1. CHAPTER 8 Transportation

2. Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 8-2 Factors Influencing Transportation Costs Product-related factors –density –stowability –ease or difficulty of handling –liability Market-related factors –Degree of competition –Location of markets –Government regulation –Balance or imbalance of freight traffic –Seasonality –Domestic versus international movement

3. Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 8-3 Terms of Sale and Corresponding Buyer and Seller Responsibilities a Source: Harold Fearon, Donald Dobler, and Ken Killen, The Purchasing Handbook, National Association of Purchasing Management, 1993, McGraw-Hill. 1.Terms of Sale FOB Shipping Point, FREIGHT COLLECT Buyer pays freight charges. Buyer bears freight charges. Buyer owns goods in transit. Buyer files claims (if any). Title passes to buyer Freight charges paid by buyer SellerBuyer 2.Terms of Sale FOB Shipping Point, FREIGHT ALLOWED Seller pays freight charges. Seller bears freight charges. Buyer owns goods in transit. Buyer files claims (if any). Title passes to buyer Freight charges paid by seller SellerBuyer 3.Terms of Sale FOB Shipping Point, FREIGHT PREPAID AND CHARGED BACK Seller pays freight charges. Buyer bears freight charges. Buyer owns goods in transit. Buyer files claims (if any). Title passes to buyer Freight charges paid by seller, then collected from buyer by adding amount to invoice. Seller Buyer

4. Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 8-4 Terms of Sale and Corresponding Buyer and Seller Responsibilities (cont.) Source: Harold Fearon, Donald Dobler, and Ken Killen, The Purchasing Handbook, National Association of Purchasing Management, 1993, McGraw-Hill. 6.Terms of Sale FOB Destination, FREIGHT COLLECT AND ALLOWED Title passes to buyer SellerBuyer Buyer pays freight charges. Seller bears freight charges. Seller owns goods in transit. Seller files claims (if any). Freight charges paid by buyer, then charged to seller by deducting amount from invoice. 4.Terms of Sale FOB Destination, FREIGHT COLLECT Buyer pays freight charges. Buyer bears freight charges. Seller owns goods in transit. Seller files claims (if any). Title passes to buyer SellerBuyer Freight charges paid by buyer 5.Terms of Sale FOB Destination, FREIGHT PREPAID Seller pays freight charges. Seller bears freight charges. Seller owns goods in transit. Seller files claims (if any). Freight charges paid by seller Title passes to buyer SellerBuyer 8-3 b

5. Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 8-5 Five Basic Transportation Modes Motor Rail Air Water Pipeline 8-4

6. Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 8-6 Comparison of US Domestic Transportation Modes Economic Characteristics 8-5 a

7. Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 8-7 Comparison of US Domestic Transportation Modes (cont.) Service Characteristics 8-5 b

8. Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 8-8 Nonoperating Third Parties Freight forwarders Shippers’ associations or cooperatives Transportation brokers Intermodal marketing companies or shippers’ agents Third-party logistics service providers 8-6

9. Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 8-9 Major U.S. Agencies Regulating Transportation Surface Transportation Board Department of Transportation Federal Maritime Commission Federal Energy Regulatory Commission 8-7

10. Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 8-10 International Distribution Shipping Options Landbridge Minilandbridge All-water Rail Microbridge Truck/rail Landbridge All-water Source: Adapted from David L. Anderson, “International Logistics Strategies for the Eighties,” Proceedings of the Twenty-Second Annual Conference of the National Council of Phyisical Distribution Management, 1984, p. 363. Used by permission of the Council of Logistics Management. 8-8