Modes of Transportation in Supply Chain Trey Lynn Brigham Young University BusM 361 Professor S. Tom Foster Welcome to my presentation.

Agenda Transportation defined Brainstorming Modes of transportation Strengths and weaknesses of each mode Pricing UPS example Exercise Summary Let’s learn about different modes of transportation!

Transportation means of conveyance or travel (of goods and services) from one place to another Although this definition may seem simple, transportation is one of the most important aspects of supply chain management. The timely delivery of goods and services is critical to every company’s operation.

Brainstorming What types of products require transportation in your organization? How far are these products required to travel? How important is the speed of delivery for these products? The responses to these questions should be written down or remembered for an exercise later on.

Modes of Transportation Motor Air Rail Water Pipeline Intermodal Each mode will be discussed individually in the presentation

Motor (Trucking) 1970’s – economic deregulation of interstate traffic Lower costs Accessibility Small, frequent shipments Deregulation took place from the mid 70’s to the early 80’s. Complete deregulation for all states didn’t occur until 1995. This gave buyers more options in selecting the transportation mode and carrier. Pricing was also opened to free markets. Accessibility – trucks are able to access many more locations than planes or railroads. Regional truck lines are excellent for small, frequent shipments that require follow-up or expediting. They are most effective over short distances.

Trucking Disadvantages Speed Capacity Range Trucks are much slower than some other forms of transportation (such as air). Trucks are also unable to carry as much cargo as ships or trains and they cannot go as far without stopping.

Air Premium transportation Speed delivery Range Air is considered a premium mode of transportation because of the speed of delivery and the low impact on the cargo (items are less likely to be broken than those shipped by rail or truck) Airplanes are also able to cover much longer distances in a short time Savings resulting in speed of delivery may outweigh extra costs

Air Disadvantages Price Non-direct points Add-on charges Necessary? Cost per pound significantly higher than that of other transportation modes Airlines may charge more for non-direct points, or destinations that are not near hubs. Necessary? - Studies have shown that many premium air freight shipments could have been shipped using lower-cost surface mode and still arrived within the needed time frame

Rail Lowest overall cost per unit weight Consistent time schedule Recommended with most commodity types Weather Railroads cost much less than other modes when shipping large quantities or bulky goods over long distances. Trains also run on a more consistent time schedule than trucks or airlines. Trains are often able to travel in weather that would slow or stop trucks and airplanes.

Rail Disadvantages Inflexibility Potential damage of goods Ineffective with small shipments Inflexibility – trains are limited as far as areas in which they can travel (tracks must be present). Shippers may not be able to easily divert a carload of freight from one destination to another in case the desired unloading point changes and obtaining goods in transit in cases of emergency may be inconvenient. Potential damage – load shifting when freight is not securely blocked and braced (knowledge of the materials is very important in this case)

Water (Ships) Large volumes Long distances Slower than air travel Limited access Ships are one of the oldest methods of transporting goods and they are virtually the only way to transport large volumes of good over-seas. Although this method is slower than shipping by air, a ship can carry much more cargo than an airplane. Costs are reduced significantly by choosing ships over air transport.

Pipeline Transport of homogeneous materials Lower transportation costs than other modes Higher initial costs Unable to transport a variety of materials Pipelines are ideal for materials such as water, oil, and gas. Pipelines have high initial costs since they must be built but once they are constructed transportation costs are much lower than other modes.

Intermodal Use of various transportation modes Containers More popular due to globalization Containers allow goods to be shipped by boat and then transported across land by trucks and trains. Intermodal transportation is one of the most effective ways of transporting goods from overseas to local vendors.

Pricing Handling characteristics Distance freight is moved Weight of freight Costs inversely related to speed of service Handling characteristics – carrier will begin rating process by classifying the freight using a basis of 100. Commodities that are denser and easier to handle will receive a lower classification number. Higher rates for higher numbers Distance freight is moved – rates increase at a decreasing rate as distance increases Weight of freight – as the total weight of a shipment increases, the cost per pound decreases. A shipper may lower total transportation costs by consolidating shipments with a carrier. Rates are generally listed in cents per hundred pounds (cwt) Price based on weight, distance, and frequency of shipments

United Parcel Service Small package shipper Business built around transportation Effective intermodal transportation

UPS - Methods Trucks Air Small, frequent shipments Deliver directly to homes and businesses Air Time sensitive shipments Small packages (long distances) UPS has mastered the art of using different modes of transportation for different types of shipments. These are some examples of

UPS - Methods Rail Sea Transcontinental distances Used primarily in intermodal transport Sea Door to door ocean shipping Weekly departures between major ports UPS uses railroads to deliver many packages which arrive by ship and are destined for places across the country. Transportation by rail and by sea create a form of intermodal transportation which maximizes efficiency.

UPS Provides expertise as a resource to businesses http://www.ups-scs.com/transportation/ UPS has organized its knowledge of shipping in order to help both small and large businesses. UPS offers a full range of supply chain solutions. These solutions include deciding which modes of transportation are best for certain needs and deciding which providers to use.

Exercise Take ideas from brainstorming and decide which modes of transportation would be best for your company. List circumstances which would require using alternate modes of transportation and consequences your company would encounter.

Summary Each mode of transportation has its own strengths and weaknesses The effectiveness of each mode depends on several factors including distance, price, and timeliness Services exist to help choose the best modes of transportation

Bibliography Cavinato, Joseph L, Ralph G Kauffman. The Purchasing Handbook. The McGraw-Hill Companies, 2002, New York, NY. Copacino, William C. and James F. Robeson. The Logistics Handbook. The Free Press, 1994, New York, NY. Taylor, David. Global Cases in Logistics and Supply Chain Management. International Thomson Business Press, 1997, London, UK. http://www.ups-scs.com/transportation/