The Domestic Transportation System Chapter 6

What is Transportation? The movement of goods and people between two points

5 Modes of Transportation Truck Rail Air Water Pipeline

Intermodal Transportation Occurs when two modes or more work together on a regular basis, utilizing the advantages of each Refers to carriage when using a container that can be transferred from the vehicle of one mode to a vehicle of another mode without the contents being relocated or disturbed

Routing or Shipping Guides Contain instructions for choice of mode and carrier to handle each shipment Computerized so that decision on how to ship is determined at the time of order processing Sometimes supplied to vendors indicating how goods must be routed

Nodes or Terminals Points to and from which shipments are made Integral part of the transportation and logistics system Represents points where one achieves access to or exit from a transportation system

Types of Shippers Small shippers LTL - Less-Than-Truckload Carriers Parcel carriers LTL - Less-Than-Truckload Carriers TL/CL - Truckload and Carload Shippers Large Bulk Shippers

Small-Volume Shippers Parcel carriage Packages weighing up to 100 to 150 pounds Parcel post A service of the U.S. Postal Service Charges are based on weight and distance and are relatively low

Small-Volume Shippers UPS FedEx Passenger Carriers Buses

UPS Best-known parcel carrier Very reliable Rates include both pickup and delivery Provides computer software to assist with documentation so customers may learn of the status of their shipment

FedEx Specialty is overnight delivery Uses large fleet of aircraft to carry parcels to and from several major hubs each night

Passenger Carriers Carry small packages Packages carried in the belly of passenger aircraft

LTL - Less-Than-Truckload 150 to 5,000 or 10,000 pounds Shipments are to big to handle manually, yet they do not fill a truck Trucks that carry LTL freight have space for and plan to carry shipments of other customers at the same time

LTL Bobtail truck picks up freight and carries to terminal Freight then loaded aboard line-haul trucks Line-haul trucks driven to terminal near freight’s destination Freight loaded from line-haul trucks, moved through terminal, loaded onto bobtail truck for delivery

Consignees Receivers of Freight Usually specify that all shipments made to them be routed via a specific LTL or parcel carrier

LTL by Air 2 Methods Freight tendered directly to the airline Freight given to a freight forwarder for consolidation Products that are air freighted tend to be high in value and are often of a perishable nature or otherwise require urgent delivery

Air Freight Air freight moves in air cargo containers Air cargo containers have varying shapes, designed to take into account the plane’s interior contours

Freight Forwarders 2 types Consolidators of freight Surface Air Consolidators of freight Give volume discounts to customers shipping large quantities of freight at one time Offer pickup and delivery service but do not perform line-haul service

Airlines & Freight Forwarders Airlines encourage freight forwarder traffic because it results in an agreeable division of labor Forwarder provides retail function dealing with the customer Airline provides wholesale function by moving the forwarder’s containers between major cities

Forwarder - Air Carrier Relationship Elements Honoring of space commitments made by forwarder Fixed, competitive rates Honored rebates, based on forwarder performance As little bulk as possible, tender whole containers

Forwarder - Air Carrier Relationship Elements Airline guarantees lift Improved on-time delivery by airlines Preferred access to capacity during peak periods No competition at the retail level

Shippers’ Cooperatives Same function as surface and air freight forwarders, except do not operate as profit-making organization

Broker A facilitator that brings together a buyer and seller Some handle LTL shipments by consolidating shipments and turning them over to truckers, forwarders, or shippers’ associations

Published Rates Used for parcels and LTL shipments Based on 3 factors: The size of the shipment The distance traveled The product’s handling characteristics

TL/CL Truckload & Carload Shippers 20,000 to 30,000 pounds Carloads tend to be heavier than truckloads Use intermodal surface containers 102 inches wide X 8.5 feet high X 40 feet long

3 Reasons TL Cost Less Than LTL The shipper loads & the consignee unloads the trailer The load goes directly from the shipper to consignee without passing through terminals Paperwork, billing, & control costs are no more for a truckload than they would be for 10-pound LTL shipment

TL Rate Negotiable Price is a function of supply and demand for transportation

TL Freight Haulers Specialize in truckload lots, using their own equipment or contracting with owner-operators Example firms Schneider National Van Carriers - largest J.B. Hunt Transport Advertise less because do not need to maintain a nationwide presence

Private Transportation TL Shipping The shipper provides and operates its own equipment

Dedicated Equipment TL Shipping Carrier owned but assigned to serve specific customers for an indefinite period

Chartered Cargo Aircraft Charter or rent an entire aircraft to handle specific shipments Expensive as compared with other modes of transportation Example - Averitt Air Charter - BNA

Large Bulk Shippers Bulk Materials Loose rather than in packaged form Handled by pumps, scoops, conveyor belts, or by the force of gravity An ideal equipment configuration for one bulk cargo may not be able to handle another Particle size is always a question

Methods Bulk Cargo is Transported Truckload hauls Railroads Water carriers Pipelines Slurry Systems

Truckload Hauls 2 Kinds For-hire trucks - retained for a specific haul or for a span of time or for a task Private trucks

Railroads Multiple-car shipments encouraged because the railroad can switch and haul a number of cars as easily as one Unit train handle the largest of rail hauls a train of permanently connected cars that carries only one product from origin to destination

Water Carriers Domestic movement Interland waterways - barge system Ocean going vessels between the mainland states and Alaska, Hawaii, and Puerto Rico

Pipelines 2 types of oil pipelines Crude - transport petroleum from wells to refineries Product - carries gasoline or aviation fuel to tank farms located nearer to consumers

2 Types of Crude Pipelines Gathering lines - start at each well and carry the product to concentration points Trunk lines - larger and carry crude oil from concentration points to the oil refineries

Slurry Systems Involve: Grinding the solid material to a certain particle size Mixing it with water to form a fluid, muddy substance Pumping the substance through a pipeline Decanting the water and removing it, leaving the solid material

Dry Bulk-Handling Systems Often large and custom engineered to fit specific needs Book examples Coal car unloading facility Taconite loading facility Large grain elevator

Project Cargo Recurring shipments usually lend themselves to logistics analysis that results in either lower-cost shipments or a more efficient method of handling the shipment, or both

Oversized Moves Some products are assembled at the factory to determine functionality then disassembled for shipment due to size Cost is reduced if the time required for disassembly and assembly is less, hence oversized moves via high-weight trucks and heavy dollies

3 Limitations of Oversized Moves Weight Height of bridges or tunnels Curvature of the road or steepness of grade

Hazardous Materials Have the potential of endangering the carrier’s equipment, other products, people, and the environment Can be transported by any mode Usually move in special dedicated or shipper-owned equipment Regulated by both state and federal governments

3 Reasons Railroads Haul More Hazardous Materials Their equipment Their routes Their relatively low incidence of accidents

Hazardous Regulations Include: Employee training programs Special packaging Special marking The most stringent regulations deal with tank vessels operating within 200 nm of the United States

Mode Comparison Ton-mile - one ton of freight carried one mile Pipeline 1.3 cents per ton-mile (slow) Water 1.7 cents per ton-mile Rail 2.9 cents per ton-mile Truck 36 cents per ton-mile Air 89 cents per ton-mile (fast)

Transportation Regulation A government agency approves or disapproves the services offered and the rates charged Carriers were allowed to operate as monopolists or oligopolists and in return assumed the common carrier obligation

4 Specific Obligations of Common Carriers To serve To deliver To charge reasonable rates To avoid discrimination

Transportation Deregulation Began in late 1970s Continued into 1990s Nevertheless, some regulation still exists Traffic manager must be able to operate in both environments

Carriers Still Subject to Economic Regulation Railroad service to captive shippers - those that have no viable alternative means of transport Household goods movers Petroleum pipelines Natural gas pipelines

Inland waterway traffic Water transport & some joint motor-water transport between the mainland, Hawaii, Puerto Rico, and Alaska

Transportation Rates Complex 3 Factors of Rate Structures Relationships between different products, in terms of their handling characteristics Relationships between shipments of different weights Relationships between different distances the products are carried

Ratemaking Must define all 3 relationships in numeric form Then must devise methods of tying those numbers into a rate of so many cents per hundredweight for a specific haul Rates are found with the help of a classification tariff

4 Factors to Determine Freight Classification Density of the product Stowability Ease or difficulty of handling Liability to damage and theft

Rate Determination Once the class is determined, it is necessary to establish the rate bases number from the applicable tariff This number is the approximate distance between the cities of origin & destination

Rate Determination With the class & and the rate base number, the specific rate per hundred pounds can be located in another tariff To establish the specific cost of moving commodity A between City B & C, use: Weight X Rate = Charge

Computerized Freight Rates & Tariffs Most shippers & carriers have computerized many aspects of their freight-moving activities Buyers, sellers, & carriers regularly exchange data via electronic means Internet widely used to find or book rates as well as track freight

2 Forms of Computerization Internal External

Internal Computerization Implies that a firm will own or lease its own computer facilities The entire rate-retrieval operation will be performed by employees of the company

External Computerization Use of an outside company The computer & rate-retrieval programs are operated & continually updated by the contracting company Advantages over internal: Less expensive to start up Can be operational in less time

End of Chapter 6