Multimodal Transport System Multimodal or Intermodal transport refers to journeys that involve two or more different modes of transport.

t. For instance, if materials are moved from Lanchow in central China to Warsaw in Poland goods may be loaded on to trucks, transferring them onto rails for a journey across China to Shanghai, then ship to Rotterdam, back into rails to cross Europe, then truck for local delivery. For Logistics managers intermodal services become necessary because of their characteristics and costs. For example, limited accessibility of air transport requires coordination with a land carrier to make the pick ups and deliveries. Similarly, inaccessibility applies to rail, water and pipeline but not to the motor which has a definite advantage here. The intermodal services maximizes the primary advantages inherent in the combined modes and minimize their disadvantages. The combined services will have both good and bad aspects of the utilized modes. For instance, coordinate of rail and water will have a lower total cost than an all-rail movement but higher cost than that of all-water. Likewise, combined system transit time will be lower than all water movement but higher than all-rail. The decision to use multi-modal system must consider the effect on total logistics costs. The aim of intermodal transport is to combine the benefits of several separate modes but avoid the disadvantages of each, like, combining the low cost of shipping with flexibility of the road, or getting the speed of air with the cost of road. However, each transfer between modes causes delays and adds costs of extra handling. Intermodal transport works well when transfer can be done efficiently. Transfer of motor carrier trailer to another transport mode is facilitated through containerization.

Choice of Mode Factors influencing the choice of mode are as under: Bulkiness of the materials; heavy items would be shipped by ocean going vessels.

Value of materials; expensive items raise inventory costs and thus encourage faster modes. Criticality of materials; even low unit value items that hold up the operations need fast and reliable transport. Susceptibility to market changes; operations that respond quickly to changes cannot wait for critical supplies using slower transport.

Reliability with consistent delivery is important. Cost and flexibility to negotiate rates. Reputation and stability of carrier. Susceptibility to loss, theft and pilferage Schedule and frequency of delivery. Special facilities available Limitations of Multimodal system Sometimes carriers are reluctant to participate.

Willingness to coordinate in respect of moving the product is higher when any one carrier is incapable to transport in its entirety Containerization Container is large rectangular box into which a firm places commodities to be shipped. After initial loading, the commodities themselves are not rehandled until they are unloaded at their final destinations. Throughout the movement, the carrier handles the container, not the commodities. The shipper can transfer the container from one mode to another, eliminating the need to handle the commodities each time thus reducing handling costs, damage costs, theft, pilferage and the time required to complete the modal transfer. Many firms that modify their material handling systems to include cranes, forklift trucks, and other equipment capable of handling large, heavy containers have found containerization to be desirable avenues for increasing productivity and controlling material handling costs, especially in periods of continually increasing labour costs. As the objective of intermodal transport system is to provide virtually seamless journey, the best way to achieve same is to use modular or unitized loads.

Piggyback Trailer on Flat Car TOFC is a specialized form of containerization in which rail and motor transport coordinate. Carrier places motor carrier trailer on a rail flatcar, which moves the trailer by rail for long distance. A motor carrier then moves the trailer for short distance pickups and deliveries. This service combines the long-haul, low cost advantage of rail with accessibility of motor. Piggyback services mostly move under contract.

Material Handling The primary material handling objective is to efficiently move large quantities of inventory into and specific customers orders out of the warehouse. The functions performed in a warehouse are classified as movement or Handling and storage. Movement or handling is emphasized and storage is secondary. Handling is divided into Receiving In storage handling , and Shipping An extremely important aspect of logistics is the productivity potential that can be realized from capital investment in material-handling equipment. Specialized handling equipment is required for unloading bulk materials such as for solids, fluids, or gaseous materials. The guidelines suggested in designing the material handling systems are:

(a) Equipment for handling and storage should be as standardized as possible. (b) When in motion, the system should provide maximum continuous flow. (c) Investment should be made in handling rather than stationery equipment. (d) Handling equipment should be utilized to the maximum extent possible. (e) In selecting handling equipment, the ratio of deadweight to payload should be minimized.

(f) Whenever possible, gravity flow should be incorporated in the system design. The handling systems can be classified as under: Mechanized Semi automated Automated, and Information directed

Mechanized Systems A. Forklift Trucks Forklift trucks can move loads of master cartons both horizontally and vertically. A pallet or slip sheet forms a platform upon which master cartons are stacked. A slip sheet is a thin sheet of solid fibre or corrugated paper and are used for situations when product is handled only a few times. A forklift truck normally transports a maximum of two unit loads i.e. two pallets at a time High stacking trucks are capable of up to 40 feet of vertical movement. Even trucks capable of operating in aisles as narrow as 56 inches ar also found in warehouses. The significance of narrow-aisle forklift trucks has increased as warehouses seek to increase rack storage density and overall storage capacity. Forklift trucks are not economical for long distance horizontal movements because of high ratio of labour per unit of transfer. Most effectively utilized in shipping and receiving and placing merchandise in a predetermined storage space. Common sources of power are propane gas and electricity. Many forklift operations are utilizing radio frequency data communication to speed up load put away and retrieval assignments. Under the above system, workers receive their assignments through either handheld or vehicle mounted RF terminals. RF technology provides real-time communication capability to central data processing systems, and when combined with bar code scanning of cartons and pallets,it allows fork

lift operators to receive and update item status inquiry, material orders and movement and inventory adjustments. B. Walkie-Rider Pallet Trucks Low cost, effective method of material handling. Highly versatile low-lift pallet and/or skid handlers with load capabilities from 3,000 to 8,000 lbs. Typical applications include loading and unloading, order selection and shuttling over longer distances throughout the warehouse. Popular in grocery warehouses. Electricity is the power source.

C. Towlines Either in-floor or overhead mounted drag devices. The major advantage is the continuous movement but lacks flexibility of forklift trucks. Most common application is for order selection within the warehouse. Order selectors place merchandise on a four wheel trailer, which is then towed to the shipping dock.

D. Conveyors Conveyors are classified according to power, gravity or roller/belt movement. Portable gravity style roller conveyors are often used for loading and unloading. In some cases these are transported on the over-the-road trailers to assist in unloading at the destination.

Warehouse Site Selection Process Traditionally, sales were key drivers in influencing warehouse site selection. Companies satisfied the needs of their sales force by building warehouses with the hope to increase market presence and hence revenue. Many companies still believe that in order to succeed in certain markets,they must have a warehouse presence. While this may be the case in for some industries such as food where the warehouses must deliver the products to customers in a timely manner; there are alternatives to building warehouses.

Before making a site selection companies must closely examine the current distribution network and the impact of adding , subtracting or consolidating facilities for the entire organization. Many factors come into play when analyzing the impact a new warehouse will have on the companys distribution network. These are: Quantitative variables

(a) Cost drivers, tangible and relatively easy to define. (b) Demand potential and trends, consumption pattern, transportation requirements and costs, labou costs, facility costs and utility cost. Qualitative variables

(a) More difficult to understand and to measure. (b) Customer service levels and top management preferences. Once all the data is collected, the actual analysis is done depending on the number of alternative location strategies. The company should be able to select the best site according to cost, operating factors, and expected customer service levels. The idea is to ensure the greatest return on investment.

The Square Root Law The square root law states that The total inventory in a system is proportional to the Square Root of the Number of Locations at which a product is stocked. The significance of The square Root Law is that a firm currently operating out of five warehouses which centralizes to one warehouse can theoretically reduce inventory carried in stock by 55 percent. This will of course result in large savings in inventory carrying cost which will be slightly offset by more rapid transport to meet current delivery service levels. It is recognized that the inventory tends to increase as the number of locations increase. While the reduction of inventory and number of locations for keeping finished products are desired, the companies must do so without reducing service to customers. The square root law determines the extent to which inventory reduces by reducing the number of locations. An important assumption is the total customer demand remains same.

The Square Root Law states that the total inventory in a future number of warehouses is determined by multiplying the total inventory at the existing warehouses by the square root of number of future warehouses divided by number of existing warehouses. Mathematically, it is represented as under: L = [(L1) x { (W2 W1) }], where L= Total inventory in future warehouses L1= Total inventory in existing warehouses W1= Number of existing warehouses W2 = Number of future warehouses. For example, In a company there are 40 warehouses and the existing inventory is 2,00,000 units. If the number of warehouses are reduced to 10 what will be impact on total inventory. L1= 2,00,000 W1= 40 W2= 10 L= [(2,00,000) x { (10 40 )}] = 1,00,000 Thus, inventory will consist of 1,00,000 units giving a reduction of 50%. Conversely, if the number of warehouses are increased, the total inventory will increase. Assumptions are Inventory transfer from one warehouse to other is not done. Lead time does not vary. Customer service level does not change from any warehouse. Demand level is well distributed from all warehouse. Warehouses as Distribution Centres

Distribution strategies can be of following types Cross docking Milk runs Direct shipping

Hub and spoke model Pool distribution

A. Cross Docking Cross-docking co-ordinates the supply and delivery so that the goods arrive at the receiving area and transferred straight away to the loading area, where they are put into delivery vehicles. Cross docking is a flow-through concept as it is not desirable to interrupt flow of products anywhere, because space, brick and mortar is getting very expensive these days. Cross docking shifts the focus from supply chain to demand chain. The stock coming into cross docking centre has already been pre-allocated against a replenishment order generated by a retailer in the supply chain. Cross docking encourages electronic communications between retailers and their suppliers. There are two forms of cross docking

(1) Basic cross Dock In this form packages are moved directly from the arriving vehicles to the departing ones. This form of cross docking does not need a warehouse and a simple transfer point is enough. (2) Flow though Cross Dock In this case, when the materials arrive and they are in large packages, these packages are opened and broken into smaller quantities, sorted, consolidated and transferred to vehicles for delivering to different customers. Cross docking can be developed into a phase where nothing actually moves through a warehouse. The stock kept within the vehicles are referred to as stock on wheels. Nowadays, wholesalers use the method of drop-shipping, where they do not keep the stock themselves, but coordinate the movement of goods from the upstream suppliers to the downstream buyers.

On receiving the goods workers put them in lanes corresponding to the receiving doors. A second team of workers sort the goods into shipping lanes from which a final team loads them into outbound trailers.

Benefits of Cross Docking Helps to improve the speed of flow of the products from the supplier to the stores. Helps to reduce the cost as the labour is removed from the job of storage as well as by eliminating warehousing/storage. Helps to reduce the amount of finished goods inventory that is required to be maintained as safety stock.

Constraints of Cross Docking Requires a strong IT base and real time information sharing facilities e.g. Bar codes on cartons. Appropriate for products with large, and predictable demands. Requires that distribution centres should be set up such that the benefits of economies of scale in transportation can be achieved on both the inbound and outbound side. Requires a great degree of coordination and synchronization between the incoming and outgoing shipments which, in turn, relies on better information and planning. Product availability, accuracy and quality aspects are critical.

B. Milk Runs A milk run is a route in which a truck either delivers product from a single to multiple retailers or goes from multiple suppliers to a single retailer. In other words, a supplier delivers directly to multiple retail stores on a truck or a truck picks up deliveries for many suppliers of the same retail store.

Benefits/ Limitations of Milk Runs Milk runs help to reduce the the transportation costs by consolidating shipments to multiple stores on a single truck . Milk runs allow deliveries to multiple stores to be consolidated on a single truck, resulting in a better utilization of the truck and somewhat lower costs. The use of milk run is helpful if very frequent, small deliveries are needed on a regular basis and either a set of suppliers or a set of retailers is in geographic proximity. Helps to reduce the amount of inventory to be kept as a safety stock in the warehouses. High degree of coordination and synchronization required among the members of supply chain.

C. Direct Shipping Direct shipping refer to the method of distribution in which goods come directly from the suppliers to the retail stores. In this case, routing of each shipment is specified and the supply chain manager needs to decide on the quantity to ship and the mode of transportation to use. This system eliminates the need for the intermediates facilities such as warehouses and distribution centres. Goods that are generally distributed through the method of direct shipping are certain perishable items, high volume goods, high bulk items and specialty products.

Benefits/Limitations of Direct Shipment The major advantage of direct shipment network is the elimination of intermediate warehouses and the simplicity of its operation and coordination. Saves a lot of time as the time required for distribution of goods from the supplier to the retail store would be short because each shipment goes direct. As goods move directly from the supplier to the retailer there is less handling of the products as a result there is less product damage. Since the distribution is direct, the invoice match receiving records resulting into ease of maintaining store records. The direct shipment network is justified if the retail stores are large enough because with the small size of retail stores the direct shipment network tends to have high costs. Direct shipment from the supplier to the retailer poses a lot of hassles for the store personnel e.g. more deliveries, paperwork, loading and unloading etc. Due to uncertainties of shipments from suppliers such as delay in transportation, wrong goods supplied, transit damage make it necessary to maintain safety stock.

D. Hub and Spoke Model In this model, the distribution hub is the location that holds inventory for a large region, with each spoke leading to smaller distribution centre, which houses inventory for a smaller region. The main driver of the hub and spoke model is the proximity to the customer, with the goal being to supply to a maximum numbers of customers in minimum time. Currently, Hub and Spoke model is restricted to fulfilling the just-in-time needs of heavy manufacturing industries. If a company expands its operations, its suppliers may move to nearby areas so as to supply it more efficiently. In this case, company that expands is the hub and suppliers are its spokes.

The type of product to be distributed largely necessitates a hub and spoke operation. The products that cannot be air freighted are mostly distributed through hub and spoke model.

E. Pool Distribution Pool distribution is the distribution of product to numerous destination points- customers, stores, stop points within a particular geographic region. Pool distribution is is useful when high frequency regular shipments in LTL quantities are involved. Pool distribution represents an excellent cost effective alternative to the higher cost of individual LTL shipments. Instead of LTL direct, product is shipped to regional terminals in truckload quantities. There it is offloaded, then segregated and sorted by delivery point then reloaded on local delivery trucks for delivery to the individual destinations.

Benefits When you have multiple shipments bound for specific region, pool distribution is simple cost effective alternative to LTL. Merchandise reaches retail stores speedily. Less handling than normal LTL service and hence reduced claims. Meet customer delivery requirements.Handle peaks in business effectively.