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Global transportation and trade are intertwined such that factors affecting trade are likely to affect global transportation. The relationship between trade and global transportation emanates from the fact that global transportation involves moving trade commodities across various destinations. Global transportation involves numerous activities that need proper coordination for the movement of commodities to be successful. Such coordination can only be achieved through intensive planning of the whole global transportation network (Black, 2010). This research paper will focus on the importance of planning in the global transportation network. The paper will focus on the role of planning in carrier and mode selection, route planning, anticipation of challenges and their mitigation, preparation of documentation and identification of logistical issues within the global transportation network.
Planning and the Selection of Route, Carrier and Transport Mode
Individuals and organizations involved in export and import trade are concerned with making profits. As such, any reduction in the costs of their operations means additional profits. Therefore, all their activities and efforts are focused on maximizing profits, reducing costs and increasing efficiency of their business transactions.
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The route taken by the transport carrier impacts on many transport aspects such as the time taken to deliver the cargo, the efficiency of the supply chain, customer satisfaction and the overall success of business entities. Although the selection of the transport route is almost entirely a preserve of the carrier, proper planning and negotiations by the transport managers can influence the routes taken by carriers transporting their cargo. Planning on the route to be used will, therefore, reduce the time taken, increase customer satisfaction and improve the efficiency of the supply chain.
The mode of transport selected depends on factors such as the nature of the cargo being transported, the urgency of the cargo reaching the destination and the cost of transportation. Bulky goods that are not perishable are best transported using water transport. On the other hand, perishable goods that need faster transportation are best transported through air transport. The different variables involved in deciding the mode of transport to be used such as cost and urgency must be balanced for the transportation system to be effective. To achieve effectiveness, transport managers must plan on the best mode of transport for their cargo after weighing and analyzing all the variables and striking a balance among them (Ritter, Barret and Wilson, 2007). Such planning will lead to low costs and efficiency of the mode of transport chosen.
Selecting a carrier within a transport mode requires constant planning because the level of service and freight rates of some service providers may vary from time to time. When the quality of service provided by a carrier deteriorates, the transport manager should seek other carriers with the required level of service quality. Identifying the level of service quality by a carrier requires planning. The transport manager should be constantly planning on how to evaluate the carriers being sought for services. Depending on the satisfaction provided by the carrier, the manager may choose to continue or terminate the contract and seek new carriers. When there is no planning, the manager may not be able to identify pitfalls in the services being provided by various carriers. Consequently, the individual or organization seeking transport services may progressively incur losses without knowing. During carrier selection, the transport manager can use Perfect Order Index (POI) to determine the levels of service provided by various carriers. POI combines several metrics such as on-time delivery, zero damage, complete labeling and documentation. The importance of planning at this stage is crucial because failure to plan may cause serious delays in the delivery of cargo. Documentation is critical to all modes of transport because it is used by authorities in both the destination and country of origin. The authorities use the documents to levy taxes of the cargo at the entry points. When there is poor planning by either the carrier or transport manager, the cargo may have some crucial documents missing. As a result, the cargo may be reprimanded at some ports, which may disrupt the delivery schedule, reduce customer satisfaction and damage business reputation.
Planning and Anticipation of Challenges Facing Global Transportation
As mentioned earlier, global transportation is closely related to global trade. Trade has been negatively affected by economic, social and political factors over the years. Likewise, global transportation has been faced with various challenges. These challenges include, fluctuations of trade levels, security risks, shift in regional sourcing and carrier consolidation.
When trade levels are high, global transportation is faced with the challenge of congestion within international ports, scarcity of containers, and high freight rates. Therefore, importers and exporters may find it difficult to secure transport services from carriers. Moreover, congestion in ports delays cargo delivery and causes inconvenience. During the global trade decline, containers are available, but traders may not benefit from increased capacity. During these times, carriers reduce their frequency to different destinations and retire the worn out equipment in a move to reduce costs. Although fluctuations in global trade levels are a challenge to the transportation industry, it is predictable. Economic conditions and performance can indicate the direction of trade levels. As such, transport managers can predict and plan for either high or low trade levels. By anticipating high and low trade levels, the managers can negotiate with carriers prior to such periods when capacity is still available. Such negotiations need strategic planning that involves close monitoring of economic conditions and deciding on when to negotiate with carriers (Coyle, 2011). When there is no planning, either low or high trade levels may come and meet the traders by surprise. This may leave transport managers with few options, thereby rendering transport extremely difficult.
Terrorism and other crimes such as piracy on the seas have become extremely challenging to the transport industry globally. Such crimes pose a security risk to the transport industry. Transport systems have become easy targets for piracy and terror attacks. When the transport industry is not the direct target of criminals, it may be used to aid piracy and terror attacks. Transport managers with good planning skills can reduce such risks by being actively involved in planning the route their cargo should take and using carriers with enhanced security. There are countries that are considered more prone to terror attacks than others. Good planning by managers can ensure that the cargo being transported avoids the high risk ports and entry points. Such planning requires prior considerations and negotiations with carriers, which may need efficiency in interpersonal skills. Therefore, planning may help minimize the security risks associated with global transportation.
Shifts in regional sourcing are consequential to global transportation. When manufacturing of products moves from one region of the world to another, there are implications to the global transportation industry. Countries with low labor costs are attractive to manufacturers yearning to reduce their costs of production. Movement of manufacturers away from their home countries to set up manufacturing plants in distant regions may complicate supply chains and cause delays in delivery schedules. On the other hand, conditions in the global economy may render the low labor costs in the foreign countries ineffective. For instance, high fuel prices may increase the cost of transportation to levels that cannot be offset by lower labor costs being sought in the distant regions. This may initiate a reverse process where manufacturers may favor short distances from their home countries, which helps to reduce transportation costs. Such shifts may either increase or decrease the cost and complexity of the supply chain in the global transportation industry. Transport managers should be proactive in their planning by effectively predicting such shifts before they happen. Such predictions ensure timely negotiations and contracts with carriers, which can cater for the shifts and changes in logistics.
Economic meltdowns cause businesses to adopt new strategies for survival purposes. One such strategy is consolidation. Carriers consolidate during such harsh economic times to maximize their performance by taking advantage of economies of scale. When they consolidate, they reduce the number of players within the industry, which may influence the consolidated carriers to hike their rates. Planning by the transport managers can help identify the stable carriers within the industry (Kristiansen, 2005). Such carriers are unlikely to consolidate or become infeasible. Planning on engaging the most stable carriers can help in securing a smooth flow of cargo, despite the harsh economic conditions. Therefore, constant planning helps traders involved in the global transport industry to evaluate their business environments and adjust their tactics accordingly.
Planning and Logistical Issues
Proper planning equips the transport manager with the required knowledge and information that are vital to the success of the transport operation. The logistical issues that are crucial to the transportation process are found within distribution channels, communication channels and transaction channels.
The distribution channels define the route through which cargo takes from the country of origin to the destination. The global distribution channel can be very complex especially because the cargo may pass through several ports or intermediary destinations before reaching its final destination. Such physical complexities may delay the delivery of the cargo and needs to be planned for prior to the operation. Apart from the physical complexities, there are other issues such as government regulations, service options and infrastructural designs that may vary across countries. These complexities pose challenges to the actual operation and reduce the efficiency of the supply chain. Due to the large distance covered by the cargo, there may be several stoppages, lack of freight control and lack of visibility. Such problems may paralyze the operations within a distribution channel. Within the distribution channel, several aspects such as route mode and carrier choice are critical and must be planned for adequately. Planning helps the transport manger to make the supply chain efficient though a smooth flow of cargo from the country of origin to the destination. Planning enables the manager to match the freight with the right mode and carrier, which maximize on cost, efficiency and reduce risk of theft and damages. Prior planning enables the transport manager to search for the carriers with increased capabilities in terms of security and tracking systems. Such carriers have increased tracking capabilities that have been created due to the availability of various supply chain management software. Although such carriers may be expensive, the enhanced capabilities increase their security efficiency to desirable levels, notwithstanding the high costs. From these aspects of the distribution channel, it is clear that planning plays a vital role in managing various aspects within the channel.
The communication channel in the global transportation system is involved with sharing of information among carriers and intermediaries across borders. This sharing of information is critical in maintaining freight visibility and control. Moreover, it provides the transport manager with easy control of the cargo as it passes international borders to its destination. Planning enlightens the transport manager on the important documentation required for a smooth flow of cargo. Documentation is crucial and its absence may curtail flawless movement of goods across international borders. Planning also helps the manager to research on the best software system to manage the supply chain. Consequently, the manager is able to choose the right carrier with the required capability to manage the movement of the cargo and enhance its visibility and control.
The transaction channel involves the payment and the preparation of goods for transportation purposes. The activities within the transaction channels are crucial to both the importer and the exporter. The negotiations involved determines the responsibility for carrying out various tasks such as paying for custom duties, transport fees and who is responsible for complying with government regulations. Planning on when to negotiate prevents possible hiccups that may occur during the cargo transportation. The planning clearly defines the responsibilities of both the importer and exporter, eliminating speculations on who is responsible for carrying various activities (Novack and Bardi, 2011). Such speculation may lead to delays at entry points and may inconvenience the cargo’s end users who may have to wait for longer than expected. Timely planning, therefore, ensures that the roles are defined and responsibilities are executed at the right time.
Planning is a critical element in the global transportation system because it helps in dealing with various issues proactively. Planning helps in the selection of transport carriers, modes and routes to be taken by the carriers. Such selection determines the supply chain efficiency and quality of service provided. Moreover, planning helps in anticipating challenges that may face the transportation system and deciding how to mitigate them. Finally, planning helps in streamlining logistical activities involved in the distribution channel, communication channel and transaction channel that may hinder a smooth flow of the cargo being transported.