Transportation modes used by firms

Abhijeet Pratap

December 23, 2023

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It is the digital era and not everything needs to be physically transported. There are a large number of services that can be availed of directly from the provider without the need for transportation. A large number of services are provided online. However, there are still a large number of physical products that have to be shipped from businesses to customers. For example, Amazon serves millions of customers daily and uses its own distribution and shipping network to make timely deliveries. However, large companies depend on their supply chains to a very large extent for the procurement of raw materials and production of goods that can be shipped to the consumers.

The physical flow of materials in the supply chain is referred to as logistics. Companies depend on several types of physical distribution methods. The ones used most commonly include air, rail, truck, water, and pipeline. In some areas companies have to depend on other methods where these options are not available. For example, sometimes companies have to deliver products through high traffic areas and they use motorcycles for delivering products. In some desert areas, they depend on camels to carry products.

In this post, we will discuss the most commonly used transportation methods including trucks, rail, roads, water and air.

Common Transportation Methods Firms Depend On

Trucks:

Trucks are perhaps the most commonly used modes for transportation. A large number of companies that extensively depend on their suppliers, maintain their own fleets. For example, Walmart has its own logistics operations which includes thousands of trucks and trailers. Compared to most other modes employed by companies except airlines, trucks are the fastest and the most convenient. They can go anywhere where there are roads. However, trucks can be very expensive and not as suitable in some cases. In some cases, companies may need to hire a very large number of trucks for delivery which can prove quite costly. Suppose, a company needs to deliver tons of coal, it is better to use the trains that trucks in this case. Another important thing to note is that delivery using trucks is not as environment friendly as compared to some other modes of transportation. These trucks also emit a fairly high amount of CO2. Based on these facts, while trucks may not be the best solution in all cases, they may still be the most convenient and fastest solution in most cases.

Water:

A large number of international businesses depend on cargo shipping to shop heavy cargo to international markets which can be reached through water. Moreover, it suits a large number of cases because it is inexpensive compared to the other modes of transport. It might not be suited for all cases since there is not always a waterway available but yet when you have it, cargo shipping is your best option. Another drawback of cargo shipping is that it can be slow or time consuming and so if you want things shipped fast, you will need to depend on other modes.

There are a large number of products and mainly loose cargo that companies ship through waterways. Cargo shipping plays an important role in international trade and supply chains. While cargo ships mainly transport loose cargo like petroleum, grains, ore and other mining products, they also carry consumer electronics products. The consumer goods products are generally shipped using intermodal containers that can be up to 53 feet long and more than 8 feet in height.

Another important benefit of using cargo shipping is that cargo ships are huge and can carry a lot of cargo. Cargo ships can carry much more than an average train can. For example, there are large cargo ships that can carry up to 15,000 large containers which is around 6 times what a train can. It is their capacity that makes them comparably inexpensive with respect to the other modes of transporting cargo.

If a market is accessible via waterways and there is a lot of cargo to be transported plus there is enough time to send the cargo, then cargo shipping can be a great option. However if you want products shipped to the target location in just a few days, cargo shipping might not be your best option.

Air freight

The fastest way to ship a product is via airplane. However, the costs of shipping via air are much higher when compared to shipping via sea. It is mostly high value products that are shipped via air and some perishable goods that need to be shipped very fast. Shipping perishable products via air may also require extra caution since it is important to maintain the right temperature until the plane has taken off. It may require the use of special containers. Often companies hire freight forwarders to take care of packaging of perishables so that their condition does not deteriorate while they are in transit. With time, the use of air freight has grown and there are a large number of ecommerce and delivery companies around the globe that are using planes for making timely deliveries. For example, companies like Fedex, UPS and Amazon have their own cargo planes for shipping of products. For example, in 2023, Fedex had 700 aircraft in its global network.

Railroads

Many of the same products that are shipped via sea are also shipped via railroads. In most cases, a large number of products that are shipped via sea are then sent to inland destinations via railroads. The large containers that the cargo ships carry often end up on cargo trains. Especially, when it comes to carrying products over very large distances on land, cargo trains are highly suitable for the job. When the products are offloaded from trains, they are sent in trucks to warehouses and distribution centers. Railroads are the middle link between trucks and ships. They are not as costly as trucks for carrying goods and not as convenient either when it comes to locations that can be reached via road. However, shipping via railroad is faster than shipping via sea and a little expensive also. If prices of gasoline rise then so would the costs of trucking. In that case, businesses start looking for options like railroads for shipping so they can reduce their shipping costs.

Pipelines:

Pipelines are used for transporting oil, natural gas and chemicals generally. Around two third of petroleum products including diesel, jet fuel, kerosene and heating oil are transported using pipelines. However, the costs of building pipelines are very high. Companies invest millions in building pipelines since once they have been constructed, there are no other big costs involved in the products being transported. It can be very cheap to transport petroleum products using pipelines. If you have to transport petroleum products over hundreds of miles, it might cost you next to nothing. The speed at which a petroleum product is delivered depends on the size and pressure of the pipe as well the density of the liquid.

However, the use of pipelines also requires the use of other modes to carry the products. It means you cannot deliver to the final customer using pipelines only. Companies generally employ trucks for the final part of the delivery process. Oil reaches a location through pipelines and then it is carried to the service stations in trucks. In some cases, materials can also get stolen from the pipelines. Criminal organizations can tap into pipelines in remote areas to steal oil.

How a company selects its preferred methods of transportation depends on various factors. However, it also depends on the customers and market to some extent because based on changing demands and preferences the modes of transportation may also need to be changed. First of all, it is the question of what is the most important for the company. It can be speed, costs or time of delivery. If speed is really very important for the business, it would adopt the fastest means of delivery like aircrafts and trucks. If costs are the main concern for a business, it would use cargo shipping and trains. Companies face several trade offs while deciding which mode of transportation to use for shipping of products. A company can also adopt multiple modes of transportation based on changing consumer needs and preferences.