Abstract
This paper is dedicated to transportation and its role for logistics and supply chain management. The significance of this study is determined by the fact that transportation may be regarded as the basis of all types of commerce and economy in general providing the distribution of products. In addition, modern trends, such as globalization, nationalization, and sustainability, require the modernization of transport logistics for its increased efficiency. The paper includes literature review, the evaluation of transportation’s significance for supply chain management and logistics and its impact on a company’s performance, transportation’s approach, risks, and expenses. Finally, the significance of efficient transportation management is demonstrated using the example of Starbucks. All in all, according to the results, transportation becomes more complex, however, more and more organizations invest in its technological development as it ensures their stable growth and competitiveness.
Introduction
Transportation is among the most important economic operations in a corporate supply chain. By linking producers and consumers, it serves as a backbone for commerce and the economy, allowing commodities and resources to move from one place to another efficiently. Back-end conceptions like logistics and supply chain management depend on efficient transportation because merchandise and products should be transferred between sites regularly. Because of the nationalization and globalization trends of the last few decades, logistics management has grown in importance in various fields (Wan et al., 2018). Logistics may help businesses improve their efficiency and competitiveness by streamlining their production and distribution operations using the same resources. Logistics would be limited in its effectiveness if it did not have access to well-maintained transportation infrastructure. Logistics can benefit from a more efficient transportation system by lowering operating costs and enhancing the quality of services. The public and private sectors should work together to enhance transport networks. Supply chain management relies heavily on transportation and is a need and a facilitator for practically any corporate strategy or activity.
Literature Review
There are multiple studies dedicated to transportation, and the majority of researchers emphasize its importance for logistics and supply chain management. Thus, according to Topolšek et al. (2018), “a well-developed transport system ensures better efficiency, a reduction of operating costs, and higher service quality of logistics systems” (p. 1196). Transportation is regarded as one of the most essential components of logistics and product distribution (Topolšek et al., 2018). A considerable number of sources define the impact of transportation on countries’ economies in multiple ways. For instance, in-depth research of Cherono and Workneh (2018) dedicated to the peculiarities of transportation of fresh tomatoes from South Africa demonstrate the significance of proper transportation management for products’ quality. In turn, quality products affect consumer loyalty, increase sellers’ revenues, strengthen partnership throughout supply chains, and contribute to the development of economies of all countries involved in logistics.
Undeveloped transportation system leads not only to the poor quality of products but to the increase of final costs for consumers affecting their purchasing power. In addition, according to Negi et al. (2018), when suppliers do not have an access to transport networks or there is a lack of information and infrastructure, they are forced to sell to local and informal buyers at lower prices. In this way, transport logistics allows manufacturers selling at government mandate or competitive prices stimulating production, while undeveloped transportation systems cause the unavailability of products from particular suppliers, their losses due to lower prices, and the elimination of smaller supplier in a highly competitive environment.
Meanwhile, as transportation defines the efficiency of supply chain management, its development and the impact of it are frequently examined. Thus, Topolšek et al. (2018) mention the goals of transport logistics to be sustainable and environmentally friendly by lowering pollution, CO2 emissions, congestion, noise, and the dependence on fossil fuels. At the same time, technological progress is continuously changing all spheres of life including supply chain management and transport logistics. In their article, Shah et al. (2019) provide the benefits of transportation that underline its significance for trade and economy and address Industry 4.0 (I4.0) that presupposes the implementation of communication and information technologies to the production and distribution of products and services. In particular, the authors examine autonomous transportation, including autonomous guidance vehicles and the delivery of goods by drones and robots (Shah et al., 2019). According to them, the use of technologies in relation to transport logistics has a great potential as it may contribute to profit maximization along with cost reduction that will lead to customer satisfaction and overall economic development.
Significance of Transportation in Logistics and Supply Chain
In the 21st century, globalization and technology are two of the most important factors driving supply chain innovation. Attributable to globalization, supply chains are now spread throughout the globe, with production relocating to countries with lower labor costs while most consumers stay in wealthy Western countries. As the ‘glue’ and ‘life blood’ of global supply chains, transportation has become essential to the distribution network management to facilitate broad production and delivery systems (Topolšek et al., 2018). In an industrialized civilization, transportation is perhaps the most critical sector since, without it, no part of the economy can function, from a grocery shop to a factory. The more complicated things get, the greater the need for a reliable transportation system grows.
Managing the possession and distribution of goods, services, and associated data from the position of origin to the destination of consumption, from the point of production to the site of utilization, is what logistics is all about. Transportation is used in this definition to describe the flow of products from the site of origin to the place of use and manufacturing to the point where it is sold or consumed. The intricacy of both inbound and outgoing logistics can be seen through arising interconnectedness (Wan et al., 2018). Demand forecasting, inventory management, warehousing, and supply of goods are all part of logistics. As long as the firm’s supply chain is well-managed, customers will be pleased with its delivery times and speeds, and the company will save money. Inbound and outbound transportation are both dependent on shipping for their time and location services.
Transportation serves as a link between the various procedures that lead to the development of usable items for the end-user. The concept of business logistics is structuring all of these operations and elements into a system of products transportation to minimize costs and maximize customer service. Managing a system once it has been put in place is critical. Transport in the logistics system has a more nuanced role than simply moving items on behalf of the business. Only a high level of management, effectiveness can take advantage of its intricacy. A well-managed transportation system can ensure that products are delivered to the appropriate location at the right time to meet the needs of customers (Grzelakowski, 2019). As well as increasing efficiency, it also connects manufacturers with consumers. Because transportation is the foundation of company logistics efficiency and economics, as well as the expansion of other logistical tasks, it is critical. In addition, the quality of service and the organization’s competitiveness are enhanced by an efficient transportation system that performs logistics activities.
The Effect on a Company’s Bottom Line
Logistics and supply chain management include transportation as a critical component. Effective transportation can keep the distribution network flowing and maintain a lean inventory if appropriately used. Transportation can influence storage efficiency, reduce lead times, and save expenses in areas such as storage management because inventory should be moved in and out of production and storage regularly. Even minor hiccups in a company’s transportation network might have significant financial ramifications. A company’s direct interaction with the customer can also be found in shipping its items (Topolšek et al., 2018). The point of delivery often judges a company’s ability to deliver. The ‘final mile’ delivery, which is frequently the most complicated, expensive, and prone to delays, requires transportation. Customers’ happiness with a product’s quality and timeliness of delivery might be affected by the logistics of the product’s transportation.
Many commercial activities directly influence the economy because of the importance of transportation. For example, transportation aids in the control of price increases and the enhancement of profit margins. Transportation provides coordination between lowly and highly provisioned regions, conveying things conveniently to meet demand in different areas where buyers desire to purchase commodities at stable rates (Shah et al., 2019). Profits are maximized when low-cost raw materials are moved from different spots to manufacturing areas where labor is least expensive and then disseminated to high-profit market sectors using efficient transport networks. Large-scale production is made possible by transportation because it supplies every link in the supply chain with no disruption and at scale, allowing firms to produce and sell their goods at lower costs while servicing many customers and generating high income.
Transportation Approach
Due to transportation’s pivotal role in supply chains, large corporations are more likely to design mobility plans. Efficient supply chain management is aided by incorporating transportation into the overall distribution network (Min et al., 2019). Because of this dynamic approach, the company’s transportation strategy aims to avoid carrier competition or poor planning. Strategic collaboration amongst supply chain stakeholders is critical to achieving the goals of an organization’s supply chain management strategy, not merely employing technology to find the most efficient route or implementing best practices.
To be effective, transportation strategies should be implemented correctly for modern supply chains, which rely on expert management to cut inventory and storage costs while increasing delivery times. Cross-docking at distribution centers, for example, is part of Wal-Mart’s responsive transportation system. Due to this process, a range of products from different vendors can be found on each truck that heads to the retail outlet. Since total transportation costs comprise network selections, reliability levels, and inventory expenses, this has assisted the retail giant in reducing costs (Shah et al., 2019). The best results can only be achieved if a company’s transportation plan is aligned with its competitive strategy.
Transportation Risks
As one of the most crucial supply chain elements, transportation is susceptible to failure. The bulk of supply chain incidents is caused by transportation-related issues, which subsequently have a ripple impact across the company’s operations. Because shipments allow businesses to continue running, carriers take on considerable risk. In an accident, interruption, or cargo loss, the supply chain will be disrupted, and the financial profit will be reduced (Min et al., 2019). The reliability and integrity of the transportation technique, employee training and retention, adherence concerns, and environmental impacts can all put shipping companies at risk.
These services are fundamentally outsourced, making them high-value but high-impact parts of the supply chain. There is an increased risk because each element of the supply chain has its own set of regulations, contractual arrangements, and business practices to cope with. When dealing with shipping companies, logistics information providers, customs, export officials, and warehousing firms, there are inherent risks when dealing with third parties, even if the company is extremely large. After all, Wal-Mart does not yet have ships and does not distribute the services and items to the front door (Topolšek et al., 2018). Supply chain risk mitigation techniques that incorporate transportation risk as a primary idea in their network risk control measures are more likely to succeed.
Transportation Expenses
Companies spend a lot of money moving merchandise through the supply chain to get it to its final destination. It has been estimated that transportation expenditures in the supply chains of American businesses average $836 billion per year, or 62.8 percent of overall logistics charges (Grzelakowski, 2019). Commercial transportation comprises 6 percent of the US gross domestic product (GDP). Transit costs can differ significantly according to various factors, including distance, transportation type, and storage conditions. Moving a product over a great distance is expensive; the heavier it is, the more significant the effect of distance. In a modern supply chain, both suppliers and enterprises are contending, and the ease with which commodities can be transported affects competitiveness.
When freight services became more affordable and widely available in the 1990s and early 2000s, firms prioritized speedy delivery to target markets and customers to cut costs. Consumers’ expectations for quick availability and delivery have not varied, but the status quo has; thanks to the proliferation of e-commerce, rising oil prices, and geometrically rising transportation costs, the current state of affairs has undergone significant change. Supply chain management has undergone several changes because of the underlying modifications (Min et al., 2019). This move from outsourcing to nearshoring has been noticeable in several organizations and products, reducing shipments travel distance. Product design and packaging have changed to improve production efficiency while also considering transportation factors such as product size, protection of commodities, and unloading and repackaging operations. Finally, yet significantly, the supply chain’s inventory management has shifted from minimal delivery to a mix of lean and transportation techniques, with far-reaching implications for the management of the distribution network aimed at overcoming shipping issues and costs.
Case Study of Starbucks
Coffee giant Starbucks relies heavily on transport systems in its supply chain. Supply chain networks that are centralized and closely integrated are rare, but Starbucks has complete control or engagement in each step of the supply chain process. Starbucks’ core offerings are coffee and coffee-related items. As a result, the primary raw material used by Starbucks is coffee beans. Starbucks purchases coffee beans from small to medium-sized farms in Central and Southern United States, Africa, Asia, and the Middle East directly from plantation farmers. The coffee beans are transported by truck to the closest port after harvesting and packaging. When shipping coffee beans by sea, they should be transported in vented containers to avoid the growth of mold and mildew (Alwaleed et al., 2019). The beans are transported to one of six warehousing facilities in the United States and Europe, with a minimal number to ensure close monitoring of site operations and all products’ uniform preparation and packaging. The beans should first be roasted, packaged, and dispatched to reach one of the 8 centralized or 50 regional distribution hubs. The beans are then shipped straight to Starbucks locations, restaurants, and a few chosen retailers that carry their products.
The Starbucks supply chain shows that transportation is vital to the company’s operations. Various modes of transportation are required to go from plantations to ports, storage facilities, distribution centers, and stores. These approaches include ground transportation (via road), sea shipment, and air delivery. Outsourcing transportation and distribution earlier accounted for 70% of Starbucks’ supply chain expenditures, but that figure has now been reduced to only 20%. In 2008, Starbucks underwent a significant overhaul of its supply chain structure, and now almost all transportation is under its control as part of the ‘self delivery’ function (Alwaleed et al., 2019). Coffee beans are now refined closer to where they will be sold at Starbucks to use a regionalized manufacturing system. This allowed for cutting transportation expenses and lead times, as well as converting coffee plant processes to five days instead of seven. Coffee giant Starbucks employs 24 co-manufacturers worldwide and runs six of its manufacturing facilities.
It is difficult but inevitable when it comes to effective delivery and transportation for Starbucks. Compared to most other corporations, Starbucks purchases and then exports coffee beans from around the world. The company does close to 70,000 deliveries every week (Alwaleed et al., 2019). Starbucks has to consider logistical efficiency when restructuring its supply chain. Only the best carriers remained as partners with this worldwide company after being evaluated for their capabilities. Starbucks has integrated several technological expertises into its supply chain to enhance operational effectiveness further. Starbucks cut expenses by $500 million during the first 2 years after overhauling its supply chain system without sacrificing quality.
Conclusion
Moving products from one site to the next along with the distribution network is a vital part of logistics from the beginning to when they reach consumers. An expensive and time-consuming project that significantly influences corporate operations and overall profitability is discouraged. High-profile organizations have established acceptable transportation strategies to integrate into supply chain management, ranging from using suppliers and cost savings to technological tracking and the strategic location of distribution centers. Supply chains have become increasingly complex because of globalization, with more distance and links between the delivery of raw materials and the shipment of the finished product. Transportation is in short supply and unprofitable in financial and environmental terms. Efficiencies in moving goods are primarily determined by how well the transportation system operates. The advancement of technology and management principles enhances the moving load, timely delivery, reliability, operational costs, the utilization of facilities, and energy conservation. Logistics management relies heavily on transportation. A well-functioning system requires a well-defined logistics framework and transportation tools and strategies to connect the various production processes. With this understanding, businesses are continually focusing on transport systems and aiming to improve supply chains in the future.
References
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