1. TRANSPORT FUNDAMENTALS

2. INTRODUCTION
Transportation is one of the most important elements in logistics costs for most firms.
Freight movement has been observed to absorb between one-third and two-third of total logistics costs.
The logistician needs to have a good understanding of the transportation matters.

3. EFFECTIVE TRANSORTATION SYSTEM
DEVELOPED
NATION
DEVELOPING
NATION

4. Importance of effective transportation system
Greater competition – making goods available to a market. The goods from outside a region have a stabilizing effect on prices of all similar goods in the marketplace.
Availability of non-seasonable products throughout the year across the world.
Economies of scale – with the greater volume provided in markets, more intense utilization can be made of production facilities leading to specialization of labour.
Reduced product prices.

5. Service choices and their characteristics

6. Transportation provides a wide range of services that revolves around the five basic modes: water, rail, truck, air and pipeline.
A transport service is a set of performance characteristics purchased at a given price.
The modes may be used in combination.
Transportation agencies, shippers’ association and brokers may be used to facilitate these services.
The aim is to select a service or a combination of services that strikes best balance between the quality of service offered and the cost of that service.

7. SELECTING A TRANSPORT SERVICE - BASIS
1. Price
It is the line haul rate for transporting goods and any accessorial or terminal charges for additional service provided.
In case of for-hire service, it is the rate charged for the movement of goods between two points, plus any additional charges, such as for pickup at origin, delivery at destination, insurance etc.
When the shipper owns the service, it is the allocation of the relevant costs to a particular shipment. Relevant costs include items such as fuel, labour, maintenance, depreciation of equipment, and administrative costs.

8. 2. Transit time and variability
Delivery (transit) time is usually referred to as the average time it takes for a shipment to move from its point of origin to its destination.
Transit time variability is a measure of the carrier performance.
If variability is viewed relative to the average transit time for the transport service, air can be the least dependable and truckload the most dependable.

9. 3. Loss and damage
Product condition is a primary customer service consideration.
The shipment of goods may be for replenishing a customer’s inventory or for immediate use. Delayed shipments or goods arriving in unusable condition means inconvenience for the customer or high inventory costs due to stockouts.
The claims process takes time to gather pertinent facts about the claim, takes effort on the part of the shipper to prepare the claim form, ties up capital while claims are being processed and involve considerable expense if the claim can be resolved only through court action.

10. Single-mode Service Choices and Issues
Air
Rapidly growing segment of transportation industry
Lightweight, small items [Products: Perishable and time sensitive goods: Flowers, produce, electronics, mail, emergency shipments, documents, etc.]
Quick, reliable, expensive
Often combined with trucking operations

11. Single-mode Service Choices and Issues
Rail
Low cost, high-volume [Products: Heavy industry, minerals, chemicals, agricultural products, autos, etc.]
Improving flexibility
intermodal service

12. Single-mode Service Choices and Issues
Truck
Most used mode
Flexible, small loads [Products: Medium and light manufacturing, food, clothing, all retail goods]
Trucks can go door-to-door as opposed to planes and trains.

13. Single-mode Service Choices and Issues
Water
One of oldest means of transport
Low-cost, high-volume, slow
Bulky, heavy and/or large items (Products: Nonperishable bulk cargo - Liquids, minerals, grain, petroleum, lumber, etc )]
Standardized shipping containers improve service
Combined with trucking & rail for complete systems
International trade

14. Single-mode Service Choices and Issues
Pipeline
Primarily for oil & refined oil products
High capital investment
Low operating costs
Can cross difficult terrain
Highly reliable; Low product losses

15. INTER-MODAL SERVICES
It implies shipping products using more than one transportation mode in the process.
It allows exchange of equipment between modes.
Increased international shipping is one of the major driving force.

16. Intermodal service combinations
Rail-truck
Rail-water
Rail-air
Rail-pipeline
Truck-air
Truck-water
Truck-pipeline
Water-pipeline
Water-air
Air-pipeline

17. Trailer on Flatcar (TOFC)
Also known as piggyback, it refers to transporting truck trailers on rail-road flatcars, usually over longer distances than trucks normally haul.
It is the most popular coordinated service.
It provides a blend of the convenience and flexibility of trucking and the long-haul economy of rail.

21. Plans for TOFC service:-
Plan I – Railroads transport the trailers of highway common carriers. Billing is through the highway carriers, and the railroads charge a portion of the carriers rate or flat fee for moving the trailer.
Plan II – Railroads use their own trailers and containers and transport these on their own flatcars. Railroads contract with local truckers to handle assembly at originating terminals and delivery from destination terminals.
Plan II1/4 – Similar to plan II, except railroads provide either pickup or delivery or both.
Plan II1/2 – Railroads provide the trailers or containers & the shippers move these to & from rail terminals.

22. Plans for TOFC service:-
Plan III – Shippers or freight forwarders can place their own trailers or containers, empty or loaded, on railroad flatcars for a flat rate. Pickup and delivery are the responsibility of shippers.
Plan IV – Along with furnishing trailers, shippers also provide the railroad equipment on which the trailers can move. The railroad charges a flat rate for moving the cars, empty or loaded.
Plan V – Two or more rail and truck carriers quote jointly on TOFC service. Each carrier may solicit freight for the other, which has the effect of extending the territory of each into that served by the other.

23. Containerized Freight
In this truck-rail intermodal service, only the container is hauled, thus saving the dead weight of the understructure and wheels.
It is known as container-on-flatcar (COFC).
The container can also be used in combination services with water as well as with air.
The typical container sizes are 8 by 8 by 20 feet and 8 by 8 by 40 feet. Both are compatible with the standard 40-foot highway trailer and with most other modes.

24. Transport Cost Characteristics

25. Variable and fixed costs
Fixed costs are those for roadway acquisition and maintenance, terminal facilities, transport equipment, and carrier administration.
Variable costs include line-haul costs such as fuel and labour, equipment maintenance, handling, and pickup and delivery.

26. Transport Cost Characteristics – By Mode
Rail
High fixed costs, low variable costs
High volumes result in lower per unit (variable) costs
Highway
Lower fixed costs (don’t need to own or maintain roads)
Higher unit costs than rail due to lower capacity per truck
Terminal expenses and line-haul expenses
Water
High terminal (port) costs and high equipment costs (both fixed)
Very low unit costs

27. Transport Cost Characteristics – By Mode
Air
Substantial fixed costs
Variable costs depend highly on distance traveled
Pipeline
Highest proportion of fixed cost of any mode due to pipeline ownership and maintenance and extremely low variable costs

28. Factors Influencing Transportation Costs
Market-related factors
»Degree of competition
»Location of markets
»Government regulation
»Freight traffic into and out of a market
»Domestic versus international movement

29. Factors Influencing Transportation Costs
Product-Related Factors
• Density: the weight-to-volume ratio
• Stowability: degree to which a product can fill the available space in a transportation vehicle
• Handling: ease or difficulty of handling the product
• Liability: threat of theft or pilferage

30. Transport prices - Rate Fixation
Line-haul rates – charges incurred between origin and destination terminals, or door-to-door in case of truckload motor carrier service.
Special service charges – prices for additional services, such as terminal services, stop-off services, and detention of carrier equipment.

31. Line Haul Rates

32. Product Basis
A product classification system is followed in which product items are assigned to different classes and rates are quoted for each class.
Freight-All-Kinds – when carriers quote single rates for shipments regardless of the classification of the commodities that make up the shipment, the rate is referred to as a freight-all-kinds (FAK) rate or an all-commodity rate (ACR).

33. Factors taken into account for product ratings:-
Weight per cubic foot as packed for shipment
Liability to loss, damage, waste, or theft in transit
Risks due to hazards of carriage
Expense of, and care in, handling
Competition between articles of different description but largely used for similar purposes
Trade conditions
Commercial conditions and unit of sales

34. Shipment Size Basis
Rates are quoted on quantity basis and can be different depending upon whether the shipment size falls in relation to prescribed minimum quantities established in the rate tariff.
There may be single rate for all quantities, referred to as any-quantity (AQ) rate.
There are incentive rates such as In-excess rates which are lower than vehicle-load rates and apply to those quantities that exceed vehicle-load minimums

35. Route Basis
When shipments involve full-vehicle-load movements, carriers use a per-mile charge to compute total shipping expenses.
When vehicle is loaded with cargo destined for more than one stop, a stop-off charge is added to the bill.
The per-mile rate is determined by the location of the last point on the route.

36. Miscellaneous Rates Cube Rates – rates based on space occupied.
Import or Export Rates
Deferred Rates – shipper is willing to accept the possibility of increased delay in delivery compared with regular service in exchange for lower rates.
Released Value Rates – the carrier’s limited to some fixed figure for loss or damage of goods.
Ocean Freight Rates – Ocean carriers are quoted either on a space or weight basis, further fees and surcharges may be added to cover items such as tolls and handling.

37. Special Service Charges

38. Diversion and Reconsignment
Diversion of a shipment refers to changing the destination of a shipment while on route.
Reconsignment refers to changing the consignee of a shipment , usually after it has reached the original destination.
Used for perishable commodities
Carrier's equipment can be used a warehouse.

39. Transit Privileges
A special service that permits shipments to be stored before moving to the final destination.
A shipment is treated as if it moves directly from an origin point to a destination point, and the freight charge is composed of the through rate from the origin to destination plus a small additional charge for the stop-offpoint.

40. STOP-OFF PRIVILEGE TO COMPLETE LOADING
Direction of movement
$1.10/unit
$0.50/unit
$1.00/unit
I - Origin
18000 units
J -Complete loading
36000 units
K - Destination

41. Protection Articles requiring some additional protection.
Perishable commodities may need refrigeration, icing, ventilation, or heating.
Fragile commodities may require extra packing .

42. Interlining
One carrier may pick up a shipment and then give it to another carrier that serves the destination region.
The first carrier pays the second, but the shipper is billed by the first.
The total shipment charge includes the profit made by both carriers, and the rate may be higher than if none carrier could handle the shipment form origin to destination.

43. Terminal Services Pickup and delivery charges
Switching – The movement of railroad cars from private sidings and junctions to rail terminals or stations or vice versa. It may be paid by the shipper or consignee on a flat-charge-per-car-basis.
Demurrage and detention – Penalty charges imposed on shipper or consignee for holding the carrier’s equipment beyond an allowed free time that the carrier may hold a shipment

44. In-company Management v/s. Out-sourcing

45. In-company Management
Providing transportation service through company ownership of equipment or contracting for transportation services.
It requires investment in transportation or commitment to a long term contractual agreement.

46. Benefits: Better operating performance
Greater availability and capacity of transportation service
Short order cycle times
Emergency response capability
If the shipping volume is high, it may be more economical to own the transportation service than to rent it.

47. In case of special requirements:
Fast delivery with high dependability
Special equipment not generally available.
Special handling of the freight
A service that is available on demand

48. PRIVATE CARRIER COSTING

49. Vehicle operating costs:-
Fixed costs:-
Insurance on the vehicle
Licensing fees
Equipment amortization
Expenses associated with housing the vehicles
Operator costs:-
Driver compensation
Wages contribution to health and pension plans
On the road expenses such as meals, hotel, and other living costs
Contributions to social security
Vehicle operating costs:-
Costs incurred in keeping the vehicle on road – fuel, tires, maintenance.

50. TRANSPORT DOCUMENTS These documents are evidence shipment of goods.
They evidence the mode, manner and date of shipment.
These are of following types:
Bill of Lading
Multimodal Transport Document
Airway Bill
Railway Receipt
Lorry Receipt
Post Parcel Receipt
Courier Receipt

51. BILL OF LADING
A receipt issued by the shipping company (an exclusive evidence of goods having been given to the charge of the shipping company).
Functions:
Receipt of goods
Contract of Carriage
Document of Title to Goods

52. TYPES OF BILL OF LADING On Board Received Shipped for Shipment

53. TYPES OF BILL OF LADING Trans-shipment Through Bill of lading

54. TYPES OF BILL OF LADING
Claused
Bill of lading
Clean
Bill of lading

55. Straight Bill of lading
TYPES OF BILL OF LADING
Consignee-Named Or
Straight Bill of lading
“Order”
Bill of lading

56. MULTIMODAL TRANSPORT DOCUMENT
Issued when the movement of goods involve more than one mode of transport.
It is a document evidencing receipt of goods and is a negotiable instrument.
The carriers or Combined Transport Operators takes the liability for safe conduct of transport of goods by various modes of transport from the place of receipt of goods to the place of delivery.

57. AIRWAY BILL
An acknowledgement issued by the airline company or their authorized agents stating that they have received the goods detailed therein for dispatch by air to the named consignee at the address stated therein.
It is not a negotiable instrument.