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MS3121 Fundamentals of Business Logistics
Management
When the Chinese write the word crisis, they do
so in two charactersone meaning danger, the
other opportunity.
Topic 4 The Transportation System
CR (2004) Prentice Hall, Inc.
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Transport Fundamentals in Planning Triangle
CR (2004) Prentice Hall, Inc.
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Transport System Defined

Performance




-
Average transit time



-
Transit time variability
(reliability)


-
Loss and damage (security / safety)



-
Other factors including accessibility,
capability,
tangible services
and various less



Cost



-
variable and fixed costs



-
common or joint costs



-
cost characteristics by mode

-
rate profiles
CR (2004) Prentice Hall, Inc.
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Carrier Selection Determinants and User
Implications

• Transit time
• Average time it takes for a shipment to move from
  its point of origin to its destination
• Variability (reliability)
• The usual differences that occur between
  shipments
• A measure of the uncertainty in carrier
  performance

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Carrier Selection Determinants and User
Implications

• Capability
• The carriers ability to provide the equipment
  and facilities that the movement of a particular
  commodity requires
• Accessibility
• The carriers ability to provide service over the
  route in question
• A carriers physical access to facilities

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Carrier Selection Determinants and User
Implications

• Loss and damage (security / safety)
• Product condition is a primary customer service
  consideration
• The responsibility is relieved if loss and damage
  result from an act of God, default by the
  shipper, or other causes not within control of
  the carrier
• Claims are typically expensive and time-consuming

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Carrier Selection Determinants and User
Implications
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Transport Choices



Small shipment carriers


Primary intercity carriers

-

UPS

Air

-

-

Federal Express

Truck

-

-

Postal services

Rail

-

-

Water

Bus Package Express

-


Pipe

-




Agents


-


Coordinated services

Freight forwarders

-

Piggyback

-

Shipper associations

Birdyback


-



Fishyback

-

Others


-

Autos

-

Bicycles

-

Taxis

-

Human

-

Electronic


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Importance of Modes
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Performance Overview
Relative Costs of Performance
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The Basic Modes of Transportation Rail
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The Basic Modes of Transportation Truck (Motor)
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The Basic Modes of Transportation Water
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The Basic Modes of Transportation Air
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The Basic Modes of Transportation Pipelines
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Performance Rating of Modes
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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


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Coordinated service

• Also called Intermodal Services
• Trailer on flatcar
• TOFC
• Piggyback
• Containerized freight
• COFC
• Containerization

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Types of Intermodal Services
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International Transportation

• Free trade zones
• Documentation
• Bill of lading
• Freight bill
• Export declaration
• Certificate of origin
• Modes

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Foreign (Free) Trade Zone
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Transportation cost structure

• Variable and fixed costs
• Common or joint costs
• Cost characteristics by mode
• Rate profiles
• Volume-related rates
• Distance-related rates
• Uniform rates
• Proportional rates
• Tapering rates
• Blanket rates
• Demand-related rates

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Transportation cost structure

• Cost characteristics - Rail
• Variable cost is low
• Labor
• Fuel
• Maintenance, etc.
• Fixed cost is high
• Terminal
• Roadway
• Administration, etc.
• Significant economies of scale in railroad costs

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Transportation cost structure

• Cost characteristics - Trucks
• Variable cost is high
• Labor
• Fuel
• Fuel taxes, tolls, etc.
• Fixed cost is the lowest
• Do not own their roadway
• Tractor-trailers are not expensive
• Terminal expenses and line-haul expenses

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Transportation cost structure

• Cost characteristics - Water
• Variable cost is very low
• Labor
• Fuel
• Fixed cost is high
• Transport equipment
• Terminal cost (harbor fees, costs for loading and
  unloading cargo)
• One of the least expensive carriers of bulk
  commodities over long distances and in
  substantial volume

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Transportation cost structure

• Cost characteristics - Air
• Variable cost is high
• Labor
• Fuel
• Storage, space rental and landing fees, etc.
• Fixed cost is low
• Do not own the terminals
• Variable expenses are influenced by distance than
  by shipment size!

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Transportation cost structure

• Rate profiles - Volume-related rates
• Minimum charge or any-quantity rate
• e.g., 60USD for any shipment that is less than 10
  pounds
• Less-than-vehicle load rate
• e.g., 5USD per pound for any shipment that is
  greater than 10 pounds
• Vehicle-load rate
• e.g., 2000USD per carload for shipment that is
  more than 1000 pounds (a full carload is 500
  pounds)

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Transportation cost structure

• Rate profiles - Distance-related rates
• Uniform rates
• High fixed cost structure
• Proportional rates
• High variable cost structure
• A trade-off between rate structure simplicity and
  service costs
• Tapering rates
• Fixed cost is spread out over long distance
• Blanket rates
• Competition
• Simplify administration

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Transportation cost structure

• Rate profiles - Demand-related rates
• How much the demand side is willing to pay
  determines the transportation charges