Transportation
Transportation
• Transportation
– The actual, physical movement of goods and
people between two points
TRANSPORTATION – LOGISTICS – MARKETING INTERFACES
• Customers satisfaction is a component of the marketing
concept
• Transportation inefficient increase costs
Þ Product : what products should an organization produce?
The ease or difficulty of transporting a product ( physical
characteristics) , cost of transportation, transportation
equipment availability and capacity of that equipment to
move the product
Þ Price: transportation is a variable expense of business. It
has obvious impact on the prices that company must charge
for its goods and services
Transportation – Logistics – Marketing interfaces
Þ Target markets: where should products be marketed or
sold?
Þ Purchasing/procurement. What to purchase can be
greatly determined by transportation. ( what, when,
where of purchasing and procurement)
Þ Facilities location: ( plant, warehouse, retail locations to
final customers)
Transportation
• Transportation influences or is influenced by
the following logistics activities:
– Transportation costs are affected by node location
– Inventory requirements are influenced by mode
– Packaging requirements are dictated by mode
– Carrier classification rules dictate package choice
Transportation
• Transportation influences or is influenced by
the following logistics activities:
– Materials handling equipment and design of the
docks are dictated by mode
– Maximum consolidation of loads achieved with
order-management technology reduces costs
– Customer service goals influence the type and
quality of carrier
– Customer service goals influence carrier choice
Transportation
• Five different types or modes of
transportation include:
– Air
– Motor carrier (truck)
– Pipeline
– Rail
– Water
Comparing and Contrasting
Transportation Infrastructure
• Table 12.1 indicates:
• Wide disparities in the various infrastructures
exist between highly populated countries
• Lack of infrastructure makes it difficult to use
that mode domestically
Comparing and Contrasting
Transportation Infrastructure
Transportation Modes
• The attractiveness of a particular mode
depends on the following attributes:
– Cost
– Speed
– Reliability
– Capability
– Capacity
– Flexibility
Source: Drawn from David J. Bloomberg, Stephen LeMay, and Joe B. Hanna, Logistics
(Upper Saddle River, NJ: Prentice Hall, 2002), Chapter 7.
Transportation Modes
• Airfreight
– Generally the fastest mode for shipment
exceeding 600 miles
– Expensive
– Accessorial service, if needed, adds
transportation cost and time
– Best suited for high-value, lower-volume
urgent, perishable or time-specific deliveries
– Dimensional weight used for rates
Transportation Modes
• Airfreight
─ Examples of products that move by air:
• Auto parts and accessories
• Cut flowers and nursery stock
• Electronic or electrical equipment, i.e. iPods
• Fruits and vegetables
• Machinery and parts
• Metal products
• Photographic equipment, parts, and film
• Printed matter
• Wearing apparel
Transportation Modes
• Airfreight
─ Reliability is problematic due to delays caused
by:
• Weather (fog, snow, thunderstorms)
• Congestion and resultant delays with air passenger
transportation (belly freight)
Transportation Modes
• Motor Carriers
– Most important business user of the Interstate
Highway System
– Primary advantage is flexibility
– Cost is generally lower when compared to airfreight
– LTL vs. TL
Transportation Modes
• Motor Carriers
─ Less-than-truckload (LTL)
• 150 to 10,000 pounds
• Too big to be handled manually, too small to fill a truck
• LTL trucks carry shipments from many shippers
• Prominent LTL carriers include:
─ ABF Freight System
─ FedEx Freight
─ UPS Freight
─ YRC (formerly Yellow Freight and Roadway)
Transportation Modes
• Motor Carriers
– Less-than-truckload (LTL)
• Process
– Local pick-up
– Origin terminal used to load aboard line haul
– Line haul to terminal near destination
– Destination local delivery on smaller trucks
– Consignee receives
Transportation Modes
• Motor Carriers
– Truckload (TL)
• Focus on shipments > 10,000 lbs
• Close to the amount that would physically fill a truck
trailer
• Possible that large shipments from several customers
can be consolidated
Transportation Modes
• Motor Carriers
– Truckload (TL)
• Prominent LTL carriers include:
– Schneider
– National
– J.B. Hunt
– Swift Transportation,
– Werner Enterprises
Transportation Modes
• Motor Carriers
– Truckload (TL)
• Process
– Shipments tend to move directly from the shipper’s
location to the consignee’s location
Transportation Modes
• Pipelines
– Only mode without vehicles
– No need for vehicle operators
– Transportation is one way
– Most reliable mode
Transportation Modes
• Pipelines
– Tend to be the slowest mode
– Accommodates only liquid, liquefiable or gaseous
products
– Capable of transporting large product volumes
– High fixed costs, but relatively low cost per unit
due to large product volume
Transportation Modes
• Railroads
– U.S. dominated by four carriers
• Burlington Northern (BN) (west of the Mississippi)
• CSX (east of the Mississippi)
• Norfolk Southern (NS) (east of the Mississippi)
• Union Pacific (west of the Mississippi)
– Domination limits service and pricing options
Transportation Modes
• Railroads
– Neither “best” or “worst” on any of the six
attributes
– Superior to air, motor, and pipeline, but inferior to
water when transporting different kinds of products
– Less flexibility, but more when compared to air,
water, and pipeline
Transportation Modes
• Railroads
– Superior to air and motor with regards to volume,
but inferior to pipeline and water
– Less expensive than air and motor, but more
expensive than pipeline and water
– Faster than pipeline and water, but slower than air
and truck
Transportation Modes
• Water
– Relatively inexpensive
– Focus on lower value bulk commodities handled by
mechanical means
– Many different kinds of products can be carried
– Carry greater volumes than rail or truck
– Slow average speeds
– Somewhat unreliable
Intermodal Transportation
• Intermodal transportation
– refers to transportation when using a container or
other equipment that can be transferred from the
vehicle of one mode to the vehicle of another
mode without the contents being reloaded or
disturbed
– Two or more modes are employed to utilize
advantages of each while minimizing their
disadvantages
– Example - piggyback transportation
Intermodal Transportation
• Containers
– Large reusable steel boxes used for intermodal
shipments1
– Provide significant reduction in freight handling costs
– Are interchangeable among rail, truck, and water
carriers
1http//en.wikipedia.org/wiki/Shipping_containers.
Intermodal Transportation
• Containers
– Airfreight containers (ULDs) are designed specifically
for fuselage
– Are measured by TEU’s (20-foot equivalent unit)
– Allowed for land bridge services
Intermodal Transportation
Transportation Specialists
• Freight forwarders
– Two types of domestic freight forwarders
• Surface
• Air
– Exists by offering a service to shippers that must
use LTL rates because they do not generate
enough volume to use TL rates
– Typically offers pickup and delivery service but
does not perform the line-haul service (done by
motor carriers or railroads)
Transportation Specialists
• Freight forwarders
– Give volume discounts to customers shipping large
quantities of freight at one time
– TL rates < LTL rates because
• Shipper loads the goods and the consignee unloads
trailer
• The load goes directly from shipper to consignee
without passing through terminals
• Paperwork, billing, and other administrative costs are
little more for a 25,000 lb shipment than for 250 lb
shipment
Transportation Specialists
• Air forwarders
– Consolidate shipments
– Tender to airlines in containers ready for loading
– Forwarders provide retailing function
– Airline provides wholesaling function
• Shipper’s associations
– Similar to air and freight forwarders but are not-
for-profit organizations
– Primarily focused on achieving the lowest rates for
members
Transportation Specialists
• Brokers
– Companies that look to match a shipper’s freight
with a carrier to transport it
– May consolidate LTL shipments and then give to
motor carriers, freight forwarders, or shippers’
associations
• Third party logistics companies (3PLs)
– Find clients with complimentary transportation
needs to maximize equipment utilization
Transportation Specialists
• Parcel carriers
– Parcels are packages weighing up to 150 pounds
– Parcel carriers are companies that specialize in
transporting parcels
– Parcel carriers include:
• USPS
• UPS
• FedEx Express
• Greyhound Package Express
Transportation Regulation
• The five modes are influenced by federal,
state and local government regulations
– Examples:
• Mandatory retirement age for pilots in U.S.
• Placement of lighting on truck trailers
• Regulation
– Costs money
– Needs to be codified
– Is enforced by government agencies
Transportation Regulation
• Level and degree of regulation varies from
country to country
– i.e. industrialized countries tend to have more
stringent transportation equipment emissions
regulations when compared to those of less
industrialized countries
• Logisticians must understand
– Relevant transportation regulations
– Cost and service implications of regulations
Transportation Regulation
• Environmental Regulation
– Environment Protection Agency (EPA) is the
federal regulatory agency established to protect
human health and the environment
– Current concerns include:
• Noise and air pollution
• Resource conservation
Transportation Regulation
• Safety Regulation
– Department of Transportation (DOT) is the federal
agency responsible for transportation safety
regulations for all five modes
– Federal Aviation Administration (FAA) has primary
responsibility for air transportation safety
– Federal Motor Carrier Safety Administration
(FMCSA) is focused on reducing crashes, injuries,
and fatalities involving large trucks and buses.
Transportation Regulation
• Safety
– Office of Pipeline Safety (OPS) is responsible for
safety considerations for natural gas and liquid
pipelines
– Federal Railroad Administration (FRA) has primary
responsibility for safety in the U.S. railroad
industry
– U.S. Coast Guard (USCG) has safety regulation
responsibilities for marine safety considerations
Transportation Regulation
• Economic Regulation
– Refers to control over business practices and
activities such as entry and exit, pricing, service,
accounting, and financial issues, and mergers and
acquisitions
– Regulation began in the 1870’s due to a belief that
transportation companies would not act in the
public’s best interest without government
regulation
Transportation Regulation
• Economic Regulation
– Surface Transportation Board (STB)
• Has primary responsibility for resolving railroad rate
and service disputes and potential rail mergers
• Some jurisdiction over motor carriers, domestic water
transportation, and rates and services of pipelines not
regulated by the Federal Energy Regulatory
Commission1
1http://www.stb.dot.gov/stb/about/overview.html
Transportation Regulation
• Economic (continued)
– Due to deregulation
• Civil Aeronautics Board (CAB) was eliminated
• Interstate Commerce Commission (ICC) was eliminated
with functions transferred to a new agency, the Surface
Transportation Board (STB)
– Economic deregulation has allowed greater
freedom with respect to pricing and service
options
Legal Classification of Carriers
• Transportation carriers are classified as either
– For-hire
• Common
• Contract
• Exempt
– Private
• Classification is important because different
levels of economic regulation are applicable to
different carriers
Legal Classification of Carriers
• Common carriers
─ Serve the general public
• Contract carriers
─ Offer specialized service to customers on a
contractual basis
─ No obligation to serve the general public or to
treat customers on an equal basis
Legal Classification of Carriers
Legal Classification of Carriers
• Exempt carriers
─ Exempted from economic regulation due to
legislation
• Private carriers
─ Companies whose primary business is other than
transportation and provide their own
transportation service
– Also exempt from economic regulation
