Aligning supply chain transportation strategy with industry characteristics

Abstract

Purpose – The purpose of this paper is to propose that transportation modal mix in global supply chains is a result of the strategic alignment between industry characteristics and supply chain strategies. Design/methodology/approach – Using annual US trade statistics and manufacturing industry data for the years 2002-2009 between the USA and its top 12 Asian trading partners, this study applies various regression methods to examine key factors associated with the transport modal decision. Findings – The results show that industry characteristics have an impact on the transportation modal mix in global supply chains. Manufacturing industries use more air freight and less ocean freight when facing positive sales surprises, high-monthly demand variation, a high-contribution margin ratio, a high cost of capital, and increased competition. Practical implications – The findings provide important insights for logistics managers and freight forwarders. While transportation cost remains an important concern, a logistics manager must also consider non-cost factors such as competition, working capital, and demand uncertainties in their modal decisions. Freight forwarders should be supply chain solution providers who consider all of these industry factors and suggest a proper mix of transportation modes for their customers. Originality/value – This study is among the first efforts to examine the impact of industry characteristics on the transportation modal mix in global supply chains. This study first develops a theoretical framework for the modal choice decision for international transportation movements and then, using an extensive and innovative data set, provides new findings regarding current air freight practices in global supply chains.