CHAPTER 7 Transportation Management

© 2008 Prentice Hall 7-2 Learning Objectives F To examine the background of the transportation management function F To discuss the functions of transportation management F To identify the role negotiations play in the transportation management function

© 2008 Prentice Hall 7-3 Learning Objectives F To examine the new options available for private carriage F To understand the purpose of freight consolidation

© 2008 Prentice Hall 7-4 Industrial Transportation Management F Key Terms –Bill of lading –Demurrage and detention –Diversion –Expediting F Key Terms –Hazardous material –Loss and damage –Private transportation

© 2008 Prentice Hall 7-5 Industrial Transportation Management F Key Terms –Rate and service negotiations –Rate determination –Reconsignment –Reparations F Key Terms –Shipment consolidation –Tracing –Transit privileges

© 2008 Prentice Hall 7-6 Rate Determination and Negotiation Activities F Rate Determination F Freight Classification F Rate and Service Negotiations F Rate Regulatory Bodies

© 2008 Prentice Hall 7-7 Rate Determination F Often located on carrier Web sites F Information needed for rate determination may include: –Origin and destination by city or zip code –Whether carrier will load/unload –Dimensions (cube) of load –Number of units –Weight –National Motor Freight Classification number –Description of material to be moved

© 2008 Prentice Hall 7-8 Figure 7-1: Page from a Catalog by AW Direct Showing Shipping Charges

© 2008 Prentice Hall 7-9 Figure 7-2: Page from a Port of Houston Tariff Showing Some Loading, Unloading, and Wharfage Charges

© 2008 Prentice Hall 7-10 Freight Classification F Freight classification values relate to handling characteristics of freight F May apply to National Motor Freight Classification Committee for change in classification F Goods in foreign trade list commodities by harmonized number of Harmonized Tariff Schedule of the United States (TSUSA)

© 2008 Prentice Hall 7-11 Figure 7-3: Motor Carrier Classification Docket Proposal for Changing the Classification of Spark Plugs

© 2008 Prentice Hall 7-12 Rate and Service Negotiations F Both rates and service levels may be negotiated F Long-term relationships are encouraged F Negotiations are subject to antitrust laws

© 2008 Prentice Hall 7-13 Rate Regulatory Bodies F U.S. Department of Commerce Foreign Trade Zone Board F Department of Transportation committees F House of Representatives subcommittees

© 2008 Prentice Hall 7-14 Private Transportation F Private transportation is used when firms own and operate their own trucks, railcars, barges, ships, and/or airplanes –Wal-Mart has largest private truck fleet in U.S. u 7,767 tractors and 26,117 trailers F Private trucking provides –Improved level of customer service –Advertising on the trucks –May be less expensive

© 2008 Prentice Hall 7-15 Documentation F Bill of lading –Straight bill of lading –Order bill of lading –Long-form bill of lading –Preprinted short-form bill of lading F Freight bill

© 2008 Prentice Hall 7-16 Figure 7-6: A Long-Form Bill of Lading

© 2008 Prentice Hall 7-17 Figure 7-7: A Preprinted Short-Form Bill of Lading

© 2008 Prentice Hall 7-18 Freight Payment and Audit Services F Freight bills must be paid within a specific number of days F Payment services are used u To detect duplicate billings u To ensure that proper rate was charged

© 2008 Prentice Hall 7-19 Routing F Shippers have the right to select the carriers along the route to shipment destination F More often need to be specified for hazmat F Generally are computer generated F Alternative routes and carriers are also important

© 2008 Prentice Hall 7-20 Diversion and Reconsignment F Diversion occurs when the shipper notifies the carrier, prior to arrival, of a change in destination F Reconsignment occurs when the shipper notifies the carrier, after arrival, of a change in destination

© 2008 Prentice Hall 7-21 Tracing and Expediting F Tracing is the attempt to locate lost or late shipments –Done by computer at no cost F Expediting is rapidly moving a shipment through a carrier’s system. F Both of these are less likely to be used today since shipments can be pinpointed en route and carriers provide better on-time performance

© 2008 Prentice Hall 7-22 Loss and Damage F Shippers and carriers try to resolve first –What is the full actual loss? –Concealed loss or damage –Who takes possession of damaged goods after claim settled? F If unresolved, moves to court system

© 2008 Prentice Hall 7-23 Transit Privileges F Transit privileges allow cargo to be stopped en route between origin and destination to be unloaded, stored, or processed and then reloaded for delivery to original destination F Often used in household goods moving and storage industry

© 2008 Prentice Hall 7-24 Reparations F Reparations are payments made to a shipper by a carrier that has charged illegally high rates in the past F Also collected when carriers do not live up to terms of contracts with shippers

© 2008 Prentice Hall 7-25 Demurrage and Detention F Demurrage is a penalty payment made to the railroad for keeping a railcar beyond the time when it should be released back to railroad F Detention is the word used in the trucking industry F Carriers do not want equipment used as temporary warehouse by shipper or consignee

© 2008 Prentice Hall 7-26 Transportation of Hazardous Materials F Hazardous material is a substance or material in a quantity and form which may pose an unreasonable risk to health and safety or property when transported in commerce –Must be moved safely –Labeled with placard –Must have 24-hour hotline used in event of spills

© 2008 Prentice Hall 7-27 Figure 7-12: Specialized Container with Sump to Capture Hazardous Waste Leaks from Barrels

© 2008 Prentice Hall 7-28 Consolidating Small Shipments F Shipments > 150 and < 500 pounds F To get a lower rate, shipment consolidation may occur: aggregating customer orders across time or place or both

© 2008 Prentice Hall 7-29 Figure 7-13: The Transportation Manager Consolidates Shipments Whenever He or She Can