Clearing And Forwarding

JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY.

NAME: ISAAC SIMIYU WEPUKHULU
REG. NO: HD211-C008-0005/2013 :DAVID MUSASULA KIMUNGUYI
REG. NO: HD211-C008-0283/2011RA
UNIT: CLEARING AND FORWARDING
SCHOOL OF HUMAN RESOURCE DEVELOPMENT.
COURSE: BACHELOR OF PURCHASING AND SUPPLIES MANAGEMENT.
YEAR OF STUDY:THIRD YEAR

Diversity of Modes Transport modes are the means by which people and freight achieve mobility. They fall into one of three basic types, depending on over what surface they travel – land (road, rail and pipelines), water (shipping), and air. Each mode is characterized by a set of technical, operational and commercial characteristics:
Road transportation. Road infrastructures are large consumers of space with the lowest level of physical constraints among transportation modes. However, physiographical constraints are significant in road construction with substantial additional costs to overcome features such as rivers or rugged terrain. While historically road transportation was developed to support non-motorized forms of transportation (walking, domestication of animals and cycling at the end of the 19th century), it is motorization that has shaped the most its development since the beginning of the 20th century. Road transportation has an average operational flexibility as vehicles can serve several purposes but are rarely able to move outside roads. Road transport systems have high maintenance costs, both for the vehicles and infrastructures. They are mainly linked to light industries where rapid movements of freight in small batches are the norm. Yet, with containerization, road transportation has become a crucial link in freight distribution.
Rail transportation). Railways are composed of a traced path on which wheeled vehicles are bound. In light of more recent technological developments, rail transportation also include monorails and maglev. They have an average level of physical constrains linked to the types of locomotives and a low gradient is required, particularly for freight. Heavy industries are traditionally linked with rail transport systems, although containerization has improved the flexibility of rail transportation by linking it with road and maritime modes. Rail is by far the land transportation mode offering the highest capacity with a 23,000 tons fully loaded coal unit train being the heaviest load ever carried. Gauges, however, vary around the world, often challenging the integration of rail systems.
Pipelines). Pipeline routes are practically unlimited as they can be laid on land or under water. The longest gas pipeline links Alberta to Sarnia (Canada), which is 2,911 km in length. The longest oil pipeline is the Transiberian, extending over 9,344 km from the Russian arctic oilfields in eastern Siberia to Western Europe. Physical constraints are low and include the landscape and pergelisol in arctic or subarctic environments. Pipeline construction costs vary according to the diameter and increase proportionally with the distance and with the viscosity of fluids (from gas, low viscosity, to oil, high viscosity). The Trans Alaskan pipeline, which is 1,300 km long, was built under difficult conditions and has to be above ground for most of its path. Pipeline terminals are very important since they correspond to refineries and harbors.
Maritime transportation). Because of the physical properties of water conferring buoyancy and limited friction, maritime transportation is the most effective mode to move large quantities of cargo over long distances. Main maritime routes are composed of oceans, coasts, seas, lakes, rivers and channels. However, due to the location of economic activities maritime circulation takes place on specific parts of the maritime space, particularly over the North Atlantic and the North Pacific. The construction of channels, locks and dredging are attempts to facilitate maritime circulation by reducing discontinuity. Comprehensive inland waterway systems include Western Europe, the Volga / Don system, St. Lawrence / Great Lakes system, the Mississippi and its tributaries, the Amazon, the Panama / Paraguay and the interior of China. Maritime transportation has high terminal costs, since port infrastructures are among the most expensive to build, maintain and improve. High inventory costs also characterize maritime transportation. More than any other mode, maritime transportation is linked to heavy industries, such as steel and petrochemical facilities adjacent to port sites.
Air transportation Air routes are practically unlimited, but they are denser over the North Atlantic, inside North America and Europe and over the North Pacific. Air transport constraints are multidimensional and include the site (a commercial plane needs about 3,300 meters of runway for landing and take off), the climate, fog and aerial currents. Air activities are linked to the tertiary and quaternary sectors, notably finance and tourism, which lean on the long distance mobility of people. More recently, air transportation has been accommodating growing quantities of high value freight and is playing a growing role in global logistics.
Intermodal transportation Concerns a variety of modes used in combination so that the respective advantages of each mode are better exploited. Although intermodal transportation applies for passenger movements, such as the usage of the different, but interconnected modes of a public transit system, it is over freight transportation that the most significant impacts have been observed. Containerization has been a powerful vector of intermodal integration, enabling maritime and land transportation modes to more effectively interconnect.
Telecommunications. Cover a grey area in terms of if they can be considered as a transport mode since unlike true transportation, telecommunications often does not have a physicality. Yet, they are structured as networks with a practically unlimited capacity with very low constraints, which may include the physiography and oceanic masses that may impair the setting of cables. They provide for the instantaneous movement of information (speed of light in theory). Wave transmissions, because of their limited coverage, often require substations, such as for cellular phone networks. Satellites are often using a geostationary orbit which is getting crowded. High network costs and low distribution costs characterize many telecommunication networks, which are linked to the tertiary and quaternary sectors (stock markets, business to business information networks, etc.). Telecommunications can provide a substitution for personal movements in some economic sectors.
ECONOMIC IMPORTANCE OF TRANSPORT
Mobility is one of the most fundamental and important characteristics of economic activity as it satisfies the basic need of going from one location to the other, a need shared by passengers, freight and information. All economies and regions do not share the same level of mobility as most are in a different stage in their mobility transition towards motorized forms of transport. Economies that possess greater mobility are often those with better opportunities to develop than those with scarce mobility. Reduced mobility impedes development while greater mobility is a catalyst for development. Mobility is thus a reliable indicator of development. Providing mobility is an industry that offers services to its customers, employs people and disburses wages, invests capital, generates income and provides taxation revenue. The economic importance of the transportation industry can thus be assessed from a macroeconomic and microeconomic perspective:
At the macroeconomic level (the importance of transportation for a whole economy), transportation and the mobility it confers are linked to a level of output, employment and income within a national economy. In many developed countries, transportation accounts between 6% and 12% of the GDP.
At the microeconomic level (the importance of transportation for specific parts of the economy) transportation is linked to producer, consumer and production costs. The importance of specific transport activities and infrastructure can thus be assessed for each sector of the economy. Transportation accounts on average between 10% and 15% of household expenditures while it accounts around 4% of the costs of each unit of output in manufacturing, but this figure varies greatly according to sub sectors.
. Thus, from a general standpoint the economic impacts of transportation can be direct, indirect and induced:
Direct impacts. The outcome of improved capacity and efficiency where transport provides employment, added value, larger markets as well as time and costs improvements.
Indirect impacts. The outcome of improved accessibility and economies of scale. Indirect value-added and jobs are the result of local purchases by companies directly dependent upon transport activity. Transport activities are responsible for a wide range of indirect value-added and employment effects, through the linkages of transport with other economic sectors (e.g. office supply firms, equipment and parts suppliers, maintenance and repair services, insurance companies, consulting and other business services).
Induced impacts. The outcome of the economic multiplier effects where the price of commodities, goods or services drop and/or their variety increases. For instance, the steel industry requires cost efficient import of iron ore and coal for the blast furnaces and export activities for finished products such as steel booms and coils. Manufacturers and retail outlets and distribution centers handling imported containerized cargo rely on efficient transport and seaport operations.
Transportation links together the factors of production in a complex web of relationships between producers and consumers. The outcome is commonly a more efficient division of production by an exploitation of geographical comparative advantages, as well as the means to develop economies of scale and scope. The productivity of space, capital and labor is thus enhanced with the efficiency of distribution and personal mobility. Economic growth is increasingly linked with transport developments, namely infrastructures, but also with managerial expertise, which is crucial for logistics. Thus, although transportation is an infrastructure intensive activity, hard assets must be supported by an array of soft assets, namely management and information systems. Decisions have to be made about how to use and operate transportation systems in a manner that optimize benefits and minimize costs and inconvenience. 2. Transportation and Economic Opportunities Transportation developments that have taken place since the beginning of the industrial revolution have been linked to growing economic opportunities. At each stage of human societal development, a particular transport technology has been developed or adapted with an array of impacts. Five major waves of economic development where a specific transport technology created new economic, market and social opportunities can be suggested:
Seaports. Linked with the early stages of European expansion from the 16th to the 18th centuries, commonly known as the age of exploration. They supported the early development of international trade through colonial empires, but were constrained by limited inland access.
Rivers and canals. The first stage of the industrial revolution in the late 18th and early 19th centuries was linked with the development of canal systems in Western Europe and North America, mainly to transport heavy goods. This permitted the development of rudimentary and constrained inland distribution systems.
Railways. The second stage of industrial revolution in the 19th century was linked with the development and implementation of rail systems enabling more flexible and high capacity inland transportation systems. This opened up substantial economic and social opportunities through the extraction of resources, the settlement of regions and the growing mobility of freight and passengers.
Roads. The 20th century saw the rapid development of comprehensive road transportation systems, such as national highway systems, and of automobile manufacturing as a major economic sector. Individual transportation became widely available to mid income social classes, particularly after the Second World War. This was associated with significant economic opportunities to service industrial and commercial markets with reliable door-to-door deliveries. The automobile also permitted new forms of social opportunities, particularly with suburbanization.
Airways and information technologies. The second half of the 20th century saw the development of global air and telecommunication networks in conjunction with economic globalization. New organizational and managerial forms became possible, especially in the rapidly developing realm of logistics and supply chain management. Although maritime transportation is the physical lynchpin of globalization, air transportation and IT support the accelerated mobility of passengers, specialized cargoes and their associated information flows.
The most common reasons for the declining marginal returns of transport investments are:
High accumultation of existing infrastructure. In a context of high level of accessibility and transportation networks that are already extensive, further investments usually result in marginal improvements. This means that the economic impacts of transport investments tend to be significant when infrastructures were previously lacking and tend to be marginal when an extensive network is already present. Additional investments can thus have limited impact outside convenience.
Economic changes. As economies develop, their function tends to shift from the primary (resource extraction) and secondary (manufacturing) sectors towards advanced manufacturing, distribution and services. These sectors rely on different transport systems and capabilities. While an economy depending on manufacturing will rely on road, rail and port infrastructures, a service economy is more oriented towards the efficiency of logistics and urban transportation. In all cases transport infrastructure are important, but their relative importance in supporting the economy may shift.
Clustering. Due to clustering and agglomeration, several locations develop advantages that cannot be readily reversed through improvements in accessibility. Transportation can be a factor of concentration and dispersion depending on the context. Less accessible regions thus do not necessarily benefit from transport investments if they are embedded in a system of unequal relations.
Therefore, each transport development project must be considered independently and contextually. Since transport infrastructures are capital intensive fixed assets, they are particularly vulnerable to misallocations and malinvestments.
Transportation provides market accessibility by linking producers and consumers so that transactions can take place. A common fallacy in assessing the importance and impact of transportation on the economy is to focus only on transportation costs, which tend to be relatively low; in the range of 5 to 10% of the value of a good. Transportation is an economic factor of production of goods and services, implying that it is fundamental in their generation, even if it accounts for a small share of input costs. This implies that irrespective of the cost, an activity cannot take place without the transportation factor. Thus, relatively small changes in transport cost, capacity and performance can have substantial impacts on dependent economic activities. An efficient transport system with modern infrastructures favors many economic changes, most of them positive. The major impacts of transport on economic factors can be categorized as follows:
Geographic specialization. Improvements in transportation and communication favor a process of geographical specialization that increases productivity and spatial interactions. An economic entity tends to produce goods and services with the most appropriate combination of capital, labor, and raw materials. A region will thus tend to specialize in the production of goods and services for which it has the greatest advantages (or the least disadvantages) compared to other regions as long as appropriate transport is available for trade. Through geographic specialization supported by efficient transportation, economic productivity is promoted. This process is known in economic theory as comparative advantages.
Large scale production. An efficient transport system offering cost, time and reliability advantages enables goods to be transported over longer distances. This facilitates mass production through economies of scale because larger markets can be accessed. The concept of “just-in-time” in supply chain management has further expanded the productivity of production and distribution with benefits such as lower inventory levels and better responses to shifting market conditions. Thus, the more efficient transportation becomes, the larger the markets that can be serviced and the larger the scale of production. This results in lower unit costs.
Increased competition. When transport is efficient, the potential market for a given product (or service) increases, and so does competition. A wider array of goods and services becomes available to consumers through competition which tends to reduce costs and promote quality and innovation. Globalization has clearly been associated with a competitive environment that spans the world and enables consumers to have access to a wider range of goods and services.
Increased land value. Land which is adjacent or serviced by good transport services generally has greater value due to the utility it confers to many activities. Consumers can have access to a wider range of services and retail goods while residents can have better accessibility to employment, services, and social networks, all of which transcribes in higher land value. In some cases, transportation activities can lower land value, particularly for residential activities. Land located near airports and highways, near noise and pollution sources, will thus be impacted by corresponding diminishing land value.
Transport also contributes to economic development through job creation and its derived economic activities. Accordingly, a large number of direct (freighters, managers, shippers) and indirect (insurance, finance, packaging, handling, travel agencies, transit operators) employment are associated with transport. Producers and consumers take economic decisions on products, markets, costs, location, prices which are themselves based on transport services, their availability, costs and capacity.