1. Transportation Management
CHAPTER 13
Transportation Management
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2. Copyright © 2015 Pearson Education, Inc.
Learning Objectives
To explain contemporary transportation management
To discuss how rates are determined
To learn about modal and carrier selection
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3. Copyright © 2015 Pearson Education, Inc.
Learning Objectives
To distinguish among various transportation documents
To illustrate select activities associated with making and receiving shipments
To learn about transportation service quality
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4. Transportation Management Key Terms
Amodal shipper
Bill of lading
Class rate system
Commodity rate
Concealed loss or damage
Demurrage
Density
Detention
Documentation
Expediting
FOB destination
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5. Transportation Management Key Terms
FOB origin
Freight bill
Freight claims
Rate
Routing
Routing guide
Stowability
Tracing
Transportation Management
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6. Contemporary Transportation Management
refers to the buying and controlling of transportation service by either a shipper or consignee1
Transportation is the most costly logistics activity
1Source: John J. Coyle, Edward J. Bardi, and Robert A. Novack, Transportation, 6th ed. (Mason, OH: South-Western, 2006).
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7. Contemporary Transportation Management
Transportation managers also involved in other operations of the firm
Marketing
Manufacturing
Outbound shipping
Purchasing
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8. Rate (Pricing) Considerations
Rate Determination
One key responsibility of transportation managers
Rate
Price charged for freight transportation
Fare
Prices charged for passenger transportation
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9. Rate (Pricing) Considerations
Rate Determination
Weight x rate = transportation charge
Transportation rates based on three factors
Product
Weight
Distance
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10. Rate (Pricing) Considerations
Rate Determination
Commodity rate
One specific rate for every possible combination of product, weight, and distance
Class rate system
System to simplify rate determination
Freight classification used to simplify the number of commodities
National Motor Freight Classification (NMFC)
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11. Rate (Pricing) Considerations
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12. Rate (Pricing) Considerations
Rate Determination
Factors used for determine product’s freight classification
Density
refers to how heavy a product is in relation to its size
Viewed as primary factor for setting a product’s classification
Stowability
refers to how easy the commodity is to pack into a load
possible considerations involve the commodity’s ability to be loaded with hazardous materials and ability to load freight on top of the commodity
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13. Rate (Pricing) Considerations
Rate Determination
Factors used for determine product’s freight classification
Ease of difficulty of handling
refers to challenges to handling that might be presented by a commodity’s size, weight, and so on
Liability for loss and damage
considers, among others, a commodity’s propensity to damage other freight, its perishability, and its value
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14. Rate (Pricing) Considerations
Rate Determination
Weight groups are used to simplify shipment weight
Weight group examples:
<500 lbs (highest rate)
lbs
1000-1,999 lbs
Distances are simplified through rate basis numbers
Zip codes are replacing rate basis numbers
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15. Rate (Pricing) Considerations
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16. Rate (Pricing) Considerations
Rate Determination
Commodity Classification Standards Board develops and maintains commodity freight classifications
Shippers prefer lower classification number (lower rate)
Carriers prefer higher classification number (higher rate)
Transportation managers can appeal a commodity’s classification
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17. Rate (Pricing) Considerations
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18. Rate (Pricing) Considerations
Rate and Service Negotiations
Both rates and service levels may be negotiated due to economic deregulation
Allows transportation managers to take advantage of trade-offs between price and service
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19. Rate (Pricing) Considerations
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20. Rate (Pricing) Considerations
Rate and Service Negotiations
Domestic terms of sale
When freight charges are paid for a particular domestic shipment
Transportation cost analysis
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21. Modal and Carrier Selection
Two-step process
First determine appropriate mode(s)
Then select carrier(s) within the chosen mode(s)
Carrier selection is more challenging
Difficult to be aware of every possible carrier
Lack of agreement on the number of relevant factors
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22. Modal and Carrier Selection
Amodal shipper
Refers to a transportation manager who purchases a prespecified level of transportation service and is indifferent to the mode(s) and or carrier(s) used to provide the actual transportation service.
Research indicates shippers are more interested in transportation metrics than in modes
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23. Copyright © 2015 Pearson Education, Inc.
Documentation
Documentation
Serves practical function
What, where, and how much is being transported
Potentially provides legal recourse
Transportation department is responsible for completing all documents needed to transport the firm’s products
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24. Copyright © 2015 Pearson Education, Inc.
Documentation
Bill of lading
Functions as a delivery receipt when products are tendered to carriers
Bill of lading classifications
Straight bill of lading
Order bill of lading
Long-form bill of lading
Preprinted short-form bill of lading
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25. Copyright © 2015 Pearson Education, Inc.
Documentation
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26. Copyright © 2015 Pearson Education, Inc.
Documentation
Freight bill
Invoice submitted by the carrier requesting to be paid
Freight bill-paying service
Automated service in attempt to pay carriers within a specific number of working days
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27. Copyright © 2015 Pearson Education, Inc.
Documentation
Freight bill
Internal audits
Conducted to detect current errors that result in overcharges and to
Correct these errors in the future
External audits
Work is performed by an independent third party to detect errors in freight bills
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28. Copyright © 2015 Pearson Education, Inc.
Documentation
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29. Copyright © 2015 Pearson Education, Inc.
Documentation
Freight claims
Refers to a document that notifies a carrier of wrong or defective deliveries, delays, or other delivery shortcomings
Concealed loss or damage difficult for shippers and carriers
Refers to situation where loss or damage is not apparent until after a shipment has been unpacked and inspected
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30. Making and Receiving Shipments
Key area of decision making in transportation management involves making and receiving shipments
Refers to tactical planning and control of shipments along with supervision of freight loading and unloading
Source: John E. Tyworth, Joseph L. Cavinato, and C. John Langley, Traffic Management: Planning, Operations, and Control (Prospect Heights, IL: Waveland Press, 1991).
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31. Making and Receiving Shipments
Consolidating small shipments
Shipments > 150 and < 500 pounds
To get a lower rate, shipment consolidation may occur: aggregating customer orders across time or place or both
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32. Making and Receiving Shipments
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33. Making and Receiving Shipments
Demurrage and Detention
Demurrage
Penalty payment made to the railroad for keeping a railcar beyond the time when it should be released back to railroad
Detention
Same concept as demurrage except it usually refers to the trucking industry
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34. Making and Receiving Shipments
Routing
Process of determining how a shipment will be moved between origin and destination1
Routing guide
Example of routing
Document that can provide a variety of shipment-related information
1http://
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35. Making and Receiving Shipments
Tracking and Expediting
Tracking
Refers to determining a shipment’s location during the course of its move
Expediting
Involves the need to rapidly move a shipment to its final destination
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36. Transportation Service Quality
Macroenvironmental changes have caused organizations to demand higher levels of service quality
Economic deregulation allowed for both price and service competition resulting in a need to measure performance
Can measure performance through the use a performance scorecard
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37. Transportation Service Quality
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38. Copyright © 2015 Pearson Education, Inc.
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