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To borrow from last week, I don't care if it is the bar of soap going down the conveyor or the shipment of pulp from Brazil, the costs in transportation is the onloading and the offloading. These termination points are also the points most susceptible to mishandling and accidents. Granted the load must be secured appropriately, depending on the application, but you'll find the problems and the costs are at the ends.
The second most costly area of transportation is rehandling. If you check ocean freight rates for instance, the distance hardly matters (note: there is a special condition going on at this time where freight is bypassing the Suez Canal and for which this statement does not apply). It is the loading and unloading that reflects the cost. Same is true of rail rates. Only trucking shipping prices correlate closely with distance.
To some extent, this goes back to the efficiency we talked about last week as related to energy losses. Trucks, or lorries if you prefer, have the poorest ratio of gross weight to tare weight. They also have the poorest coefficient of drag, both individually and on a cumulative basis. Additionally, they have the poorest ratio of personnel to tare weight.
So why do we use trucks? Convenience is one reason. They can easily go from point to point. If you think of the contents of the truck as work in process (WIP), the truck will have the lowest WIP inventory costs because of its speed.
I believe there are many cases where we use trucks because it is the way we have always done it.
In the United States, trucks became the default transportation mode with the advent of the Interstate Highway System, starting in the late 1950's. Evidence? The trucks nearly destroyed the railroad system between 1960 and 1990. The trucking system became viable with the advent of the Interstate Highway System.
Since then, rail has experienced a revival because of the rapid growth of intermodal transportation via the now ubiquitous standard shipping container. Rail, ship, or truck, the intermodal container works with all. Which brings us right back to the title of this week's column. The intermodal shipping container minimizes costs at the termination points.
The message is simple...when you can, use intermodal shipping to minimize your costs. And...don't just automatically put those containers on trucks, use other modes when you can.
Be safe and we will talk next week.
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