Transportation has to do with the movement of products from a source such as a plant, factory, or workshop to a destination such as a warehouse, customer, or retail store. Transportation may take place via air, water, rail, road, pipeline, or cable routes, using planes, boats, trains, trucks, and telecommunications equipment as the means of transportation. The goal for any business owner is to minimize transportation costs while also meeting the demand for products. Transportation costs generally depend upon the distance between the source and the destination, the means of transportation chosen, the size and quantity of the product to be convey. In many cases, there are several sources and different destinations for the same product, which adds a significant level of complexity to the problem of minimizing transportation costs.
IMPORTANCE OF TRANSPORTATION IN MARKETING
The importance of transportation may include:
- Availability of raw materials: Transportation helps in conveying the raw materials from one place to another. Raw materials are generated at one place before they are transported to another place where they are processed or used to manufacture goods.
- Availability of goods to the customer: The goods are transported from one place to another. These goods which are produced at one place are transported to other distant places for their usage. Transportation make it easy to move the goods from one place to another.
- Transportation helps in mass production: Whether it is to purchase and bring raw materials or to distribute finished goods, a means of transportation is necessary. This expands old markets and creates new ones. As a result, the demands for goods increases and production should also be increased. The contribution of transportation is very important to move commodities to all the nooks and crannies of the world. If the development of transportation was not made, market would be limited to local areas and production would be restricted to meeting local needs only. As a result, the economy of each country would remain undeveloped.
- The Physical Supply of Products: Transportation moves the necessary raw materials to factories where the production of goods take place. And the supply of finished goods to the consumers. It easily moves finished goods to the final consumers. This significantly increases aggregate sales of goods. In fact, transportation is such a key integral part of marketing, which helps in carrying goods to the various consumers in different places. This narrows the gap between the producers and the consumers and facilitates distribution of the goods to the consumers at a minimum cost and limited time.
- Specialization: Transportation encourages division of labour and specialization on geographical or regional basis. Transportation cost highly affects localization of industries. Production of goods may be centered at such a place where the environment is the best and production cost is minimum. This makes maximum utilization of local resources possible, which is both economically and socially necessary.
- Mobility of Labour and Capital: Transportation facilities provide mobility of labour and capital. If more labour force is available at any place, transport helps to carry it to the necessary place. This means of transportation carries labours from one place to another. This encourages labour and capital to be used and invested in more productive sectors.
- Stabilization in Price: Transportation helps to bring stability in the prices of different products. It moves goods from one place to another area.This establishes coordination between demand and supply, and brings stability in prices. It helps to supply the necessary goods regularly to the consumers. Besides this, consumers get necessary goods at lower prices, because it encourages competition among producers and makes mass production at lower cost possible.
MAJOR MODES OF TRANSPORTATION
There are five basic means of transporting products used by manufacturers and distributors. There are: air, motor carrier, train, marine, or pipeline. Many distribution networks consist of a combination of these means of transportation. For example, oil may be pumped through a pipeline to a waiting ship for onward movement to a refinery, and from there it is transferred to trucks that transport gasoline to retailers or to the final consumers. All of these transportation choices have advantages and disadvantages. Some of these modes of transportation are explained below:
- Air transport: Air transportation offers the advantage of speed and can be used for long-distance transport. However, air is also the most expensive means of transportation. It is generally used only for smaller items of relatively high value such as electronic equipment and items for which the speed of arrival is important such as perishable goods. Another disadvantage associated with air transportation is its lack of accessibility; since a plane cannot ordinarily be pulled up to a loading dock, it is necessary to bring products to and fro the airport by truck.
- Rail transportation: This is typically used for long distances. It is less expensive compare to air transportation, it offers about the same delivery speed as trucks over long distances and exceeds transport speeds via waterways. In fact, deregulation and the introduction of freight cars with larger carrying capacities has enabled rail carriers to make inroads in several areas previously dominated by motor carriers. But access to the network remains a problem for many businesses.
- Motor carriers: Accessible and ideally suited for transporting goods over short distances, trucks are the dominant means of moving around the world. In fact, motor carriers account for approximately $120 billion about N190 billion in annual revenue, much of it due to local movement of goods (movement to and fro business enterprises in the same community or local region).
- Water transportation: Water transportation is the least expensive and slowest mode of freight transport. It is generally used to transport heavy products over long distances when speed is not an issue. Although accessibility is a problem with ships because they are necessarily limited to coastal areas or major inland waterways, piggybacking that is, using trucks to support is possible using either trucks or rail cars. However, industry observers note that port terminal accessibility to land-based modes of transportations is lacking in many regions. The main advantage of water transportation is that it can move products all over the world.
- Pipeline: Pipelines are generally used to transport oil, natural gas, and chemicals. Two-thirds of petroleum products are transported by pipeline, including heating oil, diesel, jet fuel, and kerosene. Pipelines are costly to build, but once they are constructed, they can transport products cheaply.
FACTORS AFFECTING THE CHOICE OF TRANSPORTATION
- Nature of goods: If you are transporting bulky goods, you will have to tailor your strategy accordingly. It is quite difficult to transport vehicles, heavy plant or machinery by air. Therefore consideration should be given to heaviness, bulkiness or lightness of goods. It is also important to know that quick delivery is necessary for perishable goods.
- Speed: Some types of product, such as perishable goods, need to reach the customer quickly; in such circumstances, a quick plane journey may be preferable to a long sea voyage. Think about the type of goods you are transporting before you decide how to send them.
- Handling: Sometimes goods are rough handled while transporting them, for example, products transported by ship may be hauled on board the vessel in a net or sling, stacked beneath dozens of other goods, and subjected to moisture condensation. Before you select a particular mode of transport, you need to be sure your product can withstand it.
- Cost: Cost is one of the most important factor that determine the selling price of a product. As you considered your products, you need to considered your profits as well. If you cannot afford to transport your goods by air, then don’t bother doing it; try transporting them by road or ship instead.
- Local conditions: Take a look at the country you are transporting the goods to and observe if there are risks and weaknesses in its transport infrastructure. If the local ports have bad reputation, or the road network is not up to date, you will need to tailor your strategy accordingly.
- Availability: Some mode of transport are not available in some areas.
MAIN DOCUMENTS USED IN TRANSPORT
1) Bill of lading: The bill of lading is the most important export document whenever goods are sent by ship. It is issued by the shipping company. The key information in a bill of lading are:
- The name of the shipping company.
- The name of the shipper (beneficiary) or his agent.
- The name of the carrying vessel.
- The names of the ports of shipment and discharge.
- The identification (shipping) marks and numbers.
- The number of containers, cases, packages or individual items.
- A description of the goods in general terms consistent with the description of the goods in the letter of credit.
- Evidence that the goods have been received for shipment or shipped (loaded) on board and its date.
- The name of the consignee (if not made out ‘to order’) and also the name and address of the ‘notify party’ wherever applicable.
- Whether freight has been prepaid or payable at destination.
- The number of originals issued (A bill of lading is normally issued in a set of three originals; anyone of which may be used to take delivery and possession of goods. It is important that the consignee must secure all the originals.)
- The date of issuance and the signature of the ship’s master or the carrier or his agent.
Bills of lading are normally issued in a ‘set’ of two or more transferable copies, all of which must be signed by the master of the ship who makes a note on the bills of lading, of the number of copies issued and any damage to the goods taken on board. He then keeps one copy for reference. The other copies are sent to the foreign importer by separate mail or returned to the exporter (consignor).
However, if the exporter has arranged for the importer to open a letter of credit in the exporter’s favour in a local bank, then the bills of lading together with the other shipping documents such as the invoice, the consular invoice, the marine insurance policy and a certificate of origin must be lodged by the exporter at the local bank, together with the bill of exchange.
The functions of a bill of lading are as follows:
- It acts as an advisory note indicating the quantity and description of goods sent by a named ship.
- It is a receipt of goods in good condition on board, signed by the master of the ship. Any damage to goods is noted.
- It is evidence of a contract of carriage between the shipper and the ship owner.
- It is a document of title to goods described therein. This means that the holder of the bill of lading can claim the goods when he hands it over to the Port Authority at the port of discharge.
- When delivery of goods has taken place, all other copies of the bill of lading are rendered invalid.
- Since it is a document of title it can be used as a basis for negotiating for a letter of credit from the bank.
- It informs the customs authorities of the type of imports/exports and the country of origin or destination respectively.
- It allows the customs to see at a glance whether the imports or exports are taxable.
- It helps in the recording of statistics.
- It may be used as a document in support in the event of an insurance claim.
2) Consignment note / Delivery note: It is sometimes called a rail and road consignment note or a delivery note. It is normally prepared by the road/rail transport company or a freight forwarder.
The key information in a consignment note/delivery note :
- The name and address of the sender (consignor).
- The name and address of the recipient (consignee).
- The number of packages or cases.
- The marks and numbers on the packages or cases.
- A brief description of the goods.
- The place of departure and the date of departure.
- The time of collection and delivery,
- The time of arrival.
- The type of haulier and the vehicle number.
- The signature of the carrier, (if its a Rail Consignment Note, it is stamped by the Station master).
- The freight charged.
The functions of a delivery note are as follows:
- This is an advice note, indicating the quantity and description of goods being dispatched on a certain date by the named road or rail transport agency.
- It is evidence of a contract of carriage but is not negotiable.
- It is not a document of title but should be dispatched with other documents for it shows the date of dispatch of the goods which is useful for exchange and import control purposes.
- It is a receipt for goods and a document for delivery.
- It is also on a note of freight charges.
- A delivery note is used whenever a consignor (trader) sends goods by a road haulier company.
3) Airway bill/Air consignment note: An airway bill is a very important document used whenever goods are sent by air. An airway bill is issued by an airline company in a set of 12 copies. However, only three copies are originals – the first is for the carrier, the second for the consignee and the third is for the shipper. The balance 9 (nine) copies are retained by the airline company for administrative purposes. It corresponds to a BJ1 of lading but it is only used when goods are sent by air.
The key information in an airway bill is as follows:
- The name of the airline company or carrier.
- The name and address of the shipper (beneficiary).
- The names of the airports of departure and destination, flight number and actual flight date.
- A description of the goods in general terms, its weight and the freight charged, its declared value.
- The number of pieces sent.
- Evidence(by and authorized signature) that the goods have been received by the carrier or its agent, and the date of issuance.
- The name and address of the consignee and also the name and city of the carrier or its agent.
- The status of the freight charges prepaid or payable at destination.
It is normally prepared in triplicate by the consignor. The part marked for the ‘Carrier’ has to be signed by the consignor. The part marked for the ‘Consignee’ travels with the goods. The third part is signed by the carrier and returned to the consignor ..
The consignee is usually the bank that issues the letter of credit, and the party to be notified when the goods arrive is the importer.
The functions of an airway bill are as follows:
- It is an advice note indicating all the key information stated above.
- It is evidence of contract of carriage but it is not negotiable.
- It is not a document of title. The delivery of goods is not dependent upon the presentation of the Airway Bill but rather the goods will be delivered to the named consignee against proof of identification at the airport of destination.
- It should be dispatched with other documents for it shows the date of dispatch which is useful for exchange and import control purposes.
- It may be used as a receipt to be signed by the consignee on the delivery of the goods.
- It is also a note of freight charges.
4) Packing list and Weight note: These two documents are normally combined. The weight note shows the gross weight and net weights of the goods. These must agree with that stated in other relevant documents such as the bill of lading.
The key information in a packing list:
- The name and address of the shipper. Generally it is prepared by the shipper using his letterhead.
- The name and address of the consignee.
- The name of the ship.
- The port of departure and port of destination.
- The marks and numbers on the packages or cases.
- The number of packages.
- A general description of the goods.
- The gross and net weight of the goods.
- The date of issuance and the invoice number.
- The signature of the shipper or the agent as a verification of all the above information.
The functions of a packing list are as follows:
- This may be one of the documents that have to be submitted to the advising bank, together with the other relevant shipping documents such as the Bill of Lading, etc. according to the terms of the letter of credit before the shipper can secure payment.
- It serves as a verification of important information of the goods shipped or transported by road haulage such as gross and net weight of the goods, details of the packaging, description of the goods as agreed upon in the contract of sale between the importer and exporter. These details must agree with that in the other documents, e.g. the bill of lading.
5) Goods received note/Cargo receipt: The key information in a goods received note:
- The name and address of the consignee or his authorized agent who is claiming delivery and possession of the goods.
- The description of the goods. The number of packages of cases claimed. The unit price.
- The total value of the cargo claimed.
- The date of issuance.
- The signature of the consignee or its authorized agent.
- The condition of the goods upon receipt.
The functions of the goods received note are as follows:
The acknowledgement of receipt of goods at the port of destination by the consignee or its authorized agent.
The undertaking by the consignee that the goods were received in good order and according to the contract, thus absolving the ship owner or the port authorities from any liability to later claims for damage or theft.