LYCEUM-NORTHWESTERN UNIVERSITY

Dagupan City
INSTITUTE OF GRADUATE AND PROFESSIONAL STUDIES

In Partial Fulfillment of the Requirements for the Course

Doctor of Business Administration

BA 306 GLOBAL SUPPLY CHAIN

Logistic and Transportation in Global Supply Chain

(Written Report)

Presented to:
DR. FERDINAND L. TIMBANG
Professor

Presented by:
ARJOE S. DE GUZMAN, MM, MBA

Sept 2024
I. Overview of Global Logistic and Transportation System
The global transportation and logistics services market size was USD 1,149.92 billion in 2021
and is projected to grow from USD 1,211.06 billion in 2022 to USD 1,804.49 billion by 2029,
exhibiting a CAGR of 5.11% during the forecast period. Based on the analysis, the global market
exhibited a decline of -8.3%in 2020 as compared to 2019. The global COVID-19 pandemic has
been unprecedented and staggering, with transportation and logistics services experiencing
lower-than-anticipated demand across all regions compared to pre-pandemic levels.
Transportation and logistics services include acquiring raw materials and delivering finished
goods to customers via various modes of transportation such as air, sea, rail, and road. In a
nutshell, transportation and logistics services include goods storage, inventory, delivery, and
distribution from point A to point B and its primary goal is to deliver goods in a safe, timely,
and cost-effective manner.
In recent years, real-time monitoring of goods across multiple points is now possible owing to
various technological developments. Factors such as the increase in use of the cloud-based
system and the rise in trade agreements are anticipated to fuel the demand for the
transportation and logistics services over the forecast period.

COVID-19 IMPACT: Disruption in the Movement of Goods Caused by the Pandemic

Hampered Market Growth
The coronavirus pandemic has disrupted supply chain operations worldwide. The crisis put
transport and logistics resources under unprecedented pressure. Shippers face uncertainties in the
movement of goods due to exit restrictions in certain countries. The imbalance between supply
and demand and lack of capacity for long-distance and last-mile fulfillment services disrupted
the logistics industry network.
Limited staff and reduced working hours further restrict logistics activities. The COVID-19
outbreak has impacted the Domestic Transport Management (DTM) service. In the infected
areas, there was an imbalance between incoming and outgoing goods, which increased the
delivery time. Truck volume has decreased significantly, restricting the movement of medium
and heavy trucks. Service providers face numerous problems such as transportation
disruptions due to border closures and increased demand for storage facilities to store existing
products that can no longer be sold due to closures. 3PL companies have started short-term
memory identification services to deal with this situation.
For example, DB Schenker Logistics implemented a service that identifies unused storage
space. This service aims to inform customers about storage space at 794 locations in 60
countries to find additional storage space near production sites. Road traffic is severely
affected by the current health crisis.
LATEST TRENDS: Increasing Utilization of Cloud-based Systems in Logistics
Management to Propel Market Growth

Technological advances are becoming increasingly popular in the transport and logistics market.
Small and medium-scale businesses are aiming to double their investments in technologies by
2025. Leading companies operating in the market are focusing on technological advancements to
maintain their dominating position in the market. All leading players are digitizing their supply
chain systems. Transportation management (TMS) Such as Freight Viewer, tracking systems are
now moved to the cloud for more efficiency.
Moreover, many logistics companies are moving their TMS to the cloud to create a cloud-
based TMS. Cloud-based TMS enables automation, seamlessly eliminates manual tasks,
streamlines work processes, and reduces additional expenses for the IT infrastructure. In
addition, they also collect data from various internal and external sources, which leads to
better visibility. The cloud-based TMSs can be implemented and accessed from anywhere
worldwide.
DRIVING FACTORS: Increasing Global Trade Activities to Facilitate Market
Augmentation
Global trade activities include importing and exporting goods and services worldwide. Logistics
and freight services are used to transport goods internationally through different modes of
transport. An increase in trade activities globally has led to a rise in the volume of goods
transported to various countries through other means of transportation. For instance, according to
the United Nations, exports from developing countries increased by 30%, and global trade
reached a record level of USD 28.5 trillion in 2021. China contributes the most, with 15% of
global exports. Thus, increasing global trade activities in emerging economies are driving market
growth.
In addition, the development of overseas markets and increased trading activities due to
globalization boost transportation and logistics market expansion. Further, the proliferation of
trade agreements among various governments is another primary driver for the logistics market.
For instance, In December 2020, India and the U.K. announced Free Trade Agreement (FTA)
between both nations for pharmaceuticals, fintech, chemicals, petroleum, and food products.
Growth in the E-commerce Industry to Support the Transportation and Logistics Services
Market Growth
E-commerce refers to buying and selling goods on the internet. The e-commerce industry relies
on logistics services and 3PL/4PL services to manage the deliveries of products to the customers.
The rise in demand for online services, especially after the pandemic considering its benefits,
contributed to the growth of the transportation and logistics sector. The change is attributed to
fast consumer growth and cross-border sales as customers are available with many product
varieties and can assess for any supplier across the globe.
With continuous proliferation of e-commerce industries, last-mile deliveries are also witnessing
an upswing. The major benefiting sectors are pharmaceuticals and food & beverages; FMCG
products have a greater emphasis on last-mile delivery options across logistics industries.
For instance, in July 2020, Movile Group, a mobile commerce platform, invested in Mensajeros
Urbanos, a last-mile delivery startup based in Colombia. This investment aimed to expand its
operations in major cities from Mexico & Colombia and expand the required infrastructure, such
as warehouses.
RESTRAINING FACTORS: Lesser Control over the Operation of Logistics Services to
Restrain Market Growth
Manufacturing companies or retailing units have to rely on the reliability, competency, and
consistency of logistic service providers, and this situation lacks direct control over the process.
The manufacturer cannot even monitor all operations in the warehouse, which can seriously
threaten the product’s quality and safety. Outsourcing to third/fourth party logistics (3PL/4PL)
may lead to a breach of any product, technology, or confidentiality, resulting in the exposure of
customers’ data. This lack of control over logistics services hinders the growth of the market.
SEGMENTATION: Inventory Management to Lead the Market Owing to Rapid
Technological Advancements
By service type, the market is segmented into warehouse services, transportation, inventory
management, and administration & supplies.
The inventory management segment is the fastest-growing segment, with a CAGR of 6.12%
from 2022 to 2029. Rapid technological advancements in inventory management are expected to
offer beneficial opportunities for the market growth. Technological advancements such as using
RFID technology to manage inventory and track goods in real-time are expected to increase the
demand for the segment over the forecast period. In addition, the growing adoption of AI and
machine learning in inventory management is another factor that is anticipated to increase the
demand over the forecast period.
Transportation segment is the second fastest-growing segment in the market. The growth is
attributed to the adoption of advanced technology such as anti-theft GPS systems. In this system,
it is possible to obtain the real-time location of the complete fleet and separate items in transit.
Additionally, the adoption of blockchain technology in the transportation segment is another
factor fueling the demand over the forecast period. For instance, the use of IoT sensors helps to
determine the amount of space a particular cargo occupies.
All the supply chain providers are using & developing a new software-based monitoring,
analyzing system to make the system more efficient. Number of 3PL, 4PL service providers are
also rising across the globe, which is the reason the administration & supplies segment has also
shown significant growth during the forecast period.
By Mode of Transport Analysis: Growing Demand for Pure Electric Zero Emission
Vehicles to Drive the Roadways Segment Expansion
Based on mode of transport, the market is divided into airways, railways, waterways, and
roadways. The roadways segment holds the highest global transportation and logistics market
share. The roadways segment is the most used for the transportation of goods as it is cost-
effective, simple, and can provide door-to-door service. Growing technological advancements
and e-commerce are expected to drive growth of the road transport segment over the forecast
period. Furthermore, an increase in global import and export activity is another factor driving the
segment's growth during the forecast period.
Waterways holds the second-largest position in the market. Rising infrastructure development in
the form of canals to shorten trade routes, increased trade agreements, and rising consumer
disposable income have resulted in increased global demand for international goods. These
factors are assisting the waterways segment to maintain its second-largest position over the
forecast period.
Mail and parcels are transported via airway services. They are also used to quickly import
something from one country to another. Global infrastructure spending on new and existing
railway networks continues to rise. With increased business and commercial activity, the world
population's personal and freight transportation needs are growing. The scenario is forcing
governments to improve their transportation networks across the board, so airways and railways
have witnessed significant growth during the forecast period.
By End Use Analysis: Petrochemicals Segment to Hold Major Share Due to its Growing
Use to Make Several Products
By end use, the market is categorized into automobiles, machinery, apparel and footwear,
pharmaceutical products, retail, aircraft, ships and railways, electronics, petrochemicals,
agriculture, building materials, and others. Petrochemicals segment is one of the significant
segments in various industrial processes. Products, such as industrial oils, plastics, detergents,
and tires, are derived from petrochemicals. Additionally, the increase in demand for green
warehouses is another factor driving the growth of the petrochemicals segment over the forecast
period.
Others segment is anticipated to hold the second most prominent position in the market. Others
segment includes plastics, wood, paper, metals, and glass. Increasing demand from numerous
industries, such as electronics, automotive, aerospace, and defense, is helping to maintain the
second-largest position of the others segment over the forecast period. Additionally, increasing
industrialization and urbanization in developing countries drive the market's growth during the
forecast period.
REGIONAL INSIGHTS: Rising Middle Class Population in Asia Pacific to Contribute to
Market Augmentation

Regionally, the market is split into North America, Europe, Asia Pacific, and the rest of the
world.
The Asia Pacific transportation and logistics services market share was 37.84% in 2021 and is
anticipated to dominate the market throughout the forecast period. It also has the highest growth
rate when compared to other segments. The growing middle-class population in India and South
Korea is expected to boost the adoption of transportation and logistics services in this region.
Furthermore, rising political tensions between China and other countries have compelled
organizations to invest in Southeast Asian nations such as the Philippines, Malaysia, Thailand,
and Singapore. Moreover, due to its significant European and North American exports, China
dominates the market in this region.
North America is the market's second most important region. One of the primary factors driving
this region's growth is the growing demand for green logistics to address rising environmental
concerns. Furthermore, expanding e-commerce industries and the trend of online shopping in
countries such as the United States and Canada is expected to drive the market over the forecast
period. Europe has also shown remarkable market growth and is focusing on strategies to
improve its market position such as early adoption of AI technology in the transportation and
logistics service sector.
KEY INDUSTRY PLAYERS: Upgrading of Product Transportation and Logistics Services
Portfolio to Drive Competition in the Market
C.H. Robinson, headquartered in Minnesota, U.S., is establishing a third-party logistics service
providing freight transportation services. It operates through North American Surface
Transportation, Global Forwarding, Robinson Fresh, Managed Services, and Other Surface
Transportation segments. The company offers logistics, intermodal transportation, and freight
forwarding services, organizes air shipments, and provides door-to-door services. In 2021, the
company handled approximately 20 million shipments, with 100,000 customers and 85,000
contract carriers, including contracted motor carriers, railroads, and ocean and air carriers. It
operated throughout North America, South America, Europe, Asia, and the Oceanic.
The company also provides transportation and logistics services, such as freight consolidation,
supply chain consulting, customs brokerage and analysis, emission analytics, optimization, and
reporting. In addition to transportation and logistics services, the company also provides sourcing
services under the trade name Robinson Fresh, which consists of marketing, buying, and selling
fresh fruits, vegetables, and other value-added perishables.
FedEx is a U.S.-based company providing transportation, logistics, and other business services.
It primarily operates through four segments: FedEx Ground, FedEx Express, FedEx Services,
and FedEx Freight. Its fleet comprises 697 aircraft working with 650 airports. The company has
presence in around 220 countries globally. FedEx is one of the world's most significant transport,
logistics & courier companies, with main cargo hubs in the U.S. and Hong Kong. The company
also looks after several business logistics & supply chain managements for the U.S. government
and has operations & presence in more than 200 countries.
KEY INDUSTRY DEVELOPMENTS:
February 2023: FourKites and RCS Logistics announced a partnership to provide RCS
customers with a one-stop service that provides complete visibility into their shipments across
ocean, water and air, intermodal and over-the-road (OTR). Using FourKites' real-time supply
chain data, RCS's internal teams and customers benefit from automatic real-time visibility into
the status and location of transit and resting shipments worldwide.
November 2022: A.P. Moller –Maersk launched a new ocean shipping service, Shaheen Express.
It will rotate between Mundra, Pipavav, Jebel Ali, Dammam, and Jebel Ali and back to Mundra,
creating a stable and reliable service for the India-UAE-Saudi Arabia corridor. The new service
will primarily address the rising demand for customers trading between the Indian and the Gulf
markets.
October 2022: DHL Supply Chain expanded its logistics service by offering a new solutions
suite for electronic waste recovery management. The new circular supply chain solution helps
companies in enabling appropriate reprocessing, reuse, or recycling of used electronic parts such
as touchscreens, processors, computer modules, or tech assets. By implementing this solutions
suite, companies can reduce their environmental impact and avoid the loss of scarce raw
materials.
June 2022: FedEx Corp and supply chain visibility platform FourKites announced a strategic
alliance to make supply chains smarter by bringing comprehensive and highly granular visibility
into multi-modal and multi-carrier operations with the deep network and rich insights of their
combined networks
January 2021: C.H. Robinson announced a new technology center in Cork (Ireland), delivering
personalized solutions for shippers and carriers with the industry’s premier technology built for
and by supply chain experts. This expansion is a commitment by the company to invest in the
industry- technology to accelerate the pace of innovation and provide best-in-class technology
and services to customers and carriers.
The Setting of Global Transportation Systems
1. Transportation in the Fordist Era (1920-1970)

The adoption of the assembly line epitomized the Fordist era as the dominant form of industrial
production, an innovation that substantially benefited transportation. The internal combustion
engine, or four-stroke engine by Daimler (1889), which was a modified version of the Diesel
engine (1885), and the pneumatic tire (1885) by Dunlop made road vehicle operations faster
and more comfortable. Compared with steam engines, internal combustion engines have a
much higher efficiency by using a lighter fuel; petrol. Petrol, previously perceived as an
unwanted by-product of the oil refining process, which was seeking kerosene for illumination,
became a convenient fuel for the emerging land transport system. Initially, diesel engines were
bulky, limiting their use to industrial and maritime propulsion, a purpose which they still fulfill
today.

The internal combustion engine permitted extended flexibility of movements with fast,
inexpensive, and ubiquitous (door-to-door) transport modes such as automobiles, buses, and
trucks. Mass-producing these vehicles changed the industrial production system considerably,
notably by 1913, when Ford began producing the Model T car using an assembly line. From
1913 to 1927, about 15 million Ford Model Ts were built, making it the second most-produced
car in history behind the Volkswagen Beetle. Economies of scale realized along the assembly
line were passed on to the consumer, making the automobile even more affordable and popular.
The rapid diffusion of the automobile marked an increased demand for oil products and other
raw materials such as steel and rubber. This led to the creation of large manufacturing clusters.

Economies of scale also improved transportation in terms of capacity, which enabled it to carry
low-cost bulk commodities such as minerals and grain over long distances. However, the process
was slow as cargo ships required large amounts of labor to be loaded and unloaded. This
technical limitation informally imposed a limit of 10,000 deadweight tons to break-bulk cargo
ships that would remain as such until containerization began in the late 1950s. Still, the
gradual growth of international trade, particularly after World War II, gave a strong impetus
for shipbuilding. The end of the war left an ample supply of military cargo ships, namely Liberty
Ships, which could be cheaply used for commercial purposes and became the workhorses of
global trade until the 1960s. Oil tankers are a good example of applying the principle of
economies of scale to transport larger quantities of oil at a lower cost, especially after WWII,
when global demand surged. Maritime routes were thus expanded to include tanker routes,
notably from the Middle East, the dominant global oil producer. The long distances in the oil
trade favored the construction of larger tankers. In the 1960s, tanker ships of 100,000 tons
became available, to be supplanted by VLCCs (Very Large Crude Carriers) of 250,000 tons in
the 1970s and by the ULCCs (Ultra Large Crude Carrier) of 550,000 tons at the end of the 1970s.

What remained a challenge was the loading and unloading of cargo, which remained unchanged.
Loading items such as amphorae, barrels, bags, or crates was slow and labor-intensive.
Unitization, where batches of break-bulk cargo could be combined into one handling unit, was
difficult to achieve because of the volume and weight limits that could be handled manually.
Since antiquity, amphorae were used as load units but had limitations for carrying goods other
than bulk. Technical advances, such as using ropes for bundling cargo, provided some
improvements, but methods and productivity remained similar. From a material handling
perspective, a port of the late 19th century would be difficult to differentiate from a port of the
17th century. Loading and unloading a ship could easily account for up to three-quarters of the
total maritime transportation costs.

The pallet became the first effective load unit, particularly after the invention of the forklift in
1937. Pallets permitted better handling of goods as they could be more effectively managed and
stored. By the early 1930s, about three days were required to unload a rail boxcar containing
13,000 cases of unpalletized canned goods. A similar task could be done in about four hours
with pallets and forklifts. During World War II, however, the massive adoption of pallets as
the standard supply unit load by the US military permitted fast handling of goods and
turnaround of transport assets. This underlined the growing importance of efficient
transportation systems in the competitiveness of nations, let it be for commercial or military
gain.

Although the first balloon flight took place in 1783, no practical applications for air travel were
realized until the 20th century due to the lack of propulsion. A lighter-than-air device could be
designed, but steering could not be readily achieved. The first propelled flight was made in 1903
by the Wright brothers and inaugurated the era of air transportation. The initial air transport
services targeted carrying mail since it was a type of freight that could be easily transported
and proved to be profitable. 1919 marked the first commercial air transport service between
England and France, but air transport suffered from limitations in terms of capacity and
range. Several attempts were made to develop dirigible services, with the first Atlantic crossing
by a Zeppelin airship in 1924. However, such technology was almost entirely abandoned in 1937
after the spectacular Hindenburg accident, in which the hydrogen-filled reservoirs of the dirigible
burned. The 1920s and 1930s saw the expansion of regional and national air transport services in
Europe and the United States with mass-produced propeller aircraft such as the Douglas DC-3.
Through the first half of the 20th century, the Atlantic remained an important technical challenge
for long-distance transportation modes since it linked large markets in Europe and North
America. The post-World War II period was the turning point for air transportation as the range,
capacity, and speed of aircraft increased, as well as the average income of the passengers. A
growing number of people were thus able to afford the speed and convenience of air
transportation. Applying the gas turbine principle led to the development of jet engines. 1952
marks the beginning of commercial jet services with the Comet, but a design flaw grounded
the plane the following year. In 1958, the first successful commercial jet plane, the Boeing
707, entered into service and revolutionized international movements of passengers, marking
the end of transoceanic passenger ships (liners) and replacing propeller planes for long-
distance services. The jet plane enabled the setting of time-dependent trade relations between
producers across the world (such as electronics), created a long-distance market for perishables
(fruits, vegetables, flowers), and supported the development of mass tourism.

Basic telecommunications infrastructures, such as the telephone and the radio, were mass-
marketed during the Fordist era. However, the major change was the broad diffusion of the
automobile, especially from the 1950s, as it became a mass consumption product and when the
first major highway systems, such as the American Interstate, began to be built. No other modes
of transportation have so drastically changed lifestyles and the structure of cities, notably for
developed countries. It created suburbanization and expanded some of the largest cities to areas
larger than 100 km in diameter. In dense and productive regions, such as the Northeast of the
United States, Western Europe, and Japan, the urban system became structured and
interconnected by transport networks to the point that it could be considered one vast urban
region; the Megalopolis.

2. A New Context for Transportation: The Post-Fordist Era (1970-2000s)

Among the significant changes in international transportation from the 1970s are the massive
development of telecommunications, the globalization of trade, more efficient distribution
systems through the application of logistics, and the considerable development of air
transportation.

Telecommunications enabled growing information exchanges, especially for the financial and
service sectors. After 1970, telecommunications successfully merged with information
technologies. As telecommunications became widely available household conveniences, they
also became a medium of doing business, in addition to supporting and enhancing other
transportation modes. The information highway became a reality as fiber optic cables gradually
replaced copper wires, multiplying the capacity to transmit information between computers.
Global submarine cable networks, which have existed since the setting of telegraph networks in
the 19th century, were overhauled with fiber optics to become the backbone of the global
telecommunication system, particularly the Internet. However, this growth was dwarfed by the
tremendous growth in the capacity of microprocessors, allowing for the diffusion of personal
computing devices, which are now fundamental components of economic and social activities
worldwide.
A satellite communication network was also created to support the growing information
exchanges, especially for television images, but remained of marginal use because of lower
bandwidth. Local cellular networks emerged from this wireless technology that expanded and
merged to cover whole cities, countries, regions, and continents. Telecommunications have
massively diffused and reached the era of individual access to the Internet, portability (cellular
phones), and global coverage, enabling global media systems.

The diffusion of railways in the late 19th and early 20th centuries considerably improved the
efficiency of inland transportation. However, the growth of trade and the economies of scale
provided by railways placed additional pressures on ports where the interface between maritime
and inland transport systems was the bottleneck. Containers were introduced by the American
entrepreneur Malcolm McLean, who initially applied containerization to land transport but saw
the opportunity to use container shipping as an alternative to acute road congestion in the early
1950s before the first Interstate Highways were constructed. The first containership (the Ideal-X,
a converted T2 oil tanker) set sail in 1956 from New York to Houston and marked the beginning
of the era of containerization.

Before the introduction of containers, loading and unloading at ports could account for between
50% and 70% of the cost of break bulk shipping. Containers, the main agents of the modern
international transport system, enable increased freight transport flexibility, mainly by reducing
transshipment costs and delays; handling a container requires about 25 to 40 times less labor than
its equivalent in bulk freight. Loading and unloading operations that required days could now be
done in a matter of hours. The first containerships spent about 18% of their operational time at
ports, while a breakbulk ship would spend 40%. From a cost perspective, loading and unloading
cargo went from about $5 per ton for breakbulk cargo to about 15 cents per ton with containers.
This enabled further the unitization trend brought forward by the pallet, particularly since pallets
could be loaded into containers. The initial attempts at containerization thus aimed at reducing
maritime transshipment costs and time. Later on, the true potential of containerization became
clear when interfacing with other modes became an operational reality, mainly between
maritime, rail, and road transportation.

In 1960, the Port Authority of New York and New Jersey, foreseeing the potential of
containerization, constructed the first specialized container terminal next to Port Newark; the
Port Elizabeth Marine Terminal. Unlike conventional break bulk operations that require storage
sheds adjacent to piers, containerization requires large paved open spaces for container storage.
The Sea-Land Company established the first regular maritime container line in 1966 over the
Atlantic between North America and Western Europe. It took over a decade for the container to
become a standardized form of maritime shipping as ports and shipping lines were initially
reluctant to provide the required capital investments. By the early 1980s, container services with
specialized ships (cellular containerships, first introduced in 1968) became a dominant aspect of
international and regional transport systems, transforming the maritime industry. However, the
size of those ships remained constrained for 20 years by the size of the Panama Canal, which de
facto became the Panamax standard. In 1988, the first post-Panamax containership was
introduced, indicating the will to expand economies of scale in maritime container shipping. The
container revolution was concomitant with globalization by supporting an increasingly complex
system of trade involving parts, manufactured goods, and even commodities. Few other transport
innovations had such an impact on the global economic landscape.

Air and rail transportation experienced remarkable improvements in the late 1960s and early
1970s through massification and network developments. The first commercial flight of the
Boeing 747 between New York and London in 1969 marked an important landmark for
international transportation, mainly for passengers. Still, air freight became a significant
economic function of air transportation in the 1980s. Depending on the configuration, this
giant plane could transport up to 400 passengers. It permitted a considerable reduction of
airfares through economies of scale and opened intercontinental air transportation to the
mass market. Attempts were also undertaken to establish faster-than-sound commercial services
with the Concorde (1976; flying at 2,200 km/hr). However, such services proved unprofitable,
and no new supersonic commercial planes have been built since the 1970s. The Concorde was
retired in 2003, but the setting of supersonic passenger services remains a market that can be
developed. At the regional level, the emergence of high-speed rail systems provided fast and
efficient inter-urban services, notably in France (1981; speeds up to 300 km/hr) and Japan (1964;
Shinkansen; speeds up to 275 km/hr). Later, high-speed services were expanded in Europe, and
more recently, high-speed rail systems were constructed in China, South Korea, and Taiwan.

3. The Setting of Global Mobility Systems (2000s-)

While transportation allowed the trade of raw materials and finished goods, it also allowed
making better use of the comparative advantages of regions. In the first half of the 20th century,
the setting of regional manufacturing clusters specializing in sectors such as transport equipment,
textiles, or foodstuff became prevalent. By the second half of the 20th century, trade
liberalization and the formation of economic blocs allowed for the fragmentation of production
at the global level. A conjunction of trade liberalization, containerization, and technological
innovations modified the operational scale of transport systems and their network structure.
The setting of gateways and hubs became particularly prevalent, leading to an extended scale
for transportation that reflects commercial considerations less subject to political or
regulatory constraints. This particularly impacted air transport systems with a network
hierarchy of services ranging from regional services with hub-and-spoke networks to globally
interconnected city pairs.

The increasing efforts to manage freight reinforced the development of logistics and global
supply chains. Major transportation equipment manufacturers, particularly car manufacturers,
became dominant actors of transnationalism. Even if the car is not an international transport
mode, its global diffusion has expanded the global trade of vehicles, parts, raw materials, and
fuel (mainly oil). Car production, which used to mainly occur in the United States, Japan, and
Germany, became a global industry with a few key players in well-integrated groups such as
Ford, General Motors, Hyundai, and Toyota. Car manufacturing is a supply chain-intensive
industry associated with the circulation of parts within manufacturing clusters. Although
manufacturing clusters emerged in the first half of the 20th century, by the 21st century, clusters
became prevalent across a wide range of activities and locations. Accessibility and connectivity
offered by intermodal transportation allowed for setting logistics clusters near terminal facilities.
These clusters became the regulators and coordinators of distribution systems spanning large
regions.

Transportation systems at all scales are being transformed by their integration with information
technologies, a process also known as the digitalization of mobility, leading to a higher level of
integration between modes as well as the automation of transportation operations. This relates to
the Fourth Industrial Revolution, impacting mobility and global value chains. To remain
competitive, corporations created in earlier parts of the Industrial Revolution needed to
continuously adapt their business model, considering technological innovations and the business
opportunities they provided. Therefore, the historical evolution of transportation is strongly
associated with the evolution of economic, social, and managerial processes.

The global transportation system is marked by growing infrastructure, economic and

environmental constraints, leading to the search for alternatives. Transportation modes have a
dependence on fossil fuels, and second, road transportation has assumed dominance and is
increasingly congested. The rise in oil prices since the 1970s induced innovations in transport
modes, reduced energy consumption, and the search for alternative energy sources (electric cars,
adding ethanol to gasoline, hybrid cars, and fuel cells). Decarbonization has become the
framework articulating the transportation energy transition. Still, the reliance on fossil fuels
continues with robust growth of motorization in developing economies.

Since the onset of the Modern Era in the 15th century, transportation has played a significant role
in the development of the global economy. Like most technological innovations, transportation
innovations take place in waves that reflect the cumulative development of infrastructures.
Although each wave played out differently, developed economies such as Europe and the United
States first saw the setting of canal systems, which were then complemented by rail transport
systems. Later, the internal combustion engine supported the development of extensive road
systems. From the 1950s, air transport systems developed to service regional and international
markets. With containerization, the global transportation system further evolved to support
global supply chains, and digitalization allowed new forms of productivity and efficiency
improvements.

I. Modes of Transportation in Global Supply Chains

A supply chain is nothing without its transit. For all the efforts stand still if a product doesn’t get
delivered to its intended recipient – and, for such a titular mechanism to work, an organization
finalizes various modes of transportation in supply chain management to ensure that they
maintain the key performance metrics which actively drive its revenue. For an enterprise to
choose one or multiple modes of logistics options, its key parameters should cover efficiency,
scalability, robustness, visibility & innate quality to work seamlessly, even in the face of
contingencies.

What Are the Different Modes of Transportation Used in Supply Chain Management?

1. Trucking
Most goods are shipped by truck completely or at some point during the shipping. Trucking is
the most flexible of all modes of transportation. It is categorized by “Full Truck Load” (TL)
when the entire truck is hired and delivered directly, or “less-than-truckload” (LTL) which
generally includes integrating orders to increase utilization of the truck. Presently, Canada is
facing a serious issue which is shortage of qualified drivers. Demand for drivers continues to
increase every year, and the average age of drivers is increasing. The trucking industry will face
challenges to make driving more attractive to entice new workers into trucking jobs.
The most used mode of transport which allows extended delivery services for other types of
transportation. For improving efficiency, profitability, service level, and productivity;
transportation companies cooperate with fellow transportation companies by creating efficient
transport planning, extending portfolio and vehicle capacity, and strengthening market position
in the region. This definition is called horizontal cooperation. As road transportation is most used
globally by organizations, policymakers insist on shifting companies to more environmentally
friendly modes of transportation such as inland waterways or rail carriage.

2. Railroads
Rail can be a very cost-effective means of transporting goods for long-distance travels. Goods in
containers, or products that are bulky and heavy are ideal for train transport. Canada has a very
old and well-established rail system. It ships products including cars, fertilizer, food and
beverages, forest products, grain, metals and minerals and petroleum products. Often, large
manufacturers locate themselves near rail lines for easy shipment of raw material into and
finished goods out of their facilities. Compared to trucking, shipping by rail is very energy
efficient, and removes many trucks from congested highways.
The essential and efficient mode of transport, among other types, links to other carriers by using
containers. This mode increased over decades and continues to grow.
3. Airfreight
For goods that are expensive, small and light, and urgent air shipping may be a good choice. Air
carriers charge by a combination of the weight and size of the shipment. This mode of transport
is generally used when speed is more important than cost. Shipping by air is very reliable.
Firms may want to consider the environmental impact of regular use of air shipping. The
airfreight mode of transport is steadily growing. Also, the airfreight sector is changing
direction to integration and cooperation with other modes of transportation such as water and
inland carriages. This action will allow companies to provide services like Just-In-Time. Also,
air transport is a part of the intermodal system.
4. Waterway
This is a very common way of shipping goods. The goods that travel by water include chemicals,
stone, cement, sugar, coal and other heavy commodities.
The Great Lakes St. Lawrence Seaway System is a 3,700 kilometer marine highway that runs
between Canada and the United States. Since 1959, it is serving many industries to ship iron ore,
coal, limestone, steel, grain and cement. The cost for shipping by waterways is economical. Most
low-cost products are shipped by waterways.
For the international movement of freight, maritime transport performs a dominant role in the
supply chain. Service quality such as real-time information or tracking systems is more important
than delivery price for the logistics industry. The water industry has three types of operation:
industry, liner, and tramp shipping. Industry shipping supplies raw materials like natural gas,
which requires high-pressure containers. Liner shipping conveys standardized containers
partially or comprising manufactured products from various shippers and different
consignments. Liner Shipping Companies (LSCs), which offer this type of operation, invest in
ships, containers, and cutting-edge technology for improving customer satisfaction. Manage
capacity is a central key point in the liner shipping operation. Tramp shipping has irregular
schedules, sporadic routes, and prices to maximize profit with long-term contracts. Liner
shipping is similar to bus services, while tramp shipping is the same as taxi services.
5. Pipelines
Crude oil, natural gas and other petroleum products are shipped by pipelines. Once the pipelines
are built, the cost per kilometer for shipping is very inexpensive. There is a lot of opposition and
concern over new pipelines because of worry over spills and leaks that may contaminate land
and waterways.

Characteristics of Mode of Transportation

Mode Characteristics

Road Advantages: direct access to consignee place and consignor; high accessibility, mobility, and
availability level; cheapest investment funds; frequency, and dependability.

Disadvantages: limited and low capacity for moving large quantities of freight; low safety
and speed.

Rail Advantages: Carrying capacity is high, energy consumption is low, and impact of weather
conditions is low, good on speed, capability to transfer oversized freight.

Disadvantages: time-consuming for organizing goods, complicated and high cost of

maintenance, equipment requirements, and difficult flexibility to manage urgent demand.

Air Advantages: High-speed delivery to far destinations; high security; risk of damage products
is low; accessibility and flexibility; the great frequency for regular move products from one
location to the next; connect national and international distance.

Disadvantages: Delivery fee is high; capacity constraints; required other modes of transport
for moving goods to the airport; lack of direct access to consignees and consignors; manage
demand; impact weather factors that affect low schedule reliability; cost of delay can be
significant; air traffic.
 Water Advantage: Cheap price and has a high capacity for bulky freights.

Disadvantage: Products take a long time to arrive; weather conditions affect schedule.

Pipeline Advantages: high capacity; the impact of weather conditions is low; operation fee is cheap;
conveyance is continuous; excellent dependability.

Disadvantages: Supervision is hard; high cost of infrastructures and ongoing maintenance

and inspection.

II. Logistics and Transportation Cost Optimization

What is logistics cost reduction?

The concept of ‘logistics cost reduction’ concerns the tactics and procedures companies use to
cut costs linked with transporting, storing, and controlling goods in their supply chain. The
objective of lowering logistics costs isn’t solely about cutting back on spending, but also about
simultaneously preserving – or even stepping up – the game in terms of how well your logistics
operations run. You may have to fine-tune several supply chain elements like transit
mechanisms, storage facilities, stock control, and order execution.

The 8 Practical Ways of Reducing Transportation and Logistic Cost

If freight is a crucial part of your company, your company will continue to face increasing
charges throughout the whole of your transport logistics. In addition to the regular fuel and
machinery market price rises, suppliers face many budgetary pressures in several directions.

For companies, reducing transportation logistics costs has always been the number one priority.
There are several ways to optimize transportation costs, improve the supply chain procedures and
save money for businesses.

Strategies for decreasing logistical expenses can range from streamlining inventory levels,
revising smarter shipping networks, providing better processes, improving relationships between
suppliers and third parties, etc.
1.Get Creative ideas – Don’t Rely On Single Modes
Becoming much more flexible and adaptable in your transport modes can really help to offset
losses in ways you may not have taken into account. Freight shipping by sea is usually much
cheaper than air. However, the time it would take could eventually cost you sales.

Try to look at transport costs for various modes but don't be too worried about making the
switch if necessary. Intermodal transport would be another option available for you that could
not have previously considered if you typically rely on single modes.

Rail transportation is considerably cheaper than trucking, but perhaps a unique combination of
these two could be the key to staying on time and in a budget. Another way to help with the
mode’s flexibility is to reduce your use of more expensive shipping options.

If your buyer only needs part of what you ship as early as possible, you will probably expedite
the shipment for a whole load. However, you can bring down the costs by only expediting the
freight that has to get there quickly and using cheaper modes for the remaining portion of the
shipment.

2. Explore Shipping Consolidation Opportunities

The Less-than-truckload (LTL) shipment is an economical option for smaller weights. And if
you can try to consolidate large shipments of different products or shipments for all buyers into
one shipment, you would save cash using full load shipping (FTL).

3. Consider warehousing services

If you are shipping a lot of goods from point A to point B, especially over a long distance, you
can store products closer to your customers and thus drastically reduce transport costs.

You must first and foremost understand the security considerations. Make sure that the
operation of your warehouse is safe - Be securely proactive. Do everything to avoid expensive
injuries. Try as much as possible to avoid government fines.

If you have several security problems, the government can close down your operation. Get a
safety manager who would be accountable for safety and organize ongoing safety training.

4. Use Automatic container loading system to Reduce Labor Costs

One of the best ways to reducing labor cost, avoid product damages, save costs of production and
still be more productive is using our Automatic container loading system.

Analyze the reduction of labor for any warehouse operation. Each project should concentrate
on the costs of labor. Labor management software systems are available which can help
manage warehouse work.

Creating incentive programs for employees in the warehouse also work best. Try mobility in the
warehouse in your four walls. Overhead reduced. And this increases overall individual
productivity; less staff and less equipment needed.
5. Use Preventive Maintenance
If you want to cut costs on just about any equipment, preventive maintenance is used to reduce
logistics costs - Emergency or breakdown maintenance don’t work. It can be expensive in
working hours, customer support, fatal accidents (safety): the container is being unloaded,
and the forklift dies.

6. Focus On Logistics Cost Reduction

The simple best logistics cost reduction of supply chain tip is this: work together with suppliers
to reduce costs. Sometimes suppliers can cover some direct logistics costs. Try to create a
consortium of buyers (a buyer and their suppliers) to purchase the necessary logistics supplies
(i.e., Transportation fuel) at a lower cost due to buying in larger quantities.

Start inviting suppliers with a structured agenda at your facility. One topic would be to
analyze your goods and present logistics cost reduction ideas. The supplier is perhaps the
expert in their field of expertise.

Suppliers can surely help by continuing to work with you in a win-win cost savings program.
Keep a part's function, but drastically reduce component costs, never jeopardize quality.

7. Keep Customers Happy

Keeping logistics support costs incredibly low per order involves customers to be happy (and this
Fast-Track customer retention customers). One of the best supply chain cost reduction technique
is exceeding customer expectations; companies can keep up and effectively manage the
enormous burden of reducing logistics costs.

Because of this high correlation between client satisfaction and overall cost drastic reduction,
customer service should also be assessed accordingly for changes in logistics costs.

8. Make Better Uses of Available Storage Space and Increase the Storage Density
Clearly identify and try to eliminate spaces. Always tends to increase the storage density in bins
and racks by improving the use of vertical space. Lowers the damage to the shipping containers
by eliminating movement during transportation.

Try to make better uses of available storage space to increase the density of storage. Make
efforts to encourages organized operations that are linked directly to labor, efficiency, use of
assets and accuracy of inventories.

III. Challenges and Strategies in Managing Global Logistics

As per a Fortune Magazine report, almost 94% of the Fortune 1000 companies faced pandemic-
induced supply chain disruptions. Most logistics leaders experienced these disruptions first-hand,
as COVID-19 exposed the weaknesses of traditional workflows in the existing supply chain
logistics.

For instance, lack of upstream and downstream visibility, legacy demand management
processes, lack of resilience to demand variability, and unexpected outages due to reliance on
manual effort across logistics operations had shattered supply chain during the first wave of
lockdowns.

It became clear that companies needed to optimize supply chain management and
logistics (SCML) quickly. For many, the answer came from a new generation of SAP for
logistics and non-SAP tools, which promised to address challenges such as inconsistent tracking
and increasing transportation costs. These tools enabled them to build truly resilient and agile
supply chains.

While these tools are flexible and can adopt to the enterprise’s varying needs, businesses must
understand the ups and downs of extensively tweaking software capabilities to fit their needs.
While solution providers like SAP provide industry-specific best practices content to help
organizations thrive on the benefits of standardization, most will need to find a middle path
between standardization and customization to compete effectively in today’s business ecosystem.

Understanding the logistics industry’s central challenges

While the pandemic affected the logistics sector deeply, many of the issues that surfaced were
present beforehand. These persistent issues include:

Increasing transportation costs

While the Russia-Ukraine conflict has triggered the recent volatility in fuel prices, transportation
costs have increased over the last few years. Several trucking businesses predict that the rates of
annual contracts will rise by double digits this year because of strained capacity.

In addition, Europe suffers from a short supply of heavy goods vehicle drivers, with a
shortage of around 400,000 throughout their land. Similarly, road transportation rates have
increased by 23% in the US amidst rising freight spending and increased input costs for
logistics players. In sum, transportation costs are going up univocally across the globe,

Inconsistencies in tracking

Despite the benefits of IoT, many brands continue to follow manual tracking processes. Using
spreadsheets and multiple software for the same activity decreases workforce productivity and
reduces efficiency.

Limited visibility of shipments

Modern-day consumers expect visibility of their orders. However, a lack of visibility throughout
your supply chain can cause issues that can seriously hamper your goods' flow. Unnecessary
delays become the norm without end-to-end transparency, as do warehouse operational
inefficiencies.

Fragmented communication
A logistics supply chain begins with manufacturing and ends with the final product getting
delivered to the customer. Unfortunately, OEMs often suffer from a lack of an integrated
communication channel. This deficiency leads to fragmented communication that adversely
impacts delivery times and efficiency.

Empty miles

Empty miles, also known as non-revenue miles, have plagued the logistics industry for years.
They lead to unnecessary cost increases, adverse environmental impacts, and negatively affect
the efficiency of both carriers and shippers.

Delivery delays

The spiraling effect of the pandemic caused factories to shut down and led to a series of labor-
shortage-related issues. In addition, they have siloed and fragmented legacy processes that
negatively impact the delivery times.

For example, customers must wait for up to twelve months to get their hands on a Tesla Model
X or Model Y. Smartphone shipments have also been seriously delayed because of chip
shortages; several brands have delayed new launches and greatly increased waiting times for
people pre-ordering their products.

Logistic Strategy

Having a sound global distribution strategy in place will ensure your customers based overseas
receive the products they order at the right time and in good condition. By offering international
delivery, you can expand your customer base across the world.

The transportation, handling, and storage of raw materials and finished goods are vital elements
of supply chain management, and how these activities are conducted can affect the quality of the
products and the end customer experience.

Strategic logistics planning ensures that the end-user receives their product at the estimated time
and at an affordable rate. With improved service delivery, you will also achieve greater customer
satisfaction.

What is a logistics strategy?

A logistics strategy encompasses strategic, operational, and tactical levels of logistical planning.
The supply chain strategy should include warehouse facility locations, customer service levels,
and inventory and transportation decision-making.

Customers are the most important. Ensure that your logistics planning focuses on your
commitment to making deliveries reliable and consistent.

1. Identify and track KPIs of delivery time, inventory management, and order accuracy
Building trust over time with your customer base is vital to customer brand loyalty. Key
performance indicators (KPIs) help to assess, analyze, and track manufacturing processes. Start
by first identifying the KPIs you can use and this could be a combination of a few metrics,
including inventory accuracy, customer order cycles, transportation and warehousing costs or
number of shipments.

By measuring these KPIs, you can evaluate your long-term performance and your progress,
maintain high standards and identify weak areas. This way, you can continually improve your
company operations, productivity and performance. When customers are happy with your
delivery service, they will order your products again.

2. Leverage digital technologies

Supply Chain Visibility (SCV) provides technology that offers real-time data. With Internet of
Things (IoT) sensor technology, cloud services, artificial intelligence, robotics and analytics, you
can track shipments, and inventory movements in warehouses. Digitalization, firstly, automates
the data gathering and entering process, and so removes the effort, time and cost involved in
manually needing to do so.

These digital technologies also allow you to link and combine data from different sources
across the supply chain in order to be able to extract insights, identify systemic issues, find
solutions to these problems and modify existing strategies. With advanced analytics, you can
also accurately forecast demand and gather the resources required to meet these demands.
With digital systems, it is now possible to track and trace items as they make their way across the
globe. And this lets you provide your customer with real-time updates – for example, when their
product is first mailed from the store or when it arrives in the port of their country. Fostering
trust in your brand increases customers transparency.

3. Improve supply chain transparency and traceability

Supply chain transparency focuses on mapping the whole supply chain while traceability looks at
the individual purchase orders progressing through the supply chain. With real-time data, you are
immediately made aware of any disruptions along the supply chain – which improves efficiency.
Both transparency and traceability enhances trust in the company and its product, ensuring
customer loyalty. Inspiring consumer trust by sharing and explaining relevant procedures for
delivering their products is also of great importance.

4. Priorities customer satisfaction to build a strong reputation

Satisfied customers will become loyal customers, and they become your company’s biggest
promoters. They attract new customers with referrals and recommendations. Customer
satisfaction will also let you stand out from your competitors, help you make better product
decisions and ultimately, increase sales.

Use surveys to find out what your customers want, and manage their expectations. Allow your
customers to interact with you on social media platforms. By answering queries, addressing
any issues and making customer service an effortless process – you incrementally build a
positive brand experience for your customers.

5. Outsource logistics to maximize efficiency

When first starting out and orders are small, you might carry out the logistics in-house, or on
your own. As your order numbers increase and your company scales up, it may not be feasible to
continue with this arrangement. When you outsource your logistics, you can save time, deliver
goods in a cost-efficient manner and gain access to expertise.

By outsourcing your logistics to a third-party logistics provider, you can also free up your
resources to focus on other functions, like marketing and branding, or expanding overseas –
in order to further propel your business.
Conclusion
Logistics and transportation are an essential component of supply chain management. It involves
the planning, carrying out and management of goods, services, and information from the point of
origin to the point of consumption. Logistics aligns the complex pattern of traffic and
transportation, shipping and receiving, import and export operations, warehousing, inventory
management, purchasing, production planning, and customer service. Companies see logistics as
a critical blueprint of the supply chain. It is used to manage, coordinate and monitor resources
needed to move products in a smooth, timely, cost-effective and reliable manner.

By creating partnerships with suppliers, shipping services and warehousers, and connecting these
services through automated systems, the logistics of getting products to the consumer are
improved with reduced overhead costs and faster delivery. Understanding how the logistics
system theory works require strategic planning when calculating what will be needed while
focusing on obtaining materials and managing how quickly products are produced to help ensure
swift delivery to the consumer.

Simplifying communication and services between multiple departments help create a workflow
blueprint that reduces costs by increasing visibility and improving the overall understanding of
company needs. Cost savings is created by reducing warehousing costs and purchasing based on
supply forecasts, better inventory management, reliable shipping and timely delivery to the end-
user.
References :
-https://www.fortunebusinessinsights.com/transportation-and-logistics-services-market-107357
-https://3scsolution.com/insight/modes-of-transportation-in-supply-chain-management
-https://ecampusontario.pressbooks.pub/globalvaluechain/chapter/4-2-modes-of-transportation/
-https://kodistransportation.com/logistics/cost-reduction
-https://www.hcltech.com/blogs/central-challenges-logistics-2024-and-how-solve-them-right-
tools
-The Central Challenges For Logistics In 2024 - And How To Solve Them With The Right Tools
Georgy Norkin
AVP, SAP Practice, HCLTec
-https://www.dhl.com/discover/en-au/logistics-advice/essential-guides/global-logistics-strategy-
boost-international-sales