Transportation in logisticsThe materials have been purchased, received, stored and picked. Now they need to reach the people who will use them. Transportation physically moves materials between points in the supply chain (supplier, factory, distribution center, store, customer) and is often a company's largest logistics expense. It cannot be planned in isolation: every transportation decision affects the other areas covered in this series.Inventory. Slower or less reliable transportation increases lead time and its variability, raising the need for safety stock (see the lesson on lead time and safety stock). Goods in transit are also inventory: they have been paid for but cannot yet be used.Shipment size. High-capacity modes (rail, ship) are cost-effective only with large shipments, which increase average inventory at the destination. It is the same trade-off covered in the lesson on economic order quantity, now with freight costs included.Warehousing. Consolidating shipments at a distribution center lowers freight costs (see the lesson on distribution centers).Purchasing. Who pays for and arranges freight is part of the negotiation. In Brazil, CIF means the sender pays for freight (delivery is included in the price), while FOB means the recipient collects the goods or arranges transportation. In international trade, these terms are Incoterms, which define more precisely where costs and risks transfer.Customer service. Delivery times, punctuality and damage-free arrivals are the parts of logistics the customer sees.The five modes of transportationA transportation mode is defined by the route or medium it uses. There are five:ModeStrengthsWeaknessesTypical cargoRoadDoor-to-door service, flexibility, speed over short and medium distances, handles shipments of any sizeHigh cost per ton over long distances, more accidents, cargo theft and emissions per tonAlmost anything: consumer goods, food, less-than-truckload freight, urban deliveriesRailHigh capacity, low cost per ton over long distancesLimited network, little flexibility, requires transfers at either endOre, grain, meal, fuel, containersWater (ocean shipping, coastal shipping and inland waterways)Enormous capacity, lowest cost per ton-kmSlow, depends on ports and water depth, less frequent serviceBulk cargo, containers, fuel; coastal shipping runs between ports in the same countryPipelineContinuous flow, extremely low operating cost, little exposure to weatherHigh upfront investment, limited to liquids, gases and some suspended solids, fixed routeOil and petroleum products, natural gas, ethanol, ore slurryAirFastest over long distances, low damage ratesMost expensive, limited capacity, weight and volume restrictionsUrgent, high-value or perishable cargo: electronics, medicines, critical parts, parcelsRoad transport dominates in Brazil, partly because of the country's infrastructure. According to the CNT Statistical Bulletin of May 2026, the road network spans about 1,72 million km, of which only 12,6% is paved, while the rail network spans 31.389 km. The next lesson covers each mode's share of freight transport and policies aimed at changing that mix.A factory needs to ship 50.000 tons of ore each month from a mine to a port 800 km away along a fixed route. Which mode is likely to have the lowest cost per ton?Answer: Rail, because it combines high capacity with a low cost per ton over long distances on a fixed route — heavy bulk cargo, high volumes, long distances and a consistent route are a classic fit for rail. A truck's flexibility offers no advantage on a fixed route.Service qualityWhen comparing transportation modes and carriers, freight rates are only part of the picture. Service quality is measured by:Door-to-door transit time, including pickup, transfers and delivery, not just time spent traveling.Reliability, or how much transit time varies. A service that consistently takes 6 days is often worth more than one that averages 4 days but takes anywhere from 2 to 9, because that variability requires safety stock.Loss and damage, including cargo theft, a significant risk in Brazilian road transport.Availability and frequency: is service available on that route? How many departures are there each week?Flexibility for special cargo, last-minute changes and delivery windows.Tracking: knowing where the cargo is and receiving notice of delays.Carrier A delivers in 4 days on average, but delivery times range from 2 to 9 days. Carrier B always delivers in 6 days. Both charge the same freight rate. Which is likely to be better for planning the customer's inventory, and why?Answer: B, because less variability in delivery times means less safety stock is needed — safety stock protects against variability in lead time, not its average. With A, the customer must plan for deliveries that take up to 9 days.Costs by modeAll transportation has fixed costs that exist even when no cargo is carried (infrastructure, terminals, vehicles, administration) and variable costs that rise with distance and weight (fuel, maintenance, tolls, crews). Each mode has a typical cost structure:ModeFixed costVariable costRoadLow (roads are public; vehicles are relatively inexpensive)Medium to highRailHigh (tracks, terminals, rolling stock)LowWaterMedium (vessels and port terminals)Very lowPipelineVery high (pipeline construction)LowestAirMedium (aircraft; airports are generally public)Very high (fuel, crew)This cost structure gives rise to two principles:Economies of scale: cost per ton falls as shipment size grows because the fixed cost of each trip (loading, unloading, paperwork) is spread across more tons. That is why less-than-truckload freight costs more per kilogram than a full truckload.Economies of distance: cost per kilometer falls as distance increases because fixed terminal costs are spread over a longer journey. Modes with high fixed costs (rail, ship) become cheaper than trucks only beyond a certain distance.Actual weight and dimensional weightA truck or plane can run out of space before reaching its weight limit: pillows fill a cargo compartment without weighing much. Freight is therefore charged on the higher of actual weight and dimensional weight (volume × dimensional-weight factor). Brazilian road freight commonly uses 300 kg per m³; for air freight, the IATA standard is 6.000 cm³ per kg, or about 167 kg per m³.For example, consider a 2 m³ shipment weighing 400 kg. By road, its dimensional weight is 2 × 300 = 600 kg, higher than its actual weight, so the charge is based on 600 kg. By air, its dimensional weight is 2 × 167 = 333 kg, lower than its actual weight, so the charge is based on 400 kg.Road freight also has a price floor: the National Policy on Minimum Road Freight Rates (Law 13.703/2018) requires ANTT to publish minimum rates per kilometer and per axle according to cargo type. Freight is documented with a CT-e (electronic transport document), and a trip's invoices are consolidated in an MDF-e.A 1,5 m³ shipment weighs 350 kg. Using a factor of 300 kg per m³, what weight will be used to charge for road freight?Answer: 450 kg — the dimensional weight is 1,5 × 300 = 450 kg, higher than the actual weight of 350 kg, and the higher figure is used. The 250 kg figure would be the air-freight dimensional weight (1,5 × 167), which does not apply here.How to choose a transportation modeThe right transportation service depends on the cargo (weight, volume, value, perishability, hazardous properties), the route (distance and access to rail, ports or pipelines), shipment volume and regularity, and the level of service the customer requires. The most common mistake, though, is to compare freight rates alone. The better measure is total cost: freight plus the inventory costs each mode creates.Inventory in transit: annual demand × value per unit × annual inventory carrying cost rate × (transit days ÷ 365).Inventory at the destination: half the shipment size × value × annual carrying cost rate. High-capacity modes ship larger lots, leaving more inventory at the destination.Worked exampleA company ships 12.000 t of a product each year between two cities connected by road, rail and coastal shipping. Its annual inventory carrying cost rate is 20%. The figures are illustrative:ModeFreight (R$/t)Door-to-door transit (days)Shipment size (t)Road420530Rail26012600Coastal shipping230151.500For a product worth R$ 5.000 per ton:ModeFreightInventory in transitInventory at the destinationTotalRoad12.000 × 420 = 5.040.00012.000 × 5.000 × 0,20 × 5/365 = 164.38415 × 5.000 × 0,20 = 15.0005.219.384Rail3.120.000394.521300.0003.814.521Coastal shipping2.760.000493.151750.0004.003.151Coastal shipping has the lowest freight rate, but rail has the lowest total cost: coastal shipping takes longer and moves such large shipments that the cost of holding inventory wipes out the freight savings. What if the product were worth R$ 50.000 per ton (ten times as much)? Inventory costs would increase tenfold, reversing the result: road R$ 6,83 million, rail R$ 10,07 million, coastal shipping R$ 15,19 million. For expensive goods, speed and smaller shipments matter more than cheap freight.Annual total cost by mode: rail wins for a lower-value product; trucks win for a higher-value productIn the example, why isn't coastal shipping, with the lowest freight rate, the best choice for the product worth R$ 5.000 per ton?Answer: Because longer transit and larger shipments create inventory costs that outweigh the freight savings — coastal shipping saves R$ 360 thousand in freight compared with rail, but costs R$ 98,6 thousand more for inventory in transit and R$ 450 thousand more for inventory at the destination. The 20% rate applies to every mode.Key pointsTransportation affects inventory (lead time, goods in transit, shipment size), warehousing, purchasing (CIF or FOB) and customer service.The five modes are road, rail, water, pipeline and air, each with its own capacity, speed, cost and flexibility profile.Service quality covers door-to-door transit time, reliability, damage, availability, flexibility and tracking.Road transport has low fixed costs and high variable costs; rail, ships and pipelines have the opposite profile. This drives economies of scale and distance.Freight is charged on the higher of actual weight and dimensional weight.Choose based on total cost: freight + inventory in transit + inventory at the destination.ExercisesEasy1) A 4 m³ shipment weighs 900 kg. Using 300 kg per m³, what weight will be used to charge for road freight?2) A box measuring 60 × 50 × 40 cm weighs 10 kg. Under the IATA air-freight standard (6.000 cm³ per kg), what weight will be used to charge for it?3) In a sale with CIF freight terms, who pays for transportation? What about FOB freight terms?4) A company transports 6.000 t per year of a product worth R$ 2.000 per ton. Transit takes 10 days, and the annual inventory carrying cost rate is 18%. What is the annual cost of inventory in transit?5) Identify the most suitable mode for each shipment and explain why:a) ethanol moving continuously from a production region to a terminal;b) high-value medicines requiring urgent delivery over 2.500 km;c) deliveries of consumer goods to supermarkets across a city.Hard6) A company ships 8.000 t per year of a product worth R$ 8.000 per ton, with an annual inventory carrying cost rate of 20%. Compare the annual total costs:ModeFreight (R$/t)Door-to-door transit (days)Shipment size (t)Road380425Rail250105007) Return to the worked example from the lesson (12.000 t per year, a 20% carrying rate, road freight at R$ 420/t with a 5-day transit time and 30 t shipment size; rail freight at R$ 260/t with a 12-day transit time and 600 t shipment size). Above what value per tonne does road freight have a lower total cost than rail freight?8) Two shipments are going out: pillows (3 m³, 240 kg) and tools (0,5 m³, 400 kg). For each, calculate the billable weight for road freight (300 kg/m³) and air freight (6.000 cm³ per kg). What do the results show about which type of cargo is most affected by dimensional weight?9) A truck trip has a fixed cost of R$ 1.200 (loading, unloading and paperwork), plus R$ 4,50 per km. The truck can carry up to 30 t.a) For a 500 km trip, what is the cost per tonne with a full truck (30 t) and with only 10 t?b) With a full truck, what is the cost per tonne·km for a 100 km trip and a 1.000 km trip?c) Which economies do parts a and b illustrate?10) Demand for an item is steady at 100 units per day. Carrier A has an average lead time of 4 days with a standard deviation of 2 days; carrier B averages 6 days with a standard deviation of 0,5 day. The company uses z = 1,65 and, because only lead time varies, safety stock = z × d × σLT (see the lesson on lead time and safety stock).a) Calculate the safety stock and reorder point for each carrier.b) Which carrier requires the lower reorder point? Does that go against the intuition that the faster carrier is better?Answer Key1) Dimensional weight = 4 × 300 = 1.200 kg, more than the actual weight of 900 kg. The billable weight is 1.200 kg.2) Volume = 60 × 50 × 40 = 120.000 cm³. Dimensional weight = 120.000 ÷ 6.000 = 20 kg, more than the actual weight of 10 kg. The billable weight is 20 kg.3) CIF: the sender (seller) arranges and pays for shipping; delivery is already included in the price. FOB: the recipient (buyer) pays, either collecting the goods or arranging transport.4) 6.000 × 2.000 × 0,18 × 10 ÷ 365 = 2.160.000 × 10 ÷ 365 ≈ R$ 59.178 per year.5) a) Pipeline: a continuous flow of liquid along a fixed route, with very low operating costs (if a pipeline is available; otherwise, rail or water transport).b) Air: fast over long distances and less prone to damage; high freight costs matter less given the cargo's value and urgency.c) Road: door-to-door service, flexibility and suitability for small shipments and short distances.6) Road: freight 8.000 × 380 = R$ 3.040.000; in-transit inventory 8.000 × 8.000 × 0,20 × 4 ÷ 365 = R$ 140.274; inventory at destination (25 ÷ 2) × 8.000 × 0,20 = R$ 20.000; total R$ 3.200.274.Rail: freight 8.000 × 250 = R$ 2.000.000; in-transit inventory 8.000 × 8.000 × 0,20 × 10 ÷ 365 = R$ 350.685; inventory at destination (500 ÷ 2) × 8.000 × 0,20 = R$ 400.000; total R$ 2.750.685.Rail is cheaper by about R$ 449.589 per year.7) Let V be the value per tonne.Road: 12.000 × 420 + V × (12.000 × 0,20 × 5 ÷ 365 + 15 × 0,20) = 5.040.000 + V × (32,88 + 3) = 5.040.000 + 35,88 × V.Rail: 12.000 × 260 + V × (12.000 × 0,20 × 12 ÷ 365 + 300 × 0,20) = 3.120.000 + V × (78,90 + 60) = 3.120.000 + 138,90 × V.Setting them equal: (138,90 − 35,88) × V = 5.040.000 − 3.120.000, or 103,03 × V = 1.920.000, so V ≈ R$ 18.636 per tonne. Above that, road freight is cheaper (and by then it also beats coastal shipping, which is the cheapest option only below about R$ 3.281 per tonne).8) Pillows: road dimensional weight 3 × 300 = 900 kg, so the billable weight is 900 kg; air dimensional weight 3.000.000 cm³ ÷ 6.000 = 500 kg, so the billable weight is 500 kg. Tools: road dimensional weight 0,5 × 300 = 150 kg, so the billable weight is the actual 400 kg; air dimensional weight 500.000 ÷ 6.000 = 83,3 kg, so the billable weight is the actual 400 kg. Dimensional weight hits light, bulky cargo (low-density cargo) hardest: the pillows are billed at nearly 4 times their actual weight by road, while the dense tools are billed at their actual weight.9) a) Trip cost = 1.200 + 4,50 × 500 = R$ 3.450. Full truck: 3.450 ÷ 30 = R$ 115 per t. With 10 t: 3.450 ÷ 10 = R$ 345 per t.b) 100 km: (1.200 + 450) ÷ 30 = R$ 55 per t, or 55 ÷ 100 = R$ 0,55 per t·km. 1.000 km: (1.200 + 4.500) ÷ 30 = R$ 190 per t, or R$ 0,19 per t·km.c) Part a shows economies of scale (the fixed cost is spread over more tonnes); part b shows economies of distance (the fixed cost is spread over more kilometres).10) a) A: safety stock = 1,65 × 100 × 2 = 330 units; reorder point = 100 × 4 + 330 = 730.B: safety stock = 1,65 × 100 × 0,5 = 82,5 units; reorder point = 100 × 6 + 82,5 = 682,5.b) B requires the lower reorder point despite taking 2 days longer on average. There is no paradox: safety stock covers variations in lead time, and A's variation is four times greater. Speed without reliability means holding more inventory.
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