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100 Cards in this Set
- Front
- Back
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Transportation is the LARGEST expenditure in logistics
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True
~60% of a typical firm's total logistics cost. the most fundamental choice is between using for-hire carriers or a firm's owned and operated transportation fleet. |
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There is no such thing as cheap transportation.
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The value of transportation is greater than simply moving products from one location to another.
As a result of the below VAS |
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For-hire carriers (ISPs) also offer a wide range of Value added services
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product sorting
sequencing modification JIT/Guranteed delivery |
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Functionality
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Transportation provides 2 primary logistical services
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Product Movement
Product Storage |
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Product Movement
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When designing a logistics system you want to LIMIT the amount of IN-TRANSIT inventory.
"Access" to In-transit inventory has increased thanks to information technology and tracking systems |
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Transportation impacts environmental resources
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in direct terms, transportation represents one of the largest consumers of uel and oil in the U.A.
Indirectly transportation impacts the environment through congestion, air pollution, and noise pollution |
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Participants
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Transportation decisions are influenced by 6 parties
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Shipper (consignor)
Destination party (consignee) Carriers and agents Government <b>Internet</b>: web based enterprises have been established--2 kinds--marketplace to exchange information for matching carrier freight capacity & shipments. 2nd is for PURCHASING fuel, equpiment parts, supplies. the public <b>review pg. 189 for definitions/facts |
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Regulation to Free Market System
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Interstate Commerce Commission (ICC)
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broad regulatory power regarding transportation--regulated industry.
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Motor Carrier Act (MC80)
Staggers Rail Act (Staggers Act) |
Degregulated the transportation industry. Formal efforts to stimulate competition and promote efficiency in trucking.
went from highly regulated pretty much overnight to highly competitive |
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Surface Transportation Board (STB)
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administer remaining economic regulation issues across the industry.
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Short sea Shipping (SSS)
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shipping goods directly from one U.S. port to another U.S. port
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Transportation Modal Structure
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Freight transportation structure consists of:
-the rights-of-way -vehicles -carriers that operate within 5 basic transportation modes: Rail Truck (motor/highway) Water Pipeline Air |
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Mode
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identifies a basic transportation method or form.
Rail <b>Truck</b>: backbone. TL segment includes loads OVER 15K lbs that generally do not require intermediate stops between origin and destinations. LTL segment involves shipments less than 15k lbs that generally must be consolidated to fully utilize trailer capacity. Water Pipeline Air |
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Reative importance of each mode is measured by:
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System mileage
traffic volume revenue nature of freight transported |
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Rail
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historically handled the largest number of ton-miles within U.S.
After WWII Motor became a possiblity The capability to efficiently transport large tonnage over long distances is the main reason railroads continue to handle significant intercity tonnage. HIGH FC, Low operating VC. THe rail fixed variable cost structure offers competitive advantages for LONG-HAUL moves. <b>Unit Train</b> all capacity is committed to transporting a SINGLE product (bulk commodity). Faster and less expensive to operate--routed direct/nonstop. |
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Modal Comparative Characteristics and Capabilities
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Speed
Availability Capability Frequency |
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Read 198-202
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Intermodal
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Combines two or more modes of transportation to take advantage of the inherent economies of each.
E.g. "piggy back service" combining rail transportation and trucking through the use of standardized containers |
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Lecture
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1% increase in a nation’s logistics expenditures = .39 percent increase in PRIVATE SECTOR PRODUCTIVITY
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increases GDP
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Total cost approach studies show that an increase in public expenditures on logistics infrastructure DOES improve productivity
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not vice versa
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Rodrigues, Bowersox, and Calentone demonstrated that economically advanced countries spent less of GDP on transport than less economically advanced countries
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Rodgriguez hypothesiszes that countries investing in flexible modes have greater productivity than countries investing in less flexible modes
NO real studies to test this hypothesis |
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E W even # freeway
N S odd # freeway |
Freeways were created to better mobilize military
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ASCE 2009 Report on US infrastructure
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Overall a "D" grade
Needs $2.2 Trillion over next 5 years |
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BIggest Problems with US Infrastructure
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Congestions & Roads (4.2 B hours per year spent in traffic ~ $72 B)
Bridges ~26% are structurally deficient Inland Waterways ~ all inland locks are past lifespan Airports congested and flights increasing |
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Transportation Regulation?
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Economic Regulation
-Entry Regulation -Rates -Services Social Regulation -Labor Standards (hours of service, Driver cert.) -Environmental (Hazmat, fuel economy, etc -Public safety issues |
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Went through period of regulation then went through period of DEREGULATION
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Transportation became strategic because of deregulation.
Big change as a result of competition Outcomes of Regulation STRATEGIC COST EFFICIENT CONSOLIDATION |
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History of Regulation
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2000-Present
Technology, Globalism and Security Electronic signatures, manifests RFID standards Byrd Ammendment Jones Act USA Patriot Act CTPAT CSI |
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KNOW THE LAMBERT & STOCK (2004) Web Diagram
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Logistics Executive is the core
<b>CONTROLLABLE ELEMENTS</b> Customer Service Inventory Packaging Transportation Warehousing and Storage Other Activities <b>UNcontrollable Elements</b> Political and Legal Economic Competition Technology Geography Social & Cultural Political & Legal |
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INTERNATIONAL = Ports = Entry Ports
REVIEW PORT SLIDE |
Sea ports
Air ports Land port 90% of Int'l trade happens through sea shipping |
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Big Issues in Transportation
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Turnover of Truck Drivers
-Long Hours, low pay Traditionally around 150% (every 9 months you turnover your drivers) Increasing International Trade -Are ports ready? US becoming more isolationalist? |
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Lecture #2
GET SLIDES!!! |
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...
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Ranking of Carrier Selection Determinants
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#1 most important things when considering a carrier is RELIABILITY/CONSISTENCY
#2 is cost Extremely cut throat industry |
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Transportation Modes
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Rail
Motor Water Air Intermodal |
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Railroads
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Capable of carrying a wide variety of products, much more so than other modes
Very small number of carriers; likely only one will be able to serve any one customer location Trend is to merge smaller companies into largest ones with ultimate goal of having perhaps two transcontinental rail carriers very few railroads--FC are SUPER high. Unit Train is the most profitable type of train. Ex. Coors |
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Motor Carriers
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The motor carrier industry is characterized by a large number of small firms. In 1999, there were 505,000 registered motor carriers.
Now many fewer due to consolidation (TOUGH INDUSTRY) Low cost of entry causes these large numbers Used by almost ALL logistics systems and account for 69% of U.S. freight expenditures Consists of for hire and private carriers |
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Rail cannot go point to point
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TRUCKS can!
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Brown Water Carriers (Domestic)
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AVailable along the atlantic Gulf and pacific coasts, along th emississippi, missouri, Tennessee and Ohio River systems and the Great Lakes.
Regulated common and contract carriers haul about 5% of the freight, while private and exempt carriers do ~95% |
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International (Blue) Water Carriers
TEU = Twenty-Foot equivalent Unit |
General cargo ships
-Large high capacity cargo holds -Engaged on a contract basis -Many have self contained cranes for loading/unloading Bulk Carriers -Specially designed to haul minerals -... Tankers Container ships Damage Other |
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Pipelines
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Modal Trade offs
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REVIEW SLIDES!
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Inter-modal transportation
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Refers to us e of tow or more transportation modes cooperating on shipments
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Types of Intermodal Services
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Rail + Truck = Piggyback
Air + Truck = Birdyback Water + Truck = Fishyback |
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Landbridge
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Road railers
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Newest concept referred to as a roadrailer
Essentially a trailer ... |
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****Transportation Carriers
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Common Carriers
contract carriers Exempt carriers Private carriers |
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REVIEW LECTURE SLIDES
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missed a bunch of stuff.
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if the inventory involved is scheduled to be shipped within a few days, the cost of unloading, warehousing, and reloading the product may exceed the temporary cost...
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of using a transportation vehicle as temporary storage
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Truck
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Speed + Flexibility (point to point)
over 1 million miles of highway are available = more mileage than all other surface modes combined <b>LOW FC, high VC</b> (labor, PUs, tolls, licence fees, etc.) More efficiently handle <b>small shipments</b> moving <b>short distances</b> Favors mfg. and distributive trades, at distances of up to 500 miles for high-value products. Dominate wholesalers and warehouses to retail stores--flexiblity increasing labor costs 55% of intercity truck tonnage is by ISPs shipper owned trucks Backbone for foreseeable future |
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TL vs. LTL
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<b>Truck Load (TL):</b>
includes loads over 15,000 lbs that generally do not require intermediate stops between origin and destination--Large # of relatively small carriers very price competitive <b>Less than Truck Load (LTL):</b> less than 15K lbs that generally must be consolidated to fully utilize trailer capacity. Experiences <b>higher % of FC</b> than TL (terminal & marketing costs). High consolidation--few LARGE national carriers. |
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Water
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OLDEST mode of transportation
deepwater vs. brown water (inland) transport Inland: FEWEST system miles of any mode (~26,000) FC BETWEEN Rail & Truck limited range of operations + slow good when large tonnage at low VC when low rates are desired and speed of transit is secondary PRIMARY mode of transport for Global Logistics (international shipping) |
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Pipeline
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ARE significant part of U.S. transportation system.
70% of all crude and petroleum ton-mile movements & NATURAL GAS operates 24/7 <b>HIGHEST FC (right-of-way, constructions and requirements, pumpoing capcity) and LOWEST VC of all modes</b> only handle gas, liquids, or slurry |
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Air
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Newest but least utilized
all about speed speed of air transport potential allows other aspects of logtistics (warehousing, inventory, etc.) to be eliminated accounts for 1% of intercity tonnage limited by load size, weight lift capacity, aircraft availability FC of air transport is LOW compared to Rail, water and pipeline. Air ranks 2nd to trucking with low FC VC are extremely high (fuel, user fees, maintenance, labor intensity) Air freight has high value and and priority (time sensitive & light weight) |
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Modal Comparative Characteristics and Capabilities
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Speed: elapsed movement time. AIR IS FASTEST
<b>Availability:</b> service any given pair of locations HIGHWAY/TRUCKING HAS HIGHEST AVAILABILITY (point to point) <b>Dependability:</b> potential variance from expected or published delivery schedules. PIPELINES ARE THE MOST DEPENDABLE <b>Capability:</b> ability to handle ANY transport requirement (load size). WATER TRANSPORT IS MOST CAPABLE. <b>Frequency:</b> Quantity of scheduled movements. PIPELINES LEAD IN FREQUENCY |
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Specialized Transportation Services
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Intermodal
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combines 2 or more modes to take advantage of the inherent economies of each and thus provide an integrated service at lower total cost.
Piggback service (integrated rail and motor service) Piggyback Fishyback Trainship Airtruck |
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TOFC/COFC
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best known and most widely utilized
Trailer on flat car (TOFC) Container on flat car (COFC) Containers are th boxs utilized for intermodal product storage and movement between motor freigh, railroads, and water transportation Containers are typically: 20 or 40ftx8ftx8ft |
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line haul
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the expense to move railcars or trucks between cities
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Containership
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Fishyback, trainship, and containership are examples of the oldest form of intermodal transport.
Utilize waterways. loads a truck trailer, railcar, or container onto a barge or ship for the line-haul movement on inland navigable waterways. variant is land bridge |
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Land Bridge
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moves containers in a combination of sea and rail transport.
commonly used for containers moving between Europe and the Pacific Rim to reduce time and expense of ALL water transport |
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Non-operating Intermediaries
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broker service of other firms.
transportation broker is kind of like a wholesaler. find economic justifications by offereing shippers lower rates for movement between two locations that would be possible by direct shipment via a common carrier. <b>Primary intermediaries</b>: Freight Forwarders Shipper Associations Brokers |
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Freight Forwarders
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<b>for-profit businesses</b> that consolidate small shipments from various customers into bulk shipment and then utilize a common surface or air carrier for transport.
At destination the freight forwarder splits the consolidated shipment into the original smaller shipments. main advanatage is a LOWER freight rate obtained from the conslidation into larger shipments |
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Shipper Associations
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operationally similar to freight forwarders--consolidate small shipments to gain scale economies.
<b>Voluntary nonprofit</b> entities where members, operating in a specific industry collaborate to gain economies related to small shipment purchases. typically means improved speed of delivery |
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Brokers
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coordinate transportation arrangements for shippers, consignees, and carriers.
arrange shipments for exempt carriers and owner operators. Operate on commission basis. Providing extensive services, like shipment matching, rate negotiation, billing, and tracing. entire area of brokerage operations is highly adaptable to Internet-based transactions and is increasing in importance as a result of increased globalization |
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Transportation Economics & Pricing
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Driven by multiple factors that influence rates: -Distance -Weight -Density |
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Economy of Distance
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Major influence on transportation cost--directly contributes to variable expense (labor, fuel, maintenance)
<b>2 main points:</b> -Cost curve will never be 0 because of FC -Tapering Principle--cost curve increases at a DEcreasing rate as distance increases |
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Economy of Weight
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Transport cost DECREASES as load size INCREASES--FC of pickup, delivery, and administration are spread over incremental weight.
small loads should be consolidated. |
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Economy of Density
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Combination of Weight x Volume
vehicles are usually more constrained by cubic capacity than by weight. higher-density products are typically assessed lower transport cost per unit seek to imporve product density so that trailer cube is fully utilized (think ikea cup redesign) |
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Other Pricing Factors
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<b>Stowability:</b>how product dimensions fit into transportation equipment. Not exactly same thing as density--nesting--trash cans easier with lots of them
<b>Handling</b>:special equipment, and how products are physically grouped together <b>Liability</b>: reduce by improving packaging or loss/damage <b>Market Factors</b>:Lane volume/balance. |
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Transport Lane
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refers to movement between origin and destination points.
Since transporation vehicles and drivers typically retern ot their origin, either they must find a back-haul load or the vehicle is returned DEADHEADED empty. empty return movements occur, labor, fuel, and maintenance costs must be charged against the original front-haul movement. Ideal situation is to achieve two-way or balanced movement of loads--doesnt really happen all the time Demand location and seasonality result in transport rates that change with direction and season |
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Costing Freight
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Costing allocation is primarily a CARRIER concern, but since cost structure influences negotiations.
Several Cost Categories: |
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Variable
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Costs that change in a predictable, direct manner in relation to some levle of activity
include direct carrier costs associated with movement of each load. measured as cost/mile or per unit of weight. Labor, fuel, maintenance |
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Fixed
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Expenses that DO NOT change in the SR and must be paid even when a company is nOT operating.
vehicles, terminals, rights of way, information systems, support equipment In the SR expenses associated with FIXED ASSETS must be covered by contribution above variable costs on a per shipment basis |
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Joint
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expenses created by the decision to provide a particular service
E.g. when a carrier elects to haul a truckload from point A to point B, there is an implicit decision to incur a JOINT cost for the backhaul from point B to point A can have big impact on transportation CHARGES bc carrier quotations must include implied joint cost based on assessment of back-haul recovery |
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Common Costs
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includes carrier costs that are incurred on behalf of all or selected shippers.
terminal or magement expenses are characterized as overhead allocated to shipper according to level of activity |
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Pricing Freight
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<b>Class Rates</b>:Determine classification or grouping for shipment. Then determine the rate or price based on freight classification of the product
<b>Freight Classification</b>: Rate Determination Cube Rates Commodity Rates Exception Rates Special Rates & Services |
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Transportation Management
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Rate
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the price in dollars per CWT to move a specific product between 2 locations
the rate is listed on pricing sheets or on computer files known as TARIFFS |
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Freight Classification
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All products transported are grouped together into uniform classifications--considers cost handling/transport
products with similar density, stowability, handling, liability, and value characteristics are grouped together. Class assigned = Rating = used to determine freight rate. <b>Truck</b>: National Motor Freight Classification system <b>Rail</b>: Uniform Freight Classification system relative index of 100--higher the number the more expensive to ship. LTL of identical porducts will have HIGHER ratings than TL shipments a Number of different classifications may apply to the same product depending on shipment size, transport mode, and product packaging |
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Rate Determination
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1. classification rating
2. rate determination rate CWT i based on shipment origin and destination (+ minimum charge) origin and destinations are zip coded. alternative to CWT is per mile charge (common in TL) Minimum Charges Surcharges: additional charge designed to cover specific costs |
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Cube Rates
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replaces 18 traditional freight classifications of NMFC with 5 cube groupo=ings
cube shipping document (CSD) Stackables (ST) nonstackables (NST) <b>hopefully will reduce complexity and improve accuracy of transportation pricing |
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Commodity Rates
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large quantity of product moving between 2 locations on regular basis
special or specific rates published without regard to classification. point to point basis--only applied to certain products less prevalent in Motor commodity rate supersedes the class or exception rate |
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Exception Rate
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special rates published to provide prices lower than the prevailing class rates are called exception rates
changes classification that is normally applied. exceptions can be higher or lower than original class rates (usually lower) <b>Aggregate Tender Rate</b>:utilized when a shipper agrees to provide multiple shipments to a carrier in exchange for a discount or EXCEPTION from the normal class rate ... |
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Special Rates & Services
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# of special rates and services provided by carriers are available for use in logistical operations
<b>Freight-all-kind (FAK) rates:</b> a mixture of different products is transported under a negotiated rating. average rating is applied for the total shipment. LIne haul rates since they replace class, exception, or commodity rates single carrier = local/single rate multiple carriers = joint rate <b>Transit Services</b>:permit a shipment to be stopped at an intermediate point between initial origin and destination for unloading, storage, and/or processing <b>Split Delivery</b>: payment is typically structured to reflect a rate as if the shipment were going to the most distant destination. <b>Demurrage</b>:used by railroad for holding a railcar beyond 48 hours before unloading shipment. Trucks use the term DETENTION to cover similiar delays |
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Special Accessorial Services
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COD
Change COD INside Delivery Marking or Tagging Notify before delivery REconsignment of delivery Redeliver REsidential delivery Sorting and Segregating Storage |
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Environmental Services
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special control of freight in transit
refrigeration, ventilation, heating |
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Transportation Management Systems (TMS)
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wide variety of planning, execution and administrative responsiblity
5 functions: Operational Managment Consolidation Negotiation Control Auditing & Claims Admin |
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Operational Management
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<b>Equipment Scheduling & Yard Management</b>
Load Planning Routing and Advanced Shipment Notification Movement Administration |
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Bill of Lading
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the basic document used in purchasing transport services
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Freight Bill
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represents a carrier's method of charging for transportation services performed
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Shipment Manifest
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lists individual stops or consignees when multiple shipments are placed on a single vehicle
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Product Pricing & Transportation
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FOB Pricing
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Free on Board/ freight on board
<b>FOB Origin:</b> simplest way to quote price. Seller indicates the price at point of origin and agrees to tender a shipment for transportation, but assumes no further responsibility. Buyer selects mode of transport, carrier, transportation charges, and assumes all risk <b>FOB Destination Pricing</b>: product ownership title does NOT pass to the buyer until delivery is complete |
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Delivered Pricing
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seller establishes a price that includes transportation. The transportation cost is NOT specified as a separate item.
<b>Single Zone Delivered Pricing</b>:buyers pay a single price regardless of where they are located. typically reflect the sellers average transportation cost <b>Multiple-zone pricing:</b> establishes different prices for specific geographic areas. <b>Base Point Pricing:</b> final delivered price is determined by the product's list price plus transportation cost from a designated base point usually the manufacturing location. |
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Pickup Allowances
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equivalent to purchasing merchandise on an FOB origin basis
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