Transport in supply chain management is one of the critical factors. In addition to logistics, transport guarantees that the manufacturer gets the inputs (raw materials) for the production and that the outputs (finished products) are delivered to the customer. Hence, transport has a huge impact on the supply chain. Time and place utility is created by transportation, indicating the criticality of ensuring that the mode of transport selected is the most economically feasible for the business (Monczka, Handfield, Giunipero & Patterson, 2015). There is an increase in the number of companies that are dependent on a global supply chain given the international nature of the business. For such business, the management has to be careful about the choice of the mode of transportation to use. There are two main modes of transportation for the companies that adopt the global supply chain, air and water. The economic impact of the transportation mode on the operations of the business is the main concern for the supply chain management. Water transport is a major component of global supply chain, but with some pros and cons in terms of economic analysis.
For a business to reap the benefits of a transportation network, it is critical that it is economical. The adoption of an economical transportation network is based on a crucial analysis of the costs and benefits of the mode. It is evident that some companies remain entrapped in the conventional viewpoint that transportation is n essential evil. It is a cause for costs and risks that the business cannot avoid. Regardless, there is no denying that transportation is the leading aspect of the cost structure of the logistics of a business (Monczka et al., 2015). Transportation, as part of the supply chain logistics, takes up as much as 30 percent of the overall cost. The amount is almost the cost of inventory and warehousing put together. The cost notwithstanding, transportation is an element that cannot be ignored. For the businesses that are obtaining their raw materials and selling their products in the global market, they cannot ignore the economic impact of water transportation.
Water transportation is perhaps the most economical mode when it comes to the transportation of raw materials and finished products across national borders. The only mode that has the potential to compete with this mode is air. Road can only be used when the distance for travel is short and it can be convenient and economic to use the mode (Taylor, 2015). For the supply chain managers who want to compete more effectively and efficiently, they should consider water transport of the overseas sourcing and delivery of finished products. Although the data available on this mode is related to cost, there is no doubt that there is much more that should be put into account in making the decision on the mode of transport to use. Supply chain managers have outpaced the rivalry by realizing the importance of transportation in the supply chain management process (Cosgrove & Rijsberman, 2014). There have developed complex devices that can be used by the management for the purpose of monitoring, controlling, and optimizing transportation systems that are available, including water transport.
When considering the economics in the choice of transportation to choose for the company, water transportation is the most likely mode of choice. The mode is the oldest and the most economical because of the low cost. Rivers come into being naturally when compared to other modes such as air. Given the reality that it does not require huge investment to construct or maintain, the mode does not take high cost to use. The cost of maintenance for the inland water transportation is economical (Morrissey & O’Donoghue, 2013). For the movement of bulky goods are the least possible cost, water transportation is the most convenient. The management should always take into consideration the cost of delivering raw products to the company and the finished goods to the customers. The decision making, in global operations, take the form of comparing alternatives, mostly air and water. From an economic analysis, water is the most economical, especially for the movement of bulk cargo.
In terms of the carrying capacity, water transportation has been revealed as the most efficient. The mode is the most critical for the transportation of bulky cargo for lengthy distances. Hence, it is playing an important role in the global supply chain where companies are importing a lot of raw materials and exporting a lot of finished products. It is also the most suitable for the goods with long lead times (Cosgrove & Rijsberman, 2014). There products that the company would suffer no cost if they took a long period of time during the delivery process. This is because, unlike other modes such as air, it takes longer time for goods to be delivered via water. For international trade, water transportation is indispensable. It is playing a very critical role in bringing distant regions at a close proximity. With water, there is a wide range of products that can be transported. Hence, it is the most convenient mode of transportation for international trade.
Flexibility of services is an important benefit of water transportation. Compared to other models such as railway and road, water transportation is highly flexible. The mode can also be adjusted to the needs of the individual business. The mode of transport is usable under different conditions, including during natural calamities. During events such as flood and rains, water transport is not mainly affected. This is as opposed to air transport which is greatly affected by such incidents. Companies are assured that their cargos will be safely sailing even when there is experiences of the natural calamities (Taylor, 2015). In terms of safety, water transport rates better than other modes. There is low risk of breakdowns and accidents in the use of water transport in comparison to other modes. Hence, there is a higher chance or probability that the goods will reach their destinations where the business’ management has made the decision to use water transportation.
Despite the advantages associated with the use of water transport, there are major drawbacks that the supply chain managers should take into consideration. The mode of transport is characterized by longer lead or delivery times that should be noted. The slow speed in the use of this mode affects the period of delivery for the products. This has serious effects on the business including the cost involved in waiting for the products. The business can hold on a lot of capital in the goods that take months to be delivered (Cosgrove & Rijsberman, 2014). Monsoon failure also leads to the falling of the water levels making it difficult to navigate. This leads to more delays and long waiting period for the goods. Due to this reality, the mode of transport of not suitable for small businesses which do not have a lot of capital to hold in undelivered products. For such businesses, faster modes such as air transport should be considered even if they are most costly.
Water transport can be highly unreliable, especially in the case of inland water transport. The normal route cause can be disrupted by any changes in the water ways such as changing of the courses of a river that is used for water transport. Also, there are some waterways that are not operational the whole year because of their seasonal nature. Some water ways are affected by freezing during winter and decrease in the level of the water during summer. The mode, hence, is only useful when there is adequate water level to support navigation. Storms can also have negative effects on the use of water. In such situations, it means that the water cannot be navigable. This means that some operations are usually during these periods, causing major inconveniences for businesses (Morrissey & O’Donoghue, 2013). It is difficult to determine when the most appropriate time is for the use of the water transport for the delivery of goods in an out of the business. The inconvenience can cause major losses for the businesses, especially the small ones.
No mode of transport is suitable for all the transportation needs of a business. Hence, the supply chain manager has major analysis to carry out in determining the most effective and efficient mode of transport to use (Morrissey & O’Donoghue, 2013). The decision is based on an assessment of a number of factors that come to play in the consideration of the transport mode. Water transport could be suitable for some transportation needs of the business but not all. When considering the cost of transporting bulky goods, water transport is the most suitable. However, in the transportation of high value goods that are needed at a shorter time, other modes should be considered, such air (Taylor, 2015). The same applies when the cost of waiting for the goods is too high for the business. The managers should consider all the costs and benefits in determining the mode of transport for use. The consideration should also consider the value of the product to be transported. The analysis will lead to the best decision.
Water transport is one of the main modes of transportation in the world today. While it is one of the oldest modes of transportation, it is gaining importance with the growth of international trade. The mode is providing the critical services to companies wishing to transport bulky raw materials from the suppliers and final products to the customers. While air transport can achieve the same objective, the cost of the mode is way higher than the use of water. Hence, for the bulky goods that can take a long period of time in the network without major cost for the business, water transport is the most convenient because of the low cost. However, careful cost benefits analysis should be undertaken before making the important decision on the mode to use. There are situations where one mode will be more suitable than another considering the nature of the product and the cost of transporting them to the destination.
Cosgrove, W. J., & Rijsberman, F. R. (2014). World water vision: making water everybody’s business. Routledge.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.
Morrissey, K., & O’Donoghue, C. (2013). The role of the marine sector in the Irish national economy: an input–output analysis. Marine policy, 37, 230-238.
Taylor, G. R. (2015). The transportation revolution, 1815-60. Routledge.