Chapter 6:

Intermodal: Intermodal transport is the movement of goods from the point of pick-
up to the point of delivery using multiple modes of transport (road, sea, air, etc.). Each
mode has a different transport service provider, with separate transport service
contracts. With Intermodal transport, multiple service providers are involved in
the delivery process.
Multimodal: Multimodal transport is the activity of transporting goods from the
pick-up point to the delivery point using many different modes of transport (road, sea,
air, etc.). Each mode has one or more different transport service providers, but there
is only one (01) transport service contract under the name of only one transport
unit during the entire delivery process.

=> Basically, the difference between the two terms lies in the number of Contracts of
carriage and the responsibility of carriage between the carrier and the shipper
(Seller/Buyer).

Advantages and disadvantages of modes:

1. Air:
Advantages of Air Modes:
- Speed and Efficiency:
○ Air carriers provide fast transportation, making them ideal for high-
value or time-sensitive shipments that need quick delivery.
- Specialization in Lightweight, High-Value Goods:
○ Air transport is particularly suitable for small shipments (under 500
pounds) such as high-tech or lightweight products.
- High Value per Unit Weight:
○ Air freight is best for goods with a high value relative to their weight,
e.g., items valued at $75,000 per ton in 2002.

Disadvantages of Air Modes:

- High Costs:
○ Air transportation is expensive compared to other modes, with high
fixed costs (infrastructure, labor, and fuel) and variable costs depending
on cargo weight or passengers.
- Limited Freight Volume:
○ Air carriers are not suitable for large, heavy shipments, as their capacity
is best for smaller loads.
- Market Challenges:
○ In the U.S., the industry faced significant financial difficulties, including
bankruptcies in the early 21st century, before recovering after 2010.

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 - Dependency on High-Tech and Expensive Goods:
○ The reliance on high-value, low-weight goods limits its application for
bulk or lower-value shipments.
2. Package Carriers:

Advantages:

- Specialization in Small, Time-Sensitive Shipments:

○ Package carriers excel in transporting small packages (up to 150
pounds) that require rapid and reliable delivery.
- Value-Added Services:
○ They provide services like package tracking, and in some cases,
processing and assembly of products, which enhance customer
satisfaction.
- Growth with Online Sales:
○ Popular with e-commerce businesses (e.g., Amazon, Gilt Groupe) due to
their ability to deliver small packages efficiently to customers.
- Reliability for Local Deliveries:
○ Use trucks for local pickups and deliveries, integrating multiple
transportation methods to increase reliability.
- Consolidation Efficiency:
○ Consolidation of shipments at sorting centers helps improve utilization
and reduce costs.

Disadvantages:

- High Cost:
○ Package carriers are more expensive compared to other modes like LTL
carriers, making them less suitable for large shipments.
- Capacity Limitations:
○ Best suited for smaller shipments and not competitive for bulk or large-
volume transportation.
- Operational Complexity:
○ Requires coordination across various sorting centers, transfer points, and
delivery systems, increasing logistical complexity.
- Dependency on Technology:
○ Relies heavily on information systems for tracking and routing, which
can be a potential challenge if disrupted.

3.Truck:

Advantages

- Door-to-Door Delivery:
○ Provides direct shipments without the need for transfers, ensuring
convenience and efficiency.
- Shorter Delivery Time:

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 ○ Faster compared to rail transport, especially for shorter distances.
- Accessibility:
○ Trucks can access virtually any location with roads, making them highly
versatile.
- Low Entry Barriers (for TL):
○ Truckload (TL) operations have relatively low fixed costs, allowing
small businesses or individuals to enter the market with just a few
trucks.
- Flexibility:
○ Suitable for various shipment sizes, from small (LTL) to large (TL).
- Consolidation with LTL:
○ LTL operations use hub-and-spoke networks to consolidate partial
loads, optimizing cost and efficiency for smaller shipments.

Disadvantages:

- Higher Cost Compared to Rail:

○ Trucking is more expensive than rail for long-distance or bulk
shipments.
- Market Imbalance in TL:
○ TL carriers face challenges with unbalanced inbound and outbound
flows, leading to idle time or "deadheading" (empty trucks traveling).
- Longer Delivery Times for LTL:
○ LTL shipments take longer due to the need to consolidate loads and
make multiple stops for pickups and deliveries.
- Driver Fatigue Risks:
○ Long driving hours can lead to fatigue-related accidents, which
necessitates compliance with strict U.S. Department of Transportation
regulations on hours of service.
- Environmental Concerns:
○ Trucks generally have a larger carbon footprint compared to trains for
the same shipment weight over long distances.

4. Rail:

Advantages

1. Cost-Effective for Heavy Loads: Rail is ideal for transporting large, heavy, or
high-density products over long distances due to its pricing structure and load
capacity.
2. Efficiency for Non-Time-Sensitive Goods: Rail excels in carrying goods like
coal and other low-value, non-urgent items where transportation time is less
critical.
3. Economies of Scale: High fixed costs (tracks, locomotives, cars, yards) are
offset by the ability to move large volumes of goods efficiently.
4. Fuel Efficiency: Rail transport is more fuel-efficient than road or air for heavy
goods, reducing per-unit transportation costs over long distances.

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 5. Minimizes Road Congestion: By moving large amounts of freight, rail
reduces reliance on trucking, easing road congestion and wear.

Disadvantages

1. Long Transportation Times: Rail shipments are slower compared to other

modes like air or truck, making it unsuitable for time-sensitive goods.
2. Dependence on Load Building: Trains often wait to accumulate enough cars
before departing, leading to delays and uncertainty in delivery times.
3. High Fixed and Operational Costs: Rail incurs significant fixed costs for
infrastructure and high variable costs for labor and fuel, which account for over
60% of railroad expenses.
4. Track Congestion and Idle Time: Delays from track congestion, terminal
operations, and exchanging cars for different destinations increase inefficiency.
5. Limited Flexibility: Rail is not ideal for short-distance, small, or urgent
shipments due to its lack of adaptability and dependence on scheduled
networks.
6. Operational Challenges: Vehicle and staff scheduling, poor on-time
performance, and transition delays pose significant logistical hurdles.

5. Water

Advantages

1. Low Cost for Large Loads: Water transport is the cheapest mode for carrying
large quantities of goods, especially bulk commodities and heavy freight over
long distances.
2. Efficient for International Trade: It dominates global trade, accounting for
78% of U.S. international merchandise freight by weight in 2002, making it
ideal for large-scale international shipping.
3. High Capacity: Capable of transporting enormous volumes of goods, such as
cars, grain, apparel, and other commodities, efficiently over vast distances.
4. Containerization Efficiency: The increasing use of containers improves
handling, reduces cargo damage, and supports specialized and larger vessels,
enhancing cost efficiency.
5. Flexibility in Global Reach: It supports trade between seaports across
continents, vital for economic globalization.

Disadvantages

1. Slow Speed: It is the slowest mode of transportation, unsuitable for time-

sensitive shipments.
2. Port and Terminal Delays: Significant delays occur at ports and terminals,
exacerbated by congestion and customs/security processes, especially in the
U.S.

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 3. Geographical Limitations: Water transport is restricted to areas with access to
waterways or coastal regions, limiting its applicability for inland or remote
locations.
1. Ineffectiveness for Short-Haul Trips: Its slow pace and reliance on
loading/unloading infrastructure make it less suitable for short-distance
shipments, except in regions like Japan or parts of Europe.
2. High Initial Infrastructure Costs: Developing and maintaining port facilities,
specialized vessels, and waterway systems require substantial investment.
3. Regulatory and Security Challenges: Issues like port security, customs
management, and compliance with international regulations add complexity to
operations.

6. Pipeline:

Advantages of Pipeline Transport:

1. Cost-Effective for Stable, Large Flows: Pipelines are ideal for transporting
crude petroleum, refined products, and natural gas over long distances when
flow is consistent and large.
2. Low Operating Costs: Once established, pipelines have low variable costs and
require minimal ongoing labor or maintenance.
3. High Capacity Utilization: Pipelines are optimized for operation at 80–90%
of capacity, ensuring efficiency for predictable demand.
4. Reliability: Pipelines operate continuously, unaffected by weather or traffic
conditions, making them highly dependable for steady transport.
5. Reduced Traffic Congestion: By transporting fuels directly to refineries or
ports, pipelines reduce reliance on road and rail transport for these
commodities.
6. Environmentally Friendly: Pipelines produce fewer emissions compared to
truck or rail alternatives for equivalent cargo volumes.

Disadvantages of Pipeline Transport:

1. High Initial Fixed Costs: Setting up pipelines and related infrastructure

requires significant upfront investment, making it less feasible for small-scale
or short-term needs.
2. Limited to Specific Commodities: Pipelines are restricted to transporting
liquids and gases, such as crude oil, refined products, and natural gas, limiting
their versatility.
3. Inflexibility: Once installed, pipelines are location-fixed and lack the
flexibility of modes like trucks, which can serve varying destinations and
routes.
4. Unsuitable for Variable Demand: The pricing structure incentivizes use for
stable, predictable demand, making pipelines less efficient for fluctuating or
low-volume shipments.

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 5. Environmental and Safety Risks: Pipeline leaks or ruptures can have
significant environmental impacts and require extensive monitoring and
maintenance.
6. Long Lead Times for Setup: Building new pipelines involves lengthy
planning, permitting, and construction phases, delaying implementation.

7. Intermodal
Advantages of Intermodal Transportation:

1. Cost Efficiency: Combining modes like rail and truck allows shippers to take
advantage of rail's lower costs for long-distance transport and trucks' flexibility
for last-mile delivery.
2. Improved Service Levels: The truck/rail combination offers faster delivery
than rail alone and is more economical than truckload (TL) transport for long
hauls.
3. Global Reach: Intermodal is crucial for international trade, as it seamlessly
connects ports, rail, and road networks, enabling efficient long-distance
transportation of goods.
4. Convenience for Shippers: A single point of contact simplifies operations, as
shippers deal with one entity managing multiple carriers and transport modes.
5. Scalability: The use of standardized containers enables quick transfers between
modes, improving efficiency and reducing handling times.
6. Environmental Benefits: Rail transport emits less CO₂ per ton-mile than
trucks, contributing to sustainability goals.

Disadvantages of Intermodal Transportation:

1. Complex Coordination: Transfers between modes require precise scheduling

and communication, which can lead to inefficiencies if not managed properly.
2. Delays at Transfer Points: Handling and transferring shipments between
modes (e.g., from rail to truck) often involve waiting times, increasing overall
delivery times.
3. Initial Costs: Infrastructure investments, such as terminals and specialized
equipment for container handling, can be expensive.
4. Limited Flexibility: The reliance on specific modes or terminals can restrict
route options, especially for remote or poorly connected areas.
5. Potential for Damage: Multiple handling stages increase the risk of goods
being damaged during transfers.
6. Dependence on Accurate Information Flow: A lack of efficient information
systems can disrupt coordination, leading to delays and inefficiencies.

*) Three basics questions when design a transportation network

Three basic questions need to be considered when designing a transportation network
between two stages of a supply chain:

1. Should transportation be direct or through an intermediate site?

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This question evaluates whether goods should move straight from their origin (e.g., a
factory) to their destination (e.g., a retailer) or make a stop at an intermediate facility
(e.g., a warehouse or distribution center).

- This decision shapes the overall structure of the transportation network.

- Direct transportation is simpler and quicker but often inefficient for low-
demand or dispersed destinations.
- Intermediate sites allow consolidation, enabling cost savings and better
utilization of resources, but add complexity and time.
- The choice also reflects trade-offs between speed, cost, and the ability to scale
operations.

2. Should the intermediate site stock product or only serve as a cross-docking

location?

If an intermediate site is used, the question is whether it should hold inventory for
future demand (acting as a buffer) or merely serve as a transit point where goods are
sorted and immediately shipped onward without storage.

- Stocking inventory enables quicker responses to demand but incurs storage and
management costs. It is useful when demand is unpredictable or lead time is
critical.
- Cross-docking minimizes storage costs by streamlining flow but requires
precise timing and coordination. It’s best for fast-moving goods or predictable
demand.
- The choice reflects the company’s priorities regarding inventory holding,
service levels, and operational efficiency.

3. Should each delivery route supply a single destination or multiple destinations

(milk run, discussed later)?

This question considers whether a single shipment should deliver directly to one
destination (dedicated delivery) or make multiple stops to serve several destinations
along a route (milk run).

- Delivering to a single destination is simpler but less cost-efficient when

demand volumes are small or destinations are close to one another.
- Milk runs improve vehicle utilization and reduce costs but add complexity and
potential delays.
- The decision depends on shipment size, proximity of destinations, and delivery
time constraints.

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