Unit 3. Logistics and transportation

Logistics management can be defined as a part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements.

The history of logistics is rooted in its military application. Since WWII it has developed into an important function of business as it became evident that logistics and transportation add place and time value to products and enhance the form and possession value added by manufacturing and marketing. The concept of logistics as a business discipline began to appear in the business-related literature in the 1960s when it was called physical distribution. At that time its focus was on the outbound side of the logistics system. With the emerging importance of Supply Chain Management, logistics and transportation has become even more crucial as supply chain managers realize that the coordination and integration of the logistics systems of all organizations with the supply chain are requirements for success.

Warehousing and Storage. Warehousing is defined as the storage of goods: raw materials, semi-finished goods, or finished goods. This includes a wide spectrum of facilities and locations that provide warehousing. Since this is a point in the logistics system where goods are held for varying amounts of time, the flow is interrupted or stopped, thereby creating additional costs to the product.

In a macroeconomic sense, warehousing creates time utility for raw materials, industrial goods, and finished products. It also increases the utility of goods by broadening their time availability to prospective customers.

Transportation. Transportation involves the physical movement or flow of goods. The transportation system is the physical link that connects customers, raw material suppliers, plants, warehouses, and channel members. The basic modes of transportation are water, rail, motor carrier, air, and pipeline. Water is the slowest mode, with rail, motor carrier, and air following in order of speed of delivery. Generally, the order is reversed when looking at costs.

The shipper chooses a type of carrier to utilize: common, regulated, contract, exempt, or private.

Common carriers serve the general public at reasonable prices and without discrimination. They cannot refuse to carry a particular commodity or refuse to serve a particular point with the scope of the carrier's operation. Common carriers are liable for all goods lost, damaged, or delayed unless caused by an act of God, an act of a public enemy, an act of public authority, an act of the shipper, or some defect within the good itself.

Regulated carriers are required to provide safe and adequate service and facilities upon reasonable request and are liable for damage up to limits established by the carrier. Regulated carriers can be motor carriers or water carriers and are subject to minimal federal controls.

A contract carrier does not serve the general public, but rather serves one or a limited number of contracted customers. They have no legal service obligation. They often provide a specialized service and usually have lower rates than common or regulated carriers.

Exempt carriers are exempt from regulation regarding rates and services. Exempt status comes from the type of commodity hauled or the nature of the carrier's operation. Exempt motor carriers are usually local and typically transport such items as agricultural goods, newspapers, livestock, and fish. Exempt water carriers transport bulk commodities such as coal, ore, grain, and liquid. Exempt rail carriers transport piggyback shipments and exempt air carriers haul cargo.

A firm's own transportation is termed a private carrier. Private carriers are not “for-hire” and not subject to the same federal regulations as other types of transport. However, the carrier's primary business must be something other than transportation.

Once the mode and type of carrier is determined a final decision can be made based on other factors. Accessibility is one such factor. Some firms have geographic limits to their routing network. Others may not possess physical access to needed facilities or have the ability to provide the equipment and facilities that movement of a particular commodity may require. Reliability—the consistency of the transit time a carrier provides—is also a key factor. Finally, convenience and communication are other important considerations when selecting a carrier.

Measures that a transportation firm would use to judge its performance include: orders shipped on time, orders shipped complete, order preparation time, product availability, and transit time. From the customer perspective performance can be gauged from orders received on time, orders received complete, orders received damage free, orders filled accurately, and orders billed accurately.

Exercise 1. Give English equivalents:управление цепями поставок; физическое распределение; хранение на складах; сырье; участник канала распределения; отправитель груза; перевозчик; необлагаемый налогами; авто-железнодорожные перевозки; доступность; транспортная сеть; производительность, результативность; надежность; постоянство; стабильность.

Exercise 2. Answer the questions:

1. How can you define logistics management? 2. Why has logistics and transportation become more crucial than it used to be?3. What can increase the utility of goods?4. What is the use of warehousing?5. What objects are connected with the transportation system? 6. How can you range the basic modes of transportation according to their speed of delivery and costs? 7. What types of carriers can you name? 8. What are the main characteristics of common carriers? 9. What are common carriers liable for? 10. What kind of carrier can establish limits of damage it is liable for? 11. Is it possible for the carrier to have no legal service obligation? 12. What items are typically transported by exempt motor carriers? 13. What factors determine a final decision of choosing the mode and type of carrier? 14. How can one judge the transportation firm's performance?

Exercise 3. Discuss the following in groups:

1. Do you agree that logistics and transportation is as important part of company's success as the quality of their goods and their service? Why?

2. Imagine that you are the manager of a company. Choose the line of activity and justify a type of carrier to utilize. Compare your answer with a partner.

Unit 4. The exterior.