Transportation—Managing the Flow of the Supply Chain Lecture 8

Introduction  Transportation involves the physical movement of goods between origin and destination points.  The transportation system links geographically separated partners and facilities in a company’s supply.  Transportation facilitates the creation of time and place utility in the supply chain.  Transportation also has a major economic impact on the financial performance of businesses.

Role of Transportation in Supply Chain Management  Transportation provides the critical links between these organizations, permitting goods to flow between their facilities.  Transportation service availability is critical to demand fulfillment in the supply chain.  Transportation efficiency promotes the competitiveness of a supply chain

Challenges to Carrying out This Role  supply chain complexity  competing goals among supply chain partners  changing customer requirements  limited information availability  synchronizing transportation with other supply chain activities

Challenges to Carrying out This Role  Transportation capacity constraints pose a challenge.  Rising transportation rates present another major concern for organizations.  The transportation industry is impacted by governmental requirements that affect cost structures and service capabilities.  Regulation is growing in areas where the transportation industry has the potential to impact the quality of life, the safety of citizens, and the growth of commerce.

Modes of Transportation  primary modes of transportation truck rail air water pipeline intermodal transportation

Modes of Transportation  moves approximately 19.5 billion tons valued at nearly $13 trillion  Modal breakdown: Trucking 80.0 % $635 billion Rail 06.7% Air 04.7% Water 04.6% Pipeline 01.2%

Modes of Transportation Motor Carriers  widely used mode of transportation in the domestic supply chain  573,469 private, for hire, and other U.S. interstate motor carriers  economic structure of the motor carrier industry contributes to the vast number of carriers in the industry  comprised of for-hire and private fleet operations  Truckload carriers.  Less-than-truckload (LTL)  Small package carriers  Low fixed cost, high variable

Modes of Transportation Railroads  7 Class I railroads revenues in excess of $290 million  Activity levels have been achieved despite a lack of direct accessibility to all parts of the supply chain  Railroads are “natural monopolies”  Two carrier types: Linehaul Shortline carriers  High fixed, low variable

Modes of Transportation Water  Major facilitator of international trade  81% international freight movement  19% coastal, inland, and Great Lakes traffic  High variable and low fixed cost  Two primary carrier types Liner Charter  Options include Container ships Bulk carriers Tankers General cargo ships Roll-on, roll-off (RO–RO) vessels

Modes of Transportation Air Carriers  491 air cargo carriers Combination carriers Air cargo carriers Integrated carriers Nonintegrated carriers  Domestic market is dominated by 14 major carriers  High variable and low fixed cost

Modes of Transportation Pipeline  Unique mode of transportation as the equipment is fixed in place and the product moves through it in high volume  174 operators of hazardous liquid pipelines that primarily carry crude oil and petroleum products  Three primary types Gathering lines Trunk lines Refined product pipelines  High fixed versus low variable

Modes of Transportation Intermodal Transportation  Use of two or more different modes in movement  Greater accessibility  Overall cost efficiency  Facilitates global trade  Development of standardized containers that are compatible with multiple modes.  Product-handling characteristics Containerized freight Transload freight