A Comprehensive Guide to Understanding the Role of Transportation in Supply Chain


A Comprehensive Guide to Understanding the Role of Transportation in Supply Chain

The global market for transport management systems is expected to reach $7981.5 million by 2030. Starting from moving raw materials to transporting products to end customer, supply chains, irrespective of industries, depend on efficient transportation for smooth business processes. So, understanding the role of transportation in supply chain for optimum management is a definite competitive differentiator. But how does a business accomplish this?

An organization must build a flexible, affordable transportation network as the basis for cost-effective logistics management. Keeping in mind the competitive market, making strategic changes to cut costs and improve customer service levels with a responsive, cost-effective transportation network in place, significantly impacts the overall flow of the supply chain. 

The foundation of a responsive transportation network is end-to-end network visibility. In a recent survey, 36% of the respondents believe predictive warehouse analytics helps in building a more balanced supply and demand model. Transportation offers an organization the chance to continuously improve operational efficiency and the bottom line, unlocking untapped value for shareholders when the right tools to manage complexity and visibility are in place.

This blog discusses various modes of transportation, the reasons behind transportation being a crucial component, and the role it plays in building an efficient, sustainable, and profitable supply chain.

How Different Modes of Transportation Work With Different Logistics Components

There are various modes of transportation in the logistics sector, each with distinct advantages and relevance to each industry and business sector. The mode of transportation companies choose—from land, rail, sea, and air—depends on a few variables. For instance, businesses in the transportation of heavy goods choose rail transportation over road and air options because they can handle heavier goods at scale and lower costs. In contrast, air freight is preferred when the value per unit weight is high, and there is a degree of urgency.

The increasing role of transportation in supply chain is widening owing to the dynamic trend in logistics – Multimodal transportation. It combines different modes of transportation to provide the quickest shipping time. 

This approach is not only cost-effective but also time-effective. More shippers are choosing to do so in order to benefit from cost savings, environmental advantages, and improvements in highway safety. Multimodal transportation is gaining popularity because of the lower costs, predictable pricing, standardized transit schedules, and flexibility.

What Makes Transportation a Crucial Component of Supply Chain Management?

The role of transportation in supply chain can be understood from three prominent perspectives:

Transportation as an Enabler of Goods Movement

Global trade is at its healthiest point ever as a result of flexible and cross-border transportation methods. With careful planning, companies can grow their markets while also boosting the economies of their respective nations. The benefits of various forms of transportation have made the world smaller owing to global trade.

Transportation for Supply Chain Sustainability

A sustainable supply chain fully integrates ethical and environmentally friendly practices into a competitive and successful model. Transparency throughout the entire supply chain is essential, and sustainability efforts must cover everything from sourcing raw materials to last-mile logistics to product returns and recycling procedures.

To account for supply chain emissions, one must be aware of the issue, actively engage with suppliers and transportation service providers, and be willing to commit to long-term climate change and sustainable practices goals.

Transportation for Supply Chain Profitability and Efficiency

The supply chain is held together by the link of transportation. Since raw materials are moved from dealers or the location where they are purchased to the location where they are manufactured and then to the final consumer, every step of the process needs to be connected by optimized transportation. 

Without a reliable and cost-effective shipping strategy in place, companies risk losing a lot of time and money, which could negatively impact their competitive advantage. This includes having solutions ready for potential disruptions, like equipment failure, natural disasters, work stoppages, government interventions, etc.  

Role of Transportation in Supply Chain: The Top Ten List

To expand, businesses must have a strategic transportation strategy. It entails establishing an extensive network of organized transportation plans and distribution schemes for receiving and shipping products. Nobody likes to receive late orders, so it makes a smooth shipping process all the more important to keep customers coming back for more. 

Below are the top 10 roles of transportation in the supply chain.

Efficient Goods Movement

Every type of product has a particular mode of transportation that is required. As a result, the ability to transport goods using a variety of different methods is crucial to a company’s supply chain. Moreover, as global and regional travel have vastly different requirements, engaging appropriate transportation keeps the supply chain moving in the right direction. 

Gaseous and liquid materials, for instance, are moved from one location to another using pipelines; moving large pieces of equipment across the ocean by shipping companies helps optimize the costs involved. Similarly, products with high value and urgent requirements are transported via air or road to ensure the efficiency of time.

Shipment Segmentation 

Choosing the right carrier can significantly bring down your overall spending both in terms of resources and time. Depending on the customers, products, season, and other factors, each shipment will receive varying priority levels. It is necessary to segment the modes and routes of transportation in order to accommodate such needs.

An efficient transportation system also needs a variety of modes of transportation. A product frequently travels through several modes, like sea-road or air-road, before reaching a distributor or end-user. 

Cost Reduction

Costs in a business operation can be managed by effectively optimizing the role of transportation in a supply chain. The majority of the logistics budget is spent on freight and fuel. It is expensive to move products from one location to another using one or a combination of the different modes of transportation.

Businesses can become more aware of the supply chain network in general, and how it interacts with the larger transportation ecosystem by utilizing technology and data. The right data provides shippers with insights into freight flows and other factors that could affect how much it will cost to transport goods to various locations. They gain a deeper understanding of the transportation ecosystem and how it influences the entire supply chain as a result.

Synchronization Across Supply Chain Activities

Supply chain technology is synchronized with transportation by Transportation Management Software. It is best suited to handle the daily monitoring of transportation operations. Route planning, fleet management, fuel costing, supplier relations, cargo handling, and customer communications are among the tasks monitored by a TMS.

A TMS is very good at managing and reducing transportation costs. Adoption of TMS is growing as affordable transportation is the way ahead for an effective supply chain. This is reflected as the TMS market is projected to reach $28 billion by 2027.

Inventory Planning and Management

A lean inventory is maintained through effective transportation management, which improves the efficiency and smoothness of stock movement through warehouses. Improving the flow of goods into and out of the warehouse can help save money on transportation and storage while also cutting down on lead times.

Local Fulfillment and Distribution 

A distribution network in a supply chain is a connected system of warehouses and transportation hubs that receive inventories of goods before shipping them to customers. It serves as a connecting point between the manufacturer and the final consumer, either directly or via a retail network.

With evolving consumer demand, a quick and reliable distribution network is crucial. Two of the most crucial components of a distribution network are its proximity to the customer and its infrastructure. Smart transportation helps connect these components in a proper manner.

Multimodal Logistics 

With multimodal logistics, shippers have more access to various transportation modes and standardized transit schedules. This translates into benefits for safety, capacity, and reliability. Businesses can similarly streamline their reverse logistics as they move their freight to multimodal. 

Bypass Geographical Limitations

Extending a company’s global reach is a key strategy for growth. Because last-mile delivery is so important to keeping customers happy, it is an essential component of logistics and supply chain management. However, getting it right is incredibly challenging due to geographical and infrastructural limitations. 

No matter where consumers are, goods are accessible to them through well-planned transportation. Using transportation strategically can lead to a successful supply chain with both regional and global reach. 

Enhanced Customer Experience

A crucial component of transportation management is making certain that finished goods are delivered to customers on schedule and in the same condition as when they were shipped. One of the few steps in a supply chain where businesses interact directly with customers is delivery, which is heavily dependent on transportation. 

As a result, ensuring prompt delivery while taking precautions to prevent delays can boost customer satisfaction and build the brand’s reputation for dependability and trustworthiness.  

Supply Chain Sustainability

Inefficient and poorly optimized delivery routes increase the distance traveled and fuel consumption. They also lead to empty miles, which greatly impact last mile sustainability and business profitability. AI-based transport management solution smartly clubs planned and on-demand orders (that need to be delivered on the same route) to minimize trip volumes and improve delivery productivity. This also reduces the distance traveled, fuel consumption, and delivery time. 

How Does Intermodal Transportation Influence Global Supply Chains?

Intermodal transportation is one of the major supply chain trends currently prevalent in the transportation sector. Here, the freight is transported from source to destination by at least two different modes of transport. Generally, each means of transport is associated with a distinct supplier and governed by individual contracts. However, every segment works in sync to achieve the agreed delivery timeline.

The intermodal transportation method is of great help to ensure hassle-free international movement of products. For international shipments, once the products are loaded onto a container, they remain so through the entire journey. As this involves a mix of sea, air, and land travel, it is more fuel-efficient and cost-effective for companies to move bulk orders across borders. As it ensures greater consistency and capacity utilization, intermodal transportation is fast shaping the evolving role of transportation in the supply chain.

Transportation Optimization for Efficient, Sustainable, and Profitable Supply Chains

Transportation optimization effectively assists transportation management systems in saving time and speeding up that process, thereby reducing delivery delays. It also helps reduce transportation costs and simplify supply chain operations across geographies.

Nearly 35% of firms now use TMS to manage their transportation network easily. Smart load selection, trip planning, driver selection, and tour planning are all features of intelligent TMS systems that can reduce costs, and boost productivity, efficiency, and customer satisfaction. Smart routing, intelligent allocation, and vehicle capacity planning are additional benefits. With optimization, companies can run fewer unnecessary miles and better use the existing delivery network’s capacity.

Planning and optimizing routes is another use of optimization in the transportation sector. An optimized route fulfills the order’s constraints and requirements while delivering the freight at the lowest possible cost. For drivers to guarantee more precise on-time deliveries, these technologies continuously re-sequence the remaining stops based on time commitments, current traffic, and new pickups. The end result is less mileage, better fuel use, and happier customers and drivers.

Leverage Transportation the Right Way – Choose Shipsy

Shipsy’s AI-powered logistics platform is the one-stop solution to connect cross-border and local logistics seamlessly and improve supply chain operations via intelligent 3PL management.

The smart solution offers companies with unified interfaces and drag-and-drop features for enhanced user experience and actionable analytics for smarter decision-making. Say goodbye to empty miles and gain a 360-degree view of the entire transportation process with process-oriented dashboards offering KPI-based real-time tracking.

Shipsy is transforming logistics ecosystems to deliver excellent service across industry verticals, and is helping businesses unlock:

  • 23% reduction in last mile delivery costs.
  • 77% reduction in steps for the delivery process.
  • 32% increase in mid-mile vehicle utilization.
  • 37% decrease in ETA SLA breaches
  • 64% increase in customer experiences

Connect with our team for a customized demo to transform the supply chain operations and implement an efficient logistics management solution to boost all transportation endeavors.


Related Posts

Multimodal Visibility- How It Drives Supply Chain Efficiency and Profitability

Multimodal visibility facilitates real-time tracking shipments to help shippers know the exact status of the shipment and avoid delivery delays, increasing transportation costs, and other problems.


Five Multimodal Logistics Challenges and How Businesses Can Address Them

As supply chains become longer, more complex, and more SLA-driven, multimodal logistics emerge as a powerful solution. Here is our take on multimodal logistics challenges and how to overcome them.