TRANSPORTATION PURCHASING

Today the early decision requires the buying firm to select the suitable shipment mode. Each of the modes has specific operating and cost characteristic, and the buying professional must weight them in selecting the most suitable transportation mode. The most basic selection decision is the trade-off between cost, reliability, and speed. The cost of shipment is usually tied to the speed of the mode. However, on-time delivery and service quality are more important.

 Mode selection

        Firstly is rail. The railroads are best for large loads going long distances. To be more specific, rail is preferred for loads over 30,000 pounds over distances exceeding 300 miles. If trucks have small entry barriers, the rail industry may have the highest. Train tracks would need to be laid down, which in this ever-crowded world creates immense cost for even the shortest routes. For long routes across open terrain, most places in the world already have tracks.

        
Secondly is truck. Truck transport is the most available and accessible of the modes because motor vehicles are not restricted by terminal to terminal operation but can provide service from the shipper’s loading point to the receiver’s dock. Highway transport is used mostly for short hauls of high value manufactured goods, because trucks have higher operating costs and less capacity than train.

Thirdly is water. Water transport are classified into several categories :

(1) inland, 
(2) lakes, 
(3) coastal and intercoastal, 
(4) international deep sea. 

The majority of commodities shipped via water carriers are semi processed materials, fuel, oil, coal, chemicals, minerals, and petroleum products. Water carriers are an excellent transportation shipping mode for low valued bulk commodities in large quantities. Speed is not a critical criterion for those raw materials.

Air transportation has been the single most significant development in logistics of this century. While other modes of transport are seeing growth resulting from increasing international trade, the air cargo is experiencing exceptionally high growth. This is a result of increased trade, but also the increased wealth and resulting demand for premium service. There are two types of carriers, airlines that carry cargo as a side line, and dedicated air cargo carriers. Currently air cargo is a small part of airlines revenue, but the air cargo industry as a whole is growing. Most important is an increasing in time sensitive cargo and luxury goods being traded worldwide. 
Air cargo carriers have now evolved into three forms. There are the integrated carriers, such as FedEx and UPS. Scheduled carriers are typically airlines offering cargo services. Charter carriers are the specialized all cargo carriers. 
One of the market in air cargo is mail. The mail that monopoly market of the official postal service in a given country. Secondly is express transportation. The speed of delivery is crucial. The package is promised to be delivered at certain time. Thirdly is courier. Advance and 10 times more expensive than express service and there is no need to develop tracking services. Lastly is freight. Move larger package that would be too expensive to be sent through air express.
 

       
Lastly is pipelines. Pipelines are the last thing people think of. It require very high investment, but with very low variable costs. One unique thing about pipelines is that the cargo only moves in one direction, with rare exceptions.