Chapter 9: Transportation Flashcards by Shay Bevins

What is Transportation

the function of planning, scheduling, and controlling activities related to the mode, carrier, and movement of inventories (products) into and out of an organization

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Goal of Transportation

get the right product, to the right place, at the right time by ensuring the product is moved as efficiently as possible from point of origin to point of destination

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Objectives of Transportation

To maximize the value to the company through price negotiations
To make sure service is provided effectively
To satisfy customers needs (internal and external)

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Modes of Transportation

the preferred mode of transportation depends upon the product being moved, its size, distance, speed, cost, etc

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Mode definition

the way in which goods are transported

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Carrier definition

refers to the company that transports the goods

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Types of Modes

Truck, air, pipeline, rail, water

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Contract carrier

person or company who transports freight under contract to one or a limited number of shippers (Ex. JP Hunt, Ryder, Penske)

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Common carrier

person or company who transports freight for a fee that can be hired by anyone to transport goods (Ex. UPS, FEDEX, USPS)

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Private carriers

person or company that transports its own cargo as a part of a business that produces, uses, sells, or buys the cargo that is being hauled (Ex. Walmart, Amazon)

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Exempt carriers

person or company specializing in services or transporting commodities exempt from regulation by the Interstate Commerce Act (Ex. NJ Transit, City Bus, Ambulance)

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Modes of Transportation: Truck

Most flexible mode of transportation
Carries > 80% of US Freight
Interacts w other transportation modes to and from ports, airports, railcars, warehouses
Carries nearly anything from packaged household goods, to building materials, to liquid petroleum
Competes with Rail and Air for short-medium hauls: Short haul is 0-200 miles from home terminal, Long Haul is >200 from drivers home terminal

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Tractor & Trailer

Tractor (Car Part) Trailer (where the products go) and they make up a truck

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Standard Sizing of a Trailer

53’ Long x 8’6” wide x 9’ High
Max Cube Utilization: 3509 Cube
Standard can hold 60 pallets

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General Freight Carriers

A trucking company which handles a wide variety of commodities in standard trailers. Freight is generally palletized.
- Can be LTL or FTL
- they carry majority of goods shipped
- does not require the use of specialized equipment

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Specialized Freight Carriers

A trucking company which handles the movement of cargo that requires specialized equipment for transportation because of the shipments type, size, weight, and shape
- Transport commodities like liquids, petroleum, household goods, building materials, and other specialized items

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Less than Truckload (LTL)

the transportation of relatively small freight (freight does not require the entire space of a truck)
Advantages: cost effective, more available carrier options, ideal for small businesses
Disadvantages: increased risk of theft/damage, increased shipping times, delays and mix ups
MANY SHIPPERS MANY PRODUCTS

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Full-Truckload (FTL)

the transport of goods that fill up a full truck, or a partial load shipment occupying an entire truck
Advantages: best way to transport large shipments for long distances, ideal for high risk or delicate shipments
Disadvantages:

1 SHIPPER

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Rail Transportation

9% of total freight spend, competes for transportation when the distance is long and the shipments or heavy or bulky
- shipments involve building materials, construction equipment, coal, gravel, sand, lumber, etc.
- aging infrastructure and equipment are an issue
- rail is slow and inflexible but it has the most capability
- pair with trucks for door-to-door delivery

Pipeline Transportation

2% of total freight spend
- Most reliable form of transportation, and lowest per unit cost
- Materials are transported in a liquid or gaseous state; petroleum, natural gas, drinking water, gasoline
- Little maintenance needed

Air Transportation

5% of total freight spend
- Fastest mode of transportation
- Most expensive mode of transportation
- Cannot carry extremely heavy or bulky cargo, ideally items with a high cost to weight ratio
- Light high value goods like jewelry, fine wines, pharmaceuticals, racehorses
- Half of the goods transported are carried by freight only airlines like Fedex other half are luggage in passenger planes
- Paired w trucks

Water Transportation

5% of total freight spend
Inexpensive
Very slow and inflexible
Includes inland waterways, coastal and Intracoastal, and deep-sea cargo
Primarily used for heavy, bulky, low value materials like coal, grain, sand, and petroleum and containerized goods
Also includes automobiles, produce, containerized cargo
Competes w rail and pipeline for some cargo shipments
Paired w trucks

Intermodal Transportation

Use of multiple modes of transportation to execute a single transport shipment
- Common forms include: Rail and Motor Carriers, Rail and Water, Roll-on/Roll-off Ships

Intermodal: Rail and Motor

Offer point-to-point pickup and delivery service known as Trailer on Flatcar

Cost of Service Pricing

the setting of a price for a service based on the costs incurred in providing it

Value of Service Pricing

a pricing strategy which sets prices based on the value perceived by the customer "priced at what the market will bear"

Combination Pricing

price is set at a value between cost-of-service minimum and value-of-service maximum. Most carriers use some form of combination pricing. Common in highly volatile markets and changing competitive situations

Net-Rate Pricing

established discounts and accessorial charges are rolled into one all-inclusive price. pricing is tailored to the individual customers needs.

Terms of Sale

delivery and payment terms agreed between a buyer and a seller

Free on Board (F.O.B) Origin/Shipping Point

- Seller places goods Free On Board with the carrier at the seller's location, and buyer pays freight costs - Ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller - Buyer assumes the risk for in- transit loss or damage BUYER PAYS FREIGHT COSTS

Free on Board Destination

- Seller places goods Free on Board to the buyer's place of business, and the seller pays freight costs - Ownership of the goods remains with the seller until the goods reach the buyer - Seller assumes the risk for in-transit loss or damage SELLER PAYS FREIGHT COSTS

Freight Forwarder

Consolidates LTL shipments into FTL shipments - They take small shipments from multiple companies and consolidate them into larger shipments

Load or Transportation Broker

Bring shippers and carriers together

Shippers Association

Nonprofit cooperatives which arrange for members shipping

Intermodal Marketing Company

Purchase blocks of rail capacity and sell it to shipper

Warehouse Management Systems (WMS)

Track and control the flow of goods from recieving dock to outbound shipment. New technologies, such as RFID tags, facilitate tracking

Transportation Management Systems (TMS)

Used to select the best mix of transportation services and pricing

Global Trade Management System (GTM)

Provides global visibility, standardization,

Reverse Logistics

Involves the process of moving a product from the point of customer receipt back to the point of origin to recapture value or ensure proper disposal - Backwards flow of goods from customers in the supply chain

5 Rs of Reverse logistics: Returns

Customers return products for a number of reasons. An item may be defective, damaged, seasonal, fail to meet expectations, or be excess inventory

5 Rs of Reverse Logistics: Recalls

typically involve a product defect or potential hazard and may be subject to government regulations, liability concerns, or reporting requirements

5 Rs of Reverse Logistics: Repairs

not all products that are returned are disposed. Manufacturers may identify the failure and repair, refurbish, or remanufacutre

Reverse Logistics Cost

4-5 Times as much as forward logistics and requires on average 12 times as many processing steps

Reverse logistics often viewed as

unwanted supply chain activity, a cost of doing business, a quality or regulatory compliance issue

Poor Reverse logistics can hurt a company:

inability of information systems to handle returns, lack of worker training in reverse logistics procedures, little or no identification on returned packages, need for adequate inspection and training

Return of unsold goods

goods may be distributed downstream with the understanding that the goods may be returned for credit if they are not sold (newspapers, magazines, prestige cosmetics, pharmaceutical)