1. 1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 19

2. 6-2 Rate Types  Line haul rates  Class >Freight classification of items >(National Motor Freight Classification of Selected Products) >Rate tables of tariffs  Contract rates  Drayage (local delivery)  Commodity and contract rates  Specific rates for given shipment sizes for specific products moving between designated points  Special service charges  Extra charges  Diversion and reconsignment  Stop-off privilege example

3. Should always check to see if shipment can be declared at the next higher weight break for a lower rate and lower total charges Table 6-5 Table 6-4 Suppose we wish to ship 15,000 lb. (150 cwt.) of wheat flour from New York to Los Angeles by truck. The trucker offers a 40% discount from the published tariff. What is the transportation charge? From the freight classification table, this is item number 1090--00. It shows a minimum weight of 36,000 lb., which is greater than this shipment size. Therefore, the class rating is 55, or less-than-truckload. From the class 100 tariff, the rate is 6065, or $60.65 per cwt. With a 40% discount, the effective rate is (1-.40) x 60.65 = $36.39. The shipment charges are 0.55 x 36.39 x 150 = $3,002.18. Class Rate Example CR (2004) Prentice Hall, Inc. 6-11

4. Break Weight where: Break Weight = Weight above which the next higher weight break rate should be used for lower transport costs Rate Next = Rate for next higher weight break Weight Next = Minimum weight of next higher weight break Rate Current = Rate for true weight of shipment. Question Suppose 9,000 lb. of Class 100 merchandise is to be shipped from New York to Dallas. From Table 6-4, the rate would be $52.21/cwt. However, should the shipment be priced at the next higher weight break rate of $40.11/cwt. for a lower cost? CR (2004) Prentice Hall, Inc. 6-12

5. Break Weight (Cont’d) Since the 9,000 lb. shipment size exceeds the break weight of 7,682 lb., size as if a 10,000 lb., shipment for a total cost of $40.11x 100 = $4,011. Otherwise, the shipment would have cost $52.21x90 = $4,699. Answer CR (2004) Prentice Hall, Inc. Calculate break weight 6-13

6. 6-6 Stop-Off Privilege Example CR (2004) Prentice Hall, Inc. Suppose 3 shipments of J=8,000 lb., K=12,000 lb., and L=10,000 lb. originating at I are to be delivered in the following way.

7. 6-7 Stop-Off Privilege Example (Cont’d) The better choice All volume to the farthest stop Load, lb. Points Rate, $/cwt. Charges 8,000 I to J 3.05 $244.00 12,000 I to K 3.35 402.00 10,000 I to L 3.60 360.00 Total $1006.00 Load, lb. Points Rate, $/cwt. Charges 30,000 I to L 3.00 $900.00 3 stops at $15 each 45.00 Total $945.00 CR (2004) Prentice Hall, Inc.

8. 6-8 Private carrier costing  Service Reliability  Short Order Cycle Times  Emergency Response Capability  Improved Customer Contact  Costs:  Fixed Costs  Operator Costs  Vehicle Operating Costs CR (2004) Prentice Hall, Inc.

9. 6-9 Rate Profiles By distance Rates vary with the distance between origin and destination in the following manner CR (2004) Prentice Hall, Inc.

10. 6-10 Rate Profiles (Cont’d) By volume Rates by shipment size have the following characteristic CR (2004) Prentice Hall, Inc.