Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

3.1.5 Direct Transport Versus Indirect Transport

Intended learning outcomes: Differentiate between direct transport and indirect transport. Present features such as size or weight of the delivery, possibility of using an existing transport network, and need for merged transport.

Production as well as distribution networks for physical products must generally be designed in careful consideration of the possibilities for transporting the goods. For each means of transport, e.g. lorry, railway wagon, ship or aircraft, the infrastructure must be available in terms of the corresponding mode of transport, i.e., road, rail, water, or air; this means a network of transport channels with the necessary interchanges, i.e., loading yards, railway stations, harbors, or airports.

Depending on costs and availability of a company’s own means of transport, independent carriers may be used in the transportation network. A third-party logistics (3PL) provider offers product delivery services. It may provide added supply chain expertise ([ASCM22]). Such logistics services comprise classical services such as transport, reloading, and storage, but also secondary packaging, the insertion of an information sheet, simpler assembly or repair work, and the acceptance of returned products.[note 301]

In a first approach, it is possible to distinguish two fundamental types of transport networks.

In the case of direct transport, the transport between two sites takes place without changing the primary means of transport, i.e., the means of transport into which the load unit was directly loaded. In cases where a lorry drives independently onto a train (known as a “rolling motorway”) or a ferry in the form of a secondary means of transport, this still counts as direct transport, i.e., there is no change in the mode of transport.

In the case of indirect transport, the transport between two sites uses more than one primary means of transport. Therefore it is possible to exploit the individual strengths of different means of transport for the individual transport segments, and thereby increase their utilization levels. At the same time, however, the cost and time for reloading the load units from one means of transport to another (possibly also involving a change in mode of transport) at transshipment centers — i.e., distribution centers, the purpose of which is solely to reload goods — must be factored in.

The following features for designing transportation networks have proved to be important:

  • Size or weight of the delivery in kilograms or cubic meters: How do the suitable means of transport match up to this?
  • Possibility of using an existing transport network: Can the delivery specify a means of transport that is already carrying deliveries between the point of dispatch and the recipient, and that is not yet at full capacity? This calculation could include means of transport that have a known timetable

Observation of activity in the field shows that these two characteristics correlate highly with each other: Large dimensions/high weight or a high possibility of using an existing transport network tend mainly to be served best by direct transport. In the opposite case, indirect transport is more advantageous. Both apply irrespective of the value density. For example, foam packaging and gravel are better transported directly, owing to their volume and weight, respectively. Diamonds, on the other hand, are better suited to indirect transport owing to their low volume and weight, by plane if greater distances are involved.

Two further characteristics for the design of transport networks that correlate with each other, but not with the previous pair, are:

  • Need for merged transport: To what extent will delivery be made together with products or service objects from another manufacturer or service provider? In the case of returns, to what extent must several products or parts of them be sent back to a number of manufacturers at the same time? To what extent must several service objects or parts of them be transferred to multiple service providers at the same time?
  • Customer tolerance time, as defined in Section 1.1.6.

If the need for merged transport is on the high side, or if there is greater customer tolerance time, different forms of indirect transport are advantageous.

As with production, distribution, or service networks, the two groups of features often stand in opposition to one another. Examples are

  • The transportation of very high-value goods (e.g., money, precious gems, or precious metals), or express transportation (e.g., for spare parts): low size or weight of delivery (in favor of decentralized service), however, low customer tolerance time (in favor of centralized service)
  • Regular deliveries to points of sale by a large whole­saler, on-line orders that are delivered to pickup sites, or regular transport of groups of people to events at specific locations: high size or weight of delivery (in favor of centralized service), however, high need for merged transport (in favor of decentralized service)

Again, a company must make a strategic decision, which some­times differs for each product family.

Continuation from previous subsection (3.3.3)

Course section 3.1: Subsections and their intended learning outcomes

  • 3.1.2b Design Options for Global Distribution Networks

    Intended learning outcomes: Explain design options for global distribution networks. Describe some company cases.

  • 3.1.3 Network Structure for Decentralized Distribution

    Intended learning outcomes: Disclose the distribution network structure and describe decision variables in its design. Present features such as available time for shopping, and simultaneously, capacity of an available means of transport of the customer, as well as the required geographical catchment area.

  • 3.1.3b Design Options for Retail Networks

    Intended learning outcomes: For decentralized distribution, explain the portfolio for designing retail networks retail networks.

  • 3.1.4 Centralized Service Versus Decentralized Service

    Intended learning outcomes: Differentiate between centralized service and decentralized service. Present features such as the mobility cost ratio of the service, the degree of customer involvement in bringing and picking up the service object, as well as the need for repeated transfer of the service object.