Chapter 11

Question 1

What is a supply chain and how is transportation important to it?

Answer 1

A supply chain is a network of organizations separated by distance and time, and transportation provides the critical links between these organizations, allowing goods to flow between their facilities. With efficient and effective transportation capabilities, organizations can extend the reach of their supply chains beyond local supplier capabilities and market demand, build global supply chains that leverage low-cost sourcing opportunities, and compete in new markets.

Question 2

Why is transportation service availability critical to demand fulfillment in the supply chain?

Answer 2

The need for transportation is derived from customer demand, and a shortage of transportation capacity can strand inventory in the system, leading to empty shelves and lost sales. Efficient transportation allows organizations to effectively fulfill customer demand and compete in the market.

Question 3

How does transportation efficiency promote supply chain competitiveness?

Answer 3

Cost-effective transportation provides access to higher-quality, lower-priced materials and promotes production economies of scale, while low-cost transportation improves demand fulfillment opportunities. By keeping transportation expenses reasonable, the total landed cost of a product can be competitive in multiple markets.

Question 4

What are the key factors that make transportation service effective in the supply chain?

Answer 4

Inexpensive transportation is of little value to a supply chain if the product does not arrive as scheduled and damage-free to the correct location. High-quality, customer-focused transportation delivers the right product at the right time, in the right quantity and quality, at the right cost, and to the right destination. Additionally, transportation can create supply chain flexibility by offering a range of transit times and service options.

Question 5

How does transportation influence supply chain design, strategy development, and total cost management?

Answer 5

Transportation service availability, capacity, and costs affect the number and location of supply chain facilities in a network. Transportation capabilities must align with the company’s goals, and intentional tradeoffs should be made between transportation and related activities to optimize supply chain efficiency. Proper management of transportation processes is needed to efficiently and effectively operate an organization’s supply chain, and leading organizations have already moved in this direction.

Question 6

What are the issues that inhibit the synchronization of transportation with other supply chain activities?

Answer 6

There are several issues that inhibit the synchronization of transportation with other supply chain activities, including supply chain complexity, competing goals among supply chain partners, changing customer requirements, and limited information availability. Additionally, offshore manufacturing creates major transportation challenges, and transportation capacity constraints pose another challenge to organizations needing to move freight through the supply chain. Finally, transportation rate variation adds to the complexity of the transportation function.

Question 7

Organizations face several transportation challenges in their supply chains, including:

Answer 7

Supply chain complexity: Supply chain partners may have competing goals and limited information availability, which can inhibit the synchronization of transportation with other supply chain activities.

Offshore manufacturing: The reliance on global supply chains that extend from countries like China and India can lead to greater expenses, longer transit times, and higher risk of supply chain disruptions.

Changing customer requirements: Growing demand for smaller, more frequent deliveries can limit opportunities to move product in economical container load quantities. Compression of order cycle times results in higher delivery costs and extended fulfillment operation hours. The desire for real-time shipment visibility requires technological strength.

Transportation capacity constraints: Major bottlenecks and delays occur when transportation demand outstrips carrier and facility capacity. During peak delivery season, port facilities must grapple with a surge of containers and highways are clogged with truck traffic.

Transportation rate variation: Capacity, freight volume, and fuel costs each influence the rates charged by carriers. As volume increases and capacity becomes constrained, rate increases become a real possibility.

Governmental requirements: Government regulation of transportation has historically focused on competition and pricing, but regulation is growing in areas where the transportation industry has the potential to impact the safety of citizens, quality of life, and protection of commerce. Protection of the traveling public, environmental sustainability, and the ongoing threat of terrorism are all addressed by governmental regulation.

Question 8

What are the five modes of transportation that supply chain managers can choose from when moving freight?

Answer 8

The five modes of transportation that supply chain managers can choose from when moving freight are truck, rail, air, water, and pipeline.

Question 9

What is intermodal transportation?

Answer 9

Intermodal transportation combines the use of two or more of the basic modes of transportation to move freight from its origin to destination.

Question 10

What are some of the differences between the modes of transportation?

Answer 10

Each mode of transportation has different economic and technical structures, provides different levels of service quality, handles different volumes and types of freight, has different cost structures, carrier types and service offerings, equipment variety, and current industry trends.

Question 11

What is the dominant mode of transportation in terms of the value and volume of goods moved?

Answer 11

The trucking industry is the dominant mode of transportation in terms of the value and volume of goods moved.

Question 12

Are the results skewed based on ton-miles?

Answer 12

Yes, the results are less skewed based on ton-miles, which is an output measurement combining weight and distance, or tonnage multiplied by miles transported. Trucks tend to focus on local and regional markets while the other modes provide long distance moves of larger freight quantities.

Question 13

What is the most widely used mode of transportation in the U.S. domestic supply chain?

Answer 13

Motor carriage, or trucking, is the most widely used mode of transportation in the U.S. domestic supply chain.

Question 14

What makes trucking a popular mode to move high-value, time-sensitive goods?

Answer 14

The sophisticated U.S. highway network facilitates trucking flows, giving motor carriers excellent accessibility to virtually all freight shipping and receiving locations. Combined with the industry’s excellent service capabilities, this accessibility makes trucking a popular mode to move high-value, time-sensitive goods.

Question 15

How many motor carriers are there in the trucking industry and what range in size?

Answer 15

The trucking industry is made up of 532,024 interstate motor carriers and intrastate hazardous materials motor carriers, ranging in size from single-truck, owner-operator service providers to large transportation conglomerates like UPS.

Question 16

What contributes to the vast number of carriers in the motor carrier industry?

Answer 16

There are no significant barriers to entry that make it impossible for small carriers to compete, as the equipment and licensing costs are within the reach of most organizations. Additionally, most expenses are related to freight movement, making trucking a high-variable-cost, low-fixed-cost business, with wages and benefits, fuel, maintenance, and tires driving the cost structure of trucking companies. Lastly, fixed costs are minimal as most trucking companies do not have extensive terminal and equipment needs, and the U.S. government builds and maintains the highways, with motor carriers paying for highway use through fuel taxes, licenses, and other user fees.

Question 17

What types of commodities are handled by the trucking industry?

Answer 17

Much of the freight moved by the trucking industry is regional in nature, moving within a 500-mile radius of the origin. Some of the primary commodities handled by this mode include consumer-packaged goods, electronics, electrical machinery, furniture, textiles, and automotive parts.

Question 18

What are the two types of trucking operations in the industry?

Answer 18

The trucking industry is comprised of for-hire and private fleet operations. For-hire trucking companies move freight for other organizations, while private fleets transport freight that is owned by the organization that is operating the trucks.

Question 19

What percentage of trucking companies are for-hire carriers, private carriers, and hybrid carriers?

Answer 19

Roughly 48 percent of trucking companies are for-hire carriers, 42 percent are private carriers, 8 percent are hybrid for-hire/private carriers, and the balance are other types of carriers.

Question 20

What are the three general types of for-hire carriers?

Answer 20

The three general types of for-hire carriers are truckload (TL) carriers, less-than-truckload (LTL) carriers, and small package carriers.

Question 21

What is the difference between TL and LTL carriers?

Answer 21

TL carriers handle single shipments that use the full cubic capacity of the trailer or exceed 15,000 pounds and provide direct service. LTL carriers move multiple shipments ranging from 150 pounds up to 15,000 pounds in each trailer and use a hub-and-spoke network of local and regional terminal facilities to sort and consolidate shipments moving to a particular market area.

Question 22

What are some challenges faced by the trucking industry?

Answer 22

The trucking industry faces challenges related to labor, costs, and competition. The American Trucking Association estimates that the current shortage of 48,000 drivers could rise to 175,000 by 2024. Trucking companies may not be able to recoup rising labor, insurance, and maintenance expenses despite using fuel surcharges to pass along rising energy costs. Finally, competition continues to be fierce within the trucking industry as well as with other modes of transportation.

Question 23

What are the three general types of for-hire carriers?

Answer 23

The three general types of for-hire carriers are truckload (TL) carriers, less-than-truckload (LTL) carriers, and small package carriers.

Question 24

What is the average distance per shipment via for-hire trucks and private trucks?

Answer 24

The average distance per shipment is 508 miles via for-hire trucks and 58 miles via private trucks.

Question 25

What is the current shortage of truck drivers estimated to be by the American Trucking Association?

Answer 25

The current shortage of truck drivers is estimated to be 48,000, but it could rise to 175,000 by 2024.

Question 26

What are some of the challenges faced by the trucking industry?

Answer 26

The trucking industry faces challenges related to labor shortages, rising costs of fuel, insurance, and maintenance, and fierce competition within the industry and with other modes of transportation.

Question 27

What are some examples of small package ground carriers in the US?

Answer 27

Some examples of small package ground carriers in the US are UPS, FedEx Ground, and the United States Postal Service.

Question 28

How much freight is moved by railroads annually in the United States?

Answer 28

Nearly 2.2 billion tons of freight are moved by railroads annually in the United States.

Question 29

What makes rail transportation a high ton-mile mode of transportation?

Answer 29

The combination of volume and the average shipment length of 805 miles makes rail transportation a high ton-mile mode of transportation.

Question 30

How many railroads are there in the United States and how many dominate the industry?

Answer 30

There are 575 railroads in the United States, but the industry is dominated by seven Class I railroads. These carriers generated $70.5 billion of freight revenue and handled 28.8 million carloads and 12.8 million intermodal trailers and containers.

Question 31

What are some of the challenges that the rail industry must overcome in order to compete for higher-value, more profitable freight?

Answer 31

Nagging perceptions of rail being a slow, inflexible, and inconsistent mode are challenges that the rail industry must overcome in order to compete for higher-value, more profitable freight.

Question 32

What are some of the primary commodities handled by railroads in the United States?

Answer 32

Primary commodities handled by railroads in the United States include coal, chemicals, farm products, minerals, food, and other basic materials. Railroads also handle some high-value goods, primarily automobiles and intermodal containers filled with imported finished goods.

Question 33

What are the two types of carriers in the rail industry?

Answer 33

The two types of carriers in the rail industry are linehaul freight carriers and shortline carriers.

Question 34

What is the difference between linehaul freight carriers and shortline carriers?

Answer 34

Linehaul freight carriers provide service between major markets and customers within those markets, while shortline carriers provide the local and regional links between individual customers and the national rail network of the Class I railroads.

Question 35

What types of freight can be transported by rail?

Answer 35

Railroads can move almost any type of freight—liquid or gas, slurry or solid, hazardous or harmless—in very large quantities.

Question 36

What are the three primary ways rail equipment can be organized and transported?

Answer 36

Rail equipment can be organized and transported in one of the three following primary ways: manifest trains, unit trains, and intermodal trains.

Question 37

What is a manifest train?

Answer 37

A manifest train is a train that contains a mixture of equipment and freight for multiple customers. These mixed trains travel through multiple rail yards where railcars may be added to or removed from the train, depending on their destination.

Question 38

What is a unit train?

Answer 38

A unit train is a train that moves an entire block of railcars carrying a single commodity from the origin to a single destination. This eliminates the need to stop for time-consuming rail yard classification activities.

Question 39

What is an intermodal train?

Answer 39

An intermodal train is a special type of unit train that focuses on the long-distance or linehaul movement of intermodal containers and trailers. These trains move products from ports and other high-volume locations to markets where the containers are offloaded and transferred to customers via trucks.

Question 40

Can rail transportation be used for international movement of commodities and containers?

Answer 40

Yes, rail transportation can be used for cross-border movement of commodities and containers, but there are constraints on international rail transport including limited border crossing points and differing track gauges between countries.

Question 41

What is a land bridge routing in the rail industry?

Answer 41

A land bridge routing is an international strategy that combines ocean and rail modes, where a container travels from one location to another via ocean vessel and then via train. For example, a container travels from Tokyo to Seattle via ocean vessel, from Seattle to New York via train, and onward to Rotterdam via ocean vessel.

Question 42

What are some challenges faced by the rail industry?

Answer 42

A: Some challenges faced by the rail industry include captive shippers served by a single railroad wanting rate relief, external factors such as fluctuating economic conditions and severe weather events, and capacity being an ongoing problem. Railroad companies have responded with massive capital expenditures for infrastructure improvements, equipment purchases, and new employees.

Question 43

Q: What historical perspective did people have about air cargo transportation?

Answer 43

A: Historically, air cargo transportation was viewed as an expensive, emergency mode.

Question 44

Q: What factors have spurred the demand for air transportation in recent times?

Answer 44

A: The growth of e-commerce, global supply chains, and lean inventory initiatives have spurred the demand for air transportation.

Question 45

Q: What advantage does air transportation have over water carriers in terms of global transit times?

Answer 45

A: The speed of airplanes combined with frequent scheduled flights can reduce global transit times from as many as 30 days by water carrier to one or two days by air carrier.

Question 46

Q: How does faster delivery through air transportation impact logistics costs?

Answer 46

A: Faster delivery leads to reduced inventory carrying costs, stockout risks, and packaging requirements that can be traded off against high air cargo freight costs, resulting in a lower total logistics cost.

Question 47

Q: How much does the US spend on air cargo transportation, and what percentage of the value of world trade does it move by value of goods?

Answer 47

: The US spends $28 billion on air cargo transportation, of which $12 billion is international cargo. The mode moves 35 percent of the value of world trade by value of goods.

Question 48

Q: What are some primary commodities handled by air transportation, and why are they transported by air?

Answer 48

A: Primary commodities handled by air transportation include electronics, pharmaceuticals, perishable seafood and flowers, and designer apparel. Companies are willing to pay a high premium to transport these goods because they are time-sensitive and need superior protection while in transit

Question 49

What are combination carriers and which U.S. carriers are the largest in this category?

Answer 49

Combination carriers move both freight and passengers, with cargo loaded in the belly of the aircraft. United, Delta, and American are the largest U.S. combination carriers, handling the most freight ton-kilometers each year.

Question 50

What do air cargo carriers transport and how do they differ in terms of service capabilities?

Answer 50

Air cargo carriers transport freight, packages, letters, and envelopes. They can differ in terms of service capabilities, with some providing scheduled daily service through highly coordinated networks, while others provide on-demand service for customers who need immediate, direct transportation or the full capacity of the aircraft.

Question 51

What is the difference between integrated and nonintegrated carriers?

Answer 51

Integrated carriers like FedEx and UPS provide door-to-door service, scheduled pickup and delivery windows, and expedited service through their hub-and-spoke networks. Nonintegrated carriers provide on-demand, air-only service from airport to airport. Movement to and from the airport is handled by other service providers or the customers.

Question 52

What types of aircraft are used to move air freight and what are their capabilities?

Answer 52

A wide variety of aircraft is used to move air freight domestically and around the world. Propeller planes move letters and small packages from smaller markets to consolidation points and sort operations. Jets ranging in size up to the largest Boeing 747–400 freighter are used for long-range domestic and international service. Unique aircraft like the Anatov 225 can transport massive products as large as 45,900 cubic feet and 220 tons.

Question 53

What obstacles does the air cargo industry face in terms of growth?

Answer 53

The air cargo industry faces challenges including waning demand for certain products, mode-shifting of freight from air to ocean, and new rail connections in Asia limiting air freight growth. The strategies of near-shoring and on-shoring also reduce the need for long-distance international air cargo service. Despite these challenges, industry advocates believe that international air cargo can reach annual revenues of $100 billion.

Question 54

What role has water transportation played in the development of many countries?

Answer 54

A: Water transportation has played a significant role in the development of many countries and is a major facilitator of international trade.

Question 55

Q: How much freight and ton-miles are moved annually via water transportation in the United States?

Answer 55

A: In the United States, $302 billion worth of freight and 6.5 percent of the total ton-miles annually is moved via water transportation.

Question 56

Q: How much revenue did the water transportation industry generate in the United States and for what types of traffic?

Answer 56

A: The industry generated $40 billion in revenue, $31 billion for the movement of international goods, and $9 billion for domestic coastal, inland, and Great Lakes traffic.

Question 57

Q: How does the global water carrier industry compare to other modes of transportation in terms of freight revenue and tonnage?

Answer 57

A: Globally, water carriers dominate all other modes, garnering approximately half of the international freight revenue and handling nearly all tonnage.

Question 58

Q: How much of the US freight value is moved by the US flagged fleet and how many vessels are in the fleet?

Answer 58

A: The US flagged fleet moves 2.2% percent of the nation’s freight value via 8,918 self-propelled vessels and 31,081 barges.

Question 59

Q: How many merchant ships are in the international ocean fleet and what types of ships are included?

Answer 59

A: The international ocean fleet includes approximately 50,000 merchant ships including 16,800 bulk carriers, 11,651 tankers, 10,381 general cargo ships, and 5,106 containerships.

Question 60

Q: How much TEU and tonnage capacity is there in active liner trades globally?

Answer 60

A: There are more than 20 million TEU (20-foot equivalent unit containers) and 252 million tons (deadweight) of capacity in active liner trades.

Question 61

What are the advantages of water transportation? Water transportation has several advantages:

Answer 61

Low Infrastructure Costs: Carriers require no investment for the right-of-way as nature provides the "highway" and port authorities provide terminals with unloading and loading services, storage areas, and freight transfer facilities. The water carriers pay user fees for these port services only when used. Low Variable Costs: Water transportation is a high variable cost business. Large oceangoing ships require significant capital investments, but the cost is spread over a large volume of freight transported during the lengthy lifespan of most ships. Wide Range of Commodities: International water carriers handle a wider variety of goods. Every conceivable type of cargo is transported via ocean carrier, from low-value commodities to imported automobiles. Competition: Domestic water carriers compete with railroads for long-distance movement of low-value, high-density, bulk cargoes that mechanical devices can easily load and unload. Specialized Ships: Ocean transportation of goods ranging from crude oil to electronics is facilitated by a wide range of specialized ships, including containerships, bulk carriers, tankers, general cargo ships, and roll-on, roll-off vessels. Environmental Protection: New tankers are required to be double-hulled to protect the environment in case of a collision. Lower Energy Costs: Water transportation consumes less energy compared to other modes of transportation, such as road or air transportation. Reduced Congestion: Water transportation can reduce congestion on roads and highways as it does not require large trucks to transport goods. High Capacity: Water transportation has high carrying capacity and can transport large volumes of goods at once. Cost-Effective: Water transportation can be a cost-effective mode of transportation, especially for transporting bulk cargoes over long distances. Globalization: Containerships are critical to the globalization of trade, and they are specially designed to carry standardized containers.

Question 62

Q: What are some advantages of using pipelines for transportation?

Answer 62

A: Pipelines effectively protect the product from contamination and provide a warehousing function. They also provide the most economical form of transportation with the lowest cost per ton of any mode.

Question 63

How large is the United States' network of energy pipelines compared to other nations?

Answer 63

A: The United States has the largest network of energy pipelines of any nation in the world, more than 10 times larger than the European network. The network contains 55,000 miles of crude oil trunk lines, 95,000 miles of refined products pipeline, more than 190,000 miles of liquid petroleum pipelines, and 2.4 million miles of natural gas pipelines.

Question 64

Q: What are the predominant products moved by pipelines?

Answer 64

A: The vast majority of products moved by pipeline are liquids and gases, including crude oil, petroleum-based fuels for transportation and home heating, natural gas for home heating, propane, anhydrous ammonia, and carbon dioxide used in agricultural and industrial applications.

Question 65

What is the pipeline industry comprised of?

Answer 65

A: The pipeline industry is comprised of for-hire and private carriers that maintain their own infrastructures. For-hire carriers of liquid products can move different products through their system at the same time, separated by a batching plug that maintains the integrity of individual products. Private carriers include petroleum and natural gas companies that use pipelines to move product to and from their refineries, processing plants, and storage facilities.

Question 66

What is the pipeline industry comprised of?

Answer 66

A: The pipeline industry is comprised of for-hire and private carriers that maintain their own infrastructures. For-hire carriers of liquid products can move different products through their system at the same time, separated by a batching plug that maintains the integrity of individual products. Private carriers include petroleum and natural gas companies that use pipelines to move product to and from their refineries, processing plants, and storage facilities.

Question 67

Q: What are the three primary types of pipelines in the oil system?

Answer 67

A: The three primary types of pipelines in the oil system are gathering lines, trunk lines, and refined product pipelines.

Question 68

Q: What are some challenges facing the pipeline industry due to the growth of the U.S. oil industry?

Answer 68

A: Network capacity is stretched thin in areas where new oil fields are operated but it takes significant time, money, and regulatory approval to build new pipelines. Safety is also an ongoing issue as the age and condition of the existing network is a concern. Any spill or accident creates fire, environmental, and health risks.

Question 69

Q: What is intermodal transportation service?

Answer 69

A: Intermodal transportation service refers to the use of two or more carriers of different modes in the origin-to-destination movement of freight.

Question 70

Q: What are the primary benefits of intermodalism?

Answer 70

A: The primary benefits of intermodalism include greater accessibility, overall cost efficiency, and facilitating global trade.

Question 71

Q: What has contributed to the growth of intermodal transportation?

Answer 71

A: Factors that have contributed to the growth of intermodal transportation include better information systems to track freight, the development of intermodal terminals, and the use of standardized containers that are compatible with multiple modes.

Question 72

Q: What are the different types of freight services provided by intermodal transportation?

Answer 72

A: The different types of freight services provided by intermodal transportation include containerized freight and transload freight.

Question 73

Q: What are some of the most prevalent forms of intermodal transportation?

Answer 73

A: The most prevalent forms of intermodal transportation include truck-rail, truck-air, and truck-water combinations, although other combinations are also used.

Question 74

Q: What is a recurring issue in the intermodal transportation market?

Answer 74

A: Congestion is a recurring issue in the intermodal transportation market, with equipment shortages, transfer facility bottlenecks, and labor issues creating delivery delays and supply chain disruptions.

Question 75

Q: What are combination carriers in the air cargo industry?

Answer 75

A: Combination carriers are airlines that move both passengers and cargo, with the cargo loaded in the belly of the aircraft. Some of the larger international carriers have dedicated equipment specifically for scheduled cargo service to meet the demands of global commerce. United, Delta, and American are the largest U.S. combination carriers.

Question 76

Q: What are air cargo carriers?

Answer 76

A: Air cargo carriers are airlines that primarily move freight, packages, letters, and envelopes. Some carriers provide scheduled daily service through highly coordinated networks, while others provide on-demand service for customers who need immediate, direct transportation or the full capacity of the aircraft.

Question 77

Q: What are integrated carriers in the air cargo industry?

Answer 77

A: Integrated carriers like FedEx and UPS provide door-to-door service, scheduled pickup and delivery windows, and expedited service through their hub-and-spoke networks. Ease of use and service quality makes these carriers the logical choice for domestic next-day and second-day delivery.

Question 78

Q: What are nonintegrated carriers in the air cargo industry?

Answer 78

A: Nonintegrated carriers provide on-demand, air-only service from airport to airport. Movement to and from the airport is handled by other service providers or the customers. Direct service speed, flexibility, and same-day cargo movement are key capabilities of these carriers.

Question 79

Q: What types of aircraft are used to move air freight?

Answer 79

A: A wide variety of aircraft is used to move air freight domestically and around the world. Propeller planes move letters and small packages from smaller markets to consolidation points and sort operations. Jets ranging in size up to the largest Boeing 747-400 freighter (capacity of nearly 27,500 cubic feet and 124 tons of freight) are used for long-range domestic and international service. Unique aircraft like the Anatov 225 can transport massive products as large as 45,900 cubic feet and 220 tons.

Question 80

Q: What are some obstacles to profitable growth in the air cargo industry?

Answer 80

A: The air cargo industry faces numerous obstacles to profitable growth, including waning demand for certain products, mode-shifting of freight from air to ocean, and new rail connections in Asia. Additionally, the strategies of near-shoring and on-shoring reduce the need for long-distance international air cargo service. Despite these challenges, industry advocates believe that international air cargo can reach annual revenues of $100 billion.

Question 81

Q: What role has water transportation played in the development of many countries?

Answer 81

A: Water transportation has played a significant role in the development of many countries and is a major facilitator of international trade.

Question 82

How does the global water carrier industry compare to other modes of transportation in terms of freight revenue and tonnage?

Answer 82

A: Globally, water carriers dominate all other modes, garnering approximately half of the international freight revenue and handling nearly all tonnage.

Question 83

What are the advantages of water transportation?

Answer 83

Water transportation has several advantages: Low Infrastructure Costs: Carriers require no investment for the right-of-way as nature provides the "highway" and port authorities provide terminals with unloading and loading services, storage areas, and freight transfer facilities. The water carriers pay user fees for these port services only when used. Low Variable Costs: Water transportation is a high variable cost business. Large oceangoing ships require significant capital investments, but the cost is spread over a large volume of freight transported during the lengthy lifespan of most ships. Wide Range of Commodities: International water carriers handle a wider variety of goods. Every conceivable type of cargo is transported via ocean carrier, from low-value commodities to imported automobiles. Competition: Domestic water carriers compete with railroads for long-distance movement of low-value, high-density, bulk cargoes that mechanical devices can easily load and unload. Specialized Ships: Ocean transportation of goods ranging from crude oil to electronics is facilitated by a wide range of specialized ships, including containerships, bulk carriers, tankers, general cargo ships, and roll-on, roll-off vessels. Environmental Protection: New tankers are required to be double-hulled to protect the environment in case of a collision. Lower Energy Costs: Water transportation consumes less energy compared to other modes of transportation, such as road or air transportation. Reduced Congestion: Water transportation can reduce congestion on roads and highways as it does not require large trucks to transport goods. High Capacity: Water transportation has high carrying capacity and can transport large volumes of goods at once. Cost-Effective: Water transportation can be a cost-effective mode of transportation, especially for transporting bulk cargoes over long distances. Globalization: Containerships are critical to the globalization of trade, and they are specially designed to carry standardized containers.

Question 84

Q: What are some advantages of using pipelines for transportation?

Answer 84

A: Pipelines effectively protect the product from contamination and provide a warehousing function. They also provide the most economical form of transportation with the lowest cost per ton of any mode.

Question 85

Q: What are the predominant products moved by pipelines?

Answer 85

A: The vast majority of products moved by pipeline are liquids and gases, including crude oil, petroleum-based fuels for transportation and home heating, natural gas for home heating, propane, anhydrous ammonia, and carbon dioxide used in agricultural and industrial applications

Question 86

Q: What is the pipeline industry comprised of?

Answer 86

A: The pipeline industry is comprised of for-hire and private carriers that maintain their own infrastructures. For-hire carriers of liquid products can move different products through their system at the same time, separated by a batching plug that maintains the integrity of individual products. Private carriers include petroleum and natural gas companies that use pipelines to move product to and from their refineries, processing plants, and storage facilities.

Question 87

Q: What are the three primary types of pipelines in the oil system?

Answer 87

A: The three primary types of pipelines in the oil system are gathering lines, trunk lines, and refined product pipelines.

Question 88

Q: What are some challenges facing the pipeline industry due to the growth of the U.S. oil industry?

Answer 88

A: Network capacity is stretched thin in areas where new oil fields are operated but it takes significant time, money, and regulatory approval to build new pipelines. Safety is also an ongoing issue as the age and condition of the existing network is a concern. Any spill or accident creates fire, environmental, and health risks.

Question 89

: What are the two primary carrier types in the water industry?

Answer 89

A: The two primary carrier types in the water industry are liner services and charter services.

Question 90

Q: What are liner services?

Answer 90

A: Liner services employ a wide variety of ships in their fixed-route, published-schedule service. These carriers transport individual shipments for their customers, including containers, pallets, and other unit loads.

Question 91

Q: What are charter services?

Answer 91

A: Charter services lease ships to customers on a voyage or time basis and follow routes of the customer’s choosing. The charter customer normally uses the entire capacity of the ship for large-volume freight. Contracts for charter services are facilitated by ship brokers who negotiate the price with ship owners.

Question 92

Q: How does charter service differ from liner service?

Answer 92

A: Charter services operate similarly to taxicab service with customer-specified route and tailored services, while liner service is much like a scheduled bus service with fixed routes and standard service levels.

Question 93

Q: What is private transportation?

Answer 93

A: Private transportation is a less frequently used option, where large companies may establish a private fleet of ships to achieve greater control and reduce cost for the movement of unique commodities.

Question 94

Q: What are the widely used options for ocean transportation of goods?

Answer 94

A: The widely used options for ocean transportation of goods include containerships, bulk carriers, tankers, general cargo ships, and roll-on, roll-off vessels.

Question 95

Q: What are containerships?

Answer 95

A: Containerships are specially designed to carry standardized TEU or FEU (40-foot equivalent unit) containers and vary considerably in size, from small ships that hold fewer than 400 TEUs to the latest ultra-large containerships (ULCS) with capacities of 18,000 or more TEUs.

Question 96

Q: What are bulk carriers?

Answer 96

A: Bulk carriers carry cargoes with low value-to-weight ratios, such as ores, grain, coal, and scrap metal. Very large openings on these ships’ holds allow easy loading and unloading.

Question 97

Q: What are tankers?

Answer 97

A: Tankers carry the largest amount of cargo by tonnage, usually on a charter basis. These ships range in capacity from 18,000 tons to very large crude carriers (VLCCs), some of which top 500,000 tons. Tankers are constructed in much the same way as bulk carriers but with smaller deck openings.

Question 98

Q: What are general cargo ships?

Answer 98

A: General cargo ships transport shipload cargoes on a charter basis. They have large cargo holds and freight-handling equipment to facilitate loading and unloading of a large variety of freight.

Question 99

Q: What are roll-on, roll-off (RO-RO) vessels?

Answer 99

A: Roll-on, roll-off (RO-RO) vessels are basically large ferry ships. Cargo is driven directly onto the ship using built-in ramps and driven or towed off the ship at the destination port. Large RO–ROs can transport 2,000 or more automobiles, as well as freight trailers, farm and construction equipment, and other wheeled vehicles.

Question 100

Q: What financial challenges do water carriers face?

Answer 100

A: Water carriers operate in a highly competitive marketplace and face significant financial challenges, including overcapacity in the container shipping sector, congestion at major ports and transfer points for containers, and schedule reliability of liner service lagging behind other modes. New technologies and infrastructure are needed to alleviate these chokepoints

Question 101

Q: What is domestic freight control?

Answer 101

A: Domestic freight control refers to the transfer of title and responsibility for goods during shipment within a country.

Question 102

Q: What happens to ownership of goods if the terms are FOB origin?

Answer 102

A: If the terms are FOB origin, ownership of the goods changes hands at the shipping point or seller’s distribution center loading dock, and any loss or damage becomes the responsibility of the buyer.

Question 103

Q: What happens to ownership of goods if the terms are FOB destination?

Answer 103

A: If the terms are FOB destination, ownership of the goods transfers at the buyer’s unloading dock, and the seller is responsible for the goods until they are delivered to the buyer.

Question 104

: Who is responsible for paying the carrier in FOB origin and FOB destination terms?

Answer 104

A: In general, the buyer pays the carrier under FOB origin terms, while the seller pays the carrier under FOB destination terms.

Question 105

Q: What are Freight Prepaid and Freight Collect options?

Answer 105

A: Freight Prepaid and Freight Collect are options for specifying who is responsible for paying the carrier in FOB origin and FOB destination terms. Freight Prepaid means the seller negotiates transportation rates and pays the carrier, while Freight Collect means the buyer pays the carrier.

Question 106

Q: What challenges do international transactions present and why is it important to understand the terms of sale?

Answer 106

A: International transactions involve long distances, multiple modes and logistics intermediaries, duties, government inspections, and significant opportunity for damage or delay. Therefore, it is crucial to understand how the terms of sale influence transportation decision making. This includes knowing who will be responsible for control and care of the goods while in transit, carrier selection, transfers, and related product “flow” issues, costs, documentation, problem resolution, and other related issues.

Question 107

Q: What are Incoterms and how do they facilitate efficient freight flows between countries?

Answer 107

A: Incoterms are international rules that are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of the most commonly used terms in international trade. They address matters relating to the rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold. They help clarify the terms of sale decisions such as who will be responsible for various aspects of the transaction, such as control and care of the goods while in transit, carrier selection, transfers, and related product “flow” issues, costs, documentation, problem resolution, and other related issues.

Question 108

Q: What are the primary groups of Incoterms and how do they differ?

Answer 108

A: There are four primary groups of Incoterms: E terms where the buyer takes full responsibility from point of departure, F terms in which the main carriage is not paid by the seller, C terms in which the main carrier is paid by the seller, and D terms where the seller takes full responsibility to an arrival point. The options range from the buyer taking all transportation responsibilities at the seller’s location to the seller taking responsibility all the way through delivery to the buyer’s location (and numerous locations in between).

Question 109

Q: What are some potential benefits of taking control of freight through FOB terms or Incoterms?

Answer 109

A: Taking control of freight through FOB terms or Incoterms can be beneficial for organizations with the expertise and time to manage the process. It allows them to leverage their purchasing power with specific carriers to achieve lower rates, coordinate inbound and outbound flows, and consolidate freight to achieve greater efficiencies. Other potential benefits include the ability to manage risk, achieve greater freight visibility, and ensure available equipment capacity. Therefore, terms of sale can be a strategic opportunity to improve transportation and supply chain performance.

Question 110

Q: What is the transportation "make or buy" decision?

Answer 110

A: The transportation "make or buy" decision involves a choice between using a private fleet (the "make" option) or external service providers (the "buy" option) to move freight.

Question 111

Q: What are the advantages of using a private fleet?

Answer 111

A: Well-run private fleets can operate at costs competitive with for-hire carriers while providing greater scheduling flexibility and control over transit time. They can also provide intangible benefits such as promotional impact and prestige of having highly visible company trucks on the road.

Question 112

Q: What are the advantages of using external service providers?

Answer 112

A: For-hire carriers offer the capacity, experience, and flexibility to serve a wide variety of customers. They also offer a variable-cost, simplified alternative to private transportation. By using for-hire carriers, customers do not have to incur the large capital cost of starting a private fleet, invest the time needed to build transportation expertise, or take on the challenges inherent in operating a private fleet.

Question 113

Q: What is third-party logistics (3PL)?

Answer 113

A: Third-party logistics (3PL) is an alternative to a private fleet. 3PLs provide a wide array of transportation services, including dedicated contract carriage, where the 3PL serves as the organization's private fleet and devotes a management team, drivers, and equipment to the relationship.