Land Transport: The Value Chain
Between the end of the production line and the retailer or final buyer, the goods or item undergoes several more value added processes. These values are added due to the movement or transfers of the goods along its chain of events.
As each transfer costs money, it also adds to the value of the goods being placing it in a more accessible position for its final buyer. Among elements in the value chain processes are:-
a) storage at factory or warehouse,
b) loading and stuffing,
c) transport by land,
d) storage at port,
e) documentations and clearance,
f) loading onto vessels,
g) transit by sea or air to the next port,
h) storage at port,
i) storage,
j) further transport and finally reaching the detail outlet.
Each component of the chain described above will incur a cost to the owner of the goods. However, with each additional element and cost increase, the value of the goods also increase. For example, the goods increase in its value if after being manufactured at the factory it is moved to a warehouse. Mainly because the warehouse in another step closer to the buyer of the goods.
Therefore, each step closer to the buyer increases the value of the goods. This is especially so when goods are produced in one country and transported to another country where the need to consume it is available. If buyers were to go to the factory to buy the goods, then they may find the cost to be extremely high just to buy a small amount for their own use.
When the goods are transported to the buyers, the cost although incurred is not as high as each individual buyer going to the factory to buy the goods because the transport in bulk spreads the cost of transportation over each unit of the goods.
Dealing with each component of the value chain will give the owner or user direct control over each element and thereby the ability to negotiate and cost down the services.
However, the disadvantage is that the user or owner now has to spend a lot of time on transportation and his cost may not be predictable as he is subject to all the changes and additional charges that may incur during actual transportation. This may take his focus away from his core business of producing and selling.
If he does not want to spend time and money on this, then the transportation decisions may be relegated to lower levels of personnel who may not care to utilize the cost savings and synergies well enough to give him the best advantages in terms of cost efficiency.
An alternative is to allow the transporters or another independent organization to provide logistics services within the value chain. The disadvantage is usually in the inability of the user to influence the decisions relating to transport.
The advantage is in letting the logistics manager use all the synergies of planning, economies of scale of combining several requirements from various customs together and providing this service with the best synergy.
The owner may negotiate and fix a certain rate within which the logistics manager should operate. This will ensure cost is known and predictable to the owner, whit the logistics manager will profit through proper synergising of his resources.
As each transfer costs money, it also adds to the value of the goods being placing it in a more accessible position for its final buyer. Among elements in the value chain processes are:-
a) storage at factory or warehouse,
b) loading and stuffing,
c) transport by land,
d) storage at port,
e) documentations and clearance,
f) loading onto vessels,
g) transit by sea or air to the next port,
h) storage at port,
i) storage,
j) further transport and finally reaching the detail outlet.
Each component of the chain described above will incur a cost to the owner of the goods. However, with each additional element and cost increase, the value of the goods also increase. For example, the goods increase in its value if after being manufactured at the factory it is moved to a warehouse. Mainly because the warehouse in another step closer to the buyer of the goods.
Therefore, each step closer to the buyer increases the value of the goods. This is especially so when goods are produced in one country and transported to another country where the need to consume it is available. If buyers were to go to the factory to buy the goods, then they may find the cost to be extremely high just to buy a small amount for their own use.
When the goods are transported to the buyers, the cost although incurred is not as high as each individual buyer going to the factory to buy the goods because the transport in bulk spreads the cost of transportation over each unit of the goods.
Dealing with each component of the value chain will give the owner or user direct control over each element and thereby the ability to negotiate and cost down the services.
However, the disadvantage is that the user or owner now has to spend a lot of time on transportation and his cost may not be predictable as he is subject to all the changes and additional charges that may incur during actual transportation. This may take his focus away from his core business of producing and selling.
If he does not want to spend time and money on this, then the transportation decisions may be relegated to lower levels of personnel who may not care to utilize the cost savings and synergies well enough to give him the best advantages in terms of cost efficiency.
An alternative is to allow the transporters or another independent organization to provide logistics services within the value chain. The disadvantage is usually in the inability of the user to influence the decisions relating to transport.
The advantage is in letting the logistics manager use all the synergies of planning, economies of scale of combining several requirements from various customs together and providing this service with the best synergy.
The owner may negotiate and fix a certain rate within which the logistics manager should operate. This will ensure cost is known and predictable to the owner, whit the logistics manager will profit through proper synergising of his resources.
