and freight can transfer from one transport vehicle or mode to another. For passengers, terminal rail links connect airports to central cities and suburbs. For freight, terminals are transshipment points, though some of it goes from producers to users directly.

Infrastructure financing can be public or private. Transport is often a natural and necessary public monopoly; road and sometimes rail and air transport funding are by taxation. Infrastructure project financing is often by debentures or bonds. Many infrastructure operators impose usage fees for landing at airports or driving on toll roads. From faulty forecasting overestimates of user numbers, benefit shortfalls on transport infrastructure projects are not uncommon.

 

Vehicles

A transport vehicle is a device that, unlike the fixed infrastructure, moves with its passengers and freight. Unless under electric power from an outside source, vehicles must provide their own propulsion, usually by steam engine, combustion engine, or electric motor. Most vehicles have onboard operators; others are fully automated.

Private transport is subject to only the vehicle owner-operator. Public and freight transport operations are through private enterprises or government agencies. Transport infrastructure and vehicles may have the same or different operators. Many countries with national airlines and railways have privatized them since the 1980s. International shipping remains a highly competitive sector with little regulation, but port terminals may be owned publicly.

Passenger transport divides between public and private operators. Public transport schedules regular services on fixed routes; private transport services ad hoc at passenger demand offer more flexibility but lower capacity and impose a higher environmental impact per passenger.

 

Shipping

Logistics is the entire process of handling, packaging, storage, and transshipment in transporting products from producers to consumers. Incoterm rules published by the International Chamber of Commerce to define the responsibilities of sellers and buyers for deliveries of goods under sales contracts have made commercial transactions safer and easier than ever.

The International Organization for Standardization (ISO) has revolutionized domestic and international trade by establishing ISO container standards for all vehicles at all ports, achieving for huge reductions in transshipment costs. Since the 1950s, standardized containerization has made automated rather than manual handling and transfer between transport modes possible for great gains in economy and efficiency in vehicle operation.

Bulk transport is for cargo that can tolerate rough handling without damage or deterioration; typical examples are coal, metal ore, and petroleum. The uniformity of the shipment makes transport of enormous quantities quick and efficient at enormous economies of scale in gigantic ships, whole trains, or pipelines for liquids of vast volumes.

Air freight is popular for transporting products of high value. Although by volume it transports only a small percentage of products sold in international commerce, by value it transports nearly half. Time has become increasingly important in many commercial transactions, making buyers willing to pay high costs for speedy delivery of items of high value.

 

Transport History

The domestication of animals for power together with the inventions of wheels and runners for vehicles introduced the first systematic methods of overland transport of passengers and freight. Water transport by rowing and sailing vessels also dates from prehistoric times and until the Industrial Revolution of the 18th Century was the only truly economic way to transport large quantities of cargo or over long distances.

The first roads were dirt tracks that often followed game trails. Ancient civilizations in Mesopotamia and the Indus Valley and the empires of Persia and Rome built stone-paved roads for movements by military units and commercial caravans. Deep roadbeds of crushed stone drained the roads and kept them dry. The medieval Abbasid Caliphate based in Baghdad and later in Cairo built some tar-surfaced roads.

The first watercraft fleets may have been canoes carved from logs. Early large-scale water transport was by ships using either oars, winds, or a combination for propulsion. The historical importance of water to transport accounts for the locations of most ancient cities as sites for trade on or near rivers or seacoasts and often at confluences of bodies of water. Until the Industrial Revolution, transport was slow and costly, and both production and consumption typically occurred in the same localities.

The Industrial Revolution fundamentally changed transport. With telegraphy, communication first became independent of transport and instantaneous. The application of the steam engine to railways made transport overland much faster and just as economical as by water. At the same time, transport overseas, where railroads could not venture, also rapidly expanded in scope and increased in volume after development of the steamship with its advantages over sailing vessels in speed and cargo capacity.

With the combustion engine for cars and trucks at the turn of the 20th Century, transport by road realized its true potential as the predominant overland mode. The first highways of the automotive era were of macadam, crushed stone. Later, tarmac and concrete became the preferred and most common paving materials.

After the Second World War, motor vehicles and aircraft took over most long-haul passenger transport, reducing rail and water modes to mostly freight and short hauls. International air transport has expanded steadily since the 1960s with the jet engine. Construction of divided, controlled-access, high-speed highways has brought great growth in road transport. The introduction of high-speed trains in Asia and Europe has recovered some passenger traffic for rail transport.

In early American history, private entrepreneurial stock companies owned most bridges, canals, roads, railroads, and tunnels. Most such transport infrastructure went under government ownership and control in the 19th and 20th centuries culminating in the 1971 nationalization of long-haul passenger rail transport with Amtrak.

Transport throughout history has spurred growth and expansion, more trade and dispersion of people. Economic prosperity always depends on transport capacity, but transport infrastructure and operation have great environmental impacts, making transport sustainability a major issue.

 

Planning

Transport planning is for optimal utilization of new infrastructure with minimal adverse environmental impact. With transport forecasting models, planners predict future transport patterns. On operational levels, cargo transporters use logistics to plan supply chains. Transport economics as a field of study is the basis for public policy planning by regulatory authorities, who must consider trip generation, trip distribution, transport mode choice, and route assignments while handling operations through traffic engineering.

Because of negative environmental impacts, transport questions can be controversial. Automotive transport may mean flexibility and comfort for the individual at the cost of environmental deterioration for all. Good land use keeps common activities close to homes and places high-density development close to transport lines and hubs. Transport facilities consume land, and in cities pavement for streets and parking can exceed 20 percent of total land use. Efficient transport system planning can minimize land waste.

 

Environment

Transport, a major energy user, burns most of the world's petroleum, pollutes the air, and may contribute significantly to global warming from carbon dioxide emissions. Environmental regulations have reduced vehicle emissions; however, increased numbers of vehicles in unregulated regions have offset this reduction. Accordingly, some environmentalists call for a transition from air and road to rail, increased electrification, and more energy efficiency studies.

 

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