 Importance of an effective transportation

system
 Transport selection decision
 Transport choices
 Carrier selection decisions
 Single transportation service choices
 Intermodal transportation
 Transportation rate profiling
 Transportation documentation
 Contrast of Economies of developed nation
with developing nation
 In developing nation production and
consumption take place in close proximity
 An efficient and inexpensive transportation
system contributes to
◦ Greater competition
◦ Greater economies of scale in production
◦ Reduced prices of goods
 The Transportation – Supply Chain
Relationship
◦ Firms need to recognize that the lowest
cost carrier does not necessarily
guarantee that this carrier will result in the
lowest landed cost.
◦ Therefore, firms need to keep the big
picture in mind when attempting to select
a carrier.
 Primary intercity  Small shipment
carriers carriers
◦ Air ◦ UPS
◦ Truck ◦ Federal Express
◦ Rail ◦ Postal services
◦ Water ◦ Bus Package Express
◦ Pipe  Agents
◦ Freight forwarders
 Coordinated ◦ Shipper associations
services  Others
◦ Piggyback ◦ Autos
◦ Birdyback ◦ Bicycles
◦ Fishyback ◦ Taxis
◦ Human
◦ Electronic !!
 Various modes of transportation
should be considered.
 Choose a carrier or carriers within the
selected mode, if there is a choice.
 Carefully examine the service
capabilities of the carrier as services
can vary widely between carriers.
 Transit
time and
variability
 Transit time is the average time it takes for
a shipment to move from its point of origin
to its destination
 Can be a competitive advantage
 Lowers customers’ inventory costs
 Variability refers to usual differences that
occur between shipment by various modes
 Product condition is a primary customer
service consideration
 Common carriers have an obligation to
move freight with reasonable dispatch and
reasonable care to avoid loss and damage.
 Delayed shipments arriving in unusable
condition means inconvenience for the
customer or possibly higher inventory costs
Rail

Truck

Air

Water

Pipeline
 Long hauler and slow mover of
raw materials(coal,lumber) and of
low valued manufactured
products(food, paper)
 Capable of carrying a wide variety
of products, much more so that
other modes.
 Large volume system (high fixed
costs).
 Reliability and safety are
improving and are generally
good.
 High accessibility
 Transit times faster than rail
or water.
 Reliability can be affected
greatly by weather.
 Characterized by low fixed
costs and high variable
costs.
 Relatively high cost
compared to rail and water;
trade-off is faster service.
 Transit times are fastest of
the modes, but rates are
highest
 Average revenue per ton
mile 18 times higher than
rail; twice that of trucking
 Seek goods with a high
value to weight ratio.
 Accessibility is low
 Reliability subject to
weather more than other
modes.
 Relatively low cost mode
 Typically a long distance
mover of low value, bulk-type
mineral, agricultural and forest
products
 Low rates but long transit
times
 Low accessibility
 Loss and damage costs are
considered lower than other
modes as damage is not much
of a concern with low valued
bulk products.
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 General cargo ships
◦ Large high capacity
cargo holds
◦ Engaged on a
contract basis
◦ Many have self-
contained cranes for
loading/unloading
 Tankers
◦ Specially designed for
liquid cargoes
◦ Largest vessels afloat,
some VLCCs at 500k+ tons
 Container ships
◦ High speeds for ships;
increasingly more common
and important
◦ Larger vessels can handle
up to 5,000 containers.
 RO-RO (Roll on-Roll off)
◦ Basically a large ferry
that facilitates the
loading and unloading
process by using drive
on/off ramps
◦ May also have the
capacity to haul
containers
 Moving crude oil and refined
petroleum products
 Not suitable for general
transportation
 Some research has been
performed to move minerals in
a liquid medium, but outside of
a few attempts to transport
slurry-coal via pipeline, no real
successes have occurred.
 Major advantage is low rates.
 Cost structure is highly fixed
with low variable costs.
Transportation Percent of
mode total volume
Railroads 36.5%
Trucks 24.9
Inland waterways 16.3
Oil pipelines 22.0
Air 0.3
Total 100.0
 Air generally fast over
long distances and a fair Mode ¢/ton-mile
degree of relative Rail 2.28
variability Truck 26.19
 Water is very slow and Water 0.74
moderately reliable Pipeline 1.46
 Pipe is very slow but Air 61.20
reliable
 Truck is moderately fast
and reliable
 Rail is slower and less
reliable than truck
 Refers to use of two or more modes of
transportation cooperating on the
movement of shipment by publishing a
through rate.
 Logistics managers are looking for the
best way to move shipments and these
often attempt to take advantage of
multiple modes of transportation, each of
which has certain useful characteristics.
 TOFC or piggyback refers to
transporting truck trailers on rail
road flatcars usually over longer
distances.
 Blend of the convenience and
flexibility of trucking and long haul
economy of rail.
 Standard container is a piece of
equipment that is transferable to all
transportation modes except pipelines
 Reduces theft, damage, multiple
handling costs and intermodal
transfer time.
 Transportation rates are the prices that for-
hire carriers charge for their services.
 Various criteria are used in developing rates
under a variety of pricing situations
 Most common rate structures are related to
◦ Volume
◦ Distance
◦ demand
 Costs of service are related to the
shipment size
 Shipments in consistency high
volumes are transported at lower rates
than smaller shipments
 Rates as a function of distance, range
from being completely invariant with
distance to varying directly with
distance.
◦ Uniform rates
◦ Proportional rates
◦ Tapering rates
◦ Blanket rates
 Demand or value of service may also
dictate rate levels
 Two dimensions suggest the value of
transportations service to a shipper
◦ Shipper’s own economic circumstances
◦ Available alternative transportation
services
 Bill of lading
◦ Legal contract between the shipper and the
carrier for the movement of designated freight
with reasonable dispatch to a specified
destination arriving damage free
 Freight bill
◦ Contains in addition to freight charges same
information as a bill of lading, such as shipment
origin and destination, quantity shipped and the
persons involved.
 Freight claim
◦ Generally two types of claims are made against
carriers
 Loss, damage and delay claims
 Over charges
 Bill of lading
 Dock receipt
 Delivery instructions
 Export declaration
 Letter of credit
 Consular invoice
 Commercial invoice
 Certificate of origin
 Insurance certificate
 Transmittal letter
 Arrival note
 Custom entries
 Carrier’s certificate and release order
 Delivery order
 Freight release
 Special customs invoice