Chapter 6 Transport fundamentals

1
Chapter 6 Transport fundamentals

• Transportation is a vital component in the design
  and management of logistics systems.
• About 1/3 2/3 of total logistics costs.
• The focus of this chapter
• The facilities and services that make up the
  transportation system.
• The rates (costs) and performance of the various
  transport services that a manager might select.

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Importance of an effective transportation system
1. Greater competition

• With a poorly transportation system, the market
  is limited surrounding the point of production.
• EXfresh fruits, vegetables, perishable products.
• ?Rapid shipment.

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Importance of an effective transportation system
2. Economies of scale

• Wider markets can result in lower production
  costs.
• Inexpensive transportation permits decoupling of
  markets and production sites.
• EXauto parts manufactured in Taiwan, Indonesia,
  South Korea, and Mexico are used in assembly
  operations in the U.S.A. .

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Importance of an effective transportation system
3. Reduced price

• As transportation becomes more efficient, will to
  reduce product prices.
• EXCrude oil use the large supertanker.

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Five basic modes(single-service choices)

• Rail
• Truck
• Air
• Water
• pipeline

6
Transportation service characteristics

• 1.Price
• ?See Table 6-1.
• 2.Transit time and variability
• ?See Figure 6-1.
• 3.Loss and damage
• ?maybe to provide increased protective packaging.

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Price

• The service is owned by the shipper
• Fuel
• Labor
• Maintenance
• Depreciation of equipment
• Administrative costs

• For-hire service
• The rate charged for the movement of goods
  between two points
• Pickup at origin
• Delivery at destination
• Insurance
• Preparing the goods for shipment

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Transit Time and Variability

• Transit Time

• Variability

• The way of Measurement
• Door to door
• 600???
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• Average delivery time
• Highest ? Rail
• Lowest ? Air
• Variability relative to the average transit time
  (????/????)
• The least dependable ? Air
• The most dependable ?Truckload

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10
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11
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12
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13
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16
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17
????????

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• ??????(tramp service)
• ?????(private vessels)

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?????(??????)

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  )

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23
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24
????(Flag of Convenience)

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25
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27
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30
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Trailer on flatcar (piggyback)

• rail and truck combinations
• A blend of the convenience and flexibility of
  trucking with the long-haul economy.
• The rate is usually less than for trucking alone.
• Rail can share in some traffic
• door-to-door

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(No Transcript)
34
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Containerized freight

• ?standard container
• 8 by 8 by 20 feet (Twenty-foot Equivalent
  Unit,TEU)
• 8 by 8 by 40 feet
• container on flatcar,COFC
• water-truck service
• air-truck service

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Agencies

• Own little or no line-haul equipment
• Handle numerous small shipments
• Consolidation
• Pickup and delivery service

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Transportation agencies1

• 1.Freight forwarder
• for-hire carriers of freight.
• for pickup and delivery operations.
• Advantagesmall shipment with lower price
• 2. Shippers associations
• Nonprofit basis
• Designed to perform services similar to those of
  freight forwarders
• Act as a single shipper in order to obtain volume
  rates

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Transportation agencies2
3. Transport brokers bring shipper and
carriers together by providing timely
information about rates, routes, and
capabilities.
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Small-shipment service
Parcel post U.S.A. Postal service
- United Parcel Service (UPS)
- Federal Express (FedEx)
?specialize in small-shipment services.
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Company-controlled transportation1

• Company ownership of equipment or contracting for
  transportation services.
• Breakeven analysis.

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Company-controlled transportation2

• Shipping volume is high
• Special requirements
• Fast delivery with very high dependability
• Special equipment not generally available
• Special handling of the freight
• A service that is available when needed

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Transport cost characteristics

• Fixed costroadway acquisition, maintenance
  terminal facilities, transport equipment, carrier
  administration.
• Variable costs(line-haul costs)fuel,
  labor,equipment maintenance, handling, pickup and
  delivery.

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Transportation rates
1.Volume-related rates 2.Distance-related rates
a.uniform rates b.proportional rates
c.tapering rates d.blanket rates 3.Demand-relat
ed rates See Box6.5 Example.
46
Volume-Related Rate

• Quote directly on the quantity shipped.
• Small shipment minimum charge or any-quantity
  (AQ) rate.
• Large shipment (less than a full-vehicle-load
  quantity) less-than-vehicle-load
• Large shipment( equal or exceed the designated
  vehicle-load quantity) vehicle-load rate.
• Quote a shipper special rates on particular
  commodities. (high volume)

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Distance-Related Rates Uniform Rates

• When the delivering cost are not distance related.

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Distance-Related Rates Proportional Rates

• This method does adversely discriminate against
  the long-haul shipper in favor of the short-haul
  shipper.
• Terminal charges are not recovered on the short
  haul.
• Truckload rates can have this characteristic
  because handling costs are minimal.

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Distance-Related Rates Tapering Rates

• A major reason for this shape is that with
  increased distance of the shipment, terminal
  costs and other fixed charges are distributed
  over more miles.

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Distance-Related Rates Blanket Rates

• Single rates that cover a wide area at the
  origin, destination, or both.
• To meet the rates of competitors and to simplify
  rate publications and administration led carriers
  to establish blanket rate structures.

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Line-haul rates

• Refer to the charges incurred between origin and
  destination terminals, or door-to-door in the
  case of truckload motor carrier service.
• Classified by

1. product 2. Shipment size 3. Route 4.
miscellaneous
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Line-haul rates By Product

• Class Rates (table 6-5) (See Box 6.6)
• Contract Rates
• Contract rates are meant to take precedence over
  the more general class rates.
• These may be special, one-of-a-kind rates that
  reflect individual shipping situations. (See Box
  6.7)
• Freight-All-Kinds
• Carriers quote single rates for a shipment
  regardless of the classification of the
  commodities that make up the shipment.

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Line-haul rates By Shipment Size

• See Table 6-6, Box 6.8
• Other Incentive Rates
• In-Excess Rate
• Time-volume Rates

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Line-haul rates By Route

• When shipments involve full vehicle load
  movements, carriers use a per-mile charge to
  compute total shipping expenses. (See Box 6.9)

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Line-haul rates Miscellaneous Rates

• Cube Rates
• When articles are very light and bulky.
• Cube rates are based on space occupied rather
  than weight.
• Import-Export Rates
• Deferred Rates
• At times the shipper is willing to accept the
  possibility of increased delay in delivery
  compared with regular service in exchange for
  lower rates. The shipper is promised that
  delivery will be made no later than a given date.

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Line-haul rates Miscellaneous Rates

• Released Value Rates
• Unlimited liability
• Limited liability (released value rates)
• Released value rates are particularly useful when
  the actual value of the goods is difficult to
  estimate.
• Ocean Freight Rates
• Quote either on a space or a weight basis.

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Special service charges

• Special line-haul services
• Diversion and reconsignment (example 6.10)
• When the commodities are perishable or the
  carriers equipment can be used as a warehouse.
• The shipper can gain flexibility in meeting
  dynamic market conditions at a nominal charge per
  carload.
• Transit privileges
• Stop-off privilege to complete loading (example
  6.11)
• Stop-off privilege to partially unload (example
  6.12)
• Protection such as damage-free cars,
  refrigerated cars and heaters
• Interlining

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Special service charges

• Terminal services
• Pickup and delivery
• Switching
• Demurrage and detention
• Straight plan
• Average plan