1. Transportation—Managing the Flow of the Supply Chain Lecture 8

2. Introduction  Transportation involves the physical movement of goods between origin and destination points.  The transportation system links geographically separated partners and facilities in a company’s supply.  Transportation facilitates the creation of time and place utility in the supply chain.  Transportation also has a major economic impact on the financial performance of businesses.

3. Role of Transportation in Supply Chain Management  Transportation provides the critical links between these organizations, permitting goods to flow between their facilities.  Transportation service availability is critical to demand fulfillment in the supply chain.  Transportation efficiency promotes the competitiveness of a supply chain

4. Challenges to Carrying out This Role  supply chain complexity  competing goals among supply chain partners  changing customer requirements  limited information availability  synchronizing transportation with other supply chain activities

5. Challenges to Carrying out This Role  Transportation capacity constraints pose a challenge.  Rising transportation rates present another major concern for organizations.  The transportation industry is impacted by governmental requirements that affect cost structures and service capabilities.  Regulation is growing in areas where the transportation industry has the potential to impact the quality of life, the safety of citizens, and the growth of commerce.

6. Modes of Transportation  primary modes of transportation truck rail air water pipeline intermodal transportation

7. Modes of Transportation  moves approximately 19.5 billion tons valued at nearly $13 trillion  Modal breakdown: Trucking 80.0 % $635 billion Rail 06.7% Air 04.7% Water 04.6% Pipeline 01.2%

8. Modes of Transportation Motor Carriers  widely used mode of transportation in the domestic supply chain  573,469 private, for hire, and other U.S. interstate motor carriers  economic structure of the motor carrier industry contributes to the vast number of carriers in the industry  comprised of for-hire and private fleet operations  Truckload carriers.  Less-than-truckload (LTL)  Small package carriers  Low fixed cost, high variable

9. Modes of Transportation Railroads  7 Class I railroads revenues in excess of $290 million  Activity levels have been achieved despite a lack of direct accessibility to all parts of the supply chain  Railroads are “natural monopolies”  Two carrier types: Linehaul Shortline carriers  High fixed, low variable

10. Modes of Transportation Water  Major facilitator of international trade  81% international freight movement  19% coastal, inland, and Great Lakes traffic  High variable and low fixed cost  Two primary carrier types Liner Charter  Options include Container ships Bulk carriers Tankers General cargo ships Roll-on, roll-off (RO–RO) vessels

11. Modes of Transportation Air Carriers  491 air cargo carriers Combination carriers Air cargo carriers Integrated carriers Nonintegrated carriers  Domestic market is dominated by 14 major carriers  High variable and low fixed cost

12. Modes of Transportation Pipeline  Unique mode of transportation as the equipment is fixed in place and the product moves through it in high volume  174 operators of hazardous liquid pipelines that primarily carry crude oil and petroleum products  Three primary types Gathering lines Trunk lines Refined product pipelines  High fixed versus low variable

13. Modes of Transportation Intermodal Transportation  Use of two or more different modes in movement  Greater accessibility  Overall cost efficiency  Facilitates global trade  Development of standardized containers that are compatible with multiple modes.  Product-handling characteristics Containerized freight Transload freight