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Transportation Mode Decision

The management of inbound transportation has migrated today from the purchase of a generic commodity to a complex decision involving a landscape of price and service options. Careful evaluation and selection, price analysis, aggressive negotiation, scope of value-added services offered, and a continuous search for cost reduction performed by knowledgeable personnel can affect substantial savings and improved services in the management of inbound freight.

Buyers must consider a number of performance characteristics when selecting the appropriate mode of inbound transportation. These characteristics must be matched with the type and quantity of product to be shipped, the capacities and capabilities of the transportation mode, and relevant cost issues.

Six transport mode performance characteristics drive any transportation selection decision.

Completeness

This characteristic refers to the ability of the transport mode to move inventory from one location to another without the use of other modes. The less frequently material is handled, the lower the transport cost and the shorter the delivery time.

Dependability

The degree of transport dependability is measured by the performance of a given mode in meeting anticipated on-time delivery. Dependability is critical in ensuring that planned inventory availability is delivered to schedule.

Capability

Capability refers to the ability of a given transport mode to accommodate a specific load. Characteristics such as product type (liquid, solid, bulk, or package), load weight, and load dimensions are important in deciding on materials handling equipment and mode of transport.

Frequency

This performance factor is a measure of the frequency with which a given transport mode can pick up and deliver goods. Generally, the shorter the transport interval, the greater the flexibility of the mode to respond to channel requirements.

Cost

There are several costs in transportation. The most obvious cost is the rate paid to the carrier for use of the mode. Other costs are labor and material handling to load and unload the transport medium, occurrence of spoilage and damage, insurance to protect against possible loss, and in transit inventory carrying costs.

Speed

Speed is the prime attribute of transportation. Speed enables the marketing utilities of time and place. Transportation speed can be defined as the time required to move products from the source to a terminal, load the products onto the transport vehicle, traverse terminal points, surcharges including fuel, and deliver the products to the receiving terminal.

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