Global Transportation Management Trends

March 5, 2007
Key issues today are capacity constraints and increased security issues.

Global supply chains rely on fast, responsive, and dependable transportation. Two key issues have arisen, however, that threaten to lengthen transit times, create more frequent and unpredictable delays and raise transportation costs. These issues are transportation capacity constraints and increased transportation security.

Transportation capacity constraints are afflicting several areas in the world as the practice of global sourcing has increased. For example, several European and U.S. seaports are currently operating at or near capacity. In a 2003 report, the U.S. Chamber of Commerce projected that every major U.S. container port will double the volume of freight it handles by the year 2020, with some ports on the east coast tripling in volume and some west coast ports quadrupling in volume. Furthermore, economic "hot spots" such as China are putting pressure on ocean carriers' vessel capacity in specific trade lanes. The heightened security efforts that have been implemented since the terrorist attacks on the U.S. in 2001 also threaten to disrupt the smooth flow of freight and add to the congestion at critical points in the global transport network.

Transportation capacity constraints occur at freight terminals, seaports, motor carrier hubs, and airports as well as on roadways, railways, airways, and waterways. The land transport links that provide domestic inland distribution can compound seaport congestion problems when they do not pick up the imported freight in a timely manner. Conversely, inefficient port operations can increase the amount of time (and cost) required by land carriers to pick up their loads.

Transport system capacity constraints are most severe at high demand times. Shipper facilities and public transportation facilities are frequently not operated at all hours of the day, creating artificial traffic peaks that strain facility, equipment, and labor capacities. Investing in additional capacity to meet peak-demand levels leads to gross underutilization of this capacity during normal or off-peak times. Differential pricing of transportation service may alleviate the problem by enticing some shippers to shift their demand to off-peak times, but it usually will not eliminate the problem.

Regulation Issues

Government policies and regulations affecting transportation have an important impact on capacity. Carrier pricing regulations, as well as social regulations addressing safety, labor, environment and energy issues -- for instance, hours of service restrictions for equipment operators, environmental constraints on port expansion and local noise policies that restrict aircraft landings and departures at night -- reduce capacity, service levels and cost. Engine emissions controls, energy efficiency standards, hazardous materials regulations, speed limits and numerous other rules and policies are necessary to protect the public or to promote social objectives, but they have an impact on transportation and trade that must also be considered.

Rather than targeting public policy and funding on individual transportation modes, policy makers are advised to develop a national freight policy that integrates the needs of shippers with those of multi-modal transportation concerns to establish cohesive and efficient national and global networks. A broader geographic perspective, i.e., regional or national planning rather than local, will improve the efficiency of the transportation system.

Asset Visibility

Finally, transportation asset visibility and equipment and shipment tracking technology is particularly important to improved capacity management. Integrating global positioning systems technology, on-board computers and visibility and tracking devices with shippers' Transportation Management Systems (TMS) will improve vehicle routing and scheduling, establish more timely appointment schedules and enhance event management capabilities. Intelligent Transportation Systems (ITS), implemented in many countries for road traffic management, enable improved traffic flow and safety by providing drivers with information about road work, traffic congestion and weather. ITS asset-tracking capabilities provide information about the condition and location of goods and equipment while enroute, verify that containerized cargo remains sealed and integrate with customs automation systems for more efficient verification of cargo manifest information at border crossings.

Security: Deterrence And Detection

Security is important in transportation since carriers are responsible for the safety of their employees, the public, and their customers' products. Transportation links have great risk exposure as they often span considerable distances and take place in operating environments that are difficult to control. The September 2001 terrorist attacks heightened security concerns and resulted in several new government security initiatives that have broad impacts on transportation system flow, time variance, and cost. Security awareness and preparedness must be implemented through comprehensive and on-going planning, employee education and training, and technology. Effective security plans require top management leadership and support, good fit with the organization's business model, integration across all functions and processes within the organization and with its supply chain partners, and the ability to measure performance and attain continuous improvement.

Deterrence and detection are two key elements of transportation security programs. Deterrence refers to security practices, infrastructure and technology that discourage or prevent theft and terrorism, while detection refers to the discovery of theft or product/shipment tampering during or after the fact. Physical inspections of shipments and monitoring devices (e.g., surveillance cameras, satellite tracking of vehicles and containers) are common means of detecting security breaches. Real-time monitoring devices, in conjunction with quick-response capabilities, may also be deterrents; i.e., by lessening the probability of success, they may discourage attempts at theft or terrorism.

Technology Solutions

Supply chain technology applications that enable shipment and equipment tracking, increase supply chain visibility and facilitate inter-organizational information sharing also enhance security. For example, global positioning systems (GPS) enable detection of unplanned stops in transit, en route tampering with shipments and vehicle departures from pre-designated routes (i.e., "geo-fencing"). Advanced notices of transportation-related delay are communicated to shippers and receivers and may be integrated with their event management systems to better manage disruptions.

Customs authorities are working to develop and apply better technologies for inspecting shipments (e.g., radiation/chemical detection sensors, improved x-ray technologies) that increase both the speed and accuracy of inspections. Authorities also are adopting policies to reduce the number of inspections by targeting higher risk shipments, shippers, and countries of origin for inspection as well as certifying "known shipper" status. Examples include C-TPAT-certification to identify shippers that demonstrate effective security policies and practices and permit faster customs clearance at points of entry.

The future success of global supply chains will depend on the ability of organizations to manage the capacity and security issues described above. The requisite organizational and technological tools are already available. The challenge lies in integrating them throughout the supply chain.

By Theodore P. (Ted) Stank, The University of Tennessee, Thomas J. Goldsby, University of Kentucky, Michael R. Crum, Iowa State University and Joel Sutherland, Lehigh University.

For over 50 years, University of Tennessee (UT) faculty have played a major role in the supply chain/logistics arena -- conducting innovative research, publishing leading-edge findings, writing industry-standard textbooks, and creating benchmarks for successful corporate supply chain management. Programming is top-ranked in Supply Chain Management Review, U.S. News & World Report, and Journal of Business Logistics. Certification is available.

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