Title: Transport Fundamentals
1Transport Fundamentals
Chapter 6
CR (2004) Prentice Hall, Inc.
2The 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.
3The 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.
4The 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.
5The 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.
6Figure 9-1 The Carrier Selection Decision
7The Transport Selection Decision
- Carrier Selection Determinants
- Cost
- Transit time and reliability
- Can be a competitive advantage
- Lowers customers inventory costs
- Capability
- Accessibility
- Security
8Figure 9-2 Carrier Selection Determinants and
User Implications
9The 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
10Figure 9-3 Importance Ranking of Carrier
Selection Determinants
11The Basic Modes of Transportation3
- The basic modes available to the logistics
manager are rail, motor, water, pipeline, and air.
12The 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.
13The 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.
14The 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
15The 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.
16The 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.
17The 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.
18The 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.
19The 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
20The 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
21The 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.
22The 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
23The 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.
24The 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.
25The 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.
26The 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.
27Table 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 ---
28Importance 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
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29Relative Costs of Performance
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30Rate Types
- Class rates
- Exception rates
- Commodity rates
- Contract rates
- Freight all kinds (FAK)
- Released value rates
- Differed rates
- Container rates
- Special service charges
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31Special 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.
32Intermodal 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.
33Figure 9-6 Types of Intermodal Services
34Intermodal 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.
35Intermodal 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.
36Intermodal 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