Factors Influencing Selection of Transportation Mode:

Transportation Delays

To obviate delays in transportation and handing of logistics both the suppliers and distributors are relying on better communications, IT tools, electronic transfer systems, and the internet. Usage of IT tools and electronic transfer system helps in considerable reduction in time delays and in better cooperation among the links of a supply chain.

Market Coverage

Market coverage is very much influenced by the transportation mode. Transportation cost effected the size of markets covered in a big way. The characteristics of a transportation mode are: flexibility, costs, reliability and availability. The nature of product influences the economies of the decision. For instance, a low volume and high value product is able to support higher costs, that means extended delivery distances and enhance in delivery frequency.

Sourcing Decisions

The geographical dimension of the source markets may be influenced by low cost transportation system, i.e. 'reliable bulk freight services could extend the source markets', Therefore Companies have to consider a trade off among price and quality and the costs involved in delivering to the processing point, i.e. volume and cost of transportation.

Manufacturing Operations

Selection of transportation mode based on the type of manufacturing operation which also influences the location of the manufacturing centre. For instance, transportation mode can be different for extraction based units close to the source of raw materials and for the consumer products satisfaction is close to market.

Pricing Decision

Transportation cost happens to be significant component in a product cost. Therefore, selection of the appropriate transportation mode shall have a direct bearing on the product cost. Increase in transportation costs may influence the product cost.

Customer Service Decisions

Customer service policy influences transportation selection decisions and hence both cannot be considered in isolation of the other. Moreover, the type of market will also dictate the decision and shall differ considerably. Thus, it's pertinent to overrule the cost factor while servicing the medical customers, where delivery speed is more significant than cost, in selecting the transportation mode.