Supply Chain Management Best Practices, 3rd Edition

CHAPTER 7Transportation: Logistics à la Mode

Flashpoints

• The faster your goods travel, the more you'll spend on transportation.
• Transportation is a relationship business, so take the time to get to know your carriers.
• Labor issues and costs, along with technological advances, are hastening the development and adoption of autonomous delivery vehicles.
• When it comes to transportation, rule number one is: Get it there on time.

Transportation is the lifeblood of any supply chain, but a company's logistics department tends to be an invisible link in that chain. If senior management thinks about freight transportation at all, their thoughts tend to focus on questions like, “Why are we spending so much on trucks?” or “Why are our products always shipping so late?” Those are fair questions to ask, especially when you consider that US companies spend more than $1 trillion each year on transportation, and what's more, transportation costs account for between 5% and 15% of the cost of goods sold. And yet, the supply chain professionals who manage that spend are rarely given credit for keeping costs as low as possible.

Freight transportation—the physical distribution of goods—involves four major modes: highway, rail, air, and water carriers.¹ Many shipments move on two or more modes, such as from a railcar to a truck, and these shipments are classified broadly as intermodal.² Because more than 70% of all goods in the United States at some point are transported on a truck (and 80% ...