The importance of transportation in physical distribution emanates from a variety of factors. Transportation confers â€˜time utilityâ€™ and â€˜place utilityâ€™ to the product; it determines the companyâ€™s customer service; it also has a crucial bearing on the other elements of physical distribution and marketing, like warehousing, inventory control and channel management. Finally, transportation is a very important cost element in most businesses.
Assessment of the Transportation Requirement
In the first place, a transport manager makes an assessment of the transport requirements based on the sales forecast, sales plan and schedules. He also watches the actual sales performance vis-Ã -vis the forecast and updates the transport requirements.
Routing has two dimensions:
The first one is the systematic assignment of territories to each production / supply points. Second the actual sequence in which a delivery vehicle should move and service the retail points. When a firm has more than one production location or supply point, it should clearly demarcate the marketing territory to be serviced by each location. Similarly, for each warehouse/stock point too, it should demarcate the territory. Transportation effectiveness depends very much on systematic assigning of territories to each source. When there is a strong need for drawing supplies from a source other than the designed one, it can be done, but only on the basis of strong justification.
Secondly, equal care should be taken in deciding the actual sequence a delivery vehicle should take in supplying stocks to the various retail points that come under its service territory. Intelligent routing covering both the above aspects is an integral part of effective transportation. Optimization of transport lead, reduction of transport time and optimization of costs are the objectives in effective routing.
Developing Operational Plans
The transport manager must work out detailed operational plans from the overall transportation plan. Detailed plans/schedules must be developed for each product and each and each supply point/warehouse, month-by-month and week-by-week. The plans must indicate the mode/ combinations of modes. They must also be properly dovetailed with the warehouse plans. Once the plan in all its details is ready, the task becomes one of creating the required transportation capacity and securing the required linkage between transportation schedules and warehouse space procurement.
Controlling Transportation Costs
1. As mentioned earlier, transport cost is a major element of distribution costs in most in most businesses, and it has been increasing constantly in recent years. As such, it is essential that the transportation costs are controlled tightly. Also, this has to be done without sacrificing the minimum guaranteed distribution service level to the channel and consumers. Savings in transportation can be realized by:
1. Optimizing the mix of the transport modes,
2. Reducing the transport lead and the lead-time through effective routing and other means, and
3. Eliminating multiple and wasteful transfer, and handling of products.
The transport controller has to have an overall appreciation of the whole range of physical distribution activities and the costs thereof. He cannot remain confined to the narrow role of freight rate negotiator, or a transport liaison man. He has to view transport as a total back-up capability, supporting the marketing function and a source of competitive advantage for the firm in the market place.