Transport Fundamentals
When the Chinese write the word “crisis,” they do
so in two characters—one meaning danger, the
other opportunity.
Chapter 6
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6-1
Transport Fundamentals
in Planning Triangle
Inventory Strategy
• Forecasting Transport Strategy
• Inventory decisions • Transport fundamentals
CONTROLLING
ORGANIZING
• Purchasing and supply • Transport decisions
scheduling decisions Customer
PLANNING
• Storage fundamentals service goals
• Storage decisions • The product
• Logistics service
• Ord. proc. & info. sys.
Location Strategy
• Location decisions
• The network planning process
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6-2
The importance of
transportation system
The story of less-developed vs more-developed
region
•Economies of scale
•Reduced price
6-3
Transport System Defined
Performance
- Average transit time
- Transit time variability
- Loss and damage
- Other factors including availability, capability,
frequency of movement, and various less
tangible services
Cost
- Line haul
- Terminal/local
- Accessorial or special charges
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6-4
Transport Choices
Primary intercity carriers Small shipment carriers
Air UPS
Truck Federal Express
Rail Postal services
Water Bus Package Express
Pipe
Agents
Coordinated services Freight forwarders
Piggyback Shipper associations
Birdyback
Fishyback Others
Autos
Bicycles
Taxis
Human
Electronic
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6-5
Importance of Modes
By Products Hauled
Air--very high-valued, time sensitive products
Truck--moderately high-valued, time sensitive
products. Many finished and semifinished goods
Rail--low-valued products including many raw
materials
Water--very low-valued products moved domestically,
high-valued if moved internationally
Pipe--generally limited to petroleum products and
natural gas 6-6
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Importance of Modes (Cont’d)
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6-7
Performance Overview
Air generally fast over long distances and a fair
degree of relative variability
Water is very slow and moderately reliable
Pipe is very slow but reliable
Truck is moderately fast and reliable
Rail is slower and less reliable than truck
Relative Costs of Performance
Price,
Mode ¢/ton-mile
Rail 2.28
Truck 26.19
Water 0.74
Pipeline 1.46
Air 61.20 6-8
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Agencies and small shipment
services
• Agents
• offers transportation services but own little or no line
haul equipment
• Handling numerous small shipments and consolidate
them into vehicle-load quantities
• Freight forwarders: for-hire carriers of freight;
Purchase long distance transportation service
• Transport brokers: Agents that are bring shippers and
carriers together by providing information of rates,
routes, and capabilities
• Small shipment services
• Limited size and range of services
• Rates are based on the distance between origin and
destination point
6-9
Documentation
Bill of lading
Freight bill
Freight claims
6-10
International Transportation
Free trade zones
Documentation
Modes
Agencies and services
6-11
Foreign (Free) Trade Zone
Duty free zone
Products from
Customs
abroad
To domestic Manufacturing
markets and/or storage
Duties paid
Products to
foreign
markets
No duties paid
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6-12
Rate Profiles
• Volume-related rates
• Minimum charge
• Any-quantity (AQ) rate
• Distance-related rates
• Uniform rates
• Proportional rates
• Tapering rates
• Blanket rates
• Demand (value of service)-related rates
6-13
Rate Profiles
By distance
Rates vary with the distance between origin
and destination in the following manner
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6-14
Rate Profiles (Cont’d)
By volume
Rates by shipment size have the following
characteristic
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6-15
Rate Types
Line haul rates
Class
>Freight classification of items
>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
Stop-off privilege example
Private carrier costing
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6-16
Table 6.4
6-17
Table 6.5
6-18
Break Weight
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?
RateNext xWeight Next
Break Weight
RateCurrent
where:
Break Weight = Weight above which the next higher weight break rate
should be used for lower transport costs
RateNext = Rate for next higher weight break
WeightNext = Minimum weight of next higher weight break
RateCurrent = Rate for true weight of shipment.
CR (2004) Prentice Hall, Inc. 6-12
Class Rate Example
Suppose 15,000 lb of aprons used as advertising
material is to be shipped by truck from NYC to Detroit,
Michigan. The class rating for this product (item 4745 in
Table 6-4) is 100. From a Trucker’s rate list (Table 6-5),
the class 100 Tariff is found to be $33.08 per cwt for
shipments between 10,000 and 20,000 lb, and $24.11
per cwt for shipments greater than 20,000 lb. The
carrier offers a 60% discount form the rate list.
Calculate the break weight as (24.11 x 20,000) / 33.08
=14,576 lb. Since the shipment is greater than 14,576
lb, ship as if it is 20,000 lb using the $24.11 per cwt
rate. Therefore, shipping charges are $24.11 x 200 cwt
= $4,822. Taking the discount of 0.60 x $4,822 =
$2,893. The net charge is $4,822 - $ 2,893 = $1,928
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6-11
Stop-Off Privilege Example
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.
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6-21
Stop-Off Privilege Example (Cont’d)
First, we compare the costs without the stop-off privilege. This would be to
price as if each shipment is a separate shipment from I. Suppose we know
the rates. Hence,
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
Now, we price with the stop-off privilege. We assume that all the volume
(30,000 lb.) is to be delivered to the farthest stop and we use the rate to
that point ($3.00/cwt.). A small stop off charge of $15.00 is made for each
stop including the last stop. Hence,
Rate,
Load, lb. Points $/cwt. Charges
30,000 I to L 3.00 $900.00 The better
3 stops at choice
All volume to $15 each 45.00
the farthest stop
Total $945.00 6-22
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