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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