Transportation is concerned with mobilization of men and materials from one place to another

Transportation,

quick and safer delivery of materials is one of the important function of Materials Management and normally looked after by Stores

Economics of Transportation

 Various Carriers Freight

modes of transportation available available

structure of various modes of transportation of risk in transit and extent to which carriers are willing to accept

Type

Aspects considered- most economical & effective carrier

 Freight

structure of various commodities facilities that various carrier offer

Terminal Facilities

available for expediting over due consignment

Economics of Transportation- choice of carrier

Advantages of Rail Transport

Most

suitable for heavy/ bulk material as carrying capacity of wagons/rake load is very high is less than Road beyond certain distance

Freight

Rail Transportation

 Freight

rates of certain raw materials (being commodity rates) are much less then even operating cost of Rly. the clock services & movement of bulk load very fast compared to road & sea.

Round

Rail Transportation -Advantages

Limitation of Rail Transport

No

assured delivery period for small load & piece-meal wagons to limitation of tracks, local transportation is not possible all the time. to door services are not possible (Other than from one private Rly siding to another)

Due

Door

Rail Transportation

 Not

suitable for rural and hilly area

Tracing

of consignment lost in transit is very difficult of damages en-route are very high as compared to road & Air

Possibilities

Rail Transportation - Limitations

 Very

complex & time consuming system of claims for damages and non/partial delivery very high of bulk materials for short distances handling, loading & unloading involved compared to point to point movement by road- higher packing cost

Freight

More

Rail Transportation - Limitations

Advantages of Road Transport

Flexibility

in terminal area and can provide more rapid services to users, including faster deliveries accessible to common people for small consignment and full truck loads

Easily

Road Transportation

 Most

economical for movement of load for short distance suitable mode for local movements

Most It

has very high employment potential

Road Transportation - Advatages

 Tracing

of misplaced consignment is much easy as compared to train. of movement of long distance consignment involving trans-shipment is very easy.

Monitoring

Road Transportation - Limitations

Limitations of Road Transport Bulky and voluminous/ heavy consignments cannot be moved due to limitation of vehicle and also roads
For

long distance freight rate is higher than rail mode of movement of bulk raw material, coal, steel cement & fuel oil due to limitation of road vehicles

Unsuitable

Road Transportation

 Compensation

of heavy losses from road carrier is untenable of fraud with materials are very

Possibility

high

Road Transportation -Limitations

Advantages of Air Transport Rapid speed- movement is very fast

Most

suitable for light weight & high value instrument & equipment Most suitable for perishable good of loss very limited and substantial saving in packing cost

Possibilities

Air Transportation

Limitation of Air Transport Some materials due to their inherent characteristics, cannot move by air. It cannot carry heavy/ bulky consignment
Cost

of transportation is very high and many commodities cannot bear it Limited transportation between cities having airports

Air Transportation

Advantages of Sea Transport

Most

suitable mode of International Trade for heavy and bulky consignments rates are cheaper than any other mode due to lesser operating cost and huge consignment capacity

Freight

Sea Transportation

 Speed is very low Formalities involved

very complicated Movement only between Sea-ports

Chances

in booking/delivery

of damages in transportation handling at port very high- unsuitable for delicate/small goods Mostly sea route longer then rail, road & Air

Sea Transportation -

Limitation

Another important area of achieving economy in movement of goods is right choice of Price Basis- while finalizing contracts with suppliers Commonly used price basis Inland trade - Ex-works

Choice of Price Basis and Carrier

FOR (Free on Railhead) Station of Despatch FOR Destination Door Delivery FOR Station of Despatch but freight upto destination born by supplier

Choice of Price Basis and Carrier

International Trades F.A.S. (Free alongside ship/shore) F.O.B. (Free on Board) C.I.F. (Cost Insurance & Freight)

Choice of Price Basis and Carrier

 Aspects Who

implied to various Price Basis

has to bear packing & forwarding charges?

Who
Who

has to bear freight charges?

has choice to select mode of transportation?

Choice of Price Basis and Carrier

 Point

at which legal title passes from seller to buyer?

is to bear transit damages and if required arrange for marine insurance? is to pursue claims with carriers/ underwriters

Who

Who

Choice of Price Basis and Carrier

A prudent buyer always prefers FOR Station of Despatch Price Basis which offer following opportunities:
To

select an effective carrier keeping in view urgency

Choice of Price Basis and Carrier

 To

effect economy in freight and insurance charges

develop his own reliable and effective carrier and good relation with them

To

Choice of Price Basis and Carrier

Advantages of FOB prices in field of Foreign Purchases

Benefit

freight - saving in consolidation of consignment cover through Indian Underwriters- Premium is less and settlement of claim easy

of nominating Indian Carrier and

Insurance

Choice of Price Basis and Carrier

 Substantial

saving of foreign-exchange as freight payment and premium to Indian Cos paid in Rs. urgency mode of transportation can be changed easily

In

THANKS
Choice of Price Basis and Carrier