Course Code: IEP114

Course Descrip�on: Supply Chain Management

Sec�on/s: 4IE-A, B, C, and D
Week: 13-14
Topic: Physical Distribu�on: Role of Transporta�on in the Supply Chain, Models of
Transporta�on; Transporta�on Network; Role of IT on Transporta�on
Course Handler: aProf. Sarah C. Vanguardia

Physical Distribution
In today’s global economy, transporta�on forms the backbone of supply chain management,
allowing businesses to connect produc�on, distribu�on, and consump�on efficiently. This module
explores the role of transporta�on in physical distribu�on, the models and networks that support
transporta�on, and how Informa�on Technology (IT) has revolu�onized the field. It will cover real-life
applica�ons of these concepts and frameworks, illustrate how recent so�ware solu�ons support

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transporta�on logis�cs, and finish with a case study to encourage group analysis and discussion.

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The Role of Transporta�on in the Supply Chain
Transporta�on’s primary func�on in the supply chain is to bridge the gap between each segment—

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from suppliers to manufacturers to distribu�on centers and, finally, to consumers. Efficient transporta�on
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ensures the �mely and safe arrival of goods, ul�mately impac�ng customer sa�sfac�on and compe��ve
advantage. For instance, companies like Amazon and Walmart have transformed expecta�ons for logis�cs
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and delivery speeds by op�mizing their transporta�on networks.

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Table 1: Role of Transporta�on in Supply Chains

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Aspect Descrip�on Example

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Time Efficiency Transporta�on reduces lead Amazon Prime

�mes by enabling faster Promises two-day or same-day delivery
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connec�ons between supply in select loca�ons, using air, road, and

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chain nodes local carriers for speed

Cost Management Choosing op�mal transport Walmart’s Private Fleet
modes and routes reduces Saves costs by op�mizing delivery
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overall logis�cs costs routes and filling trucks fully before

dispatch
Flexibility Flexible transporta�on models UPS
adapt to changing demands Adjusts routes and resources based on
demand peaks, such as the holiday
season

Related Research Article

In sectors like fashion and e-commerce, the speed of transporta�on is crucial for inventory
turnover and consumer sa�sfac�on. In food and pharmaceu�cals, reliability and temperature-controlled
transporta�on are essen�al to maintain product quality and regulatory compliance.
Example: Perishable items like vaccines require a cold chain—a specialized supply chain with refrigerated
transport and storage to maintain product integrity un�l delivery.
Reference
Zhang, T., Liu, X., & Shi, L. (2021). The Role of Transportation in Enhancing Supply Chain Resilience.
Journal of Supply Chain Management, 57(2), 210–220.

Models of Transporta�on in the Supply Chain

Transporta�on models represent the various approaches taken to move goods within a supply
chain. Selec�ng the appropriate model o�en depends on product type, delivery speed, distance, and cost.
The four primary transporta�on modes are air, road, rail, and sea, with each offering unique advantages.

Table 2: Compara�ve Chart of Transporta�on Modes

Mode Speed Cost Ideal for Example
Air Fastest High Urgent, high-value, low- Electronics, medical supplies
volume goods

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Road Moderate Moderate Flexible, short-haul, Local retail deliveries

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perishable goods

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Rail Moderate Low Heavy, bulk goods, long Coal, chemicals
distances

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Mari�me Slow Lowest Bulk interna�onal goods
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Pipeline Slow High Transpor�ng liquids and Crude oil, natural gas, and
gases water
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Intermodal Varies Varies Domes�c and interna�onal Goods loaded into

freight standardized containers
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Intermodal and mul�modal transporta�ons combine modes for op�mal efficiency. For example,
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rail-to-sea allows rail to transport bulk goods to a port for trans-oceanic shipping. Such models reduce
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transporta�on costs and environmental impact by leveraging energy-efficient modes like rail and sea for
long-haul journeys.
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Example:
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Companies like FedEx use mul�-modal models by combining air and road transporta�on to
improve delivery speed. Many major automo�ve companies ship parts across oceans using mari�me
transport and then employ rail or road within regions to bring parts to final assembly plants.

Reference
Wang, R., Jiang, F., & Yu, Z. (2020). Optimization Models for Multi-modal Transportation in the
Global Supply Chain. Transportation Research Part E: Logistics and Transportation Review, 142,
102315.

Transporta�on Network Design

Designing a transporta�on network involves crea�ng a system of routes, hubs, and logis�cs nodes
that allow for efficient movement of goods. Effec�ve network design is cri�cal for scalability and
sustainability.
Types of Transporta�on Networks
1. Hub and Spoke Model
Similar to the configura�on of a bicycle wheel, the hub and spoke distribu�on model shown in Figure
1 is a centralized system for warehousing and shipping. Each spoke represents a delivery direc�on,
while the hub, also known as a distribu�on center, is at the center of the wheel.

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Figure 1. Refinery: Hub and Spoke Model
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Source: htps://botpenguin.com/glossary/hub-and-spoke
Advantages
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Efficient Last-Mile Delivery Processes

It is significantly simpler to schedule dispatch and handle last-mile delivery procedures when all
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shipments are collected from a single hub. Logis�cs managers can allocate tasks in a methodical
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manner and monitor them with litle work.

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Optimal Planning of Delivery Routes

With the hub and spoke distribu�on model, delivery partners can arrange their daily routes
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around a single hub, comple�ng all deliveries in a par�cular area before moving on to another hub for
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addi�onal or on-demand deliveries.

Cost Reduction in Supply Chain Operations
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The hub and spoke distribu�on strategy lowers costs for supply chain businesses by guaranteeing
effec�ve route planning. By limi�ng the number of distribu�on hubs in a city, the strategy lowers the
cost of inventory management and saves fuel because fewer kilometers are traveled.
Environmental Sustainability and Carbon Footprint Reduction
Because of its efficient route design, the hub and spoke concept lowers emissions and wastes fuel
by driving fewer empty kilometers. By using this concept, supply chain businesses can help lower their
carbon impact.

Case Studies of Successful Hub and Spoke Implementa�ons

Amazon's Fulfillment Centers
With its centralized fulfillment centers (hubs) and quick last-mile delivery (spokes), Amazon's hub
and spoke distribu�on model has completely changed the e-commerce sector. Amazon guarantees
 prompt and effec�ve order fulfillment by placing the hubs in key loca�ons and streamlining delivery
routes.
FedEx and UPS
The hub and spoke strategy are used by interna�onal shipping behemoths like FedEx and UPS to
transport packages all over the world. Their vast network of distribu�on centers enables effec�ve
shipment consolida�on, sor�ng, and delivery route op�miza�on while preserving prompt and
dependable service.
Airlines and Airports
The hub and spoke model have long been used by the avia�on sector to increase connec�vity and
op�mize aircra� routes. Major hubs have been set up at airports like Atlanta and Chicago,
respec�vely, by airlines like United Airlines and Delta, which enable them to effec�vely combine
passengers and cargo while expedi�ng connec�ons.

Challenges

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1. Dependence on the hub - relies heavily on the centralized hub, any technical issues, delays, or

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disrup�ons at the hub can cause significant delays and impact the en�re distribu�on system

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2. Poten�al delays - shipping �me can be more prolonged in the hub and spoke model as packages
make a stop at the hub before reaching their final des�na�on

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3. High upfront costs - requires significant capital investment in terms of construc�ng the hub and
spoke loca�ons and adop�ng new technologies
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4. Resource mismanagement - requires careful tracking of inventory levels, op�mizing distribu�on
routes, and efficient availability of staff, drivers, and vehicles
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2. Point-to-Point (P2P) Model

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A point-to-point network connects directly to a set of loca�ons without interrup�ng services (e.g. pick
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up or drop off), even if the route may not be direct. In Figure 2, a point-to-point network involves 16
independent connec�ons, each serviced by conveyances (cars, trucks, planes, trains, ships) and
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infrastructures.
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Figure 2. Point-to-Point Model

Source: Jean-Paul Rodrigue (2024). The Geography of Transport Systems. 6th ed. ISBN 9781032380407
 There are two main advantages of the point-to-point distribu�on model namely:
 Faster travel �mes
Using the point-to-point model means making a con�nuous journey to your drop off point. Your
drivers won’t be stopping, changing direc�ons, or accommoda�ng other deliveries at the same
�me.
 Delays have a lower impact
With this distribu�on model, delays only affect a single delivery. As opposed to a hub and spoke
model where a delay at the central hub can have an impact on large numbers of deliveries at
once, which are all wai�ng to leave in the same vehicle.

3. Hybrid Model
Moving goods is only one aspect of transporta�on from point A to point B; other tasks include
handling supplies, packing, maintaining inventory, and overseeing safety. New tac�cs, such hybrid
logis�cs, have emerged as a result of doing this effec�vely.

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As defined by Luis Anibal Mora in his 2014 publica�on, Logística del transporte y distribución de

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carga (Transports Logis�cs and Cargo Distribu�on): “systems that consist of adop�ng mul�ple

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channel distribu�on systems to reach one or more clients.”
Although this may resemble mul�modal transporta�on, it entails a strategic partnership between

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two companies aimed at achieving a seamless, collabora�ve, and resilient logis�cs network. This
approach fosters a shared philosophy that extends not only to the companies' employees but also to
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their technological systems.
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Figure 3. Layout of a hybrid transport system

Source: A Hybrid Transport Concept for the Material Supply of a Modular Manufacturing Environment - Scien�fic Figure on ResearchGate. Available from:
htps://www.researchgate.net/figure/Layout-of-a-hybrid-transport-system_fig3_319886233 [accessed 29 Oct 2024]
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Read: HYBRID MODEL FOR MODELLING TRANSPORTATION CHOICES

Link
htps://www.researchgate.net/publica�on/376696547_HYBRID_MODEL_FOR_MODELLING_TRANS
PORTATION_CHOICES
Cita�on: FALE, Mar�n & Rupnik, Bojan & KRAMBERGER, Tomaž. (2023). HYBRID MODEL FOR
MODELLING TRANSPORTATION CHOICES. Interna�onal Conference of Management and Industrial
Engineering. 11. 221-226. 10.56177/11icmie2023.47.

Key Factors in Network Design

There are three key factors playing a dis�nct role that influence network design decisions, helping
to build efficient and cost-effec�ve supply chains that align with business goals and customer expecta�ons.
Volume impacts capacity planning while geography op�mizes the network’s spa�al efficiency and cost-
effec�veness. On the other hand, demand paterns enable adap�ve strategies to meet customer needs
effec�vely.

Volume
This factor encompasses the number of shipments and the quan�ty of goods that move through
the network. In network design, understanding volume is crucial because it affects decisions regarding
warehouse capacity, transporta�on modes, and scheduling. Higher volumes may require more robust
infrastructure, including larger warehouses or faster transport modes, while lower volumes might allow
for a more streamlined approach.
Geography
Geography refers to the spa�al distribu�on of nodes (such as warehouses or distribu�on centers)
and transport hubs within the network. Strategic placement of these nodes and hubs can significantly
reduce transporta�on costs and �me. For example, placing warehouses closer to major popula�on centers
can improve service speed, while placing them near ports can op�mize import/export efficiency.

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Demand Patterns

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This factor addresses seasonality and fluctua�ons in demand. For instance, certain products may see

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increased demand during specific seasons (e.g., holiday shopping), while others may fluctuate
unpredictably. Recognizing and planning for these demand paterns can help ensure that the network is

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responsive to peak �mes without over-inves�ng in capacity that isn’t needed year-round.
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Role of IT in Transporta�on
Informa�on Technology has transformed transporta�on logis�cs by enabling real-�me tracking,
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op�mizing routes, and enhancing overall visibility and transparency. Key IT applica�ons in transporta�on
include:
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1. Real-Time Tracking and Visibility

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GPS and IoT devices monitor shipments, allowing companies to share delivery updates
with customers.
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2. Transporta�on Management Systems (TMS)

A TMS automates processes like route planning, carrier selec�on, and load op�miza�on.
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3. Big Data and Analy�cs

Data collected from sensors, historical delivery �mes, and other sources op�mize route
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planning and resource alloca�on.

Table 3: How IT Improves Transporta�on Efficiency

IT Func�onality Benefits Recent So�ware & Pricing
TMS Improved route planning and SAP TMS: Star�ng at $30,000
resource alloca�on per year

Real-Time Tracking Enhanced visibility and customer Geotab: $30–$50 per

sa�sfac�on month/device

Analy�cs Predic�ve insights for beter Oracle Analy�cs Cloud: Starts

decision-making at $16/month/user
Example
Amazon uses TMS and advanced analy�cs to dynamically adjust routes based on demand and
traffic data. During the COVID-19 pandemic, FedEx used predic�ve analy�cs to an�cipate disrup�ons and
reroute shipments, ensuring essen�al supplies reached healthcare providers.

Reference
Liu, J., Zhang, L., & Chen, Q. (2019). The Impact of Big Data on Transportation Management in the
Modern Supply Chain. Journal of Business Logistics, 40(4), 321–332.

Table 4. Recent Transporta�on Management So�ware

Name of So�ware Descrip�on Price

FreightPOP Cloud-based TMS for integra�ng transporta�on Starts at $150 per month,
modes (air, ground, ocean, rail), offering rate scalable by features and

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shopping, tracking, and analy�cs for centralized users.

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logis�cs.

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Visit: htps://www.freightpop.com/

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Rose Rocket TMS focused on real-�me visibility, dispatch, Starts at $199 per month,
and customer/partner integra�on; includes
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driver mobile app and invoicing customiza�on. available.
Visit: htps://www.roserocket.com/
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MercuryGate TMS Scalable mul�modal TMS suppor�ng domes�c Typically priced at $500 per
and interna�onal logis�cs; includes predic�ve month, customizable with
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analy�cs and rate management for 3PLs and add-ons.

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brokers.
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Visit:
htps://mercurygate.com/
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Shipwell Cloud-based TMS with visibility, automa�on, Starts at $300 per month,
and analy�cs; designed for medium to large custom pricing for larger
enterprises needing scalable freight enterprises.
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management.
Visit: htps://www.shipwell.com/

Uber Freight AI-powered TMS (formerly Transplace) with Compe��ve rates, pricing
automated billing, tracking, and freight based on service op�ons.
visibility, suited for medium to large shippers.
Visit: htps://www.uberfreight.com/
References

Chen, X., Zhang, Y., & Fang, J. (2019). Evaluating the impact of blockchain on transportation in the supply
chain. Logistics Journal, 15(6), 489-505.
Gupta, P., & Singh, R. (2021). Transportation logistics and its role in supply chain management. Journal of
Supply Chain Management, 17(3), 221-233.
Rodriguez, S., & Lee, T. (2022). The role of AI in optimizing supply chain logistics. Supply Chain Review,
28(2), 145-157.
Smith, M., & Elkaim, D. (2023). Digital transformation in logistics and transportation: The role of IoT and
Big Data. Journal of Transportation and Logistics, 34(1), 78-92.
Zhou, Y., & Wang, D. (2020). Optimization of intermodal transportation networks with IT-enabled solutions.
International Journal of Logistics, 25(4), 391-407.

Disclaimer

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Every reasonable effort is made to ensure the accuracy of the informa�on used in the crea�on of this

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reference material, without prejudice to the exis�ng copyrights of the authors. As an off-shoot of the

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innumerable difficul�es encountered during these trying �mes, the authors endeavored to ensure proper
atribu�on of the esteemed original works, by way of footnotes or bibliography, to their best abili�es and

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based on available resources, despite the limited access and mobility due to quaran�ne restric�ons
imposed by the duly cons�tuted authori�es.
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known as the Intellectual Property Code of the Philippines.

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