FUNDAMENTALS OF LOGISTICS

-SUMMARY BY EMMA, ERIKA & JEANETTE

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1 The structure of logistics

1.1 Logistics – a few characteristics

1.2 The logistics concept

Seven Rs: Right product/service, quantity, quality, place, time, customer, cost

Logistics: Managing forward and reverse material, resource, information and financial flow to
customer’s and third-parties’ satisfaction

1.3 Logistics – responsibility and competence

Logisticians’ responsibilities: operations and construction

1.4 Changed delivery patterns

Changed demands on logistics function -> implications:

Reduced batch sizes -> more shipments (increased administration)

Shorter lead times -> investments to redesign process, shorter transportation times

Fewer suppliers

Sequenced deliveries -> need for high reliability/dependability

Deliveries of components on function level (nut-and-bolt vs. assembled) -> higher value and more
value tied in stocks, requires larger storage are for larger components

Complete delivery service -> need for over-capacity in logistics system

Lead time = production time + logistics time

1.5 Network structure

Node: where the flow is/can be stopped

Links: transport of some sort

Cycle time: maximum time between two nodes

Figure 1-6: Can= active node time, Cpn=passive node time, Cl=link time

Channel: permanent, predefined route in the transportation network

Time and place utility: In the right place at the right time

1.6 Gateways to transportation networks

Nodes have varying degree of value-adding. They can perform production, consolidation or anything
in between.

Inbound gateway: entrance of goods to network. Opposite is called outbound gateway. Gateways
can only receive or send goods.

1.7 Supply and demand chains

1.7.1 Company in focus
Supply chain: all companies that are suppliers to customers downstream the chain to final
consumption, reacts to demand

Demand chain: all companies between the company in focus and end customer, sends orders

1.7.2 Supply chains

The responsibility for deliveries lies on the supplier

1.7.3 Demand chains

Order-driven chain (pull) upstream, cooperation downstream

1.8 The utilities of the transportation service

Transportation is a service. The ability to store goods enhances efficiency.

Transportation of goods to the right place at the right time adds equally much value regardless the
choice of transportation mode (air, road…), i.e. the journey doesn’t add value.

1.9 Time concepts

Contracted time: when the transportation must be finished

Initial time: The earliest time transportation can begin

Time buffer: Time difference between when the transportation is done/begins and contracted/initial
time

Time window: Between two points in time the delivery must be performed

Slot: where a container can be put or when a plane can land or a ship can dock etc.

Allotment: capacity reservations that can only be used by certain transportation purchasers

1.10 Elements of the goods flow

1.10.1 The time components of the goods flow
Stocks should be reduced in processes

1.10.2 The degree of industrialization and distribution costs

Distribution costs as part of the total costs are increasing. Manufacturing costs -> distribution costs
due to economies of scale and presence in new markets in the industrialized part of the world
(distance):

IT can be used to create larger virtual companies of small production units and gain economies of
scale.

Scandinavia: Logistics 30% of total costs

2 Goods transports

2.1 Transportation work

Physical flow measured in ton kilometer, volume kilometer or truck bed kilometer (area)

Growing importance of tied-up capital -> resource kilometer [kr km]

Movement costs (personnel costs etc.) -> resource time [ kr hour]

2.2 Levels in the transportation systems
Three parts of transportation system:

- Material flow system: flow of products through processes within and between organizations

- Transport flow system: Transports between organizations

- Infrastructure: System of assets that makes transports possible (roads etc.)

Transport market: material vs. transport flow

Traffic market: infrastructure vs. transport flow

For the transport system to be necessary there must first be financial incentives and articles to use in
the material flow on the market (financial and article flow systems)

2.3 Performed goods transportation work

Mostly Swedish statistics chapter. For details, read the actual chapter.

2.3.1 Distribution of goods transportation work

After 1950s: Increase in road transports

After 1970s: Decrease in weight transported

Future: strong growth in transport work

2.3.2 Road transports

Type of goods in road transports: groceries, mixed cargo, semi-finished and finished goods, raw
material and construction material

2.3.3 Railroad transports

Two major sorts: ore transports and wagonload transports

2.3.4 Shipping
Sorts: Cargo vessels and ferry/passenger vessels

Trend of shorter transportation distances

Products transported: petroleum products, bulk cargo

2.4 The competition between different means of transportation
2.4.1 Displacements in the goods flow

Railway vs. Road: Railway increases when distances increase.

Shipping has lost market shares due to the demand for faster transports

Shipping and railway for low-value goods, air for high-values, road for everything in between

2.4.2 Displacements in the goods flow – European basis

Railway’s market share within EC has decreased by 50% during a few decades -> road: due to
deregulation and abolishing of trade barriers

2.5 Future development

Things impacting the future choice of transport mode:

- Increasing fuel costs: favors railway that isn’t dependent on fossil fuel (environmental taxes)

- Environmental issues: traditional emission discussion, but also noise and traffic jams. Can technical
development cope?

- Resource utilization and size of vehicle: different vehicle lengths allowed in different countries; re-
combine when entering new country. Increase in fuel costs -> high resource utilization
(competitiveness). Solution: smaller vehicles (mostly possible for road transports)

- Transportation standards: Trucks standardized and near contact with market. Piggyback: rail long
distances, road for distribution

- Competition and technical development: Truck transports further potential for development.
Railway great potential through upgrading of tracks, new wagons and use of Automatic Traffic
Control

- Time for transportation: Rail 30% slower than trucks on average. Improve rail through higher
transportation quality and better utilization

- Tied-up capital: Favors rail and road over sea. Sea focuses on petroleum products; what is the
future of that market? (scarcity, environmental awareness etc.)
- Different types of direct traffic to large ports: Good rail and road connections to harbors important.

2.5.1 Exchangeability of goods – resources

Tied-up capital: not only transported goods, but also resources tied-up during transportation time
(figure 2-23 illustrates)

Decreasing value of goods transported -> increasing importance in choice of load carrier

Avoid transporting high-value goods with low-speed transport modes; creates high capital costs

4 Freight transportation
4.1 Flow structure
Link structure: the logistics flow can be considered on different levels

- Article level: Need for coordination with other articles is disregarded

- Consignment level: Articles that are connected through activities can be viewed as an entity, thus
enabling efficiency and cost reductions. Consignments are created through consolidation

- Channel level: Combining consignments by e.g. using a joint container, semi-trailer etc.

- Corridor level: Combining channels in a node. E.g. coordination of containers to fill a vessel.

4.2 Types of goods

Full loads: W≥5 tons, no need for handling/re-loading operations. Ideal situation for transport
company -> lower price for customer. Price negotiated every time

Part loads: 1 ton≤W≤5 tons, no need for terminal to consolidate few large consignments that are
large enough for unit load carriers (e.g. EUR-pallet). Price according to weight – and distance-
dependent tariff.

General cargo: 100 kg<W<1 ton, price charged per consignment according to weight intervals.
Requires more handling than part loads. Higher-value goods than in part loads -> faster mode of
transportation

Parcels: 1 kg≤W≤100 kg, High-value goods -> fast transports (air). Low transportation need -> load
carrier varies from case to case. Large transportation companies with IT systems and sorting
establishments handle parcels.

Light goods: W≤1 kg, National postal services or international express delivery companies handle
transport. Sorting needed; can sometimes be automated (e.g. for letters)

4.3 Transportation profile

Capital costs and transportation costs should balance each other. Thus, high-value goods -> fast
transport mode and vice versa.

Low value: rail, ship. High value: air

Other aspects to consider: cheap spare parts essential to production -> fast transport to avoid
expensive stops in production. Goods with immediate interest (fashion apparel etc.) -> fast transport
before obsolete.

Full load carrier to one customer -> heavily reduced transportation times, cost efficiency

FUL=full unit load

LUL=less than unit load

Examples of FUL: full container load (FCL), full truck load (FTL)

LUL: consolidation and linking in network necessary. Increase in costs and transportation times

4.4 Types of traffic

Line traffic: Fixed routes and timetables. Lines between terminals and consolidation to ensure
customer satisfaction and high flow rate. Combined with collection/distribution of goods.

Ordered transport: Single transport performed to customer’s order. Direct transport, focuses on time
rather than cost.

Dedicated transports: For one customer with large flow of goods. Optimized timetable (Just for you –
J4U). Fixed prices decided through agreements.

Airfreight:

- Regular line traffic: Fixed timetables and freight rates. Mostly co-freighting with passenger traffic

- Charter traffic: Specially adapted transportation of only goods. Full-charter if one customer, split-
charter if many

- Currently: airfreight, but not passenger traffic, is deregulated

4.5 The degrees of freedom for freight transportation

The freedom of freight transport is limited and transport can therefore not always function as
efficiently as possible.

4.6 Just-in-time transportation

Delivery within time window, but transportation can be fast or slow.

Four principles: Tackle basic problems, eliminate waste, use simple methods, design systems for
problem exposure
JIT -> low obsolescence risk, flexibility, lower investments, shorter through-put time, less inventory
etc.

4.7 Horizontal or vertical transfers

Vertical transfers require expensive equipment. Tradeoff between close but vertical distance and
long but horizontal distance.

4.8 Third Party Logistics

4.8.1 The value chain
Primary activities: inbound/outbound logistics, production, marketing, sales, service

Supportive activities: purchasing, R&D, personnel administration and infrastructure of company

4.8.2 The distribution channel

Quality of transport is measured in e.g. number of satisfied customers or number of delayed
transports.

Transports easy to copy -> compete in price and quality

Forwarders’ (middlemen) task: take care of consignments, custom clearance, re-loading, storage and
insurance for another party. Do not execute the transporting; that is done by transportation
operators

4.8.3 Multi-actor cooperation

Logistics function: Inbound/outbound logistics, transportation and storage handling

One party logistics: Either the buyer or the producer handles logistics

Two party logistics: Buyer and producer have joint responsibility for logistics. Transport operator
used for transport assignment.

Third party logistics: Long term cooperation with third party distributor, who handles some or all of
the logistics activities in one or both companies.

Broker: Link used in short term cooperation between two companies. E.g. trading house;
intermediary of contacts

4.8.4 Third Party Logistics

3PL makes customers dependant on provider due to complexity and uniqueness of transportation
service

3PL handles physical flow and information flow concerning physical flow of goods

4.8.5 The possibilities of the logistics operator

1PL: Transport is core to producer. Owns distribution fleet -> much tied-up capital. Common in
grocery industry.

2PL: Buyer and producer cooperate -> efficiency

3PL: Contract logistics. Outsourcing of logistics between buyer and producer

4PL: Management and optimization of logistics activity in entire supply chain

5PL: Providing information solutions; e-business (figure 4-13 illustrates)

5 Road transportation

5.1 The development of transportation by trucks

There has been an explosive development of transportation by road, leading to larger trucks and new
combinations of vehicles. Most of those cannot be any larger.

The heavy growth are due to several factors:

- Small scale quantities,shipping by truck can transport smaller loads then other ways of transport
such as rail and shipping, which means that it is easy to adopt.
- Flexibility, a truck is easy to re-direct and combine.
- Safety, since there is one driver per truck and smaller capacity per driver it is safer and easier to
avoid damage, theft and loss.
- Reliability, the driver stays with the goods, if the goods stop so does the driver.
- Service, better service due to the driver who can fix problems along the way, make contact to the
customers and so on.
- Adaptability, most vehicles are independent economical units, they tend to solve smaller
economical problems themselves.

Disadvantages by increased road transports are:

- Road, environmental, nature and buildings effected by too heavily expanded car traffic.
- Air pollution and noise
- Traffic problems

5.2 Administrative circumstances

Truck transports can be divided into professional and non-professional transports. The professional
transports are increasing, they are transports done for payment and can be sub-divided into libe
traffic and booking traffic.

5.3 Vehicles
This chapter goes though different types of vehicle and technical data.

A vehicle is divided into two parts, the load carrying capacity which should be as large as possible and
the technical part, which is the one driving the vehicle forward. In contrast to the load carrying unit
this should be as small as possible in order to maximize the area in which goods can be put. The
vehicles closest to the DC:s are often smaller, 2-axles whereas for long distance 2 times 2-axle are
used. Another solution is semi-trailers where the vehicle can be disconnected from the load carrier.

Roads have shown signs of saturation due to too much traffic. This problem could be handled by:
- Controlled traffic ,jams in traffic are due to vehicles not keeping the same speed. If they were to
have the same it would be easier and this could be done by controlling the traffic.
- Double carriages, between trucks on the road there is a space, the breaking distance, which for
trucks are quite long. By connecting vehicles, either physically or electronic, the spaces is saved.
When connected electronically all vehicles are keeping the same speed and when needing to break,
the vehicle last in the queue begins.

5.4 Trends concerning the development of vehicles

The most important thing when developing new vehicles is to make them as efficient as possible.
The most important trends are:

- Environmental demands, new power engines, environmental friendly fuels, efficient

distribution systems. Steered by regulations and buyer concerns
- The lengths of the vehicle, more space for goods are better, steered by regulations.
- Short couplings, The space between the puller and the truck load. It necessary for not
touching when turning. New functions are developed.
- Smaller wheels, increases the net load volume but there are technical problems to overcome.
- Information technology, almost all trucks are equipped with mobile computers, enabling the
drivers to use the possibilities of IT.
- Air suspensions, plate and coil suspensions are previously most used. Air suspensions can
reduce the vibrations and the road wear. Using air suspensions allows higher weights and
can lead to new loading principles.
- Swap bodies, for intermodal transports for trucks and railway. Need air suspensions to work.

5.5 Industry structure

Only history about the development of the transport industry, not relevant.

5.6 Transport sales

In the transport industry the net margin is low, about 2-4 %, leading to low solidity. There are 500
transport selling companies in the industry for road transports. (Sweden?) Haulers do not sell, let co-
owned companies deal with marketing and sales.

- Transport intermediary company, such as DHL, Schenker, DFDS and TNT.

- Truck centrals, common ordering offices for haulers, example for soil.
- Privately owned larger haulers, having more than 10 vehicles.
- Local specialized companies, niche carriers such as wood or agriculture.

Chapter 6 – Rail transportation

6.1 Rail-bound traffic

The technique for railways is that there is an extremely low friction between the wheels of the train
and the steel rail. There is a small contact surface between the steels of the rail and the wheels. In
order for the railway to be efficient there need to be large flows of goods.

6.2 Separation of transportation of passengers and goods

There are different characteristics between passenger and goods traffic. The passenger traffic usally
goes by daytime, if not using sleeping wagons (they require more investments then regular train
wagons), and are faster than goods traffic with a speed of over 125 km/h. Goods traffic on the other
hand are slower with a speed between 70-90 km/h and go between terminals in cycles and usally by
night. There is also difference in:

- Wagon-design-dependent separation
- Track-bearing-dependent separation
- Track-design-dependent separation

6.3 Types of freighting

There are five types of freighting within railway traffic:

- Express goods; high frequency with passenger trains. Small goods.

- Wagon load goods; one client uses one entire wagon.
- Unit loads; consignments such as containers or swap-bodies.
- Block trains; a block of a number of wagons for one client.
- Full trains; from one sender to one receiver. In Sweden this stands for 25 % of all traffic.

6.4 Freight trains and conveyance classes

There are three types of freight trains:

- Freight express trains; trains that transport urgent goods, type A. An average speed of 90
km/h, which is the fastest means of transportation on land.
- Conventional freight trains; B transports of wagon loads between bigger stations, an average
speed of 70 km/h.
- Local freight trains; between smaller stations which are connected with the flow of the
previous types of trains.

TEETM-trains (Trans-Europe Express Merchandise – trains.) A network of international freight

express trains. Wagons loaded as class A with an average speed between 85 – 100 km/h. They
also don’t stop at boarders more than 2 hours.

6.5 Railway systems

There are nationally and internationally systems and most of it were first built over 100 years ago.
The main networks are open and go through big cities whilst a lot of the smaller networks have been
closed due to lack of maintenance. In order to increase the utility the need for an increased volume
of goods is required. Combination of transportation modes is another possibility to increase the
utilization.

The limitations for the size of trains and wagons are in Europe foremost due to the fact that the
railways are electrified, hence the size is limited by the overhead electrical lines.

6.6 Freight trains

The trains for railways have a payload between 800 – 1600 tons. The preferably way is not to have to
break up trains on the run since that is costly in time and money, called marshalling. The main
requirements are:

- A constant flow of goods.

- Using complete train sets.
- Having wagons with a high level of filling.
 - Fast circulation for engine and wagons.

Loop transportations are when a train picks up goods on different rounds (milk round). There are
loading operations instead of marshalling, although there are loop trains with marshalling as well.

6.7 Capacity of the railway

Single channel flow = single track line, only able to go in one direction at one time. This leads to a low
frequency and low capacity usage due to the length and speed of the train since no other train can go
when one is driving the stretch.

You can increase the capacity of the single track by having multiple train sets going in one direction,
and when all have arrived multiple sets go in the opposite direction.

Speed separation is when all traffic with the same speed is located to the same time, hence
eliminating waiting times, for example passenger and goods traffic.

Virtual nodes are a side track that allows trains to meet and overtake each other on a single track.

The virtual nodes allows trains to go from both directions at the same time on a single track and
meeting at the virtual node.

6.8 Intermodal transportation

The definition of intermodal transports is using more than one mean of transportation in a network.
In order to do this you need standards in packaging, EUR-pallets are a condition for this to work.
Another way is using containers or swap-bodies that are easy to change between the different
modes of transportation.

Different types of intermodal transportations are truck + rail or truck + sea.

6.9 Modular unit load for the rail loading profile, C-Sam
Making rail-bound goods transportations efficient by combining different demands, one way is
having a system with mini-containers, developed in Asia.

A system for modular unit load for the rail loading profile, called C-Sam. Uses the measures of rail
wagons length-wise and trucks breadth. And from these measures adopting to the highest possible
loading profile for both means of transportation. Creating high volume utilization, compared to EUR-
pallets that optimizes the area.
Chapter 7 – Sea transports

7.1 Development
There are high cost efficiencies of transporting goods by ships:

- Large loading capacity

- Free routes on oceans on international waters
- Always lower ton/km then other means of transportation

The chapter goes through the history of volumes and sea transports.

There are different ways of measuring ships.

- TEU: Twenty foot Equivalent units, how many 20 ft containers can be loaded on the ship.
- The draught, free board, the height of the closed deck above the water line.
- DWT: dead weight ton.

Single link: two ports connected by one relationship. The ships are completely unloaded at every call
at port which eliminates all sequencing and tracking of the goods.
Several links: sequencing and tracking is necessary since going to different ports, either only
load/unload in all ports except the one where the ship turns.
Several links with a central link: connecting several ports but with one central link in the middle. Can
be one connection between two port systems, or different parts of the world such as Europe and
Asia or North America. The central link should have fully loaded ships. All ports in a line system have
the same status = base ports.
Loop system: connects several ports, easy to extend. There could be two-way traffic with one ship
going in each direction. The disadvantage is that ships are never fully unleaded.
Feeder: control flow between larger and smaller ports, distributes the goods that comes in to the
large ports out to the smaller ones. By using smaller ships you gain higher frequency.

The imbalance concerning seaborne transportations can be divided into four different types:

- Structural imbalance: derives from the cargo. The existing outbound and inbound flow of
cargo from one and the same port is not equal, often due to underlying industrial systems.
- Design dependent imbalance: Cargo only in one direction due to the design of the ship. For
example ships carrying liquids to one port, don’t export liquids from that port and the ship
needs to sail empty.
- Commercial imbalance: the payment for transportation will determine where the ship will be
used. If revenues aren’t big enough the ship will be moved to more lucrative links.
- Operational imbalances: the sea transportation system is designed according to operations
supply of ships. Imbalances occur as a result of how ships operate and re directed.

7.2 ships for different types of cargo

The general cargo ships are divided into Lift-on Lift-off (LoLo)and Roll-on Roll-off (RoRo).

Container ships are often LoLo and lifted on and off the ships by using cranes to pick up the
containers which are placed in a cell system.
RoRo, transports everything that are in rolling load carriers.

PCC – Pure Car Carrier, specialized RoRo-ships only having personal cars, for export.

Ferries and passenger ship are also an important link to truck transports since they are operating as
floating bridges.

Bulk ships transport solid and dry cargo/mass goods, such as cement, grail, and ore. Can be pure bulk
ships or a combination with bulk and other cargo.

Tankers carry liquid bulk as cargo. Can contain different products of different sizes and quality.

7.3 Vessels for high speed

Hulls determine how fast because the difference in what touches the water. This gives different
resistances, hence different speeds.

7.4 System development

- develop the usage of containers
- buy large ships since there are a low extra cost for putting aboard one extra container, but a huge
loss if you need to refuse client to take onboard on container. Will lead to more over dimensioned
ships, on short term it is powerful to act against competitors. On the long run it will be easier to sell
the ships since the demand normally cathes up with the loading capacity.
15 Store and storage activities

15.1 Storing in stores and storage

Often uses more than one storage techniques; combination of shelf box, rack and depth stacking

15.1.1 Storage design

Storages should have:

- High filling rate; not to high, since that would result in an increase in transportation work
- Reduce transportation work; placement takes frequency of use and order of work into
account
- Easy to find and access; time-efficiency

15.1.2 Storage and handling efficiency

Storage efficiency: optimize utilization
Conflict of goals
Handling efficiency: easy to reach

Maximizing storing efficiency -> low accessibility, low capital costs, high operating costs

Maximizing handling efficiency -> easy and fast accessibility, high capital costs, low operating costs

15.1.3 Stratification of articles

ABC analysis:

Articles classified according to volume value. A-articles are closely monitored, while monitoring of C-
articles can be standardized.

Disadvantages: low value/high consumption and high volume/low consumption in the same group,
profitability not considered, complementing products might end up in different categories

Can be used for: storage control, differentiate delivery service, choose physical locations in stock,
and classify suppliers

Product-quality analysis:
Diagram where number of pallets/units of each article in stock compared to total amount of
pallets/units

Product flow analysis:

Diagram that shows the magnitude of each article’s flow through storage

15.1.4 Inventory structures

Stratum grouping:

Division of material into groups/stratum, ABC-analysis

ABC-grouping:

Large part of products account for small part of turnover

Volume value = price*average consumption

Used to decide on customer service level, availability, safety stock, grouping etc.

Perform ABC-analysis regularly to take price and average consumption changes into consideration

Note: Products in start-up phase often C-category, but need close monitoring

Stratum:

1. Choose/define criterion for categorization

2. Rank articles and calculate product’s turnover and cumulative turnover
3. Group with regard to share of total volume value

Advantages: shows where resources have largest effect, facilitates reduced inventory levels

Broad article assortments:

Article assortments increasing due to focus on demand chain -> economies of variety

Increase in low value assortment

50-20 rule: 20% of revenues from 50% of products

Implications of this change:

- Increased number of articles

- Potential for increased prices; variety satisfies customer demands
- Coupled offers; cooperation with supplier (vertical) or other selling company (horizontal) to
not need to have all articles in own storage
- Virtual inventories; cooperation -> broad assortment, no increase in inventory levels
- Software development
- More efficient manufacturing systems, make-to-order
15.1.5 Flow aspects on storage
Linear flow: Articles enter in one end and exits in another end of the facility. Suitable for large flows
of few articles.

U-shaped flow: Goods enter and exit in the same part of the facility. Place stock depending on
frequency of use.

Two other types: triangular flow and circular flow (sending and receiving combined)

15.1.6 Area utilization in a storage

Should be high

15.1.7 Storage by unit load

E.g. pallets

Disadvantages: low fill rate in storage

Advantages: Reduces number of transfers and trips, faster loading/unloading, standardized handling
and storing equipment, reduced risk of damage or theft, simplified inventory, high efficiency in
stacking

Large units (for transportation) built up of smaller units (for picking in stock)

15.2 Principles for storage

Choice of storage principle based on physical flow and requested availability

First in first out (FIFO) for straight flows

Last in first out (LIFO) for combined arrival and shipping

Comparison: equal average time in storage, median time higher for FIFO, but maximum time can be
very long for LIFO (affects quality, waste levels etc.)

Shelf warmers: items with long time in stock

15.2.1 Fixed or floating placement

Floating placement: better utilization of storage, storage system for picking

Store space = safety stock + order quantity/2

Fixed placement: Store space = safety stock + order quantity

15.2.2 Time for access

Placement should be based on picking frequency

Too high utilization of storage -> difficulties locating, storing and handling goods (could be solved
through automatic structuring during non-production hours)

Storage capacity is negatively affected by short access times

The placement of articles should be based on:

The principle of product rotation:

FIFO: when during specified time period or limited market value

LIFO is the alternative

The principle of picking position: Products that are often picked together should be placed near each
other

The principle of family groups: Articles stored together if they have similar characteristics

The principle of popularity:

Placement according to ABC-analysis and picking frequency

Linear flow -> increased refilling work when transportation work is decreased

Assumes that consumption of an article is steady

Not useful if many articles have high frequency

The principle of similarity:

Store articles that are often ordered at the same time near each other

Exception: if articles look similar and could be mistaken for each other

The principle of size: Large, heavy goods is stored near to where it will be used

The principle of aisle length:

Long isle -> high storage efficiency

Short aisle -> high picking efficiency; especially if picking in different aisles for the same order

The principle of height: Preferable to place goods in the “golden zone” (75-140 cm) for ergonomic
reasons

The principle of restructuring:

Common in automatic storage. Goods moved around to optimize storage, e.g. next-day deliveries
placed near shipping area. Often done outside working hours.

15.3 Storage methods

Five common storage methods: rack storage, depth storage, free stacking, shelf box stacking, special
designs

Combinations used in most cases

Rack: storage construction with horizontal and vertical elements, used for unit loads

Rack positions: “shelf” for e.g. a pallet in a rack

Pallet place: surface for storage of one pallet in one rack position

Short-side or long-side handling: defines which side of the pallet faces the aisle

15.3.1 Rack storage of goods on pallets

Used when product stock is between 0,5-20 m3, usually short-side handling of pallets

High costs due to low utilization

Easy access to all pallets and easy administrative control

Normally 5-6 m high racks – can be up to 12 m

Seasonal goods can be stored as depth stacking in pallet racks

Rack can support ceiling

15.3.2 Depth storage and free stacking of goods on pallets

Stacking of pallets directly on floor (free stacking) and in depth secures high storage utilization. Not
good for short-lived products; LIFO is the only possible principle.

Used when product stock is over 20 m3

No need for storage interiors

Pallets must be evenly filled to avoid imbalances in stacks

Either stack on top of each other (max. 4-5 m) or build different “floors” in storage

15.3.3 Shelf box storage

Used for small and/or manually handled goods

Shelves can be adjusted to companies’ needs

Used for spare parts, tools and small volumes in production

15.3.4 Special designs for storage

Depth storage with bar racks: Bar racks are hung on construction -> high filling rate

Dense storage system:

Used for low frequency goods handled manually

Entire sections are mobile and can be moved on rail (mostly packed tightly) to create moving aisles

Can be either shelves or racks

Expensive systems; require high utilization to justify

Carousel storage: Computer system picks small items from horizontally rotating shelves

Rotating storage: Personnel picks small items from vertically rotating shelves
15.4 Automatic storage
Automatic delivery of goods on automatic or manual signal.

Expensive investment, used when more than 100 pallets/hour are handled

Low variable cost, high interest on capital

Storage on pallets, can be depth stacked

Height: usually 12 or 20 m, but can be up to 35 m

Narrow aisles occupied by stacking cranes (Reminder: Volvo study visit)

Delivery to picking spot, where a roller chain conveyor or truck takes over

15.5 Picking storage

Used to handle production and distribution variation and to divide and sort goods before shipping.
Consists of:

- Unloading zone
- Preparation zone; unpack, check, mark, repack
- Storing zone; where goods can be picked
- Loading zone; for transportation to customers

Type of picking storage is distinguished by:

- Buffer zones; how good is stored when no picking is done

- Picking principle; how many orders are gathered at the same time and from where
- Picking technique; mechanization degree of picking and design of picking zone (place where
gathering is done)
- Final work; how packing and sorting is done

15.5.1 Buffer zones

Buffer located aside: Not in picking zone’s vicinity

Buffer located near: Near picking zone, but tools must be used to access pallets

Picking zone buffer: Buffer in picking zone is used in case of shortage and refilled from buffer located
near or aside

15.5.2 Principles for pickings

One order – part of assortment: a.k.a. zone picking, collectors pick part of order that is in their field
then forward it. Transfer time per row reduced

One row – the entire assortment: a.k.a. order picking, one collector picks everything. Low picking
efficiency, but reduces risk of mix-up of orders

Several orders – part of assortment: a.k.a. article picking, picking for several orders separated by
article. Good when manufacturing stations assemble little part of article assortment. Enables
handling of high volumes and fast picking of orders. Consolidation is performed in sorting zone.
Several orders – the entire assortment: a.k.a. co-picking, one collector picks several orders, either
sorting in carrier or in sorting zone. Reduced transfer time, but increased handling time. Article
picking: only one article is picked for many orders.

15.5.3 Picking techniques

Low picking: Picking from low height with e.g. a forklift. All pallets accessible from floor, buffer on
pallet shelves above picking level.

High picking: Picking from all heights using high-lifting picking trucks or stacking cranes

Station picking: Pallets automatically picked from storage and delivered to manual picking station on
a conveyor belt. The operator picks what is needed and sends pallets back to storage.

15.6 Administration of storage activities

15.6.1 Arrival control
Quantity and quality control

Quality can be checked by the supplier or upon arrival

15.6.2 Filling techniques

After check, a report is sent to storage. Goods are then taken to storage or manufacturing unit.

- Fixed location: article number has assigned location

- Floating location: empty store used by any article
- Depth storage: pallet box storage or shelf box storage
- Different methods for different sections

After storing new goods, the article balance is updated. Information on storage spaces is placed in
central storage book, location directories or on planning boards

15.6.3 Shortage reports

Storage personnel informs of shortages so purchases can be made

15.6.4 To make an inventory of the storage

Make an inventory (“inventera”): check that actual amount equals presumed amount. Must be made
often enough and preferably when stock levels are low.

15.6.5 Picking
Not important

15.7 The company as a controlled storage system

Considering storage as a system consisting of subsystems enables reduction of planning points and
makes it easier to estimate capacity etc. -> optimization of entire system
16 The logistics of packing

16.1 The package

16.1.1 Definitions
Package – Covering: Cover/container that protects the goods (definition that is used throughout FoL)

Package – Unit of goods: Cover/container including goods

Package – Wrapping: The act of providing goods with a cover

Package – Creation: All activities concerning creation and handling of package

Package – EU definition: All products, including disposable, that are used to contain, protect, handle,
deliver and demonstrate goods through entire supply chain

16.1.2 Packaging systems

The packaging system is part of the logistics system

Modules: To fit in every part of the supply chain the package should consist of modules (large units
for transportation, small for picking…). The large units should be multiples of the small ones. The
package should be optimized to meet customer demands, optimize volume utilization in vehicles and
adapt to its environment.

Post-production-automation (PPA): automatic combination of customer articles

Disposal system vs. multiple use system:

Variables affecting choice:

- Tied up capital; variables affecting package’s time in stock

- Transportation costs; distance, imbalances, empty packages etc.
- Reverse logistics; ability to compress packages, cleanliness of them
- Loss; design for elimination of losses
- Environment; the one with all the climate issues, that is…
- Ergonomics; increasingly minimized risk of accidents

Long distance and high seasonal variation -> disposal system

16.1.3 The function of the package

- Protection of the article; damages – mechanical, climactic, biological
- Protection of the surrounding area; damage caused by goods
- Manageability; easy to handle
- Conversion to standard units; manageability and fit in storage
- Information about the product; properties of goods and package manageability information
- Information about usage; product manual
- Commercial function; marketing message on package
- Support of reverse systems; return flows
16.1.4 Regulations and marking
- Shape of goods is not strictly regulated in general, only for dangerous goods
- Regulatory framework exists for all types of freight transport
- Mark packages on sides (in case they are piled)

16.2 The flow components of the package

The package’s flow from supplier to customer:

- Packing; packing, protection and marking of packages by suppliers

- Handling; work methods and equipment to avoid damage
- Storage; protect from damage and deterioration, surveillance of transportation to/from
storage
- Handing over – delivery; no quality deterioration (supplier’s responsibility)
- Documents and routines; suppliers should have routines to ensure high quality

16.3 The costs for packages and damage of goods

16.3.1 Package costs
Create appropriate package:

- for the product, market, loading modules and transportation and production systems
(handling equipment)
- according to restrictions (regulation) and social expectations
- considering available packages

16.3.2 The construction material of the package

Package design should consider material choice both concerning product demands and
transportation demands

16.3.3 Product specifications

Product specifications that affect choice of package: structure, size and shape, weight and density,
weaknesses in the construction, strengths in the construction, moisture resistance, compatibility
(between different parts of product, but also between package and product), complexity (possibility
to demount to more efficient packages)

16.3.4 Properties of the product

Physical state: Gas, mobile liquid, viscous liquid, paste, liquid combined with solids, powder,
granulate, tablets, capsules, blocks

Influencing function: Corrosive, toxic, volatile, odorous, limited durability, sticky, sensitive for
corrosion, fragile, abrasive, sensitive for scratches

Sensitive against the surroundings: Mechanical impact, vibration, abrasion, crushing, variations in
temperature, oxygen, odors (remaining), light (bleaching), decomposition (chemical changes),
incompatibility with materials, rodents or insects

Demands on the package in combination with the properties of the product: dirt resistant, moisture
resistant, dust resistant, prevents waste (theft), will not corrode, compatible
16.3.5 Damage of goods
Sometimes a damaged product is physically repairable, but not economically; e.g. cars

Reasons for damage: defective packages, loading with other goods, goods do not withstand statutory
cargo securing, negligent handling

Border crossing transportations -> high damage costs due to accidents, waste, theft and handling
faults

- Theft and waste decreased by better routines and marking of goods, handling faults avoided
through training and better methods

Optimize costs: Find the combined minimum for packaging costs and damage costs

16.4 Stress
Three types of stress: mechanical, climate and biological. These should be minimized.

16.4.1 Distribution systems

Controlling systems: Company’s own transportation, risk controlled by company

Limiting systems: transportation in general (e.g. railway)

Open systems: large-scale exports

16.4.2 Risks concerning distribution and storage

A number of distribution and storage characteristics that affects risk with stress:

- Mode of transportation; air, sea etc.

- Control; depends on distribution system
- Form of transportation; break-bulk, ro/ro, unit load etc.
- Physical stress; mechanical conditions and duration of storage
- Extent of risk; characteristics and intensity of risks
- Equipment; should be used at all loading/unloading points
- Efficiency; risk with stress weight against transportation volume and costs

16.4.3 Mechanical stress

Storage stress: stacking pressure, pressure on loading stools; place heaviest goods in the bottom of
piles to avoid stress

Handling stress: falls and thrusts; secure goods to avoid damage and use fast equipment instead of
fork-lifts to avoid thrusts.

Height for which 99% of all packages collapse: ; h=upper limit for normal handling
(cm), m=product weight (kg), H=largest dimension of the package (cm)

Movement stress: Stacking pressure, vibrations and thrusts. Height limitations reduce stacking
pressure for all transport modes except sea; can be reduced by using containers. Low vibration
values for sea and train, high for air transportations. Thrusts are not issues for rod and air, but for rail
they occur when shunting.
16.4.4 Stress due to the climate
Exposure to water, oxygen, dust and particles in general. Corrosion risk when cold. Sea transports;
hot -> cold climate -> risk for water vapor condensing on goods, cold -> hot climate -> risk for
condensation on slowly heating goods. Some goods need to be in a temperature regulated
transportation; package can help achieve such a climate.

16.4.5 Biological stress

Bacteria, mold, insects and rodents

Bacteria and mold need food, oxygen and water to survive. Package contains “food”, oxygen is
difficult to eliminate -> reduce humidity

16.5 Package coverings

16.5.1 Boxes
Primarily protect against mechanical strains. Wooden boxes for heavy goods. Cubic shape most
economic. Optimize efficiency; length = 1.5 to 2 x height, width = 1 to 3 x height. Can be made from
wood, cardboard, metal and plastics.

16.5.2 Covers
Paper has poor moist resistance, can be improved by impregnation with petroleum or wrapping in
plastic materials. Film or foil paper is wrapped around goods and sealed through welding, taping etc.;
transparency -> easy to identify goods

Shrink technique: film is shrunk through convection (hot air) or less commonly through infrared
radiation

Stretch film technique: mechanical stretching, film fixed by welding of seams. Low material usage ->
low costs

16.5.3 Construction materials

Suitable materials have low cost, high resistance and/or are easy to shape

16.5.4 Evaluation of transportation packages

Wood/paper based: affected by moist, not hot temperature

Plastics: affected by UV-light, brittle when cold, viscous when hot, not affected by moisture

Metals: can corrode

Textiles: affected by moisture when natural fibers, temperature when synthetic and by UV-light in
both cases

The purpose of evaluation: determine functionality of package, compare to alternatives and

investigate causes and solutions of damages

Classification method: Evaluation can be carried out through follow up of actual results of
distribution, field studies or laboratory tests
The execution of the tests: How the tests are carried out depends on how much time is available,
dimensions of packages, number of available test packages, contents of the package, possibility to
simulate reality (distribution systems) and existing information on package and product

16.6 Protection of goods in the package

16.6.1 Corrosion protection
Temporary corrosion protection through application of film made from e.g. oils, oils mixed with
dissolvents, wax, plastics etc.

16.6.2 Corrosion inhibitors

Two types: steam phase inhibitors consist of a substance that vaporizes at normal temperature and
protects against water. It is not applied directly onto goods, in contrast to contact inhibitors.

16.6.3 Drying agents

Keep humidity in package low through use of e.g. a moisture absorbent substance.

16.6.4 Dampers
Avoid resonance due to convergence of transportation frequency and product frequency by
absorbing vibration energy between package and goods by using dampers. Dampers can also absorb
thrust energy and protect product from it. Dampers are made from form stable or non-form stable
materials.

16.7 Reverse distribution systems

Packages returned to supplier due to their value (re-use) or customer’s lack of storage space

Alternative to return system: reduce need for packages or use standardized load carriers (e.g.
containers)

16.7.1 Demands on the return systems

Prevent waste arousal, include all types of packages, encourage economic control tools (deposits),
perform life cycle analysis, ensure environmental protection and a working inner market (on a
national level), prevent trading obstacles, make sure extraction of energy is efficient when recycling
the package

Responsibility of the producer: producers ensure recycling and extraction of energy and the
consumers must return packages (meaning), includes companies that manufacture, import or sell
packages (responsibility), all types of package materials are included (extent)

16.7.2 Alternate return systems

Different types of reverse systems:

- Recycling: used for original function again

- Material recycling: functions discarded, but material used again
- Energy recycling: energy extracted through burning
- Biological treatment: package broken down through decay, composting etc.
- Land filling: package dumped in assigned areas
Extent of use in the EU should be 50-65% for recycling and 25-45% for material utilization including
biological treatment

16.7.3 The structure of the return systems

Organization: full package is exchanged for empty (exchange systems), package is assigned a value;
e.g. PET bottles (deposit systems), user hires the packages (leasing systems)

Ownership:

- Individual: use of value system or identification system necessary

- One-sided: one company owns all packages
- Mutual: share responsibilities
- Third party

Cost for return systems: administration, tied-up capital and storage, purchasing and scrapping, waste
and theft, return transports (combine with other transports if possible), sorting and inspection,
reparations and cleaning
Chapter 17 – Unit loads

17.1 Conditions for unit load technology

17.1.1 The unit load principle
Standard load carriers are needed to be able to transfer them between different traffic modes.

Man load = 50kg. Too heavy for manual handling today, unit load must have lower weights.

It is preferable to decrease the amount of manual handling, especially when changing traffic modes.
Total cost of transportation can be reduced if the single items do not need to be handled separately
when unloading and loading while changing between carriers. It is preferable to use larger unit loads
and handle them mechanically. With increased mechanization the time for loading and unloading can
be reduced, the vehicle’s waiting times and related costs are reduced as well.

The principle of unit loads can be formulated as:

In order to make unit loads applicable, three conditions must be fulfilled:

 Concentrated goods flow should exist somewhere in the flow

 Flow relations should be repetitive in character
 The logistics chain should comprise several transportation vehicles

Mechanization requires investments handling equipment, pallets, containers etc. There are
additional costs for empty returns and administration. The cost reduction on the other hand can be
made from:

 reduced manpower hours per handled goods

 increased terminal throughput time which may increase the resource utilization
 reduced packaging costs
 decreased damage costs and preventions from theft, mainly because of closed unit load
carriers such as containers.

The proportion of unit load transportation is rapidly increasing.

17.1.2 The unit load
There are four physical requirements of unit loads:

 Size – The unit loads should be as large as possible to establish efficiency, but not so large
that handling difficulties occur.
 Time – The units should be formed as early as possible in the logistics chain and broken down
as late as possible (at the place of consumption). This might decrease the size of the unit
loads because there must be enough space for them in the inventory of the consumption
space.
 Shape – It must be stable to be able to mix it with other unit loads of different weights.
 Handling – The load carriers must be easy to handle with all present equipment in the
transportation system, thus in all places where handling activities occur.

17.2.3 Open and closed systems

The boundaries of a system are determined by the ability and efficiency of the physical handling of
the load carriers. Within the boundaries, the system is completely open existing and defined load
carriers, but closed to loaders outside

 Open system – The components outside the system interact with the surroundings. It yhe
open system the unit carriers are of general character which makes it possible for nearly all
kinds of goods on those carriers to be efficiently linked to the open system. Transportation
systems designed to transfer containers are typical examples of an open system.
 Closed system – The system is independent of the surroundings

The system boundaries differs, the simplest form consists of one single link ((I) in the figure) one
example is large railway containers. These containers cannot usually be used by another system due
to the dimensions.

In system (II) two or more links are included (transportation relations) with intermediate nodes
(terminals). One example is heavy cassettes, designed to be transferred between RoRo ships.
In system (III) the links adds up and the closed system increases in size, can be seen as an open
system in itself.

In the closed system (I&II) it is usually the owner who designs the specialized load carriers because
they have generally no value or use outside the system. However, in the open system (III) general
containers can be used in different areas and therefore have an alternative value. For this reason it is
common that an external owner finances the load carriers to be rent by the goods’ owner.

17.1.4 Standardization
The standardization of load carriers facilitates the handling at the terminals (node) because it only
requires a few different kinds of handling equipment at the nodes, specialized unit loads = handling
equipment is needed for all different types. Standardization is preferable and can take place at
different levels; within the company, in a group or at national and global level. The most
comprehensive standard is drawn up by ISO (International Standardization organization).

17.1.5 Unit flow

To attain high frequency either the capacity of the load carriers must be reduced or larger flows must
be created. A system with unit deliveries is able to create a large flow composed of standardized load
carriers. A flow with high frequency and high utilization of resources can be created.

There is one problem with unit loads which is empty returns. The system must find strategies to help
fill the load carriers also on the way back and try to balance the flow.

17.1.6 Unit flow characteristics

There are both advantages and disadvantages with unit load carrier systems which may depend on

the situation.

Advantages (eight):

1. Reduced handling time since the load carriers and handling equipment are suit together.
2. Simpler and faster transferal between transportation means since all transportation units
are adapted to the handled load units, reduced complexity and time.
3. Reduced terminal time for the transportation means. The waiting time for the
transportation means decrease.
4. Reduced damages on goods since the goods are enclosed in the load carrier at an early
stage.
5. Reduced packaging costs. By enclosing the goods in the load carrier at an early stage, the
packaging can be almost eliminated. Also, if packaging is eliminated, there is no need for the
producer to care about collecting used packages.
6. Easier to choose load carrier type since there are no alternatives.
7. Simpler documentation since all load carriers is handled the same way documentation is
minimal.
 8. Simpler rules for responsibility and assurance. The rules are simplified thanks to
standardization.

Disadvantages (five):

1. The means of transportation must be adapted. All the vehicles to be used in the system
must be constructed to be able to transport the load carriers.
2. Larger handling equipment. Larger load units are preferable and therefore the equipment
must be able to handle the (heavy) weight.
3. Large terminals and flows.
4. Load carrier costs. There is a need to have surplus amount of load carriers in order to avoid
unpleasant accumulation of goods. This surplus results in additional costs.
5. Repositioning of load carriers. If there is an unbalance in the system, i.e. it exist source
(large outflow) or sink (large inflow) nodes, the load carriers must be repositioned to this
source or sink. The transportation of (half) empty units is associated with costs.

17.2 Transportation units without loading pallet or tank

The physical dimensions of the goods determine how to choose the most appropriate method to
bring them together into one transportation unit. Block shaped goods(bricks) can be piled in a certain
way. Long goods(planks) must be bundled and tied up. The bundling process is done fast and in one
run by automatic equipment. Whidespread and thin goods(paper) are tied together into ring and
rolls. Sheet-shaped goods (steel plates) are usually banded together with protective material
between the bands.

It is preferable to have space beneath the unit load in order to enable forklift work.

17.3 Loading pallets

17.3.1 The module
One easy way to build a transportation unit is to place the single goods on a loading pallet. The
purpose of pallets is to enable mechanical handling of larger units. Standardized pallets can be used
in different systems, for example:

Pawn systems where the pallets are left at the receiver who pays an agreed sum of money.

Pool system where a certain amount of pallets are at the disposal of a certain amount of users.

The pallets can be made of wood (cheap to produce and easy to repair), plastic or steel.

All of Europe, except from England has a common pallet system. The European pallet system is built
on 400 x 600 mm modules to facilitate efficient pallet utilization. The shelf systems in the grocery
stores are designed from these modules in order to provide good space utilization.

The Europe pallet is the most common, with dimension 800x1200 mm. A semi-pallet is half a Europe
pallet 600x800 mm and mostly used in the manufacturing industry for very heavy goods. There is
also an ISO-pallet with the dimensions 1000x1200 mm.

The predominant number of pallets are reused, but one-time pallets may be preferable in specific
cases. For example when the producer requires specific dimensions or if the return transportations is
very hard to arrange. The one-time pallets is cheaper (30-50% than the europe pallet) because they
do not have to be as robust as return pallets.
17.3.2 Standardization of return pallets
Since the pallets are eventually placed on a load carrier like a vehicle, wagon or a container, the
dimensions of the pallet should facilitate optimal utlization of the available space. Europe pallets are
very suitable in railway wagons and trucks, but not in containers because of the inner dimensions.
New standard dimensions arise in different countries to increase the utlilization and filling rate
during transportation.

The different dimensions create handling equipment complexities but on the other hand, just one or
a few pallet dimensions would force some countries to change the dimensions of the wagons and the
containers instead, which is unrealistic and far too costly. Such a change must be combined with the
investment cycle in order to renew the transportation fleet.

17.3.3 Building loads from pallets

There is a need to secure goods during transportation. Load securing can be locking with strips,
banding or net on sea or air pallets.

Pallet collars are used to facilitate

piling of pallets and shrinkable plastic
fixes the packages on the pallet. The
height of the collars are 200 or 400
mm. Placing a lid on the collar
creates a transport unit of 200 to 400
litres. The pallet collars fulfil many
functions (four):

 Irregular goods are reshaped

 Goods protection
 Transferal of bulk goods, usually require additional materials like plastic foil.
 Reduced handling work since no physical reorientation is required. It might imply worse
resource utilization though, because disoriented stowage requires extra area.
 Increased volume utilization because of the facilitation to pile pallets.

17.4 Flats
17.4.1 Container flats
A standard for load flats has been worked
out, which directly conforms to the normal
standard for containers and is called a
container flat. There are two standardized (SIS) sizes: 10-feet and 20 feet. A container flat should be
equipped with a number of construction details in order to fulfill the demands of handling and
transferal with standardized equipment for containers:

 Corner fittings
 Tunnels for forks
 Brackets for straddle carriers
 Lashing points for the load.

17.4.2 Swap body

Swap bodies are developed to allow horizontal transfer of specialized flats. These are constructed in
a similar way to truck flats, which can be lifted (vertical transfer) or placed on support legs (horizontal
transfer). Swap bodies are neither intended nor able to stack. They are mostly used due to the lack of
standardization and in closed systems.
The swap body is defined as the part of
the vehicle whose purpose it is to
transport the goods and that can be
separated from the vehicle and coupled
together again.

The swap bodies are not as standardized as containers. Two or three pallets may fit on a swap body.
In Sweden among other countries, the swap bodies are wider which makes the unloading procedure
easier. A normal swap body has a weight of 1800-3300 kg, but when loaded the weight range
between 16-32 tons.

17.4.3 Roll body

A roll body is a flat equipped
with a strong roll at the
back’s short side and a
pulling eye on the front’s
short side, to enable the roll
on of a flat surface on the
vehicle. This means that
there is no need for external
equipment to load and
unload.

17.5 Containers
17.5.1
A holder is called a container if it fulfils the following six ISO-criteria:

 A transportation unit with a durable construction

 Strong enough to allow repetitive usage
 Specially designed to ease transfer between different means of transportation without
reloading the goods
  Equipped with facilities that allow fast and efficient handling, especially in transfers between
different means of transportation
 Designed to ease the loading and unloading of the goods in it
 Has an inner volume of at least 1 cubic meter

Freight container = ISO container. 20-foot (TEU, Twenty foot equivalent unit) and 40-foot (sea
container) containers are most common. Containers are converted to TEU in statistics. The trend
today is to increase the height of containers, because there is not the same need for standardization
as for width and length.

ISO have two types of standardized containers “serial 1” and “serial 2”, where the “serial 2” is based
on the metric system. These two dimensions are the most commonly used internationally, but they
are not applied in northern Europe. The gross weight of the load carriers is also standardized. The
possibility to stack containers depends on the conditions, in the USA double stacking is used on the
railways but that is not possible in Europe since the railways are electrified for instance.

The ISO containers have a relatively high empty weight (tara) of 2200 and 3800 kg for the 20-foot and
the 40- foot respectively. There are several models of containers depending on purpose:

 Tank containers for liquids like beverages, chemicals and petroleum products.
 Containers flat with or without gables for large constructions that are hard to load
 Cold or heat containers for goods that are temperature sensitive.
 Tipp-enabled containers for bulk goods i.e. unpacked mass goods.

In Sweden (Cesam container) and Norway (Minicontainer) another, smaller type of container is used.
The system has its advantage that it utlizes the larger vehicles allowed on the roads and railways but
the disadvantage is that the system is tied to one specific area and cannot ne used on foreign roads.

17.5.2 Container construction

In order to be able to be lifted in its four upper or lower corners, the container needs a strong frame
construction, usually made of steel (or aluminium sometimes). To meet the ISO standards the
containers should be equipped with standardized corner fittings and these fittings facilitate the
ability to stack containers. The containers may also be equipped with fork tunels, lift brackets, hold
for crane arms and holes for support legs.

At least one of the container doors should be placed on a gable and the opening should be as wide as
possible, preferably comply with the inner dimensions. A standard container should have a minimum
inner dimension to simplify dimensioning of loading pallets.

Besides the ISO container there might be a need for specialized containers to carry specific items like
frozen goods or tank containers for liquids.

17.5.3 Development trends for containers

As products get more refined before transportation, they have to be packed. Therefore, the density
of goods decreases and the need for larger volume capacity in load carriers increases.

The width (2,42 m) of a container is not suited for smaller modules like loading pallets. There is a
possibility to increase the width of the containers to give place for two pallets instead of one, but
resizing is not efficient if the pallets are to be used in the ship’s cargo space as well. Only a few new
ships have space for larger containers.

The length (40ft) can be increased for all types of transportation, the limitation depends on what the
infrastructure allows. The established length today is 45 and 48 ft.
The height of the container is limited by tunnels and such that exist in the road and railway
infrastructure. The railway has two limitations; electrification and tunnels, a maximum of three
containers can be stacked due to these limitations. Road limitation; tunnels.

However, the larger containers must fit into the corner boxes system in order for the handling
equipment to be appropriate also for the new containers.

“Eurotainers” has been developed to increase the fill rate in the containers. They are wider (2,6 m) in
order for the euro pallets to fit better. The fill rate is maximized with small loading units but this
increases the loading and unloading time. There are some ways to increase filling rate: better
conditions for automatic loading and unloading, use of Euro-pallets and wider containers to utilize
the maximum road width.

17.6 Unit load carrier transportation

17.6.1 Ships
Ships are divided according to how the load carriers are loaded or unloaded.

LoLo-ships (Lift on Lift Off) are loaded and unloaded with vertical lifters directly in the load room or
on deck. Large hatches (skeppslucka) are a prerequisite for the LoLo to work since containers are
lifted right through them directly into their positions, i.e. without horizontal movements inside the
boat.

RoRo-ships. In RoRos loads are rolled over ramps to their final positions on different decks. Car
ferries are an example of RoRo-ships. They are primarily used on relatively short distances, for
example between Scandinavia and the rest of Europe. Some of the decks may be both lowered and
raised to allow a better utilization of space. Both ship tied and port tied ramps are used. The goods
transported over longer distances (transoceanic) are most often composed of large constructions
such as paper rolls that cannot be loaded in containers.

Paper rolls are loaded on board with trucks equipped with special tools. RoRos can be used for
intermodal transportation and therefore some ships have rails.

Combined LoLo/RoRo-ships are used in order to make the ships more flexible, they can be built with
both container spaces for LoLo-handling and a space on the stern (akter) side with a ramp intended
for RoRo-goods.

Other types of ships like feeder ships, which are smaller container ships used for transportation
between relatively adjacent ports. For river transports, barges or lighters adjusted to container
transport are used.

17.6.2 Railway wagons

Railway wagons solely intended for transportation of containers and swap bodies can be built with
the simple construction of a flat wagon. The only requirements are securing sticks that secure the
lower corner boxes. The most common wagon has two axes, intended for two TEU, supporting a
maximum of 28,5 tons.

The construction gets more complex if it is intended for a semi-trailer. If loaded on a flat wagon it
exceeds the allowed load profile. Therefore, the wagon is built similarly to a box.

17.6.3 Trucks
Haulers for semi-trailers are short vehicles with a rotation connection where the front end of the
semi-trailer rests. No handling equipment is needed; instead the connection is made by hoisting
(hala) the semi-trailer with the support legs.
Trucks for containers are quipped with hoist devices if it is not available at the goods sender or
receiver. Containers may be placed on trailer chassis and then treated as a semi-trailer in the
roadway system (still treated as a container dutring rail and sea transport though).

Trucks used for handling swap bodies are equipped with air compression that is used during
handling.

17.6.4 Aircraft
Air transport is usually for small, lightweight, high value goods with high speed demand. ISO-
containers are not suitable for air transport because of the weight (tara) and poor space utlization.
There are special airfreight containers instead, made of light metals and dimensioned to fit in the
cylindrical shape of airolanes.

Sikorsky S-64 Skycrane is a helicopter, able to carry a container underneath it and used to reach
rough terrain but primarily for military purposes.

17.7 Handling of unit loads

There are principly two different handling methods for transfer of containers, LoLo (with cranes) and
RoRo (the container slides or rolls on a chassis).

17.7.1 Handling-yokes
The interface between the load carrier ant the handling equipment consists of some form of grip
device, in this context called a The interface between the load carrier ant the handling equipment
consists of some form of grip device, in this context called a yoke. Many types of yokes but they
normally adapted to a standard for unit load carriers’ grip holds, like the container’s corner boxes.

Top lift yokes are intended to grip the ISO-container’s upper corner boxes, most common type of
yoke. Exclusively used for containers.

Side lift yokes grips the container from the side, but only empty (or slightly loaded) containers can be
lifted that way because of the container design.

End lift yokes can be used on empty containers in small and low passages, but it is not that common.
There are also grip arm yokes, used in the absence of tools to grip at the upper corners. The grip
arms grip all around the objects.

The yokes are manufactured as complements to trucks and cranes. Combination yokes are used to
avoid changing time of yokes in terminals. These can handle the three ISO-containers, swap bodies
and semi-trailers.

There are intelligent yokes which in addition to lifting, also handle data gathering about the goods.

17.7.2 Handling in ports

Landbased or shipbased cranes = load/unload LoLo-ships. Terminal tractors = used for semi-trailers
and wagon-loaded containers at RoRo-ships.

Land-based cranes are the most common crane. It runs on rail on the quay(kaj). Several cranes can
serve a ship to make the handling faster. A loading cycle takes between 1,5 and 3 minutes depending
on where in the ship the container is to be loaded.

Ship-based cranes were created because cranes in ports were not designed to lift heavy containers.
Ship-based cranes have several disadvantages compared to land-based cranes (five):

 Poor utilization of cranes, especially for long distance transportation.

  The ships lurch (kränger) when the cargo is transferred across the ship. The handling is
therefore slower than for land-based cranes.
 If the superstructure of the ship lies in the middle, two cranes are needed.
 AIt increases the construction technology requirements and thus the cost for the ship in
addition to the extra costs for the crane.
 The cranes limit the stacking height on deck.

17.7.3 Handling cargo in terminals

Terminals must be equipped with specialized vehicles that can handle full units without breaking
them. This means heavy vehicles with limited maneuverability and accidents can easily occur.
Consequently, terminals must have large and flat areas.

Straddle carriers are used for loading and

unloading ships and railway wagons in the
terminal area. The containers hang
underneath a construction similar to a
portal with four legga and wheels.
Sometimes containers are stacked,
therefore the straddle carrier is
constructed high enough to straddle two to
three stacked containers.

Terminal trucks are used at specialy

designed low wagons, so-called goose-neck
wagons. The movement occur according to
the RoRo-principle and are operated by
terminal trucks. It works principally like
trucks for semi-trailers, but the rotary table
can be raised and lowered because the
repeated switch between semi-trailers and
wagons.

Counterbalance forklift trucks are

equipped with different kind of yokes
and used to handle containers within the
port area. Forklifts for loaded containers
quickly become large, space demanding
and ungainly to handle, they weight
between 50 and 60 tons and therefore
mainly empty containers are handled.
Forklift trucks can stack up to seven (empty) containers and are very useful in this case.

17.7.4 Vehicle dependent handling

In order to collect and deliver a load carrier at the sender and receiver without equipment, the
equipment should be part of the vehicles.

Semi-trailers are designed to be easy to handle without external equipment. It has a rotary table.

Side lifter is a type of truck equipped with a hydraulic arm to put down the container on the ground
or transfer it to another vehicle.
Leaning ramps on trucks are used to handle containers for bulk goods. These containers are special
and called roll bodies.

Skeletal trailers (trailer chassis) are lower chassis that makes it possible to handle the unit as a semi-
trailer. Containers can also be placed on support leg frames and are then handled like swap bodies.
One limitation is that containers are often heavier than a swap body can handle.
19 Terminals

19.1 The function of terminals

Ideal with direct floor-to-floor transports. In reality such transports would result in too low average
utilization in terms of weight and volume.

Consolidation: Goods from several suppliers are consolidated in a terminal and delivered to another
terminal where they are divided and delivered in smaller units to customers

Transshipment: Change of transport mode, e.g. small vehicles from supplier to terminal and large
ones between terminals

Coordination: Coordination of arrivals and departures, but also capacity coordination. Needed to
make node efficient.

Sorting: Value-adding operation.

Kitting: Destination sorting and creation of manufacturing kits.

Sequencing: JIT, customers want goods in the right order.

Commercialization: Prepare goods for immediate sales.

Storing: Benefits the previously mentioned functions, can be both short-time storing (delivery
synchronization, buffers) and long-term storing (delivery on customer request)

Definition of a terminal: a point in a material flow system where material flows are joined together
and divided

Costs arise for: buildings, land, staff, equipment etc.

Savings in transportation costs

19.2 The structure of terminals

19.2.1 The internal flow of terminals
Flexibility is needed when goods flows are unpredictable. Terminals are designed depending on how
much flexibility is needed, can vary in different parts of one terminal.

19.2.2 Penetration flow

Main function of terminal is transshipment. Every vehicle has a designated gate. Many gates, not
much activity apart from transshipment – low flexibility.

19.2.3 Circulation
To avoid the crossing flows in penetration flow terminals, an internal circulating flow is created. This
allows for the use of non-fixed gates – a gate can be both departure and arrival gate. Increase in
flexibility and cycle time, reduced terminal size. E.g. post terminals.

19.2.4 Circulation with a central flow

Allows for a central incoming flow directly into circulating flow. Necessary when trains are used in a
circular flow system. E.g. general cargo terminals.
19.2.5 Flow storage
Goods are stored in terminals. No fixed gates. Terminal must be dimensioned for maximum capacity
needs -> over-capacity the rest of the time.

19.2.6 Terminals in external flows

Functions as a decentralized warehouse -> near to customers. Spare parts in terminal -> short time to
fix broken products (time-based service agreements). Fast customer deliveries, economies of scale
and variety simultaneously for supplier.

Wilson formula: , R=demand, O=ordering cost, I=interest rate, C=value of article,

n=number of terminals

Centralized storing: ,

Decentralized storing: ,

Reduction in stock when going from decentralized to centralized storage: , LDL=

stock level in decentralized storage

Decentralized -> centralized storage: reduced capital costs (especially for low volume value and high
unit costs), increased transportation costs

19.3 Cross-docking
19.3.1 The function
Companies want decreased lead times, low tied-up capital and demand driven production. Life
expectancy of products decreases and customers want timely refills to avoid storage -> need for fast
distribution

Cross-docking: Ideally, unload article from incoming trailer, find destination and load article onto
trailer for that destination. Incoming consignment split into many outgoing consignments. No value-
adding activities or storing, passes through terminal in less than 24-48 hours.

Two dimensions: Terminal dimension and logistics dimension

Advanced equipment needed in terminals to decrease lead times

Important content in information systems: specification of goods including origin, time of arrival,
quantity, identification (how to), destination including address, time for send on, handling of goods
(perishability)

19.3.2 Overall view – integrated logistics

Integrated logistics focuses on coordination and on minimizing the total costs for logistics instead of
for every article individually. Storage has become physically and technically more advanced ->
increase in costs. Can be avoided through use of third party, such as the transporter, or making
storage more efficient without investments.
19.3.3 Cross-docking and integrated logistics
Combining cross-docking and integrated logistics. Cross-docking provides an efficient flow with short
lead times and no storage, while integrated logistics increases coordination between two parts
through the use of a third party. For the system to work, advanced information systems are
necessities.

The transportation buyer needs to know which concept is used in terms of:

- Rapidity: Cross-docking has fast goods flow, while integrated logistics does not define any
time requirements
- Storage: does not exist in cross-docking, but can be a main part of integrated logistics
- Information: A good information flow is important both to cross-docking and integrated
logistics
- Costs: Integrated logistics minimizes logistics costs, cross-docking minimizes tied-up capital
and increases revenues (speed)
- Value-adding activities: Big part of integrated logistics, not part of cross-docking. Differs from
joint activities (activities to improve goods flow, e.g. attaching bar codes to goods)
- Cooperation, planning, coordination and service: important in integrated logistics and cross-
docking

Over-all view:

- Cross-docking: Information and goods flow from supplier through DC to customer. No

storage.
- Integrated logistics: Logistics activities coordinated for all actors through information
exchange and coordination to minimize total logistics costs

Terminal approach:

- Cross-docking: Only joint activities for all articles are performed – traditional terminal
activities, minimized terminal time
- Integrated logistics: Joint activities and value-adding activities and storage

19.4 Administrative routines at a goods terminal

Complicated administration -> slow material flow. Administrative routines must be coordinated with
physical flow

Administrative routines:

- Incoming goods: quantity received at what time, placement of goods

- Outgoing goods: identity of goods, destination/receiver, time for dispatch
- After shipping: confirmation that the right quantity, with predestined quality has been
shipped, weight of consignment, number of parcels, marking, mean of transportation etc.

19.5 The terminal activities

19.5.1 Handling
Terminals combine transportation modes with different characteristics to meet both suppliers’ and
customers’ demands.
Queue problem: means of transportation wait for loading/unloading. Connected to the uneven
distribution of arrivals and departures during the day and the year -> over-capacity in some periods;
can be used for value-adding activities

Uneven distribution is a problem for road transports, not for train. Standstill costs are eliminated for
train if loading/unloading can be done during the time the customer disposes the wagon. By using
swap bodies waiting-time for semi-trailers can be eliminated.

Trucks have the advantage of operating as a single unit, while marshalling of an entire train is
necessary to disconnect one carriage.

Mean of transportation must be adapted/arranged for specific goods before loading; how differs for
different transportation modes, e.g. terminal staff takes care of trains, transporter takes care of
trucks.

19.5.2 Terminal vehicles

Need for unit load carriers within terminal, since unit loads are created early on in terminal activities.
Two types of handling: transportation by trucks and lifts.

Forklift trucks for pallets, specialized trucks, e.g. straddle carriers, for larger goods. With increasing
number of terminal activities, more types of trucks are needed, e.g. narrow aisle trucks.

Staff need varies within terminal, fixed transportation systems can be used instead of staff. AGVs
increase flexibility compared to man-managed systems.

For a cute visual of different types of trucks, see figure 19-11

19.5.3 Techniques to fill the units

Loading of goods into distribution unit (for final customer) requires loading in the right order, so that
goods for the first customer is placed closest to the loading/unloading part of the carrier (sequenced
loading). If one customer’s goods are not available, the loading process will have to stop and wait for
them.

Time can be saved by performing as much of the loading activity as possible outside the unit carrier,
e.g. loading onto a flat instead of carrying every single article directly onboard the vehicle.
Advantages: sequencing not necessary before loading flat onto vehicle, load carrier not needed at
terminal before flat is filled, short time for loading onto carrier -> reduced waiting-time for vehicle,
goods can be loaded onto flat immediately when they arrive.

Techniques for pre-loading are presented below.

19.5.4 Rolling flats

Flats are equipped with wheels to easily roll onto load carrier; requires even floors in load carrier and
terminal.

19.5.5 Moving deck

Moving floor in load carrier driven by engine.
19.5.6 Walking floor
Segmented floor in load carrier and loading/unloading area. Segments are moved and so are the
goods that stand on the segments (think Rubik’s cube in two dimensions…)

19.6 Land terminals

Combine long-distance transports with local distribution

Should be near major roads and contain large areas so as to enable handling of many different types
of vehicles and lengthy vehicles in particular

Investments in loading platforms are justified, since-ground level loading with trucks require much
space -> increase in trafficking area. Platform with variable height enables transshipment.

Inside terminal: Roof conveyor transports pallets; long cycle time. Trucks used for goods that aren’t
suitable to transport on conveyor wagon

Enlargement of terminal -> enlargement of conveyor -> longer cycle time -> increase in door-to-door
time

19.7 Sea terminals – harbors

19.7.1 Design
Rare with feeder traffic (transshipment between two ships)

The difference in capacity between ships and land-based transport modes -> goods storing in harbor
or many available trains/trucks when a ship is unloaded (only used in large harbors)

Fast turnaround times needed to increase the capacity of transportation routes and improve
departure frequency. Large arrangement areas are needed for loading/unloading.

Handling to/from ships: cranes

Transportation in terminal area: straddle carriers, terminal wagons, pulling trucks

Handling to/from trucks: counter balance trucks, side-lifters

Handling to/from trains: gantry cranes

85% of general cargo transported in containers -> decreased need for storehouses, protection
against damage and theft built-in

Railway tracks far from loading/unloading area

19.7.2 Different types of quays

Pier system: Piers perpendicular from quay. Used for general cargo traffic. Creates long lying times
since goods are transferred from ship to land-based transport without storing.

Straight quays with storing in storehouses: Warehouses close to harbor, partial unloading to railway
possible. Reduces lying time for ships. Used for general cargo traffic and refrigerated transports.
Straight quays: Short loading/unloading and no need for warehouses due to containerization. Large
storage areas needed.

Jetty: Fixed or floating jetty attached to quay so that RoRo-goods can be transported onto ship in the
direction of travel. For short sea shipping; short lying times.

Lock system: A dock within a lock prevents the tide and sea in general from affecting the efficiency of
harbor activities. Limits the number and size of ships.

19.7.3 Space demands

For handling reasons, unit loaders cannot be stacked as highly in the harbor as on a ship.

Block coefficient (Bk): The part of the theoretical block L*h*b (length*height*width) that constitutes
the actual ship (maximum 0.85 nowadays)

Load carrying volume (Vl): Part of ship’s volume intended for goods

Load carrying block volume (Bl) = Bk*Vl

So the goods volume in a ship is Vl = Bl*L*h*b. These goods will take a storage space in the harbor
that equals the length of the ship (L) times another length (D). Thus, we know that Vl = L*D <->
Bl*L*h*b = L*D -> D = Bl*h*b

For two ships with the same Bk and Bl we will have a change in dimension,

2
Knowing D1 = Bl*h1*b1, we find that D2 = Bl*h1*b1*k*k, i.e. D2=k *D1. Note that the calculations are
based on storing with one unit’s height on the quay (no piling). The above calculations show that
increases in ship sizes will increase the need for arrangement areas tremendously.

19.8 Airfreight terminals

19.8.1 Goods terminals
Airfreight on passenger planes is not prioritized, since passengers are a large source of income.
Alternative: daytime passenger flights and nighttime pure airfreight.

Low volume/high value items -> need for transshipment to other fast transportation mode – trucks!

Goods must be evenly distributed in plane, so containerization is not an option. 70% of airfreight
goods weigh less than 50 kg -> mechanized air terminals. Transport within terminal on conveyor belt.
Three cargo handling systems for: smaller general cargo, heavier general cargo and air pallets.
Computer system decides which category goods belong to.

19.8.2 Passenger terminals

The majority of all airfreight is performed in passenger traffic.

The terminal: Six different designs:

1. Planes park on platform, terminal is separate

2. Planes park in straight line in front of terminal’s long-side
3. Centralized terminal with piers extending from it; creates long transportation distances
 4. Curved terminal system with circulating public traffic flow within; reduces transfer times
within airport
5. For transfer airports distances are minimized (one short pier)
6. As 5, but with central outgoing flow (directly from terminal)

The aircraft: You know how to enter and exit a plane, right? The FIFO-principle should be used.

19.9 Costs for terminal handling

Cost drivers for terminal handling: dimensions, weight and composition of goods (most important),
average size and variation in time of goods flow (determines capacity), degree of terminal
mechanization, type of external means of transport

Terminal costs:

- Sea terminal: 100-200 SEK/ton (general cargo), 20-50 SEK/ton (containerized goods)
- Land terminal: 45-75 SEK/ton (car-railway)
- Air terminal: 500 SEK/ton (general cargo; small parcels and bulky goods)

19.10 Terminal localization using the point of gravity method

Variables a company cannot influence: available sites and personnel, customer demands

Variables a company can affect: geographical location, infrastructure, economic relations

Localize in point of gravity of customer demands of goods and distribution area to minimize
transportation work for distribution (assumes constant ton-kilometer cost)

19.10.1 Transportation work

One terminal – several customers:

Weigh the distance from from a customer to the terminal against the demand of that customer
(Xci*Vci, Yci*Vci – V is the volume demand)

Optimal location for terminal: ,

Since the localization is made once and the customer demands change over time, the result should
be considered a suitable establishment location, not an absolute position.

One supplier – one terminal – several customers:

The direction of the flow doesn’t impact the optimization calculations. In other words: Consider (Xs,
Ys) and Vs as values for yet another customer and use in the formulas above.

Several suppliers – one terminal – several customers:

Hub and spoke system. All customers and suppliers are weight equally and the formulas presented
above are used. This type of terminal is the most usual one.

19.10.2 Transportation costs

For different transportations, different vehicles are used (sizes, types), which means that the
transportation costs will differ. When taking this into account, a new optimal location is found:
 ,

The same arguments as above apply in the case of none, one or many suppliers.

19.10.3 Environmental impact

To minimize the environmental impact of the terminal location, environmental impacts of
transportation can be taken into account. In that case Tci in the above formulas is simply replaced
with Eci.

19.10.4 Localization of terminals

The above method can only consider one parameter at a time (e.g. Tci or Eci). For examples of more
parameters that can be used, see figure 19-34.
20 Physical distribution

20.1 Demands on the distribution

Direct distribution -> low utilization and frequency in transports, need for many transportation
resources

JIT -> high frequency, but even lower utilization, higher freight rates, difficult to receive return goods

Consolidation is the solution; creates clear flow and the network gives a short throughput time

20.2 Physical flows

Direct physical distribution = distribution network

Three ways of transport: point-to-point, serial flow or through a terminal

Two types of flows: goods flow and resource flow (vehicles etc.). The latter one is a two-way flow

Time restrictions exist due to demand for time coordination (goods vs. load carriers) and
consolidation (waiting for sufficient amount of goods)

20.3 Distribution systems

20.3.1 Direct deliveries
Fast and resource-demanding transports; no time restrictions

Number of transportation relations (R) = number of manufacturing units (m) * number of customers
(c)

Disadvantages: Low frequency in each link, low resource utilization, need for many vehicles

20.3.2 Multi-terminal system

Goods always pass a terminal -> increased transportation distances

Customer focus: Customers always receive their goods from a certain terminal, R=m*t+c, where t is
the number of terminals

Possibility to consolidate -> increased efficiency and resource utilization, higher frequency

Time restrictions exist, since the outgoing transportations must wait for goods to be delivered to
terminal. Either the outgoing transportation leaves at a predestined time or waits until vehicle is full;
increase in transportation time, but also punctuality

Producer focus: A producer always delivers to the same terminal, R=m+c*t

20.3.3 One-terminal system

Both incoming and outgoing deliveries are concentrated to one terminal, R=m+c

Advantages: increased frequency, economies of scale and improved service level

Considerable time restrictions (see multi-terminal system for explanation)

20.3.4 Hub and Spoke systems
Customers and producers seen as the same thing and have demands on incoming and outgoing
goods. Time restrictions in both directions -> same time for arrival and departure for all
transportations -> large and concentrated demand of vehicles

The terminal is called hub and the links are called spokes

R = m+c = number of nodes – 1

Lead times can be decreased by not synchronizing all transports. However, some two-way relations
are unavoidable

Hub and spoke system is appropriate for large distribution companies, the system also is beneficiary
from a reverse logistics perspective

20.4 Hub and Spoke concept

Discharger wants frequent deliveries, forwarder wants high utilization. Consolidation in central hub
makes “direct distribution” from producer to customer possible, taking these requests into account.

20.4.1 The function of the hub

Expanding markets and specialized subcontractors -> more transportation work

The trend of centralization has increase transportation distances – that doesn’t necessarily imply
more vehicle kilometers, since a centralized system generally means better utilized vehicles. Also,
with fewer terminals the large fixed costs are reduced.

The hub and spoke system efficiently avoids the tradeoff between high fill rates and frequent
departures.

Currently, over-night traffic (<24 h) is necessary to fit the centralized system

A hub can be a terminal, storage or both

Description of the system: Small loading units of goods are sent from consignor via spokes to hub
where they are sorted and consolidated with other goods destined for the same region. The larger
loading unit is sent directly to a hub in that region. Then the goods are sorted and sent in smaller
loading units to the consignee via the spokes.

Advantages: Since goods are collected from more than one region, end destinations that are not
large enough in one region, in terms of goods, may be economically interesting anyway.
Furthermore, consolidation can be performed early on without affecting transportation buyer
negatively.

20.4.2 Theoretical description of the Hub and Spoke system

The number of ton kilometers tend to increase as the number of transportation relations increase.

Comparison of number of relationships in traditional direct transports and a hub and spoke
system:

Traditional:
Hub and spoke:

Thus

Since arrival and departure times are synchronized in the hub and spoke system, there is a limit to
how many customers can be served in one hub.

Fewer transportation relations require fewer vehicles (fewer investments). At the same time the
transportation work increases and, thus, the filling rates. Additionally, it’s easier to exactly adapt
sizes of resources to large thn small goods flows (e.g. large vehicles -> economies of scale)

Comparison of frequency in traditional direct transports and with a hub and spoke system:
Assumed for comparison reasons

Traditional: Since ,

Hub and spoke:

Thus

The reduced number of tranport relations allows for a higher frequency of deliveries, mainly because
vehicles previously in use in “cancelled” relations can be used to increase the frequency.

Things not considered in the above discussion: all relationships do not need the same frequency, the
traditional system normally has less than (n(n-1))/2 relations, resource utilization has not been
investigated for the hub and spoke system

20.5 Different types of hub networks

Hub networks are created according to a structure to achieve high transportation quality

20.5.1 Single terminal networks

Many local terminals and one central hub where sorting is done. Longer transportation distances, but
higher fill rate. Good when the network covers large area with limited amount of goods.

20.5.2 Multiple terminal networks

Many connected terminals for distribution in local areas. Goods often handled in more than one
terminal -> increase in terminal costs and higher risk for goods.

20.5.3 Hierarchical multiple terminal networks

A number of central terminals are connected to smaller terminals. The small local terminals are close
to customers, but central terminals are distant from each other, i.e. one central terminal covers a
large area. Lower terminal costs than in single terminal networks.

20.5.4 Split points and co-loading points

Conditions when developing split point systems:

- Technically possible to load goods in relevant transport; weight and volume

 - Goods flow through split point should have high enough delivery frequency through full load
carriers
- Goods should come from and be intended for the same region

The aim is to increase frequency without increasing costs

Co-loading point: Goods arrive from different points, are coordinated and sent on to one final
destination

Split point: Goods arrive from one point, are split up and sent on to several destinations

20.5.5 Distributing terminals – Satellite units

Satellite points: customers and suppliers are also considered terminals, thus extending the network
structure. E.g. a supplier can function as a co-loading point and a customer as a split point. In a hub
system, a satellite point can be seen as a co-loading and split point simultaneously.

20.5.6 System levels

Hubs can be connected either through subordinate hubs being connected to a superior hub or
through a network for direct deliveries. With increasing number of levels the total transportation
time increases by the same multiple.

A hub system requires highly efficient systems for tracking goods.

20.5.7 Advantages with the hub system

- High utilization due to co-loading; enables transport of small volumes with high frequency
- Possible to combine swap bodies into vehicle combinations in hub; high flexibility and
possibility for return loads, short transportation time and high frequency
- JIT; large savings in tied-up capital and improved customer service

Disadvantages: Increased transportation costs, times and distances, goods handled several times ->
increased losses/damages, increased crowding at terminals etc.

20.6 Streamlining a terminal system

There are situations when direct relations are more efficient than hub systems, partly due to the
hub’s location, partly due to the hub’s large resource demands. Abandoning a hub system is,
however, negative from a revenue point-of-view. Below, potentials for streamlining of hub systems
and distribution systems in general are presented.

20.6.1 Direct relations

The most basic description of a direct relation is transportation between two nodes without passing
through a terminal.

Normal direct relations: Direct relations between some suppliers and customers are introduced to
the system. For this to work there must be enough goods in the system or smaller transport units.
Also, if too much goods are transported through direct relations, the amount in the hub system
might decrease to a level where the frequency is affected.

Variable direct connections: The direct relations are changed between different customers and
suppliers over time based on demand. Creates flexibility and competitive strength for transporter.
20.6.2 Extension of a relation
When a new customer enters the system it can be linked to a customer demanding similar goods
instead of directly to the hub.

Normal expansion of relations, single or multiple: Linking of two or more customers according to
above. The method only works if the cycle times for having separate relations are longer than for the
combined relation.

Extension of relations by connecting existing customers: The method is applicable only if the cycle
time of the original relation is longer than the transportation time between the two customers. The
number of resources needed is reduced, while delivery frequency is maintained.

20.6.3 Transportation resources that pass through the terminal

Decrease goods handling by using transshipment. If a large part of the load carrier is filled with goods
for one destination, only the goods that aren’t meant for that destination need to be unloaded. Then
the vehicle could continue to the destination instead of unloading, reloading and returning to the
same customer. This system requires sequencing of goods, but time in terminal and costs for
loading/unloading are reduced.

Issues: Schedule problems and adaptation difficulties between amount of goods and need for
resources due to non-predefined journeys. General resources in terminal must be used for tasks at
hand rather than for what they are best at.

Simple resource transshipment: Above system only used for one resource (vehicle)

Multiple resource transshipment: Several transshipping resources used, gives the feeling of direct
transports although a hub system is used

20.6.4 Variable location of the central hub

Adapting location of the hub to the goods flow (changes in customer demand). Variable terminal only
possible if people and equipment can be moved, standardized load carrying units are used and the
company is highly flexible.

20.6.5 Frequency change by stopping the flow

For weak relations with low goods flow the flow can be stopped to await a full truck load. This will
reduce the delivery frequency but allows for connecting small customers to a hub system.

Constant frequency: Number of cycles (ω) a resource (U) must wait before it is filled if the cycle time
is c and the flow is m: , ω should be an integer

Dynamic frequency: The frequency of delivery depends on a varying goods flow

20.6.6 Increase in frequency for large goods flows

If the goods flow is so large that it exceeds the capacity of one vehicle with the current frequency,
the frequency must be increased.

Increased constant frequency: New frequency , f should be and integer

Dynamically increased frequency: As soon as a resource is full, it takes off. Thus, customer demand
determines frequency. Of course, the time for filling a unit must be shorter than the cycle time.

20.7 Route planning

When shipping from one terminal to several customers increases the flexibility of the potential route.
If a distribution vehicle visits (k) number of customers the number of possible routes (n) is: n = k! so
even with a small number of customers there are a lot of possible combinations. When more vehicles
and routes are introduced the complexity increases.

A route-planning problem contains the following:

 A number of customers ask for a combination of goods in known quantities.
 The customers are spread out in a network of roads with known distances, expressed, for
instance, in time or length.
 The customers are to be supplied from one or more depots of vehicles, which can visit one or
more customers on the same route.
 A settled amount of vehicles with a certain capacity are at the transportation company’s
disposal.

There are also restrictions, such as:

 Vehicle restriction, all vehicles cannot unload at all customers
 Time restriction, each customer has special demands regarding delivery times and cannot be
combined in all ways in order to meet these demands
 Co-loading, some parts of the assortments must be transported separately from other parts
on the same vehicle.

The routes are designed in order to minimize or maximize present goal functions:
Minimizing
 Total driving distance
 Number of routes
 Required number of vehicles
 Time demands on vehicles
 Delivery times to some or all customers.
Maximizing
 Delivered amount of goods
 Number of visited customers
 Filling rate of the vehicles.

Loops
A simplified method for route planning where the vehicles are moving in permanent loops. It is not
an optimal distribution but quick and easy to use. The loops of deliveries can be connected to other
activities such as collecting goods.
Sweep method
A common method to divide customers by geographical placement. For example can a vehicle
operate clock-wise from the terminal, continuing until the vehicle is empty/full regarding
delivery/pick-ups. This method is not optimal but easy to use.

Determining routes from savings value

This method is well documented by Clark & Wright, 1964. The routes are built in a sequential order
of decision, each solution is gradually built and changed in order to turn out in the best possible way.

The method is built according to the following:

1. All customers who require more than one resource, for instance a vehicle, are provided with the
necessary amount of vehicles, which are filled. Remaining goods will be included in the continued
route planning.

2. Each customer, the total number of customers being n, is supported by his own route straight from
the depot. In order for this method to work it has to be temporarily accepted that the number of
routes might exceed the allowed number.

3. A measurement for priority is calculated. This measurement expresses how advantageous it is to

link two customers and serve them by a common route instead of two single routes. This
measurement is called the savings value (Sij). The value can generally be calculated as:
Where: lo = distance from depot to customer and lij = distance from customer i to customer j

Those pairs of customers that show the highest savings value is linked together into routes involving
two customers. This is done in falling order with respect to the savings value, until all customers are
included in a route.

More customers are gradually linked together into larger routes. The expansion of the extent of the
routes must pass through routes with three customers, etc. First, the pair of customers that has the
largest savings value is linked to the route (the pair of customers) that includes one of the customers
from the first pair, and that has the second highest savings value; these are a new route with three
customers and a new savings value. This procedure is repeated until all customers are involved in any
of the new routes with three customers in each. The procedure means that the routes are built from the
periphery and in towards the depot.

The routes are prolonged in order to involve three customers (customer 1, customer 2, and customer
3). The criterion for evaluation is, as before, the savings value. The connection between this and the
previous savings values can be shown by induction:

Thus, the savings value for a route that includes three customers can easily be constructed around an
addition of savings values for parts of routes. Each new route must be allowed with respect to route
length, capacity, etc. When different vehicle types are available, it has to be guaranteed that a specific
vehicle is available. The easiest way is to assume that each customer order can be loaded on each
vehicle and then start filling the largest vehicles. It is thereby assumed that these, if fully used, have
the lowest cost. Interruption occurs when no further linking options are available. When there is a
depot, all savings are positive or equal to zero. At worst, the linking results in an unchanged rout
length.

The routes can be developed for larger amounts of clients the same way as they are for three (see
previous point). The procedure means that routes can be extended to involve four customers. The
criterion for evaluation is the savings value. This can be shown with induction:
20.8 Multi depot division
Customers are allotted terminals based on existing network of routes or geographical locations of
customers and terminals. From the geographical perspective, the aim should be to minimize the
distribution cost (DC). The DC consists of a permanent terminal cost (PC) and a variable under-way
cost (RK). If the distance from terminal to customer’s gathering area is V, the distribution cost to a
customer can be calculated as: DC = PC+V*RK

When choosing between two terminals (A and B), one will be preferable for shorter distances and
one for longer and only equally beneficiary when DCA=DCB. The distance corresponding to DCA=DCB
is:

, where D=VA+VB

Note: This model uses the flying path for distance, does not account for permanent costs being
affected by volumes and variable costs not being linear to distance.

20.9 Service deliveries – the ambulance problem

Separate from the location of terminals is the ability to provide customers with service in the form of
short delivery times. For some types of products, very short service time frames are guaranteed (e.g.
ambulances) -> need for spare parts storage close to market or use of very fast transportation modes
(e.g. helicopters).

The service region of a terminal can affect the operations region of a terminal. A typical example of
when service times affect localization is for base stations for emergency vehicles.

If guaranteed service time changes over time (days, weeks etc.) terminals can be opened only when
short service times are guaranteed.

20.10 Characteristics of distribution systems

A distribution system is designed based on demands of transporter and transport buyer and the
situation.

Line traffic (conventional traffic): Straight transports between sender and receiver decrease lead
times and enables easy flow control, but the cost efficiency is low (many relations, low utilization)
Hub distribution: Described in 20.4.1. Advantageous for customers due to frequent deliveries and for
transporters due to early consolidation (resource utilization). Small flows can be transported with
maintained frequency and utilization due to co-loading. High volume flexibility and capacity
utilization and low back haulage and waiting costs are additional advantages.

Split point distribution: Transportation corridor instead of transportation network. Goods from one
area with a similar final destination is transported in a common corridor. Leads to improved service
when goods flow and, thus, frequency is increased in some relations. Two split points are directly
connected.

Loop traffic: Goods delivered according to planned routes, several customers per vehicle. No
reloading necessary, so damage risk is reduced. Reliable delivery time, but low degree of utilization
and requires rational route planning.

20.11 Merge-in-transit
20.11.1 Seamless flows
Eliminate stops that do not add value (e.g. storage). Merge-in-transit (MIT) is one type of seamless
flow.

MIT: Consolidation of many different flows into one single delivery to the customer, without using
synchronization in the form of storing. There can be more than one MIT-point in a system, e.g. in
different regions. The location of MIT-points should facilitate an efficient distribution for suppliers,
customers and transporters. It should also consider the goods value. High control in the form of
traceability is important in an MIT system.
The lack of inventory decreases capital costs, but it is difficult to synchronize a flow without buffers.

MIT is good when different components are produced in different regions, but need to reach the
customers simultaneously. Also, consolidation -> high resource utilization.

20.11.2 Modularization as a part of MIT

Modularization is important in MIT. Different variants of different modules should be possible to
combine fast in a terminal to create a multitude of variants in a seamless flow.

20.11.3 Important principals for MIT

Five principles for MIT: consolidation without storage, direct delivery to end customer, delivery on
time, strategically situated MIT point(s), the customer-order-point is placed as early as possible in the
flow.

Requirements: advanced operation/information systems, high levels of control, standardization and

information availability. Transparent supply/demand chains. JIT and quick response philosophies
should characterize processes.

Advantages: reduced lead times, capital costs and transportation costs (utilization), increased
customer service and satisfaction.
Chapter 23: Environmental effects

23.1 The environmental impact of logistics businesses

Customers have become more interested in the environmental impact of the product during its life
cycle. Transportation is often pointed out as a field that has great impact on the environment in the
so-called Life Cycle Assessments (LCA).

23.1.1 Environmental focus

Logistics must find awaw to deal with CO2 emissions, discharges from cars, noise, accidents and need
for space etc. The reason why the logistics industry has not come as far as other businesses is that
the demands have been low and the emissions from every single vehicle has been assumed
negligible. Also, few of the effects from transport have an immediate and obvious impact on the
environment closest to people. That problems that are now being solved are those that have easy
and cheap solutions.

23.1.2 Motives
 Regulation
 Customer demand
 Decrease dependence on scarce/ceasing resources

There are certification systems (ISO 14000, EMAS etc.) to formalize environmental impact.

To perform an analysis of its business from the perspective of environmental impact can be
rewarding for the understanding of the company and easier to analyze future investments.

23.1.3 Environmentally adapted logistics

Environmentally adapted logistics basically means that available resources and technology are
utilized in such a way that the companies in their logistical work strive to minimize the negative
environmental effects and the usage of natural resources as much as possible. The environmental
demands on the existing logistics system increase and at the same time new opportunities are
created.

In northern Europe (they are in the frontline) it is mainly the demand from customers that puches
the development of companies to reduce their environmental impact but in most other countries the
attitude is that this is a problem for the authorities. It is their task to set regulations and restrictions,
and then it is up to the transportation companies to be as profitable within these limits.

The first improvement steps are quite easy to achieve, they both reduce environmental impact and
improve the finances. However in the next steps, companies might have to mdoake technological
investments wich probably will result in increased prices to the customers in order to do further
improvements, and that is a big issue. One cannot be sure that the customer paying higher prices will
be the only one benefitting from the external cost savings (better health, decreased environmental
damage etc.), many times there is no direct connection between the one who is affected and the one
who should pay.

In contrast to traditional logistics, environmentally adapted logistics does not only concern
minimization of internal company costs, but also minimization of external costs. This creates
problems about who is to pay for environmental disturbances and how to form environmental fees
for example. Many representatives of the business world support a system with environmental fees
under the condition that it means total justice on an nternational level concerning charges for
different modes of transportation, different industries and companies etc. This is difficult though,
because there are different perceptions in different regions about values and the gravity of reducing
the environmental impact.
An efficient and clear division of the environmental work within the logistics area has been defined. It
is divided into four levels from the management perspective (for a company to succeed with its
environmental work it should work on all strategic levels):

1. Physical structure of the logistics system. Parameters such as number, localization and size
of factories, inventories and consolidation centres are determined.
2. Procurement and distribution patterns. Choice of suppliers, sub-suppliers, distributors and
customers affect the final goods flow.
3. Time management of flows. Time management of orders decide how the flows will be
designed as freight movement.
4. Management of transportation resources. The type of vehicles, route planning and how to
best consolidate, but under the prerequisite that it is executed according to the conditions
decided on for previous levels.

Today most companies work on level three and fourwith environmental issues and has shown to
improve both economy and environment. However, the decisions on the two top levels are rarely
influenced by which effect they will have on the environment. Nonetheless, with an increasingly
global market, a lot implies that in future it is on these two levels that the great potentials for
improvements are available.

23.1.4 Environmental trends

Transportation work has increased over time (measured in ton kilometers). The increase is due to:

 Centralization of production and therefore longer transportation disttances.

 Higher degree of refinement of products, decrease of weight and volume.
 Semi-manufactured products with many production units in the manufacturing process.
 Decreased inventory levels
 Time restrictions

According to the EU it is predicted that transportation work in Europe will increase by 50% within a
decade if no actions are taken. Railroads are developing much slower and therefore continue to
loose market share. Carbon dioxide are not yet regulated on a vehicle level in the EU. The following
parameters are relevant today when describing the environmental effect of transportation service:

 Energy consumption/discharge of fossil carbon dioxide

 Discharges into the air of NOx, HC, particles and sulphur
 Noise
 Soil use and
barrier effects

Technology level of
the vehicle. Thanks to
more efficient engines,
the NOx-emissions
from a heavy truck
have been reduced to
less than a third during
the last two decades.

Catalytic converts for

diesel vehicles are
under development but are still not effective enough. They need clean fuel with a low degree of
sulphur content. This is not available on the international market yet and the oil companies do not
see the international willingness to pay what is needed to produce this fuel on a large scale.
However, the technology needed for the development is available today

Fuel. Alternative fuels have been developed to reduce the discharges of CO2, NOx, SOx and particles.

23.2 The environmental impact of traffic modes

Transportation impact: 1994: 80-90% of all NOx and CO, 30-40% of all HC (hydrocarbons), 25% of
SOx and 45% of all CO2. Of this: Road traffic: 1990-91: 80-90% of HC and CO, 50-60% of NOx and
CO2. Shipping industry: 1994: 90% of SOx. Machines: 25% of NOx.

23.2.1 Various effects on the environment

Discharges to the air dominate. Cox, NOx and the percentage of HC and particles are dependent on
the characteristics of engines. Catalyst technology can be used to reduce the emissions. With the
introduction of low taxed diesel fuel, the SOx discharges from road traffic have been heavily reduced
and are today negligible in comparison to NOx. Discharges of lead are disappearing thanks to
catalysts.

CO2 causes global warming, CO2 from fossil sources are worse than from bio-based materials. Only a
reduction of the use of fossil energy can help reduce emissions of fossil CO2.

23.2.2 Local, regional and global effects

The external effects from transportation are described on three levels; local, regional and global.

Local: Immediately affects people’s health and wellbeing. They are short-lived in time and
comparatively easy to reduce.

Regional: Affect ground and water in a longer perspective.. Damages occur long after the discharges
have been made and they can be produced far from the damaged area and then transported by air.
Problems are therefore more difficult to handle, since those who cause the damage are often not the
same as the ones facing the consequences. Actions should be taken on a national and an
international level.

Global: Damage from the discharge of greenhouse gases and Freon gases are affecting the global
ecosystem. They are even further away than the regional effects from a time perspective. There are
huge difficulties to reduce these effects since the structure of society of the entire western world is
built on the use of cheap fossil energy.
23.2.3 Health effects
SOx: Affects lungs and breathing, irritates throat and eyes.

NOx: Affects lungs and breathing, irritates throat and eyes and reduces immune system’s defense
ability.

CO: Affects nerves, heart and vessel system.

HC: Carcinogenic, can cause inheritable diseases, irritates throat and eyes and affects nerves and
breathing system.

Particles: Carrier of carcinogenic substances, irritates lungs, throat and eyes.

23.2.4 Environmental effects

Acidification: Caused by Sox and NOx and combinations of these, which reinforces the effect. Causes
damage to forests and washes metals into streams, which in the long run causes mass-death of fish.
Acid rain also increases corrosion of metals.

Hyper-fertilization: Is caused by NOx and involves increased washout of nutrients, which in turn
leads to the acidification of the soil. Algae in lakes and bays increase which leads to lack of oxygen
and dead sea beds.

Tropospheric ozone: Is formed when sunlight hits molecules of HC and NOx. Causes damage on the
vegetation and various health problems. Tropospheric ozone also is a greenhouse gas.

Green-house effect: Caused by CO2, CH4, N20, ozone and CFCs. Causes a global temperature rise
with elevated sea levels, widesoread deserts, and increased risk for tropical storms and floods.

Dilution of the ozone layer: Caused by CFC and N2O. Means increased radiation of UV light to the
earth which causes damage to plants and animals.

23.3 Improvement work

23.3.1 Alternatives for action
Methane, reformulated gasoline and environmental diesel are fuels with very low values of discharge
since they are used in the fuel optimized engines with after-treatment of the fumes. However, there
are a still a number of factors that point out that one cannot rely on the solutions to environmental
problems of the transportation industry existing only within improved techniques, nor that a solution
is close in time:

Economy: All alternatives to today’s technique demand great investments, especially over a
transition period.

Environmnetal effects from source to user: The transportation industry is not only responsible for
the discharges from engines, buat also the energy required to produce roads, vehicles and fuel,
which has to be considered.
Use of resources/Greenhouse effect: Even if a vehicle producing no discharge could be created, all
problems are not solved. CO2 will still be emitted and cannot be taken away with catalysts or other
after-treatments of fumes. The only way to not increase CO2 in the air is to use bio-based fuels.
However, it is doubtful whether the best use of biomass is to cover the need of the transportation
industry, or if it primarily should be used to produce electricity and heat.

Growing fleet of vehicles: The economic growth mainly in South East Asia makes the size of the
world’s fleet of vehicles so big that it is difficult to lower the total amount of discharge by only
technical improvements. More energy effective fuels and means of transportation must be
developed and for economic reasons, this development can only occur in the western world.

Playing and lobbyists of the market: Strong financial, political and social groups have an interest in
keeping the situation the way it is today. A major part of the population is economically dependent
on the vehicle industry and cheap transportation.

23.3.2 Factors that influence the environmental burden

The transportation industry’s influence on the environment can be divided into internally and
externally related influences. Both affect the transportation buyer in different ways. Factors that
affect vehicles and infrastructure and also the technical improvements possible to reduce negative
environmental effect of the transportation industry are here called system for internally related
environmental influence. By improvements in this system, the transportation buyer can maintain
service level and delivery frequency, but has to accept increased costs since the improvements
require large investments.

The other system is how available resources are used.The most effective way to quickly improve the
environmental situation for the transportation industry is to make better use of available resources,
i.e. to perform larger transportation industry are called system for externally related environmental
influence. By allowing a lower service level and lower frequency, which result less traffic and, in the
long run, less negative environmental influence, the situation can be improved. The risk is that
company costs for things like storage increases.
23.3.3 Internally related influences

There are a number of factors included in the category internally related influences:

 Level of technology of the vehicle. NOx discharge for a heavy truck has been reduced by 30%
during less than a decade. Particles has reduced by 70% and fuel consumption 10%.
The catalyst does not work effective when they are old or when used in city traffic (starting
with a cold engine and repeated accelerations and decelerations). Volvo have developed
environmental engines, but they have not become big sales successes because they are more
expensive than comparable conventional engines.

 Fuels. It is important to use environmental friendly fuels, but it also important to analyze the

production process of the fuel; from raw material to final use, to make sure that no sub-
optimizations are made. Vehicles run by alternative fuels are more expensive than traditional
ones. Also the alternative fuel is more expensive to produce. Effective means of control is
necessary to convince consumers to chose environment friendly alternatives.
  Road conditions and how well traffic runs affects the environmental influence. There are
risks for sub-optimization when building roads since new and straight roads lead to lower
levels of emissions, but new roads generate pollution as they are built and maintained.
Improved roads also generate mor traffic due to improved access to the roads.

 Combined transports like railroad-truck have been of increasing interest. More traffic has to
go by rail. Train at the long distances, and truck at the remaining short makes it possible to
use alternative fuels to a greater extent. However, big investments are reuired if a common
standardized carrier system is to be introduced all over Europe, which is necessary if
combined transports are to be economically competitive.

23.3.4 Externally related influence

The greatest possibilities today to achieve improvements in the environment are to have more
efficient use of available resources. Today many big trucks are used to transport small volumes
because the trucks are generally dimensioned for demand peaks. The over-capacity today should be
considered an asset. Improved planning systems and coordination of transports are needed between
companies to achieve environmental improvements. A number of factors included in the category
externally related influence can be pointed out:
  Service level. The customer demand on speed, flexibility and frequency increases. In order to
reduce environmental influence, the only way to increase service levels is to increase
transportation costs, which the customer has to accept.

 Consolidation: The filling rates of trucks today are around 40-60%. This means that the
impact on the environment from transportation can be reduced by half. Considerable
reduction can be achieved if consolidating transports. Fuel consumption increases by 20%
when the filling rate changes from 50 to 100% and discharges increase by 10%.
 Return loads. The number of kilometers that trucks run empty is steadily decreasing, mainly
due to economic reasons.
 Route planning. The number of vehicles for distribution can be reduced by 15% if using
systems for route planning.
 Order systems – JIT. There are few example of how changes in the logistics system affect the
environment. JIT does not necessary mean that storage has to run on the road in nearly
empty trucks, but merely that the goods need to be in the right place at the right time.
Cooperation and consolidation in combination with JIT results in less traffic work..
 “Green departure” is built on the idea that a customer does not want to create any extra
transports with his business. This is realized by using the available capacity in vehicles. This
practically means that a packages is only transported with a vehicle that is already going to
that destination and if there is space left. Can only be applied for low value products because
of the uncertainty in delivery frequency. Are interesting and useful, especially for return
transports.
 Packaging/Handling. The packages affect the weight and volume of the transported goods,
the ability to stack goods, collection and gathering of products, return products etc.
 Information technology can be used to make introduction and implementation of most of
the both internally and externally related factors. IT facilitates the ability to plan more
efficient transports for example.

23.3.5 The importance of speed – EcoDriving

Fuel is the most important source of environmental effects on road transports, and it is sought to
decrease this effect. It can be done by more consolidating, using IT-aids and systems for route
planning or by ecological driving. It can be shown that fuel consumption can differ 100% between
the

“best” and the “worst” driver when driving similar vehicles. A decrease by 25-30% through teaching
drivers to drive ecologically can be accomplished. One of the simplest ways to decrease consumption
is to reduce the speed. The consumption also increases the faster the vehicle drives (more when the
speed increases from 90km/h to 110km/h than from 70km/h to 90km/h). This is also true for trains
for instance, the faster the drives, the more electricity is consumed. A vessel’s consumption increases
with an exponential factor of three when the speed is increased. Consequently, there is a connection
between spped and environmental effects, both between the modes of transportation and within
transportation modes. When planning transportation the need for high spped must be considered
with regards to its costs. Often the time needed to be reduced can be reduced in another part of the
logistics chain than during transportation and without major environmental effects.