Research Proposal

Factors Affecting Efficiency of Goods

Transport

National School of Business Management

BSc in Business Management (Logistics Management)
(special) Degree
Research Methodology
BScMGT 4101
D R Wickramanayaka
BSC- UGC-MGT-1315-165
 Research Proposal

1. Introduction

1.1 Introduction to the Topic

Factors affecting efficiency of goods transport.

1.2 Introduction to the company

Sri Lankas supermarket trade is expected to see an unprecedented growth within the
next few years, backed by increasing per capita income, an increase in the work force
and the changing consumption patterns, says a newly released equity research report.

According to the supermarket industry, it is huge concept. It also a belong to the retail
shop category.in Sri Lanka there are so many supermarkets. Example for that Keells
Super, Arpico Super, Cargils Food City PLC, etc...

The supermarket chain of Laugfs holdings have created a huge brand image in
the minds of the consumer, to be a very accessible service provider affording
an unprecedented FMCG product range at value for money.

The laugfs supermarket has been tagged as the Super store that never sleeps.
Justifiably living up to its title, laugfs was the first to introduce to Sri Lanka the 24
hour retail concept. It is also the first convenience store to jointly operate with a fuel
retail outlet and the first to introduce a 24 hour pharmacy. All these innovations have
taken laugfs to a step ahead of the rest. Operating since February 2001, the
supermarket chain has a proud reputation for the most diverse and the largest product
range in terms of SKU's (Stock Keeping Units), housing up to 25,000 per store.
Currently Supermarkets are operating 33 outlets which are mainly expanded in
Western, Sabaragamuwa and North Western Province. And also they expected to open
new outlets. Those Supermarkets are divided in to four clusters in order to convince
of maintaining and there are four authorized persons to maintain, under the CEOs
Supervision.

Page 1
 Research Proposal

VISION
To be always acknowledged as the most innovative and customer focused,
round the clock supermarket in Sri Lanka, providing consumer hassle free
living by offering value for money for a choice of their own.

MISSION
A clear sense of direction to entail full resources of a consumer marketing company,
to the convenience of the shoppers providing quality FMCG products at a competitive
prices through service excellence whilst safeguarding the Stakeholder interest and
to become a socially responsible truly Sri Lankan Company.

What is CPU?

Central Purchasing Unit is the main location which handles the functions of
purchasing (Ordering & Buying), Receiving & Storing, distributing Sorting &
Repacking products which requires to Laugfs Supermarkets. CPU makes possible a
rational distribution system. Without a CPU, the supermarket network cannot achieve
a smooth distribution flow among Laugfs Supermarkets. Generally the CPU act as the
exchange for all products which needs additional storage space, huge transportation
cost, vital buffer stocks, discount rates for large amounts, quality issues...etc.

Why it has established?

CPU has established to be supported with the general process of Laugfs Supermarkets
under some particular concerns as given as below.

- To give sensible service to all supermarket through high quality

products with, on-time delivery.

Page 2
 Research Proposal

- To maintain lower gross profit margins

- Prevent shortages
- Lead time benefits
- Distribution Facilities
Commodities which required high volumes of stocks can be purchased
to CPU to minimize the cost of delivery.

- To stabilize the prices

Price of purchasing will be differenced from area in some commodities
like Vegetables, Fruits, and Fish.etc.

Main functions of the CPU

- purchasing (Ordering & Buying)

- Receiving & Storing
- Sorting & Repacking
- Distributing

Purchasing

Purchasing can be divided into two sub functions as ordering and buying. Each and
every supermarket sends order requests to the CPU. CPU can identify the required
quantities of each and every supermarket through the system. Purchasing function is
the most important area that the CPU ought to be focused on & Manager CPU is
totally responsible for it. After finalizing the order requirement, CPU search for a
suitable supplier among the existing and new suppliers, placing orders to the most
attractive benefits.

How decide a supplier?

Page 3
 Research Proposal

There are few bases to select suppliers throughout the prevailing supplier majority.
The CPU should be focused on,

- Quality
CPU is highly concentrates on the quality of the product.

- Cost
- Credit Period
- Lead Time
- Other Benefits
The goods can be reaching the outlet through two systems as given below.

System 1

Supplier Outlet

System 2

Supplier CPU Outlet

Supplier can provide his goods directly to the Laugfs outlets by his transport vehicle.
The supermarkets can directly place their order to the suppliers or they can report to
CPU stating their requirement. Then CPU can place the order to the supplier.

Receiving & Storing

Basic Para meters should be checked

- Purchase Order
- Quantity
- Agreed Price
- Quality
The store keeper should check the supplier invoice against with the purchase order to
clarify whether the required quantities have received or not. Additional stocks and

Page 4
 Research Proposal

optional products will be rejected at the same moment. The quality should be checked
up to their standards.

Stores are required only for selected products. Mostly the perishable products like
fish, vegetables, and fruits are distributing on time of delivery to the outlets. Onions,
Garlic, Potatoes will be stored in CPU as bulks under required quality controlling
methods. Products which needs bulk storages like Dhal, Rice, Sugar, Grains and
other dry products also will be stored in CPU for more benefits.

Sorting & Repacking

CPU is separately functioned as a packing unit, which packs Sugar, Dhal, and Dry
fish under Laugfs brand. Separate women labor force has allocated for this packing
line.

Distributing

All perishable products will be distributed to all supermarkets through the CPU after
sorting each item.

Perishable Products

Vegetables

There are two types of vegetables can be seen in the market as Upcountry and Low
country vegetables. Up country vegetables are directly supplying from Nuwara Eliya
market by a supplier. Low country vegetables are supplying from the Dambulla
Market through our own employees. Vegetable are normally used to reach to CPU at
4.30 am. Daily they are supply vegetables to the CPU.

NuwaraEliya P.W supplier

Page 5
 Research Proposal

E.g: Beans,Carrot,etc

Dambulla L.H.G Supplier

Direct marketing from the manning market Colombo

E.g: brinjals,Ladies Finger,etc.

Fruits

Fruits are also distributing through the CPU under perishable goods category. Fruits
will not arrive every day. They will get their supply for two days. Plantains, papaw are
most demanded fruits among their customers.

Fruits are came from Embilipitiya, Thissamaharamaya, etc... There are different
suppliers supply fruit items. They are

Kamal Fruits
Landa Fruits

Fish category is the most important item in perishable product category. But CPU not
handle Fish category. Because they havent suitable place to maintain fish category.

Distributing Patterns of Perishable Items

Once goods are received those items are measured, checked and select their quality
and packed in to the Lorries by helpers. Vegetable items are packed in to the plastic
bucket hard vegetables are packed in lower part of the bucket and perishable
vegetables are packed in upper part of the bucket.

1.3 Problem Statement

Page 6
 Research Proposal

Problem Statement

In Central Purchasing Unit there are fast moving goods as well as perishable goods.
For example fruits, vegetables, dry cereals, fast moving consumable goods as soap,
detergent, fabric conditioners and stationary etc

Fruit and vegetables are delivered at 4 am to the warehouse daily as well and other
goods are being taken alternatively in week.

When fruits and vegetables are sorting out and picking up in transport, some are
safely sorted out while the ordering of arranging the same working procedure is not
systematically done.

When arranging and storing out in vehicles, problems create up and while some
sorting out things take a long way and the problems arrive and disarranging and
sorting out goods such as striken fruits, get hurt. The warehouse takes waste and
makes the time saving not done. This incident frequently happens in supermarkets and
as time wasted. It makes the quality of vegetables and fruits to bring out and get some
complaints.

In the same way in the warehouse when the labours get work minimum has to be
done in particular time if not failed then it has to be taken cost move laborers to be
engaged to the warehouse.

1.4 Research Questions

1. What are the factors affecting of goods transport?

2. How does each factor relate to the core relation?

Page 7
 Research Proposal

3. What is the hierarchy of importance of those factors?

1.5 Research Objective

1. To be find the factors affecting of goods transport.

2. To be find the factor relate to the core relation.
3. To be get out hierarchy of importance of those factors.

Page 8
 Research Proposal

02. Literature Review

The global focus on the resources consumptions of transport is increasing these years.
As more and more countries have implemented changes in these sectors, the focus on
transport has been intensified. Conflict the relative recent move towards inherent
safe materials, the relentless drive of consumerism has required increased quantities
of dangerous goods to be manufactured, transported, stored and used year on year
(Thomson, 1998). Of the different way of transportation, Road, Aircraft, rail,
waterways, using canals and post. Rail has higher damage potential, as larger
quantities are transported by this means. However, considering the damage it may
cause to life and properties, transport by road is more hazardous, as roads often pass
through populated areas, especially in developing countries.

The efficiency of goods transportation, it begins by establishing the theoretical

optimum and then analyzing the way in which actual transport systems deviate from
this ideal. This involves investigating efficiencies in various dimensions, each of
which is broken down in to partial efficiencies, until finally arrive at the actual
transport situation. The overall efficiency of this actual situation is then assessed as
the continuous product of all the partial efficiencies.

Efficiencies may be assessed ex-post, and analyzed to improve our understanding of

the transportation process. If the causal relationships between efficiency and
explanatory factors are understood, the potential for improvement can be assessed. A
low efficiency may be combined with a high, or a low, potential for improvement,
likewise an already high efficiency may still have a high, or a low, potential for
improvement. The objective is to identify those partial efficiencies likely to yield a
high potential for improvement.

Efficiencies may also be assessed ex ante, and used for planning purposes. If they are
used for planning purposes, they must be forecast. Even if the simple average of past
efficiency is extrapolated in to the future, this is a forecast. Efficiencies can then be
considered to be stochastic variables with a mathematical expectation and a variance.
In planning a freight transport system, one must take account of variations in the

Page 9
 Research Proposal

efficiency of different transport operations. Reducing this variability can be an

important goal of the improvement programme.

Transport efficiency, as discussed in this article, is only a subset of supply chain

efficiency. The supply chain does not only consist of the transformation of place,

E.g. Transformation of time or form

For these other transformations, useful starting point for overall efficiency measures
will have to be developed in the future. This is outside the scope of this research.

Supply chain efficiency, in turn, should be seen in a still wider context or efficiency
objectives. Different organizations will have efficiency objectives which may be in
conflict with one another.

E.g. government may focus on securing reductions in pollution levels or energy

consumption, whereas companies may want to make use of transport as a
consequence of rationalization of depot locations made possible by improved
infrastructure. (D.A. Quarmby, January 1989)

Even when confining our efficiency objectives to the scope of the individual
transportation firm, we realize that measuring physical efficiencies is only one step on
the road to a firms ultimate goal. (R.L Clarke, 1991), (G. Chow, T .D. Heaver and L
E Henriksson, 1994)

Research may focus on physical efficiencies other than the ones dealt with in this
article, such as transportation lead time, (M J Ploos van Amstel, 1990) or the use of
energy. (A C McKinnon, I Stirling and J Kirkhope, 1993), (I O Walker and F Wirl,
1993) after physical efficiencies, come cost efficiencies. Next to efficiency,
effectiveness should be investigated. ( J Gattorna,1988),( J T Mentzer and B P
Konrad,1991 ) Customer service and customer satisfaction may be intermediate goals
in the pursuit of revenue maximization.( M J Rhea and D L shrock,1987 ), (G
Livingstone,1992 ) Total quantity management may be the firms professed objective,
( J L Heskett,1994 ),( T A Foster,1989 ) underpinned a desire to maximize profits.
These profits can be maximized in the short, or in the long run. Finally, the firm may
supplement the goal of profit maximizing with other objectives such as balancing the

Page 10
 Research Proposal

interests of the various stakeholders in the business and ultimately ensuring its long
term survival.

Efficiencies are defined as fractions, or percentages. This can only be the case
incidentally, for instance if a speed limit is 80 kmph, but the actual driving speed is
above that, or if a truck loading capacity is 40 m3, but actually more is loaded because
the driver takes some extra boxes in to his cabin.

An efficiency below 100% means that the actual situation falls short of the ideal
situation.

If the optimum value of the dimension measured is neither the maximum, nor the
minimum, but something in between, defining an efficiency measure is more
problematic. One can make the actual value the nominator if it is below the optimum
value and the denominator if it is above the optimum. Or else one might drop the
dimension altogether and seek an alternative framework in which a maximum or a
minimum value is identified as desirable.

An example may be speed. In road transportation, the optimum speed may be the
maximum speed allowed by the speed limits on a given kind of road for a given kind
of vehicle. But if there are no speed limits. Likewise in shipping, since there are no
speed limits imposed on the ocean, here we could switch to another dimension, like
energy or cost, and define efficiency as minimum energy or minimum cost divided by
actual energy used or actual costs incurred. For the time being, we will avoid
problems with non-minimum or non-maximum optima, and assume that for each
efficiency, the variable concerned should be maximized or minimized.

The starting point for assessing the efficiency of goods transportation, in any actual,
past or future, situation for any mode in any link of the transportation chain, is the
theoretical, ideal situation. For goods transportation, this would involve non- stop
movement for origin (A) to destination (B), and back, along a minimum distance
route, at maximum speed, with a full load. This would represent the theoretical,
maximum transportation output.

Overall efficiency (E) in general goods transportation indicates what the actual
transportation output is as a percentage of the theoretical, maximum output. Overall
efficiency in a general freight context consists of the continuous product of four

Page 11
 Research Proposal

dimensional efficiencies with respect to time, distance, speed and capacity. Time
efficiency (T) is the percentage of the available time that the vehicle is actually
utilized.

E = T*D*S*C

The ideal situation is literally non stop, 24 h a day. Many factors, each representing
a partial efficiency, detract from this theoretical maximum. For example, the vehicle
may only be operated in certain shifts, it may need maintenance and it must stop for
loading and unloading.

Time efficiency

The point of departure for time efficiency in regional break-bulk distribution is a road
vehicle. We shall break down time efficiency into four partial efficiencies, called
business time, availability, utilization and driving factor.

Business time efficiency is the number of hours per annum that a business operates,
divided by 24h*365 days per annum. If a professional carrier business is only closed
between Saturday 16:00 h and 04:00 h each week the year round, business time is
mostly constrained by the opening hours at the origins and destinations of freight
shipments. Business time efficiency may be significantly improved by night
distribution.

Availability is percentage of business time that the vehicle is available for use. An
optimum balance should be struck between preventive and corrective maintenance.
Breakdown should be avoided. Repairs either in ones own work shop or in an outside
workshop should not be delayed by a lack of spare parts. This efficiency is generally
well managed. Variability is often due to external factors which are difficult to
control.

Utilization is the percentage of time available that the vehicle is actually used. Nonuse
may result from lack of business. It is the commercial departments job to achieve a
high utilization, while maintaining a reasonable level of flexibility. Commercial
departments have quite a number of possibilities to increase the average and reduce
the fluctuations.

Page 12
 Research Proposal

The driving factor is the percentages of operating time spent on the road actually
transport goods. Losses of driving time are due to stops for,

(a) Resting time for the driver prescribed by law

(b) Extra unnecessary stops by the driver

(c) Loading and unloading time at the depot or transshipment point

(d) Loading and unloading time at the addresses visited.

Loading and unloading time here is a euphemism for the total time that a call takes,
which may consist of long waiting times, administrative delays. The smaller the
consignment size, the greater the number of addresses to be visited, the larger the total
stop time and the lower the driving factor. The driving factor is of major concern of
transportation management. It is not only low on average, its fluctuations are a cause
of disruption to the distribution process. This aspect of transportation management is
sometimes called stop management.

Distance efficiency

Distance efficiency is the percentage by which maximum transportation output is

reduced by not using the shortest route between origin and destination. Usually the
ideal, shortest route will be the minimum, radial distance. Deviation from this route
occurs because of factors such as infrastructure, group age of goods, etc. distance
efficiency is then the radial distance divided by the actual distance.

The point of departure for distance efficiency (D) is radial distance between A and B.
we shall break down distance efficiency in to five partial efficiencies, called

Infrastructure factor (Di)

Backhaul factor (Db)

Routing factor (Dr)

Detour factor (Dd)

Page 13
 Research Proposal

Actual trip execution efficiency (Da)

D = Di*Db*Dr*Dd*Da

The infrastructure factor is radial distance between origin (A) and destination (B)
divided by the shortest route from A to B over the road network. The invers of this
factor is sometimes uses as a correction factor to derive actual distances over the road
network from radial distance are used. One haulier computed the infrastructure factor
for his situation as follows. With his vehicle planning package,

E.g. he planned twenty-seven normal trips along the given road network. The total
number of kilometers was 7880. When the same trips were planned using radial
distances, the total number of kilometers was 5977. Hence the infrastructure factor
was 0.76.

The backhaul factor indicates the loss of efficiency due to the fact that there is not
always a return load. It is defined as 50% plus half the percentage of trips where there
is return freight. In regional LTL distribution, the backhaul factor depends

On the percentage of trip where, after distribution or in between deliveries, goods are
collected and brought back to the depot or trans-shipment point. If there is a backhaul,
the return trip is treated in the same way as the forward haul. Since collected goods
often have characteristics different from distributed goods this may introduce
inaccuracy in to the model. (R A Novack, 1989)

The routing factor is the inefficiency caused by not visiting the given destination in
the optimal sequence. It is the optimal length of the route through all the delivery
points divided by the actual planned route length. The use of vehicle scheduling
software packages is helping firms to route their vehicles more efficiently.

However, the route to be taken through a given number of addresses may be longer
than the exact travelling salesman solution for other, more serious reasons than
suboptimal heuristics, certain vehicles and even drivers may not be allowed to visit
certain addresses, and most seriously, certain addresses may not be visited at certain
times. The trouble is that in practice shippers are demanding deliveries within

Page 14
 Research Proposal

narrower time windows and increasingly at the same time. Also in urban distribution,
the municipal authorities are imposing tighter restriction on delivery times.

One haulier computed the cost of time windows as follows. In his situation, 17% of
all shipments had time windows imposed on them. Except for the time windows, there
was no reason to suppose that these shipments differed from the other shipments.
Sample trips were planned with and without time windows restrictions. In the latter
case, transport costs were 18% lower. Time window restrictions were found to double
the distribution costs for the shipments concerned.

The detour is the straightforward consequence of the factor that shipments are
grouped and delivered in round trips rather than in full truckloads transported directly
between the depot and the first address, between the depot and the second address.
Even if the routing factor is 100%, if the sequence in which the addresses are visited
is optimal, the detour factor may be well below 100%. Detour is defined as the single
distance between the depot and destination I multiplied by the size of shipment I,
summed overall shipment I, and divided by half the total length of the round trip
multiplied by vehicle capacity. Since the return trips are already dealt with by the
backhaul factor, here we only deal with the forward trips, considering half the
distance of the rounds hips to be forward trips. The detour factor is inherent in LTL
distribution, but it seriously reduces efficiency.

Speed efficiency

Speed efficiency is the percentage by which maximum transportation output is

reduced by not travelling at maximum speed. We may also consider optimum output
in both an economic and environmental sense, taking account of the resource and
environmental costs incurred when vehicles move at different speeds. In practice, for
many modes of transport and links in the transport chain, the optimum speed is
considered to be the maximum allowable speed, defined by technology or legal
restriction.

The point of departure for speed efficiency (S) is the maximum speed allowed by law
for trucks anywhere in the country.

We distinguish two speed efficiencies, called speed limit factors (Sl) and congestion
factor (Sc)

Page 15
 Research Proposal

S = Sl *Sc

The speed limit factor Sl is the actual average speed limit over the round trip route
divided by the maximum speed allowed in the country. For average speed, the
harmonic average must be taken.

E.g. one third of a round trip route speed limit of 80 kmph is allowed, for one third a
limit of 60, and for one third a limit of 40 the maximum speed for a truck allowed in
the country is 80 kmph. Then the actual average speed limit is 55.4 kmph and the
speed limit factor is 0.69. The speed limit factor is assessed at 0.71 overall and the
haulier can do nothing to improve it.

The congestion factor (Sc) is the actual average speed driven over the round trip route
divided by the average speed limit over the round trip route. Assuming that truck
drivers generally drive as fast as they can, efficiency losses are mainly due to
congestion of the roads, including difficulties in finding a parking space.

The congestion factor is, unlike the speed limit factor, highly unstable, which makes
vehicle scheduling, within narrow time windows and just in time deliveries, virtually
impossible. No individual haulier can do anything about it. Only concerted action by
government may help.

Capacity efficiency

Capacity efficiency refers to the capacity of the vehicle and is measured in terms of
either weight or space. It is defined as the percentage by which maximum
transportation output is reducing by not travelling at optimum capacity. As with the
definition of optimum speed, optimum capacity may be the same as maximum
capacity, either in terms of weight or in terms of size of the vehicle, as determined by
technology or legal restrictions. For seas ships, airplanes and pipelines, maximum
physical capacity is so large as to be so difficult to assess.

This description of the general efficiency model for goods transportation may seem
quite vague and abstract. It allows, however for a more concrete specification of each
transportation mode or link and provides a framework for identifying and analyzing

Page 16
 Research Proposal

partial efficiencies. This is illustrated in the next section by a case study of a road
based regional less than truckload and goods distribution operation.

Depending on whether weight or volume is the binding constraint, capacity efficiency

(C) Should is broken down in a few, or many partial efficiencies. With weight, the
series of efficiencies would proceed from maximum gross vehicle weight, through
maximum palload weight and various gross packaging weights, to net product weight.

The experts agreed that volume is usually the binding constraint in regional LTL
distribution. Capacity efficiency is split in to seven partial volume efficiencies,
capacity factor (Cc), floor occupancy (Cf), height utilization (Ch), pallet load factor
(Cp), box load factor (Cb), net product factor (Cn), and actual loading execution
efficiency (Ca).

C = Cc* Cf* Ch* Cp* Cb* Cn* Ca

The capacity factor (Cc) is the actual load volume in cubic metres of the vehicle
occupied as a percentage of the maximum possible load volume in cubic metres
permitted by technology and law.

The floor space occupancy factor (Cf) defines the percentage of the floor space
occupied by freight, say, pallets. If pallet load are protruding, pallets may not fit
neatly in to the available truck floor area. Floor space may also be lost due to odd
shaped cargo units like machines, carpet, etc...

The height utilization factor (Ch) is the average proportion of the available loading
height in the vehicle that can be occupied by the freight. if the pallets were replaced
by slip sheets, efficiency would improve by a greater margin than could be achieved
by raising the routing factor.

The pallet load factor (Cp) is the sum of the volumes of the boxes loaded on to the
pallet as a percentage of the imaginary enveloping box around the pallet load,
consisting of its floor area multiplied by its net height. It is one minus the percentage
of air within the enveloping box. It is assessed as averaging 0.69, being quite
variable and offering potential for improvement. (M Goetschalckx and C Jacobs
Blecha, 1989)

Page 17
 Research Proposal

The box load factor (Cb) relates to the internal capacity of the boxes on the pallet. It is
the percentage of the total cubic capacity of the boxes that is occupied by, let us
assume, the final, smallest packaging unit, probably the packaging unit that is sold in
the shop.

The net product factor (Cn) is the percentage of the space in the final packaging unit
occupied by the actual product. This percentage may be quite small. For instance, the
volume of pure perfume as a percentage of the retail package size may be around
10%. From a marketing standpoint, it is often desirable to distribute products
packaged in larger and more elaborate containers as this can increase sales. The
average Cn is assesses at 0.39, a variable figure, which for commercial reasons, would
be difficult to improve.

The actual loading execution efficiency (Ca), finally is a residual efficiency to take
account of all volume efficiency losses that have not been accounted for elsewhere
and that may be caused by the fact that actual stowage is not according to plan.

Social cost

The expense to an entire society resulting from a news event, an activity or a change
in policy. When assessing the overall impact of its commercial actions in terms of
social costs, a socially responsible business operator should take into account its own
production expenses, as well as any indirect expenses or damages borne by others.

With the increasing concern for the environment, the rising demand for transport and
the development of economic understanding in these fields, a great deal of research is
now being done on evaluating the social costs of transport, a situation which justifies
a general review.

If policy decisions are to be coherent, it is essential to translate the effects of transport

activities on the environment into money terms. However, the precise way this is done
would depend upon the type of decisions to be taken. Thus, for decisions on pricing,
one is generally interested in marginal costs, while for decisions about investment,
one will generally seek to assess the difference in costs "with and without" the
investment. (Emile Quinet , 1990, The Social Costs of Transport)

Page 18
 Research Proposal

This concept of social cost involves a degree of uncertainty, related to the decision
about what constitutes the "zero level" of harmful effects in certain cases, notably for
noise and air pollution. This affects the social cost expressed in absolute terms or as a
percentage of GNP, but does not reduce the value of the concept for decision-making.
In fact, one characteristic of social cost is that it is a minimum at the optimum; the
proposed definition may be compared with that of the surplus and other concepts used
in national accounts (Quinet, 1990).

This definition must be extended to a number of situations. The first is that in which
the harmful effects do not affect a final user directly, but instead affect a production
activity by increasing its cost. Applying the above definition to this case suggests that
social cost is equal to the difference between the existing production cost, and the one
it would be possible to achieve if the harmful effects did not exist.

As regards road transport, comparisons between the fuels and engines used or usable
are more complex. The two fuels most frequently used are gasoline and gas oil. The
relative environmental effects of the two fuels are uncertain. Gas oil engines produce
more particulate matter and sulphur dioxide but their consumption is lower; in
particular,

Behavior of consumers

Individuals or groups acquiring, using and disposing of products, services, ideas, or

experiences Includes search for information and actual purchase Includes an
understanding of consumer thoughts, feelings, and actions

We assume N identical consumers. The consumer maximizes a twice differentiable,

strictly quasi-concave utility function defined over a clean good (C), a good
associated with dirty production, (D), a good associated with dirty consumption (T)

U(C, T, D,)

We interpret good D as an aggregate commodity that uses road transport as an input in

production, while T is interpreted as goods transport. Road and goods transport
demand jointly produce an externality, interpreted as congestion. Adding other

Page 19
 Research Proposal

external costs such as pollution and noise is straightforward and does not affect the
results.

The model we develop is sufficiently general to capture a wide variety of different

types of intermediate inputs and the corresponding externalities they generate.
However, to make the presentation as concrete as possible, both the theoretical model
and the numerical simulation model used for the empirical application are developed
in terms of a particular example, viz., the problem of reforming taxes on freight road
transport in view of increasing congestion. In theoretical terms, there is little loss of
generality in focusing on congestion type externalities. Such externalities affect both
consumers and producers and are well known to have feedback effects on demand. As
will be highlighted below, a simplified version of the model can also be used to study
a number of other input taxes, such as energy taxes, taxes on pesticides, etc.
Importantly, however, in focusing on freight transport and congestion externalities, we
are also able to contribute to the substantial recent literature on tax reform in the
transport sector (Mayeres and Proost 2001), (Parry and Bento 2002). Either these
models explicitly consider an urban environment and do not incorporate freight
transport, or they include freight transport but focus exclusively on tax reform for the
passenger transport market.

The application of the theoretical model to freight transport tax reform is highly
policy-relevant in view of recent discussions within the EU. There the emphasis has
shifted very much towards taxation of road freight transport instead of passenger
transport. This is to some extent due to the feeling that, in the short run, charging
passengers for the external costs they create seems infeasible at a European scale for
both political and technical reasons. An additional explanation is that international
traffic flows throughout Europe to a large extent consist of freight flows, as a
consequence, taxing and regulating freight flows is seen more as a European and less
as a local problem to be solved by individual countries. Obviously, the focus on
freight transport tax reform raises a number of interesting policy questions. Given that
passenger transport is sub-optimally taxed, which seems to be the case in many
European countries (De Borger and Proost, 2001)

Page 20
 Research Proposal

Although answering these questions seems to be a straightforward exercise in second

best reasoning, the analysis is complicated by at least four factors,

(i) Taxes on intermediate inputs are partially used to correct a distortion on final
goods markets.

(ii) Intermediate goods taxes may have non negligible general equilibrium effects
on all markets, including the labour market.

(iii) Passenger and freight transport share the same infrastructure and hence jointly
cause congestion. As a consequence, tax changes on one market automatically
affect the marginal external cost on the other transport market.

(iv) Congestion causes feedback effects in demand. The current paper develops a
model that incorporates all these complications.

Labor market

The nominal market in which workers find paying work, employers find willing
workers, and wage rates are determined. Labor markets may be local or national or
international in their scope and are made up of smaller, interacting labor markets for
different qualifications, skills, and geographical locations. They depend on exchange
of information between employers and job seekers about wage rates, conditions of
employment, level of competition, and job location.

Assume initially that the tax on freight is also set at marginal external cost. Similarly,
raising freight taxes seems desirable if it implies higher labour supply. labour supply
is affected both via the increase in the price of the dirty good and from the
redistributed revenues. If we assume that the dirty good is a substitute for leisure (in
uncompensated terms), and that leisure is a normal good then increasing the tax on
freight tends to reduce labour supply and, therefore, it is welfare improving to reduce
the freight tax below MEC. This results accords with the large double-dividend
literature in which optimal externality taxes reflect pre-existing labour market
distortions (Bovenberg and van der Ploeg, 1994). As before, however, note that these
findings have to be qualified if the initial freight tax is above or below MEC.

Page 21
 Research Proposal

As the coverage of all circumstances is impossible, simplifications have to be made.

The QRA model developed by the OECD is based on the following steps:

Choose a relative small but representative number of goods.

Select a relative small but representative number of accident scenarios

involving these goods.

Determine the physical effects of these scenarios (for open road and tunnel
sections)

Determine the physiological effects of these scenarios on road users and local
population (fatalities and injuries)

Take into account the chance to escape and/or shelter.

Take into account different risk reduction measures.

Determine the associated probabilities of occurrence.

Existing work that deals with the dynamics of the distribution process includes mainly
algorithmic approaches that focus on solving the Dynamic Vehicle Routing Problem.
In addition, various systems have been developed for fleet monitoring and incident
detection in urban environments. However, most of these systems typically focus on
handling client orders that arrive during the execution of the delivery plan and need to
be assigned to moving vehicles. Dynamic ordering, however, is only a subset of
unexpected events that may affect urban distribution performance. The work
presented in this paper addresses a different problem of dynamic fleet management in
which the distribution plan needs to be adjusted in real-time to accommodate changes
in a multitude of uncontrollable environment variables.

Environment and infrastructure facilities

Efficiency objectives relate not only to minimizing or reducing transport costs, but
also to improvement of the quality of transport services (access, reliability, travel
time, flexibility or security of freight). If efficiency improvement in transport affects
the national or regional income, it serves economic objectives, such as creating

Page 22
 Research Proposal

business opportunities. Efficient urban freight transport, in fact, serves society at

large, as it has economic effects on income, price, market share, and more.

Reduction of road maintenance costs is an infrastructure objective, while preservation

and revitalization of city centers, and maintaining the level of services within urban
areas belong to the group of urban structure objectives. It is interesting to know to
what extent the underlying problems have been quantified and to what extent
indicators and targets for objectives have been introduced. In general, efficiency
objectives can easily be quantified. Economic objectives have been quantified with
economic models when they concern specific infrastructure projects. Although
environmental conditions themselves can be measured for instance in terms of
emission concentration, it is not always easy to identify the relations between policies
on urban freight transport and environmental objectives. A lot of efforts have been
made recently in this research area, particularly in Europe, where even monetary
terms are introduced in order to measure the achievement of environmental
objectives. Even if the above mentioned objectives are achieved as a whole by a
certain policy, it is not guaranteed that benefits and costs are distributed equally
among the concerned groups in society. An important social aspect concerns how
much each group would be better, or worse, off; this is particularly important social
equity principle. It must also be recognized that policy objectives might conflict.
Efficiency improvement, for instance, may conflict with environmental objectives.
These conflicts depend very much on the choice of measures. Some measures may
even be able to serve both objectives.( July 1999)

Investments in improving the infrastructure to reduce the time and cost for goods
transportation based on the principle that beneficiaries should pay for part of the
capital.

Quality improvement

The systematic approach to reduction or elimination of waste, rework and losses in

production process. Quality improvement uses quantitative and qualitative methods to
improve the effectiveness, efficiency and safety of service delivery processes and
systems, as well as the performance of human resources in delivering products and
services.

Page 23
 Research Proposal

The main purpose of voluntary co-operation is that by consolidation an efficiency

improvement can take place in terms of cost reduction or quality improvement. There
are different ways to consolidate, terminal consolidation, route consolidation and
activity consolidation. (G. Chow, T .D. Heaver and L E Henriksson, 1994)

Goods traffic

Goods traffic contributes disproportionately to pollution, and thus to the reduction of

the quality of life in urban areas. Goods traffic also contributes to a large share of
local traffic safety problems. From both an environmental and from a traffic safety
point of view, goods traffic is unwelcome in urban areas. Attempts to resolve the
problem in order to protect the quality of life in particular areas and to make certain
areas attractive for visitors have been made, restricting goods traffic is in many urban
areas to certain routes and/or certain times. These solutions have caused their own
problems, as shops and business in urban areas are hardly accessible at certain places
and on certain times for goods traffic due to these restrictions and the resulting
congestion.( A C McKinnon, I Stirling and J Kirkhope, 1993 )

Safety issues

Safety is the condition of a steady state of an organization or place doing what it is

supposed to do. What it is supposed to do is defined in terms of public codes and
standards, associated architectural and engineering designs, corporate vision and
mission statements, and operational plans and personnel policies. For any
organization, place, or function, large or small, safety is a normative concept. It
complies with situation-specific definitions of what is expected and acceptable.

Page 24
 Research Proposal

3. Methodology

3.1 Variable effective of outcome

Y = Efficiency of Goods Transport
X = x1 Cost Factors
x2 Distance for distribution place
x3 Vehicle Capacity
x4 Fuel Consumption

Page 25
 Research Proposal

3.2 Conceptual Frame work

Independent Variables

Dependent Variable
Cost Factors

Distance for
Distribution place
Efficiency of Goods
Vehicle Capacity Transport

Fuel Consumption

4. Data Representation

4.1 Population and Sampling

Population

According to this research, population means transportation procedure in overall

supermarket industry. All supermarket who engaged in business in Sri Lanka, named
all appropriate population who serve in supermarket equally. Example for, keels
super, cargils PLC and Arpico

Sampling

When we take the supermarket industry researcher take the Laugfs supermarket to
gather data and facilities from the warehouse also the overall idea of the employees.

Sample size

Page 26
 Research Proposal

Select the section of 18 employees who would be working at laugfs supermarket

warehouse in Habarakada. It is 30% of all the employees in the warehouse.

60*30%= 18

Manager 1

Assistant Manager 1

Stores Executives 1

Supervisors 2

Store keepers 3

Drivers 4

Workers 6

4.2 Data Collection

Primary Data Secondary Data

Focus Group. By past records

Qualitative Data

Journal Articles
Quantitative Data

Personal interview by
giving questionnaire.
By using web.

Page 27
 Research Proposal

07. References

1. D.A. Quarmby, developments in the retail market and their effect on freight
distribution,Transport Economic,75-78,January 1989.

2. R.L Clarke, The measurement of physical distribution

productivity,Transportation,31(1),14-21,1991.

3. G. Chow,T .D. Heaver and L E Henriksson, Definition and measurement,

Physical Distribution Logistics Management,24(1),17-28,1994.

4. M J Ploos van Amstel, Managing the pipeline effectively, Business

Logistics,11(1),1-25,1990.

5. A C McKinnon, I Stirling and J Kirkhope, Improving the fuel efficiency of

road freight operations, Physical Distribution of Logistics
Management,23(9),3-11,1993.

Page 28
 Research Proposal

6. I O Walker and F Wirl, Irreversible pricce induced efficiency improvements:

theory and empirical application to road transportation, Energy,14(4),183-
205,1993.

7. J Gattorna, Effective Logistics Management,Physical Distribution Material

Management,18(2-3),4-92,1988.

8. J T Mentzer and B P Konrad, An efficiency and effectivenessapproch to

logistics performance analysis,Business Logistics,12(1),33-62,1991.

9. M J Rhea and D L shrock, Measuring the effectiveness of physical distribution

customer service programs, Business Logistics, 8(1),31-45,1987.

10. G Livingstone, measuring customer service in distribution,Physical

Distribution Logistics Management,22(6),4-6,1992.

11. J L Heskett, controlling customer logistics service, Physical Distribution

Logistics Management,24(4),4-10,1994.

12. T A Foster, Transportation quality program,distribution,88(8),74-82,1989.

13. R A Novack, Quality and control in logistics,Distribution Material

Management,19(11),1-4,1989.

14. M Goetschalckx and C Jacobs Blecha, The vehicle routing problem with
backhauls,42(1),39-51,1989.

15. B Ram, The pallet loading problem,Production Economic,28,217-225,1992.

16. B Fabiano, F. Curro,A.P. Reverberi, R. Pastorino,DANGEROUS GOOD

TRANSPORTATION BY ROAD.

17. Emile Quinet, 1990, INTERNALISING THE SOCIAL COSTS OF

TRANSPORT.

18. H. Knoflacher, P. C. Pfaffenbichler, H. Nussbaumer, April 2002,Quantitative

Risk Assessment of Heavy Goods Vehicle Transport through Tunnels - the
Tauerntunnel Case Study

Page 29
 Research Proposal

19. Transport Logistics,vol 1,p 139-151,1997.

20. First International Symposium on City Logistics,Urban freight transport policy

and planning, July 1999

21. Arjan van Binsbergen and Johan Visser, DUP Science, Efficiency
Improvement of Goods Distribution in Urban Areas, 2001

Supervisors Comment

.
Date Signature of Supervisor

Page 30
Research Proposal

Page 31