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Transport Fundamentals

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Transport Fundamentals Chapter 6 CR (2004) Prentice Hall, Inc. The Role of Transportation in Logistics In 1999, U.S. firms spent an estimated $554 billion to move ... – PowerPoint PPT presentation

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Title: Transport Fundamentals


1
Transport Fundamentals
Chapter 6
CR (2004) Prentice Hall, Inc.
2
The Role of Transportation in Logistics
  • In 1999, U.S. firms spent an estimated 554
    billion to move freight, or 9.9 of the GNP1
    this is up from 397 billion, or 6.3 of the GDP
    in 1993.

3
The Role of Transportation in Logistics
  • In 1999, as a percentage of sales, transportation
    was 3.24, warehousing 1.84, customer service
    0.48, administration 0.38, and carrying cost
    1.52.

4
The Transport Selection Decision
  • 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.

5
The Transport Selection Decision
  • The Carrier Selection Decision
  • 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.

6
Figure 9-1 The Carrier Selection Decision
7
The Transport Selection Decision
  • Carrier Selection Determinants
  • Cost
  • Transit time and reliability
  • Can be a competitive advantage
  • Lowers customers inventory costs
  • Capability
  • Accessibility
  • Security

8
Figure 9-2 Carrier Selection Determinants and
User Implications
9
The Transport Selection Decision
  • The Pragmatics of Carrier Selection
  • Transit time reliability
  • Negotiated rates
  • Consolidating shipments among a few carriers
  • Financial stability
  • Sales rep
  • Special equipment

10
Figure 9-3 Importance Ranking of Carrier
Selection Determinants
11
The Basic Modes of Transportation3
  • The basic modes available to the logistics
    manager are rail, motor, water, pipeline, and air.

12
The Basic Modes of Transportation Railroads
  • Capable of carrying a wide variety of products,
    much more so that 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 larger
    ones with ultimate goal of having perhaps two
    transcontinental rail carriers.

13
The Basic Modes of Transportation Railroads
  • Rail is a long haul, large volume system (high
    fixed costs own rights-of-way).
  • Accessibility can be a problem.
  • Transit times are spotty, but are generally long.

14
The Basic Modes of Transportation Railroads
  • Reliability and safety are improving and are
    generally good.
  • Premium intermodal services
  • Straight piggyback and containerized freight
  • Double stacks
  • RoadRailer service

15
The Basic Modes of Transportation Motor Carriers
  • The motor carrier industry is characterized by a
    large number of small firms. In 1999, there were
    505,000 registered motor carriers.
  • Low cost of entry causes these large numbers.
  • Used by almost all logistics systems and account
    for 82 percent of U.S. freight expenditures.
  • Consists of for-hire and private carriers.

16
The Basic Modes of Transportation Motor Carriers
  • Large number of small firms in 1999, there were
    12,500 regulated carriers, only 7 of which had
    revenues gt10 million, with 76 having revenues
    lt3 million.
  • Characterized by low fixed costs and high
    variable costs.
  • Do not own their rights-of-way.
  • Limited operating authority regarding service
    areas, routes, rates and products carried.

17
The Basic Modes of Transportation Motor Carriers
  • High accessibility
  • Transit times faster than rail or water.
  • Reliability can be affected greatly by weather.
  • Relatively high cost compared to rail and water
    trade-off is faster service.

18
The Basic Modes of Transportation Domestic Water
Carriers
  • Available along the Atlantic, Gulf and Pacific
    coasts, along the Mississippi, 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 haul the other 95 of the ton-miles.

19
The Basic Modes of Transportation Domestic Water
Carriers
  • Relatively low cost mode do not own the
    rights-of-way easy entry and exit.
  • Typically a long distance mover of low value,
    bulk-type mineral, agricultural and forest
    products
  • Low rates but long transit times
  • Low accessibility

20
The Basic Modes of Transportation International
Water Carriers
  • General cargo ships
  • Large high capacity cargo holds
  • Engaged on a contract basis
  • Many have self-contained cranes for
    loading/unloading

21
The Basic Modes of Transportation International
Water Carriers
  • 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.

22
The Basic Modes of Transportation International
Water Carriers
  • 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

23
The Basic Modes of Transportation Air Carriers
  • Limited number of large carriers earn about 90
    of the revenue.
  • Any of the air carriers can carry air freight
    although some haul nothing but freight.
  • Cost structure is highly variable do not own
    rights-of-way.
  • Transit times are fastest of the modes, but rates
    are highest.

24
The Basic Modes of Transportation Air Carriers
  • Average revenue per ton mile 18 times higher than
    rail twice that of motor carriers.
  • Seek goods with a high value to weight ratio.
  • Accessibility is low as is capability.
  • Reliability subject to weather more than other
    modes.

25
The Basic Modes of Transportation Pipelines
  • Refers only to the oil pipelines, not natural gas
  • 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 slurried-coal via pipeline, no real
    successes have occurred.

26
The Basic Modes of Transportation Pipelines
  • Accessibility is very low.
  • Cost structure is highly fixed with low variable
    costs.
  • Own rights-of-way much like the railroads.
  • Major advantage is low rates.

27
Table 9-2 Performance Rating of Modes
Selection Determinants Railroad Motor Modes Water Air Pipeline
Cost 3 4 2 5 1
Transit time 3 2 4 1 ---
Reliability 2 1 4 3 ---
Capability 1 2 4 3 5
Accessibility 2 1 4 3 ---
Security 3 2 4 1 ---
28
Importance of Modes (Contd)
By Volume Moved








Percent


Transportation

of total


mode




volume




Railroads



36.5


Trucks



24.9


Inland waterways


16.3


Oil pipelines


22.0


Air





0.3



Total

100.0


CR (2004) Prentice Hall, Inc.
29
Relative Costs of Performance
CR (2004) Prentice Hall, Inc.

30
Rate Types
  • Class rates
  • Exception rates
  • Commodity rates
  • Contract rates
  • Freight all kinds (FAK)
  • Released value rates
  • Differed rates
  • Container rates
  • Special service charges

CR (2004) Prentice Hall, Inc.
31
Special Carriers and 3PL
  • Freight forwarders
  • Shippers association
  • Transportation brokers
  • Container leasing Co.
  • Freight audit/payment
  • Equipment leasing (e.g., Ruan)

CR (2004) Prentice Hall, Inc.
32
Intermodal Transportation
  • 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.

33
Figure 9-6 Types of Intermodal Services
34
Intermodal Transportation
  • Biggest disadvantage
    is that carriers are
    reluctant to participate.
  • Cultural bias towards using only one mode and
    this makes change more difficult.
  • Certain types have been fairly well developed,
    such as rail/water, motor/water, rail/motor, and
    motor/air.

35
Intermodal Transportation Containerization
  • Referred to as Container-on-Flat-Car (COFC)
    goods are placed in a large box, where they are
    untouched until they arrive at the consigees
    unloading dock.
  • Reduces theft, damage, multiple handling costs
    and intermodal transfer time.
  • Changes materials handling from labor intensive
    to capital intensive and may reduce costs from 10
    to 20.

36
Intermodal Transportation RoadRailers
  • Newest concept referred to as a RoadRailer
  • Essentially a trailer that has been reinforced to
    ride on a rail bogey and be coupled together
    directly without first being placed on a rail
    flat car
  • Saves weight and locomotive power and thus fuel
    for the railroad
  • Special lower rates
  • Motor competitive transit times
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