6-1 Transport Fundamentals CR (2004) Prentice Hall, Inc. Chapter 6 When the Chinese write the word “crisis,” they do so in two characters—one meaning danger, the other opportunity.

6-2 Transport Fundamentals in Planning Triangle PLANNING ORGANIZING CONTROLLING Transport Strategy Transport fundamentals Transport decisions Customer service goals The product Logistics service Ord. proc. & info. sys. Inventory Strategy Forecasting Inventory decisions Purchasing and supply scheduling decisions Storage fundamentals Storage decisions Location Strategy Location decisions The network planning process PLANNING ORGANIZING CONTROLLING Transport Strategy Transport fundamentals Transport decisions Customer service goals The product Logistics service Ord. proc. & info. sys. Inventory Strategy Forecasting Inventory decisions Purchasing and supply scheduling decisions Storage fundamentals Storage decisions Location Strategy Location decisions The network planning process CR (2004) Prentice Hall, Inc.

6-3 Transport System Defined CR (2004) Prentice Hall, Inc.   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 orspecial charges

6-4 Transport Choices CR (2004) Prentice Hall, Inc.   Primary intercity carriers  Air  Truck  Rail  Water  Pipe   Coordinated services  Piggyback  Birdyback  Fishyback   Small shipment carriers  UPS  Federal Express  Postal services  Bus Package Express   Agents  Freight forwarders  Shipper associations   Others  Autos  Bicycles  Taxis  Human  Electronic

6-5 Importance of Modes CR (2004) Prentice Hall, Inc. 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 Importance of Modes (Cont’d) By Volume Moved Percent Transportation of total mode volume Railroads 36.5% Trucks 24.9 Inland waterways 16.3 Oil pipelines 22.0 Air 0.3 Total CR (2004) Prentice Hall, Inc.

6-7 Performance Overview Relative Costs of Performance CR (2004) Prentice Hall, Inc. Price, Mode ¢/ton-mile Rail 2.28 Truck Water 0.74 Pipeline 1.46 Air 61.20

6-8 Legal Classification  Common carriers  Contract carriers  Private  Agents Documentation  Bill of lading  Freight bill  Freight claims  Free trade zones  Documentation  Modes International Transportation CR (2004) Prentice Hall, Inc.

6-9 Foreign (Free) Trade Zone CR (2004) Prentice Hall, Inc.

6-10 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 CR (2004) Prentice Hall, Inc.

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 It shows a minimum weight of 36,000 lb., which is less 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 = $ The shipment charges are 0.55 x x 150 = $3, Class Rate Example CR (2004) Prentice Hall, Inc. 6-11

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

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

6-14 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.

6-15 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 $ ,000 I to K ,000 I to L Total $ Load, lb. Points Rate, $/cwt. Charges 30,000 I to L 3.00 $ stops at $15 each Total $ CR (2004) Prentice Hall, Inc.

6-16 Rate Profiles By distance Rates vary with the distance between origin and destination in the following manner CR (2004) Prentice Hall, Inc.

6-17 Rate Profiles (Cont’d) By volume Rates by shipment size have the following characteristic CR (2004) Prentice Hall, Inc.