Intermodal Transportation Curriculum for Secondary Education

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Intermodal Transportation Curriculum for
Secondary Education Pilot Study
MODULE 4 Modal Selection Process and
Transportation Decision WORKSHOP October 22
23, 2012 - Trent Lott Center, University of
Southern Mississippi Prepared By Dr. Tulio
Sulbaran, Dr. Mohammad Rahman, Dr. MD Sarder,
Dr. Chad Miller Center for Logistics, Trade,
and Transportation (CLTT) - The University of
Southern Mississippi Under the Supervision
of Dr. Lemond Irvin Mr. Brad Skelton
2
Module 4 Learning Outcomes

• At the completion of this module students should
  be able to
• Intermodal system, its importance and the
  constraints
• Common types of intermodal transportation
• Performance rating analysis of modes and cost
  impacts
• Transportation mode selection process
• Mechanized loading equipment / technology
• Intermodal risk and security management
• Case Study Analysis of measuring cost.

Big Ideas Physical distribution aspects of
intermodal transportation and mode selection
Lecture Duration Six sessions 60 min One
Case study 20 min
3
Learning Sessions

• Session I Intermodal system definition, its
  importance, and constraints
• Session II Common types of intermodal
  transportation
• Session III Understand performance rating
  analysis of modes and cost impact
• Section IV Transportation mode selection
• Session V Mechanized loading equipment /
  technology
• Section VI Intermodal risk and security
  management
• Case Study Analysis of measuring cost

4
Session I Intermodal System, definition, and
importance of Intermodal System
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Intermodal System, definition

• There are a number of descriptions about what
  constitutes an Intermodal System or
  Intermodal Transportation Facility.
• Intermodal facility is a state of the art
  transportation interface that combines difference
  mode of transportations in one place.
• According to the American Public Transit
  Association,
• Intermodal (multimodal) is those issues or
  activities, which involve or affect more than one
  mode of transportation, including transportation
  connections, choices, cooperation and
  coordination of various modes.

6
Intermodal Terminal
Intermodal System Combines several modes of
shipping-truck, water and rail Key component is
containers
Source http//www.avantetech.com/products/shippin
g/intermodal
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Importance of Intermodal Facility

• Grown considerably with increased use of
  containers
• May be the only option for global trade
• More convenient for shippers one entity, one
  entry
• Key issue exchange of information to facilitate
  transfer between different modes
• The United States spent 7.8 percent of its total
  GDP on logistics expenses in 2009.
• The number rose to 8.3 percent of GDP in 2010
• From 1.08 trillion to 1.2 trillion, increase
  from 2009 to 2010.

Currently, transportation alone accounts for
approximately 62.8 of every dollar spent on
logistics in the United States
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Importance of Intermodal Facility

• According to Council of Supply Chain Management
  Professionals (CSCMP), 2011.
• Intermodal deals with 17 of revenues, which is
  second only to coal 23
• Intermodal provides labor efficiency and fuel
  efficiency (50 savings over truck)
• Downsides inadequate speed, and reliability

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Benefits of Intermodal Process

• Collaborative planning, forecasting, and
  replenishment create greater economies of scale
• Internet-based exchange of data and information
• Significant decrease in inventory levels and
  costs and
• More efficient logistics
• Focus on core competencies

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Features of Intermodal Terminal

• Provision for loading/unloading railcars
• Box storage (long term or temporary)
• Vehicle storage (railcars/trailers/chassis)
• Check-in/check-out control
• Vehicle and box servicing/repair
• Security and lighting
• Office and administration
• Information systems
• Vehicle scales

• Access to railroad and highway system
• Area, configuration, and topography of site
• Cost to acquire site and provide infrastructure
• Adjacent land uses
• Proximity to customer base
• Ability to accommodate future growth
• Local support

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Constraints of Intermodal facility

• Following could be the limitations associated
  with promoting intermodal
• Physical
• Inadequate existing infrastructure.
• Poor coordination of loading and unloading
  activity
• Differing rail gauges.
• Lack of land availability in close proximity to
  major ports, highways and rail access routes.

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Constraints of Intermodal facility

• Institutional
• Conflicting customs and immigration procedures
• Institutional blockages to the free flow of
  transit vehicles and cargo in the hinterlands
• Lack of coordination between different levels of
  government.
• Personnel and Private Sector
• Limited number of available trained personnel
• Lack of private sectors participation
• Lack of growing private sectors to increase road
  haulage

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Session II Common types of intermodal
transportation
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Common Transportation Modes

• Mode of transport
• Air
• Road
• Water
• Rail
• Pipeline!

Growth in U.S. Domestic Freight by Mode 1980
2004 (Ton-Miles)
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Freight Mode Capacity
VLCC very-large crude carriers
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Common Intermodal Freight Transfer
Road to Port
Road to Rail to Road
Road to Rail to Port
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Transportation by Air

• Advantages
• Most expensive and fastest mode of freight
  transport
• Lightweight, small packages lt500 lbs,
• Reliable, less theft
• Cost Component
• Fixed cost low (Airport infrastructure)
• Variable cost high (fuel, maintenance, security)
• Limitation
• Limited capacity
• Other transport modes required to take freight
  to-and-from airports

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Transportation by Water

• Ocean, inland waterway system, coastal waters
• Advantages
• Carrying large volumes of freight
• primary means of international shipping
• Dominant in global trade
• Very large loads at very low cost
• Cost Component
• Fixed cost is medium (vessels, handling
  equipment, terminals)
• Variable cost is low (Economies of scale)
• Limitation
• Limited to certain geographic areas
• Quite a slow mode
• Other transport modes required to take freight
  to-and-from airports

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Transportation by Rail

• Advantages
• Low-value, high-density, bulk products, raw
  materials
• Good on speed, Dependability,
• Capability to move larger quantities of freight
• Move commodities over large distances
• Cost Component
• Fixed cost is high (equipment and facilities)
• Variable cost is relatively low (fuel,
  maintenance, security)
• Limitations
• Not as economical for small loads,
• Slower, less flexible than trucking
• Limited situations (Rail line, stations limited)

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Transportation by Road

• Advantages
• Extremely flexible, Good on speed,
• Consignor to consignee connectivity is universe
• Significant fraction of the goods moved
• Truckload (TL) (Low fixed cost, but imbalance
  between flows)
• Less than truckload (LTL) (Small lots / Hub and
  spoke system)
• Cost Component
• Fixed cost is Medium (Road, bridges)
• Variable cost is low (Fuel, maintenance, security
  etc.)
• Limitations
• Capability to move relatively smaller quantities
  per freight

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Transportation by Pipelines

• Primarily for crude petroleum, petroleum
  products, natural gas
• Advantages
• Dependability is excellent
• Best for large and stable flows
• Cost Component
• Fixed cost is high (land occupancy, construction
  and installation)
• Variable cost is relatively low (routine
  maintenance, inspection/security
• Limitations
• Used only in very limited situations

Source http//stakebuzz.com
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Transportation Model Comparisons
Mode Fixed cost Variable cost Traffic composition
Rail Medium Low bulk food, mining, heavy manufacturing
Road Medium Low consumer goods, medium/light mfg
Water Medium Low bulk food, mining, chemicals
Air Low High high-value goods, rush shipments
Pipe high low petroleum, chemicals, mineral slurry
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Session III Understand performance rating
analysis of modes and cost impact
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Physical Distribution
Physical Supply Products moving from supplier to
manufacturer inbound Physical Distribution
Products moving from manufacturer to
customers outbound
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Channels of Distribution

• Company may deliver directly to customers
• Use other companies or individuals to deliver
  goods
• Intermediaries
• Wholesalers (agents)
• Transportation companies (warehousers)

Channel distribution Any series of firms or
individuals that participates in the flow of
goods and services from the raw material supplier
and producer to the final user or
consumer. APICS 11th Edition Dictionary
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Channels of Distribution
Transaction channel negotiate, sell,
contract concerned with the transfer of ownership
(and money) Distribution channel concerned with
the delivery of goods or services
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The Way Materials Move

• Depends on
• Channels of distribution being used
• Types of markets served
• Geographic dispersion
• Number of customers
• Physical characteristics of the product
• Volume/quantity of products
• Type of transportation available

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Transportation Mode Performance
Mode Freight Value ( billions) in 2002 Freight Tons (billions) in 2002 Freight Ton-Miles (millions) in 2002 Value Added to GNP (billion ) in 2009
Air (includes truck and air) 563 6 13 61.9
Road 9,075 11,712 1,515 113.1
Rail 392 1,979 1,372 30.8
Water 673 1,668 485 14.3
Pipeline 896 3,529 688 12.0
Multimodal 1,121 229 233
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Relative Operating Characteristics
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Section IV Transportation mode selection
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Transport Selection Decision

• Carrier Selection Determinants
• Costs
• Transit time and reliability
• Can be a competitive advantage
• Lowers customers inventory costs
• Capability
• Accessibility
• Security

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Transport Selection Decision
Carrier Selection Determinants and User
Implications
Determinants User Implication
Transport costs Landed costs
Transit time Inventory, stockout costs, marketing
Reliability Inventory, stockout costs, marketing
Accessibility Transit time, flight costs
Capability Physical / marketing needs
Security/Safety Inventory, stockout costs
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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

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Transport Selection Decision
Source Edward J. Bardi and T. S. Raghurathan,
"Motor Carrier Selection in a Deregulated
Environment," Transportation Journal 29, no. 1
(Fall 1989), 4-11.
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Transportation costs

• Fixed Costs
• the costs that do not change with the volume
  moved
• buildings, equipment, land
• Variable Costs
• Costs that change with the volume moved
• fuel, maintenance, wages

• Vary by flexibility and operating cost
• Ways
• road, water, air
• Terminals
• where goods are loaded or unloaded
• Vehicles
• equipment used to move goods

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Transportation Costs

• Ways
• Land, water, road, space, how goods are moved
• May be owned by the operator (railroad tracks),
• operated by the government (roads, canals) or
• River, ocean etc.
• Terminals
• Used to sort, load and unload goods
• connection between line-haul and local deliveries
• connection between different modes or carriers
• dispatching, maintenance, administration
• Vehicles
• owned or leased by the carrier

• Other costs
• (fixed or variable)
• Maintenance
• Administration
• Fuel
• Labor

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Intermodal Cost Analysis

• Question to be asked
• Should transportation be direct or through an
  intermediate site?
• Should the intermediate site stock product or
  only serve as a cross-docking location?
• Suppliers send shipments to an intermediate
  transit point
• Freight are cross-docked and sent to buyer
  locations without storing
• Should each delivery route supply a single
  destination or multiple destinations (milk run)?

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Transportation Cost Elements

• Transportation Cost Elements
• Line haul
• Pickup and delivery
• Terminal handling
• Billing and collecting

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Line-Haul Costs (LHC)

• Line-Haul Costs
• Cost per hundred weight (cwt)
• Total line-haul cost varies
• Cost per mile
• Distance moved
• Line-haul cost per cwt varies
• Cost per mile
• Distance moved
• Weight moved

• Line-Haul Costs
• (Distances)
• Fuel, labor, depreciation
• Approximately the same per mile whether full or
  empty
• LHC Total Line-Haul Cost
• Distance Travelled

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Example 1 Line-Haul Costs

• For a given commodity, the line-haul cost is 2.5
  per mile and the distance shipped is 100 miles.
  The total line-haul cost is therefore, 250.
• If the shipper sends 60,000 pounds, the total
  line haul cost is the same as if 20,000 pounds
  were shipped.
• However the line-haul cost per hundred weight
  (cwt) will vary.
• What is the cost per weight for either situation?

LHC60,000 lbs 250100 0.42 per cwt
60,000 LHC10,000 lbs 250100 1.25
per cwt 20,000
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Example 2 Line-Haul Costs

• For a particular commodity, line-haul cost is
  3.00 per mile.
• For a trip of 800 miles and a shipment of 50,000
  pound (or, 500 cwt), what is the cost of shipping
  per cwt?
• If the shipment is increased to 100,000 pound
  (or, 1000 cwt), what is the savings per cwt?

Cost800 (3.00 x 800) / 500 4.8 /
cwt Cost1000 (3.00 x 800) / 1000 3.00 /
cwt Savings 4.8 - 3.00 1.8
/ cwt
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Example 3 Total Cost Concept
A company normally ships a product by rail.
Transport by rail costs 200, and the transit
time is 10 days. However, the can be moved by air
at a cost of 1000 and it will take one day to
deliver. The cost of inventory in transit is
100 per day. What are the costs involved in the
decision?
Rail Air
Transportation Cost 200
1000 Inventory Carrying Cost
1000 100 Total
1200 1100
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Example 4 Shipping Cost

• A company ships items fully assembled.
• Items such as scooter, toys etc.
• The average line-haul cost is 15.00 per mile,
  and the truck carries 200 assembled items.
• The company decides to ship the items
  unassembled, which facilitate to ship 500 units
  in a truck.
• Find the following

• Truck have a weight limitation
• Some products have a low density and the truck is
  filled before the weight limitation is met
• Therefore, load products or ship products
  unassembled to increase the weight shipped

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Example 4 Shipping Cost (cont.)

• Line-haul cost assembled
• 15.00/200 0.075/ item / mile
• Line-haul cost unassembled
• 15.00/500 0.03/ item/mile
• Savings per mile
• 0.075 - 0.03 0.045/item/ mile
• Trip savings
• 300 miles x 0.045 / item/mile
• 13.5 per barbecue

• Calculate line-haul cost
• ( / item)
• 200 assembled items
• 500 unassembled items
• If the average trip is 300 miles, calculate both
• Savings per mile /item
• Savings per item for 300 miles

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Session V Mechanized loading equipment /
technology
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Truck Types
Counterbalanced Trucks
(Electric/Gas/Diesel)
Pallet Trucks
Tow Trucks
Stacker Trucks
Narrow Aisle Trucks
Reach Trucks
Order Pickers
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Mechanized Loading Technology

• Mechanized loading technology offers flexibility,
  expandability, quality, and reliability in
  handling and storage of containers. Commonly
  Intermodal containers are 20 or 40 feet in
  length, and can weigh up to 100,000 pounds.
• The loading/unloading equipment can moves
  simultaneously in both horizontal and vertical
  directions.
• Some common equipment used in mechanized loading
  are
• Gantry crane
• Straddle loader
• Side loader
• Reach loader

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Marine Gantry Cranes

• Gantry crane
• supported by a mobile frame
• which travels on the ground.
• Used for transfer goods
• 2550 ton lift capacity
• Span 32-76 ft
• 5-8 container lift height

Source Intermodal Freight Transportation and
RailroadsDavid B. Clarkem, University of
Tennessee
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Straddle Loader

• Straddle loader
• This equipment includes an upper
• frame having a spreader for grasping the load and
  at least two traveling frames for receiving the
  load, and a lifting system connected to the upper
  frame and the plural traveling frames
• Used for transfer/storage
• Capacity 50 Ton
• Span 15-20 feet
• Turning radius 35 ft outside
• Lifting height 2-5 container lift height

Source Intermodal Freight Transportation and
RailroadsDavid B. Clarkem, University of
Tennessee
50
Side Loader

• Side loader
• Used to Move long or bulky materials
• in very narrow aisles.
• 2245 ton lift capacity
• Turning radius 20 ft to 52ft
• Requires aisles 30ft min to 75ft
• 2-3 container lift height

Source Intermodal Freight Transportation and
RailroadsDavid B. Clarkem, University of
Tennessee
51
Reach Loader

• Reach loader
• Generally used to transfer goods on coastal
  vessels.
• 50 ton lift capacity
• 5-8 container lift height

Source Intermodal Freight Transportation and
RailroadsDavid B. Clarkem, University of
Tennessee
52
Lift Spreader

• Lift Spreader
• This equipment has adjustable
• lifting points.
• It is used for lifting containers.
• Capacity 5 to 10 Ton

Source Intermodal Freight Transportation and
RailroadsDavid B. Clarkem, University of
Tennessee
53
Future Trend Wireless management

• Four wireless communication options

Satellite railcar application (specially on
military) Cellular Tractor to trailer High-bandwi
dth radio frequency (RF) Warehouse management
system Narrow-band RF Heavy industrial
products, retailers, products
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Section VI Intermodal Risk and security
management
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Risks in intermodal transportation

• Risk of accident
• Improperly secured cargo can cause severe
  accidents and lead to the loss of property and
  lives as well as environmental hazards.
• Risk of delay
• Involves different modes of transportation, so
  any time cargo is transferred to a comparatively
  slower means of travel
• Possibility of delay du to extra time required
  for unloading and loading.
• Risk of disruptions
• Because of its reliance on more than one mode of
  transit, intermodal transportation is also
  subject to inconsistent overall reliability and
  disruption in service may happen if not properly
  planned.

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Risks in intermodal transportation (cont.)

• Risk of carrying hazardous material
• Transporting hazardous material posses potential
  risks to the people related with the material
  handling and transportation and the adjacent
  locality, loss of property and environmental
  damage.
• Risk of terrorist activity
• Terrorist attack in a transportation mode can
  cause loss/injury of people associated with it,
  loss of products.
• The vessels can be used against a population
  center adjacent to port facilities and/or
  shipping channels, to damage port facilities
  themselves or to sink the vessel(s) and block
  access to a port facility.

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Risk mitigation strategies

• Decrease the probability of disruptions
• Adequate planning and coordination among the
  modes allied with the intermodal transportation.
• Alternative routings
• Select transportation location avoiding highly
  populated area, critical locations
• Select route that can be taken under continuous
  supervision

• Use of modern technology
• Surveillance and detection
• remote sensing, electronic tags)
• GIS to provide visual maps

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Risk mitigation strategies (cont.)

• CSI ( Container security initiative) Four core
  elements
• Using intelligence and automated information to
  identify and target containers that pose a risk
  for terrorism.
• Pre-screening those containers that pose a risk
  at the port of departure before they arrive at
  U.S. ports.
• Using detection technology to quickly pre-screen
  containers that pose a risk
• Using smarter, tamper-evident containers.

Emergency Response Planning for any anticipated
transportation
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Risk mitigation strategies (cont.)

• Hazardous Material Transportation
• Following Hazardous Material Transportation Act
  of 1975 (HMTA)
• Carry minimum quantity or threshold
• Use of Dedicated container
• Identify sensitive areas in the route and take
  precautions accordingly.
• Avoiding populated routes.

Planning and following regulations for carrying
hazardous material
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Case Study
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Intermodal Cost Components

• Terminal Handling
• Cost depends on how many times the shipment must
  be handled
• Full truckloads (TL) go directly to the customer
• Less than truckloads (LTL) must be sent to a
  terminal, sorted and consolidated
• Therefore, consolidate shipments into fewer
  parcels

• Pickup and Delivery Costs
• Depends on time spent (not distance)
• Charged for each pickup
• Therefore, consolidate multiple shipments to
  avoid many trips

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Intermodal Cost Components

• Billing and Collecting Costs
• Costs of paperwork
• Costs of invoicing
• Therefore, reduce the number of pickups and
  pieces shipped (consolidating)

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Total Transportation Costs
Transportation Total cost Line-haul Pickup
and delivery Terminal handling Billing and
collecting

• To reduce costs
• Increase the weight shipped (line-haul cost)
• Reduce the number of pickups (pickup and delivery
  cost)
• Decrease the number of parcels (terminal handling
  costs)
• Consolidate shipments (billing and collecting
  costs)

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Example Case Study

• Suppose Kholer Inc. export agriculture tractors
  to South American countries (say, Argentina).
• 24 tractors can be carried inside a 20-foot
  container.
• Each tractor cost is 700
• Transportation (Rail) from Lincoln, Nebraska to
  Gulfport, Mississippi cost is 400 per container
  Transportation (ship) cost to overseas is 2200
  per container
• 12 annual interest shipping Lead Time is 25
  days
• Land and ocean insurance are 1 and 2 of total
  product cost, respectively.
• What is the costs of shipping 40 tractors?

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Case 1 Cost Analysis

• What price should be quoted for 40 tractors?
• Note that 24 tractors can be carried inside a
  20-foot container. Here are the costs of shipping
  40 tractors

Type of cost Cost ()
Tractors cost (40 x 700) 28,000
Rail to Gulfport (2 containers) (2 x 400) 800
Ocean freight (2 x 2200) 4,400
Insurance on land (1 of 28,000) 280
Insurance on sea 2 of (28,000800) 576
Documentation 250
Subtotal 34,306
Interest (0.12 x 25/365 x 34,306) 282
Subtotal 34,588
10 markup 3,459
Total 38,047
38,047 divided by 40 tractors equals 951.18 per
tractor
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Case 2 Cost Analysis

• What price should be quoted for 100 tractors?
• Here are the costs of shipping 100 tractors

Type of cost Cost ()
Tractors cost (40 x 700) 70,000
Rail to Gulfport (5 containers) (5 x 400) 2,000
Ocean freight (5 x 2200) 11,000
Insurance on land (1 of 70,000) 700
Insurance on sea 2 of (70,0002000) 1,440
Documentation 250
Subtotal 85,390
Interest (0.12 x 25/365 x 34,306) 702
Subtotal 86,092
10 markup 8,609
Total 94,701
94,701 divided by 100 tractors equals 947.01
per tractor
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Thank you