Chapter 1 transportation s role

HO CHI MINH CITY UNIVERSITY OF TRANSPORT TRANSPORTATION’S ROLE PRESENTED BY: BICH HOAI, MSc Contents • Transportation’s role in Supply chain • Transportation’s role in the Economy Transportation’s role in Supply chain Conceptual dimensions of transport • Conceptual dimensions of transport • Fundamentals of supply chain management • Role of transport in the supply chain Transportation’s role in Supply chain Conceptual dimensions of transport Economics of Transportation • Pervasive element of daily life • Impacts citizens’ • • • • • Economic well being Safety Social interaction Quality of physical environment Quality of daily life • Transportation is considered as blood system of the whole economy • Passenger transport • Cargo transport Transportation’s role in Supply chain Conceptual dimensions of transport • Demand for Transportation Transport demand is about the movement of people and goods and we travel in order to satisfy a need (work, education, relocation etc.) • Why transport demand? • Regions or areas tend to specialize in certain economic activities • Physical gap between markets and areas of production for a given goods • Need of culture exchange => This gaps create a demand for transport Fundamental economic role of transport is to bridge this supply-demand gap Transportation’s role in Supply chain Conceptual dimensions of transport Transport Measurement Units • Typical measurement units • Ton (freight) and passenger (people) n  Q Q  Q2   Qn   Qi i 1 • Ton-miles (freight) and passenger-miles (people) • Ton km and passenger Km  Q.L  Q L 1 n  Q2 L2   Qn Ln  QiLi i 1 Example: • Calculate Ts and T miles A: +6.000 C: - 12.000 B: - 4.000 + 10.000 Freight Transportation Derived Demand • Demand for transport service to move a product to a given location depends upon the existence of demand to consume (use) that product at that location Value of (Transport) Service • Transport cost is a component of landed cost • Landed cost = Cost of production +Transport cost (from production point to market) • Transport costs influence a producer’s landed cost advantage/disadvantage vs competitors, thus determining the market value of the transport service • Landed cost also determines extent or range of a producer’s market area (Lardner’s Law) • The opinion of a LSP to transport cost? Service cost (floor transport cost) Service value • Lowest cost that transport business can operate • Top of floor freight: based on total average (max cost) Freight • Rock- bottom of floor freight: based on marginal costs Demand Floor cost Total average Supply Average change Marginal costs 10 Global Transportation Providers International Air • Rate structure • High proportion of variable costs • Fixed costs relatively low as carriers not have to invest in rights-of-way or airport terminals • Rates based on combination of value and cost of service pricing principles • Rate setting must be very sensitive to cargo density • Carriers calculate dimensional weight (dim weight) • Low density cargo rates based on dim weight 57 Global Transportation Providers International Air International air freight pricing • Governed in part by International Air Transport Association (IATA) via the Air Cargo Tariff (TACT) • Provides general guidelines for rate setting • Carriers not required to use guidelines, major carriers not • TACT includes three types of rates • General cargo rates, class rates, commodity rates • Container rates • Cost-based rate • Rate applies to a minimum weight in the container 58 Global Transportation Providers International Air • Current issues • Aligning supply with demand • During economic downturn, many planes grounded, routes cut, and service frequencies reduced • Fluctuating price of jet-fuel • Cost of security mandates • Homeland security fees and cargo screening costs • Security personnel training costs and salaries • Overall profitability of air cargo industry 59 Global Transportation Providers Surface Transport • Trucking • Primary mode for intra-continental shipments • Inhibited by varying domestic regulations • Truck dimension limits vary from country to country • Safety regulations - speed limits, driver hours-ofservice, inspection requirements - also vary • Limitations on operations during certain hours of day • Rail and pipeline are principal other modes 60 Global Transportation Providers Ancillary Services • International freight forwarders • Primary role: help shippers reduce transport costs • Primary approach: shipment consolidation • Other roles • Help shippers navigate complexity of global transport • Expertise in freight documentation, customs clearance • Non Vessel-owning Common Carriers • Specialists in less-than-container load consolidation • Export packers • Experts in export cargo packing and marking 61 Port Operations and Customs Clearance • Most intercontinental trade moves through seaports or airports • Most are owned by governments • Most are managed by port authorities • Governmental or quasi-governmental public agencies • Port authorities are financially self-supporting • Port authorities have power to develop infrastructure, set user fees, and in some cases, levy taxes • Examples: Port Authority of New York and New Jersey 62 Port Operations and Customs Clearance Seaports • Thousands of seaports globally • Most freight moves through relatively small number of major ports • Port infrastructure dictates port capabilities • • • • • Cargo handling equipment Water depth and water basin width Number and size of ship berths Size of marshalling yards and warehouses Landside mode accessibility 63 Port Operations and Customs Clearance Seaports • Current issues • Increasing size of containerships • Security: challenge of maintaining compliance with dynamic government initiatives • In U S., these initiatives include • Container Security Initiative • Security and Accountability for Every Port Act (SAFE) • Preparation for future growth or changing trade flows 64 Port Operations and Customs Clearance Airports • Most intercontinental air freight moves through airports serving passengers and cargo • A few new all-cargo airports are emerging • Less congested and lower operating costs than multi-purpose airports • Infrastructure • Runway length and number determine capacity • Cargo handling equipment • Terminal and warehouse facilities 65 Port Operations and Customs Clearance Airports • Current issues • Adapting capacity to fluctuating demand conditions • Preparing for future growth • New security regulations require • Better airport access control • Better cargo screening facilities and equipment • Ground safety and air traffic control systems 66 Port Operations and Customs Clearance Customs Clearance • Can be very complex • Customs brokers provide expertise • In U.S., customs clearance is a six step process • • • • • • Entry filing (document filing) Goods arrival Goods examination Classification for charging of import duties Taxation Release of goods for domestic delivery 67 Port Operations and Customs Clearance Customs Clearance Customs : World Customs Organization (WCO) The WCO is an independent intergovernmental body whose mission is to enhance the effectiveness and efficiency of Customs Administrations It is the competent global intergovernmental organization in Customs’ matters 68 Port Operations and Customs Clearance Customs General Rules Customs Clearance All goods exported out of or imported into Vietnam (including tax and no tax) must be declared to Customs by Customs Declaration Form The declaration must be accurate with full and detailed characteristics, quantity, quality, weight, value, specifications, and correct HS code for exports and imports Exporters and importers must submit the customs declaration form issued by General Department of Vietnam Customs Importer, Exporter or Customs Agent has to submit “customs dossier” to Customs 69 Port Operations and Customs Clearance Customs Clearance Customs declaration forms - HQ2002/XK - HQ2002/NK - HQ2002/NQ Dossier for Import Goods  Customs declaration : 02 originals  Purchase contract : 01 copy  Commercial invoice : 01 original  Bill of lading : 01 copy  Certificate of origin (C/O) if the goods are entitled to specific tariff preference : 01 original  Packing list : 01 original • Dossier for Export Goods  Customs declaration : 02 originals  Commercial invoice (for tax) : 01 original  Packing list : 01 original  Sales contract : 01 copy 70 THANK YOU 71 ... Ballou, Basic Business Logistics By: Bich Hoai, MSc.- UT 19 Contents • Transportation? ? ?s role in Supply chain • Transportation? ? ?s role in the Economy 20 Transportation? ? ?s role in the Economy • Transport...Contents • Transportation? ? ?s role in Supply chain • Transportation? ? ?s role in the Economy Transportation? ? ?s role in Supply chain Conceptual dimensions of transport • Conceptual dimensions of transport... inventory Wholesaler Retailer C U S T O M E R S Inbound Logistics Materials management Outbound Logistics BUSINESS LOGISTICS Source: James C Johnson, Donal F Wood- Contemporary Logistics 14 Supply Chain