Understanding How Transportation & Freight Works – Part 3/3

Welcome back to another edition of DID YOU KNOW? where we breakdown everything business and finance simply for SMEs to understand. This week we are taking a look at the transportation and freighting industry of South Africa which small business owners can leverage for economic growth; so sit back and enjoy this in-depth miniseries which highlights the online shopping sector and how the different service providers work together to bring their products and services to every citizen in a matter of days and hours.

Transportation and freight without online and retail stores to sell a product are like ice-cream without the milk to make it. The sector employs one million people directly and indirectly in multiple areas of the industry so we will focus on the online section of this industry as it has more data available to showcase how big its contribution is to the South African economy every year.

For additional information click here to view the whole PDF document: http://tgh.co.za/wp-content/uploads/2017/10/wwf_transport_employment_brief_online.pdf

In Part 2 we dove into the back end of how all this works to better understand the industry and how small businesses can find opportunities to leverage their skills in being part of the sector and find out who the big players in town are that seek to outsource to the online world. Now in Part 3, we conclude our deep dive into Transportation and Freight by highlighting the different modes used as well as their advantages and disadvantages.

• E-Commerce’s Platforms
• Large and Small Couriers Company
• Warehousing, Air, Sea, Railway and Road Freight

Why is Warehousing So Important?

What is it?

A warehouse is a building for storing goods. They are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc.  Usually large plain buildings in industrial parks on the outskirts of cities, towns, or villages.

What Are The Advantages of Warehousing?

• Provides the necessary facilities to the business for storing goods when they are not required for sale. It provides protection to the stock, ensures safety, and prevents wastage. Warehouses usually adopt the latest technologies as far as possible to avoid losses, from breakage, deterioration in quality, spoilage, etc.
• Many commodities like rice, wheat, etc. are produced during a particular season but are consumed throughout the year. Warehousing ensures a regular supply of such seasonal commodities.
• Enables manufacturers to carry on production continuously without bothering about the storage of raw materials. It helps to provide seasonal raw material without any break, for the production of finished goods.
• They are generally located at convenient places near a road, rail, or waterways to facilitate the movement of goods. Convenient location reduces the cost of transportation.
• Are generally fitted with mechanical appliances to handle the goods. Heavy and bulky goods can be loaded and unloaded by using modern machines, which reduces the cost of handling. It also minimises wastage during loading and unloading.
• Construction of a warehouse requires heavy capital investment, which small businesses cannot afford. In this situation, by paying a nominal amount as rent, preserving raw materials and finished products can be done in public warehouses.
• Creates employment opportunities both for skilled and unskilled workers in every part of the country. It is a source of income for the people, to improve their standards of living.
  Various steps necessary for the sale of goods such as inspection of goods by the prospective buyers, grading, branding, packaging, and labelling can be carried on by the warehouse staff. Ownership of goods can be easily transferred to the buyer by transferring the warehouse keeper’s warranty.
• Loans can be easily raised from banks and other financial institutions against the security of the warehouse keeper’s warranty. In some cases, warehouses also provide an advance to the depositors on keeping the goods
• Goods are well guarded and preserved – security staff can economically be employed to avoid theft and a cold storage facility can be provided for perishable items. Fire-fighting equipment can be installed to avoid fire. The goods stored can also be insured for compensation in case of loss.

What Are The Disadvantages of Warehousing?

• Lack of geographical flexibility
• Prohibitive costs may preclude some companies from generating enough capital to build or buy a warehouse – the cost of material handling, machinery, and equipment
• Cost of manpower
• Office and other facility expenses

List of the Main Modes of Transportation

• Road Transport
• Railway Transport
• Air Transport
• Sea Transport

Road Transport

What is it?

Road transport involves the use of motor vehicles (cars, Lorries, buses, bicycles, trucks, and animals). There are various types of roads according to size and functions, some are tarred while others are not. The best of these are modern roads, which link major towns. Road transport was developed first and it exists in all parts of the world.

Examples of Road Transportation

• Animals
• Walking
• Automobiles
• Cycling
• Bus
• Heavy-Duty Vehicle
• Non-motorised transport

Road Transportation Advantages

• Creates flexibility of service since numerous routes and destinations are possible.
• The maintenance cost involved is low.
• It offers directness and door-to-door communication is made possible.
• It enables great speed and cheapness over short distances, continuous movement is made possible.
• Carries more passengers and goods within localities because they are normally constructed to connect towns and villages where rail, air, and water transport is absent.
• A wide range of goods can be carried since roads are more able than other systems to handle outsized objects.
• Links many places – more than any other means of transport

Road Transportation Disadvantages

• Roads and motor vehicles need constant maintenance and this adds to running costs.
• Most drivers and road users are very careless and as a result of this, a lot of accidents have claimed thousands of lives and property.
• At times can be very slow due to many factors such as poor maintenance, weather, and traffic congestion.
• Most cities have so many vehicles which ply the road, hence resulting in congestion.
• Is not suitable for conveying heavy and bulky goods.
• Motorways are detrimental to the beauty of the countryside and urban living.
• Motor vehicles cause a lot of air pollution in the city leading to global warming and other environmental hazards.
• Transport by roads does not operate on schedule and therefore it is very disappointing most times.
• Goods are not normally weighed and therefore charges are indiscriminately done.

Railway Transport

What is it?

Rail transport is defined as the movement of people and commodities via the use of railways or railroads or it is the movement of passengers and goods via wheeled vehicles made to move on railway tracks or rails. However, a train is a connected series of rail vehicles that move along the track, an engine locomotive running on electricity or diesel power.

Examples of Railway Transportation

• Metro Rail
• MonoRail
• Freight Train
• Boat Train
• Over-ground Rail
• High-Speed Rail
• Regional Rail

Rail Transportation Advantages

• It is relatively safer to travel by train than to travel by road or air transport.
• Can convey heavy and bulky goods; it is also very cheap, safe, and comfortable for passengers over a long distance.
• Rail transport provides a fast and reliable service; trains running on their tracks can be timed to minimise the chance of congestion and delay.
• Large quantities of any cargo can be carried.
• It is especially suitable for steady flows of traffic between set places, for instance, movement of coal and iron ore between mines and factories.
• High-speed trains, which carry mainly passengers, help to reduce time spent on travels. Such trains are called Bullet trains in Japan, InterCity 125 in Britain, and Express or limited passenger Trains in Nigeria.
• Like any other mode of transport, it helps to open up new and remote places.
• It is particularly suited to passenger transport since it provides speed, comfort, and safety; this advantage is greatest for distances under 400km.
• Offers reasonable access along its line side although this is dependent upon the number of stations along each route); rail can provide a magnet to industry and stations become centres of new urban complexes.
• It is a relatively clean form of transport and has minimal air pollution released to the atmosphere.

Rail Transportation Disadvantages

• It involves high construction, maintenance and, operating costs, this remains true whether the system is used or not.
• It can be expensive to use, especially over short distances or for small amounts of cargo.
• It is relatively slower than some other means of transport, especially in Africa.
• Inflexible service since tracks cannot easily be moved and transshipment of cargo is often necessary at termini.
• Indirect or circuitous routes since lines are determined by relief, hence a slow movement of commodities in areas of rough topography especially across mountain or swampy regions.
• Traffic flow is variable especially commuter movement around towns and seasonal flows of farm produce; at times, when traffic slack, capital and labour are underemployed.
• It cannot accommodate awkward loads since cargo must fit both train and route dimensions (about 3m widths).
• Lines established in the past may be out-dated and a financial burden.
• Rail gauges differ in many countries. For instance, trains going eastwards from Germany or Poland to USSR may have to change their wheels before they cross the international border to USSR and even in Africa, rail gauges in all countries are not the same.

Air Transport

What is it?

Air transport is an aircraft design for transporting passengers and freight from one location to another using aeroplanes, jets, rockets helicopters, and drones. Each of these types of air transport has a unique way of achieving speed and sustainability of its voyage, However, there are other types of air transport which may or may not be used for conveying goods, but could be used for recreational purposes, they include, hot air balloons, blimps, gliders, hang gliding, parachuting, etc.

Examples of Air Transportation

• Commercial Airplanes
• Helicopters
• Private Airplanes

Air Transportation Advantages

• Air transport is a fast and efficient system that is especially suited to passenger traffic, offering comfort and high-quality service; today long-distance passenger movements are made almost entirely due to air transport.
• It involves the use of direct routes.
• Suited to high quality, expensive and perishable cargoes for which speed is essential; aircraft may also carry freight too small to interest the providers of other transport systems.
• It can often reach areas inaccessible to other modes of transport. For instance, areas of the inhospitable environment such as Central Brazil and Northern Canada.
• It offers complete freedom of movement and this provides potentially flexible routes and services (although most air movements are channelled along strict routes and political factors may restrict both landing and flight paths).

Air Transportation Disadvantages

• It is very expensive and as a result of this, it disqualifies all heavy, bulky or low-value cargoes.
• Aircraft are expensive to build and operate; it requires elaborate provisions in the form of airport facilities, controlling systems and maintenance.
• It depends on weather conditions and therefore can provide unreliable services.
• As aircraft becomes larger, the number of airports capable of being used is declining. This reduces flexibility. There is a growing difficulty finding suitable sites for airport building as well.
• Some airports are far away from urban centres and this offsets the advantage of speed and convenience.
• It offers no access between termini and therefore minimum potential for opportunity.
• Airports use up valuable land and aircraft cause a lot of noise and air pollution.

Sea Transport

What is it?

Water transport is defined as the process of moving people, freight, and mail by barge, boat, ship, or sailboat over a sea, ocean, lake, canal, and river or by other types of water transportation. It is an important mode of transport and the cheapest means of transporting bulky and perishable goods over long distances. This mode of transportation is primarily used for the carriage of people, perishable and non-perishable goods which are generally referred to as cargo

Examples of Water Transportation

• Motorboats
• Cargo Ships
• Yachts
• Ferries
• Riverboats
• Tug Boats

Water Transportation Advantages

• It involves a low running cost which makes it the cheapest form of transport system over long distances.
• Large vessels especially run economically since fuel costs can be spread over greater quantities. Distance does not add greatly to total transport costs.
• It has the capacity of conveying heavy and bulky cargoes.
• Water transport has a natural route network that is free to use. This allows flexibility of service, frequency of movement, and little congestion (except where water channels are narrow – as in the case of the Straits of Dover).
• Canals provide good access along their line sides and also encourage the development of industry and commerce. Some towns have grown largely through their connection with canals.
• It causes relatively little environmental pollution, but oil discharge from tankers seems to be a major problem to this mode of transportation.

Water Transportation Disadvantages

• This mode is very slow compared to road transport hence; it is unsuitable for perishable goods and urgent cargoes.
• There may be delays at locks and docks, while navigation may be impeded majorly due to poor weather conditions.
• It is unsuitable for short-distance journeys since trans-shipment is both costly and time-consuming.
• Canals are costly to build, maintain, and dredge, and also follow inflexible and circuitous routes. An adequate supply of water may be difficult to obtain and the limited dimensions of barges may be too small for modern requirements.
• As ships increase, the number of ports capable of receiving ocean carrying vessels is declining; this results in less flexible routes and services for the movement of such commodities as oil. Super-tankers, for instance, cannot use Suez Canal and large ships can no longer enter the smallest port except the modern ones which are very few.

That is a rap for our three-part miniseries into transportation and freighting within South Africa and if you missed in read Part 1 as well as Part 2 for more context of the subject. It was important to cover these topics so that we can understand how it all works in conjunction with each other to get a better idea of what the future holds for the industry as a whole.  Until next time stay tuned for more episodes of Did You Know?