The US Business Logistics Costs reached $1.6 trillion in 2018 i.e. 8% of the total GDP and attracted an FDI of a total of $1.5 billion.
Outsourced logistics providers, or more popularly termed third-party logistics, is an inherent component of supply chain management. Synchronizing the demand-supply equilibrium and making goods available at the place of consumption, is the prime requisite for a firm to survive in the cut-throat competitive market.
Some companies have an enormous infrastructure, including warehouses, logistics, planes, etc., while others resort to 3PLs for storage and transportation of goods because of the specialization and economies they provide. This blog discusses the modes of transport that are used in freight transport solutions to achieve mobility of goods.
The North American road logistics accounted for 780.75 billion USD and is expected to become a 912.67 billion USD industry by 2023, with a CAGR of 2.63%
Countries like the US and Canada enjoy abundant advantages to logistics solutions providers because of their massive road networks. Motorization of logistics makes road infrastructure an excellent option for shipping goods. Also, with containerization, road transportation has become a much more efficient freight distribution alternative.
However, the other side of the coin is its ineffectiveness to cater to the geographies other than roads. Road transports can’t be used for transportation in areas with varied geographies such as rivers, deserts, etc. In addition to this, road transports also require high maintenance costs. Despite this, road networks are the most widely used mode of transportation.
The 140,000-mile US railway system delivers approximately 5 million tons of goods every day, for industrial, retailer, wholesaler, and resource-based sectors.
Rail networks redefine the peripheries of transportation by breaking the constraints of road network transportation. Although rail transportation still has some physical constraints, it provides efficient inter-state mobility of goods. Again, containerization has enabled logistics solutions providers to transport goods much easier.
However, rail networks are well-defined paths on which trains are bound. This makes railways less flexible than road networks and thus, lacks door-to-door service ability. In addition to this, in several countries, railways are not yet privatized and thus, enjoy a monopoly.
Oil pipeline logistics is one of the fastest-growing sectors of the US and Canada with a GR of 7.1% between 2015 and 2020.
The US pipeline logistics is a $15 billion industry with nearly 979 businesses providing pipeline transportation services. The reason behind this is the rising oil production in the US, which is further expected to increase the industrial revenue between 2020 and 2025.
Pipeline transportation is an excellent alternative for the transportation of fluidal commodities. Pipelines can be laid anywhere, being underwater or underground. Pipeline transportation is the new shipping trend among shipping forwarders in Canada and the US for transporting commodities like oil and gas. Canada owns the largest pipeline links extending from Alberta to Sarnia, which is 2,911 km in length, making it the most cost-effective transportation solution for supply chain management, Canada.
Despite being cost-effective in transporting viscous commodities, pipeline logistics still pose several disadvantages to the shipping companies. Firstly, pipeline networks are prone to leakages which can’t be prevented. Since 2010, there have been 3,300 incidents of pipeline ruptures, causing a damage of $2.8 billion, killing 80 people and injuring more than 389 people. Secondly, the capacity of pipelines can’t be increased after laying them.
Maritime transport powers 70% of the total US international merchandise trade.
Maritime transport is linked to most of the major industries including steel industries, petrochemical industries, etc. and is a popular mode of International logistics used by US freight forwarders. With properties such as buoyancy and limited friction, maritime logistics is efficient in transporting large cargos over long distances. Because of the cost efficiency the model provides countries without an appropriate sea network, are making channels, locks, and dredging to facilitate maritime logistics.
But maritime transportation has high terminal costs. Port infrastructures require huge investment for construction and maintenance. Like road and railway logistics, containerization has given shipping companies the potential of transporting volumes of goods over long distances by water.
In 2017, the air freight traffic carried 61.5 million tons of freight through commercial airlines and generated global revenue of 91.5 billion USD.
Airway logistics is practically unlimited and is not constrained by geographical diversity. But airway and delivery services are extremely expensive. A plane requires a 3,300 meters runway for taking off and landing and is affected by aerial climatic changes like fog, rain, etc. Still, airway logistics is contributing immensely to global logistics.
It is obvious that every place is not connected through every mode of transport. Thus, freight forwarders need to use combinations of modes to reach a destination. For instance, if the goods are to be shipped to cold storage, Vancouver from China, then combining maritime with roadways makes the transportation much more efficient.
Telecommunication logistics is characterized by the movement of information within the blink of the eye. Massive volumes of information can be exchanged across vast distances through optic fiber cables and satellite networks.
Telecommunication has replaced personal mobility in several economic sectors, but the sector that has benefitted the most is the e-commerce sector, where orders are easily placed through mobile networks throughout the world.
Modern economies are characterized by integrated transport networks. Each mode of logistics specializes in one type of transport, each with its own defined peripheries. In the contemporary world, where the distribution sector is highly privatized and every freight forwarder looks forward trys to outdo their competitors in terms of cost, speed, accessibility, etc. But most of the modes are non-substitutable (eg. you can’t replace maritime logistics with rail logistics). Logistics is an invisible hand for an economy, helping the firms sync demand and supply, and make goods available at the place of consumption. Every mode of logistics has its advantages and disadvantages. Choosing the appropriate mode or combination helps in effective mobilization and increases company growth.
- Posted by admin
- On June 18, 2020