Choosing the right transportation method

- Transportation accounts for 60% or more of the total cost of logistics. This means that more money is spent on transportation than is spent on warehousing, distribution center expenses, inventory management, and order processing combined. So this is a pretty important part of understanding logistics. Transportation moves goods and materials through your supply chain from one organization to another right up to the final customer. The primary methods or modes of transportation are truck, rail, air, and water. And each of these has its own place in the effective movement of goods. Trucks, for example, are usually at both ends of the transportation journey. The first to pick up the goods and the last to drop them off. When you have a lot of stuff to move a long distance you look to railroads for the answer. Raw materials and low price products are good examples of things usually transported by rail and they're usually moved in large quantities. However, railroads have very specific routes so they're not very flexible. And compared to trucks, they're also quite slow. When you want speed you usually think of air transportation. Travel by air is fast but it's also very expensive. Prime candidates for air shipment are products and components that are low weight and high value like electronic devices and computer chips. Water transportation is the key enabler of global commerce. Most goods move internationally on ocean carriers and world trade is dominated by container ships, tankers, and cargo ships. This is the low cost transportation option but it's also the slowest. It's important to understand each of these methods of transportation because most goods use more than one method when moving from their origin to their destination. And this is called intermodal transportation. For example, if a US company places a large order with a supplier in China the order usually moves from the Chinese factory through two ports and a regional distribution center before it arrives at the customer's warehouse or store. This could involve transportation by trucks, ship, railroad, and trucks again. That's a lot of movement. So what's your transportation network look like? A really good way to find out is to pick one specific product and trace its transportation routes from your suppliers to your customers. You may find opportunities to increase your efficiency and decrease your costs. Because transportation is such a huge part of logistics it's well worth your time.