Page 179 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes Specialty carriers include package haulers such as Federal Express and United Parcel Service.
These firms focus on specific requirements of a market or product. Despite the aforementioned
problems, it is quite apparent that highway transportation will continue to function as the
backbone of logistical operations for the foreseeable future.

Water Transport

Water is the oldest mode of transportation. The original sailing vessels were replaced by
steamboats in the early 1800s and by diesel power in the 1920s. A distinction is generally made
between deep-water and navigable inland water transport.
The main advantage of water transportation is the capacity to move extremely large shipments.
Water transport employs two types of vessels. Deep-water vessels, which are generally designed
for ocean and great lakes use, are restricted to deep-water ports for access. In contrast, diesel-
towed barges, which generally operate on rivers and canals, have considerably more flexibility.
Water transport ranks between rail and motor carrier in respect to fixed cost. Although water
carriers must develop and operate their own terminals, the right-of-way is developed and
maintained by the government and results in moderate fixed costs compared to rail and highway.

Notes The main disadvantages of water transport are the limited range of operation and
speed. Unless the origin and destination of the movement are adjacent to a waterway,
supplemental haul by rail or truck is required.

The capability of water to carry large tonnage at low variable cost places this mode of transport
in demand when low freight rates are desired and speed of transit is a secondary consideration.
Typical inland water freight includes mining and basic bulk commodities such as chemicals,
cement, and selected agricultural products. In addition to the restrictions of navigable waterways,
terminal facilities for bulk and dry cargo storage and load-unload devices limit the flexibility of
water transport. Labour restrictions on loading and unloading at docks create operational
problems and tend to reduce the potential range of available traffic. Finally, a highly competitive
situation has developed between railroads and inland water carriers in areas where parallel
routes exist.

Pipelines

It operates on a twenty-four-hour basis, seven days per week, and is limited only by commodity
changeover and maintenance. Unlike other modes, there is no empty “container” or “vehicle”
that must be returned. Pipelines have the highest fixed cost and lowest variable cost among
transport modes. High fixed costs result from the right-of-way, construction and requirements
for control stations, and pumping capacity. Since pipelines are not labour-intensive, the variable
operating cost is extremely low once the pipeline has been constructed. An obvious disadvantage
is that pipelines are not flexible and are limited with respect to commodities that can be
transported: only products in the form of gas, liquid, or slurry can be handled.

Air Transport

The newest but least utilized mode of transport is air freight. Its significant advantage lies in the
speed with which a shipment can be transported. A coast-to-coast shipment via air requires only
a few hours contrasted to days with other modes of transportation. One prohibitive aspect of air

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