6-1 Transport Fundamentals CR (2004) Prentice Hall, Inc. Chapter 6 When the Chinese write the word...

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

PL

AN

NIN

G

OR

GA

NIZ

ING

CO

NT

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LL

ING

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

PL

AN

NIN

G

OR

GA

NIZ

ING

CO

NT

RO

LL

ING

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


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

6-4

Transport Choices


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


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 100.0


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

Legal Classification

Common carriersContract carriersPrivate Agents

Documentation Bill of ladingFreight billFreight claims

Free trade zonesDocumentationModes

International Transportation


6-9

Foreign (Free) Trade Zone

Products from abroad

Products to foreign markets

No duties paid

Cus

tom

s

To domestic markets

Duties paid

Manufacturing and/or storage

Duty free zone

Products from abroad

Products to foreign markets

No duties paid

Cus

tom

s

To domestic markets

Duties paid

Manufacturing and/or storage

Duty free zone


6-10

Rate TypesLine haul rates

Class

>Freight classification of items

>Rate tables of tariffsContract ratesDrayage (local delivery)

Commodity and contract ratesSpecific rates for given shipment sizes for specific products moving between designated points

Special service chargesExtra chargesStop-off privilege example

Private carrier costing


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 1090--00. 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 60.65 = $36.39. The shipment charges are 0.55 x 36.39 x 150 = $3,002.18.

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 costsRateNext = Rate for next higher weight break

WeightNext = Minimum weight of next higher weight break

RateCurrent = 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?


Current

NextNext

RatexWeightRate

ht Break Weig

6-12

Break Weight (Cont’d)

lb. 7,682 or ,82.7621.5210011.40

Weight Break x

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


Calculate break weight

6-13

6-14

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.

6-15

Stop-Off Privilege Example (Cont’d)First, we compare the costs without the stop-off privilege. This would be toprice as if each shipment is a separate shipment from I. Suppose we knowthe rates. Hence,

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,

The betterchoice

All volume tothe farthest stop

Load, lb. Points Rate, $/cwt. Charges

8,000 I to J 3.05 $244.0012,000 I to K 3.35 402.0010,000 I to L 3.60 360.00

Total $1006.00

Load, lb.

Points

Rate, $/cwt.

Charges

30,000 I to L 3.00 $900.00

3 stops at $15 each

45.00

Total $945.00


6-16

Rate ProfilesBy distanceRates vary with the distance between origin and destination in the following manner


6-17

Rate Profiles (Cont’d)By volumeRates by shipment size have the following characteristic


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