Provides PLACE and TIME Utility (Primarily PLACE)

TRANSPORTATION ======

Provides PLACE and TIME utility (primarily PLACE)

The single largest cost component of physical distribution in many companies

CARRIER SELECTION DECISIONS

Mode Selection

Carrier Selection

SELECTION CRITERIA

1. Transportation costs

2. Transit time

3. Reliability

4. Accessibility

5. Capability

6. Security

7. Impact on inventory and stockouts

8. Product differentiation

ALTERNATIVE MODES OF TRANSPORTATION

1. AIR

Viewed by many shippers as a premium, emergency service Time in transit is minimized Primarily long-haul movements Important in international distribution Typically high value and low density products High consistency and reliability High in cost (or rates) per unit weight

2. MOTOR (ROAD, TRUCK)

Most widely used mode Competes with air for small shipments and rail for large shipments LTL means "less-than-truckload" and TL means "truckload" Primarily short and medium-haul movements More flexible than other modes (point-to-point or door-to-door, not necessarily terminal-to-terminal) More versatile (carries a variety of goods) than most Provides best market coverage 3. RAIL

Typically low-value and high density products Lower is cost (or rates) than motor Terminal-to-terminal service Quite versatile

4. WATER

Competes primarily with private carriage Primarily heavy, bulky, low-value-per-unit commodities Low in cost (or rates) Important in international distribution

5. PIPELINES

Limited number of products High level of service at low cost Important in the transportation of energy

USING MODAL COMBINATIONS

Piggyback

TOFC (Trailer on flat car) COFC (Container on flat car)

Fishyback Trailers, containers, or rail cars on water carrier

Inter-modal companies (IMC)

Land bridge

INDIRECT AND SPECIAL CARRIERS

>>>>>Shipment consolidation

FREIGHT FORWARDERS: Transportation service wholesalers SMALL PACKAGE CARRIERS: UPS Federal Express: hub package distribution center SHIPPERS ASSOCIATIONS---> made up of members BROKERS--> Intermediaries LEGAL FORMS OF TRANSPORTATION CARRIERS

Common Carriers

Offer their services to any shipper to transport products between designated points using published rates >>> the backbone of transportation

Contract Carriers

For-hire carrier that serves one or a limited number of shippers under specific contractual arrangements Popular among shippers who operate in a JIT environment Negotiation is important. The negotiated rate act of 1993 defines what constitutes a legal contract of carriage with a motor carrier

Exempt Carriers

Not subject to economic regulation due to exempt status (determined by type of commodity hauled)

Private Carriers

A shipper firm is providing its own transportation Primary business of firm should not be transportation Generally not-for-hire and not subject to government economic regulation

TRANSPORTATION REGULATION

Act to Regulate Commerce of 1887

From the mid-70's : trend toward deregulation

Motor Carrier Act of 1980

Staggers Rail Act of 1980

Airline Deregulation Acts of 1977 and 1978

BASES FOR TRANSPORTATION RATES

1. Distance

Uniform Tapering Key Points

2. Volume (weight)

Any Quantity Rates LTL/TL LCL/CL 3. Value of Service

Upper limit What traffic will bear

4. Cost of Service

Floor Various costs

TRANSPORTATION SERVICES (may charge an additional fee):

TERMINAL SERVICES

Consolidation Break bulk Loading and Unloading [Demurrage (for rail) and Detention (for trucks)] Shipment monitoring (weighing) Tracing Expediting Electronic tracing Global positioning system

LINE-HAUL SERVICES

Reconsignment and Diversion Pooling Stopping in Transit Transit Privilege

SOME IMPORTANT TERMS

F.O.B (Free-on-board) TERMS OF SALE

SHIPPER------>------RECEIVER ex-factory destination specific location specific location

Determines: Who will pay freight charges Who is responsible for shipment Who will file liability claim in the event of loss/damage Claims Loss Damage Delay Overcharge

IS IT WORTH FILING A CLAIM?

COST OF FILING CLAIM vs. PROBABLE BENEFIT FROM FILING CLAIM