Air freight rates are much higher than rail or truck rates, but air freight is ideal when speed is needed or distant markets have to be reached. Shippers also use intermodal transportation —combining two or more modes of transportation. Combining modes provides advantages that no single mode can deliver. Each combination offers advantages to the shipper. In choosing a transportation mode for a product, shippers must balance many considerations: speed, dependability, availability, cost, the security of cargo, damage prevention, and others. Thus, if a shipper needs speed, air and truck are the prime choices. If the goal is low cost, then water or rail may be best. Logistics Information Management Companies manage their supply chains through information. Companies need simple, accessible, fast, and accurate processes for capturing, processing, and sharing channel information. Information can be shared and managed in many ways, but most sharing takes place through traditional or Internet-based electronic data interchange (EDI), the computerized exchange of data between organizations, which primarily is transmitted via the Internet. In some cases, suppliers may actually be asked to generate orders and arrange deliveries for their customers. to set up vendor-managed inventory (VMI) systems or continuous inventory replenishment systems. Using VMI, the customer shares real-time data on sales and current inventory levels with the supplier. The supplier then takes full responsibility for managing inventories and deliveries. Some retailers even go so far as to shift inventory and delivery costs to the supplier. Such systems require close cooperation between the buyer and seller.
Integrated Logistics Management Today, more and more companies are adopting the concept of integrated logistics management. This concept recognizes that providing better customer service and trimming distribution costs require teamwork, both inside the company and among all of the marketing channel organizations. Inside, the company’s various departments must work closely together to maximize its own logistics performance. Outside, the company must integrate its logistics system with those of its suppliers and customers to maximize the performance of the entire distribution network. Cross-Functional Teamwork inside the Company Most companies assign responsibility for various logistics activities to many different departments—marketing, sales, finance, operations, and purchasing. Too often, each function tries to optimize its own logistics performance without regard for the activities of the other functions. However, transportation, inventory, warehousing, and information management activities interact, often in an inverse way. Lower inventory levels reduce inventory- carrying costs. But they may also reduce customer service and increase costs from stockouts, back orders, special production runs, and costly fast-freight shipments.