12-1. Why is transportation important to a firm’s supply chain operations?
Transportation influences, or is influenced by, many logistics activities such as the fact that
transportation costs are directly affected by the location of plants, warehouses, vendors, retail
locations, and customers. Inventory requirements are influenced by the mode of transport used
and the transport mode influences the packaging required as well as the materials handling
equipment. Customer service goals influence the type and quality of carrier and carrier service
selected by the seller.
12-2. Why is it important to know about the characteristics of a country’s transportation
infrastructure?
Because an increasing number of shipments are being transported between multiple countries,
knowledge of a country’s infrastructure can help avert potential transportation problems. For
example, some countries may have few airports with 10,000-foot runways, which might reduce
the feasibility of moving shipments via air. As another example, data on rail gauges are
important because nonuniform rail gauges within a country, or between neighboring countries,
means that shipments moving by rail will need to be transferred from one vehicle to another,
which adds to both delivery time and costs.
12-3. Discuss the speed of airfreight transportation in terms of the line-haul and accessorial
service.
When one thinks of air transportation, one immediately thinks of speed, particularly on the line-
haul (terminal-to-terminal movement of freight or passengers); modern jet aircraft are capable of
traveling between 500 and 600 miles per hour. Because most shippers and consignees are not
located at an airport, this requires transportation from the shipper to the airport as well as from
the destination airport to the consignee (accessorial service); this accessorial service adds to
overall transit time.
12-4. Why is the reliability of airfreight transportation somewhat problematic?
On the one hand, air’s tremendous speed relative to the other modes offers the opportunity to
“make up lost time” that isn’t possible with the other modes. However, because so much
airfreight is belly freight, the increasing congestion and resultant delays associated with air
passenger transportation mean congestion and delays for airfreight. Moreover, weather
conditions, such as fog, snow, and thunderstorms, can have an adverse effect on the reliability of
airfreight transportation.
12-5. How do truckload operations differ from less-than-truckload operations?
Less-than-truckload (LTL) shipments range from about 150 to 10,000 pounds; truckload (TL)
carriers focus on shipments of greater than 10,000 pounds, although the exact weight depends on
the product. LTL shipments are often too big to handle manually and do not fill a truck, and LTL
carriers transport shipments of many customers simultaneously. Whereas LTL shipments are
routed through terminals, TL shipments tend to move directly from the shipper’s location to the
consignee’s location.
12-6. How do speed limits and hours-of-service rules potentially affect motor carrier service?
Several states mandate a two-tier speed limit policy in which the maximum speed for motor
carriers is lower than for automotive vehicles, which potentially means longer transit times by
truck. However, several states are in the process of eliminating the lower maximum speed limit
of truckers, which could potentially increase motor carriers’ length of haul. Hours-of-service
rules limit the number of hours that can be driven in 24 hours as well as the number of hours that
can be driven in one week.
12-7. What are the advantages and disadvantages of a pipeline’s lack of vehicles?
The advantages include that there is no need for vehicle operators and that the likelihood of work
stoppages by operating employees is small. The lack of vehicles also means that transportation is
one way, and the lack of a backhaul reduces potential excess capacity issues. In addition, the
pipeline’s lack of vehicles means that it is the most reliable form of transportation because there
are no vehicle-related disruptions and pipelines are virtually unaffected by adverse weather
conditions. However, the lack of vehicles means that the relevant product must be forced through
the pipeline, which means that pipelines tend to be the slowest form of transportation.
12-8. What are pipeline slurry systems? How do they function?
Slurry systems allow bulk commodities to become liquefiable by grinding the solid material to a
certain particle size, mixing it with a liquid to form a fluid muddy substance, pumping that
substance through a pipeline, and then decanting the liquid and removing it, leaving the solid
material. Although water is the liquid most commonly used in slurry systems, other liquids can
be used.
12-9. Discuss the drawbacks of rail transportation.
There is a level of market concentration and domination in railroading that creates limited
service and pricing options for potential customers. U.S. railroads have exhibited rather uneven
reliability in recent years in part because of severe weather conditions that have destroyed and
damaged many miles of track and caused significant transit time delays. Railroads present an
interesting paradox in the sense that they are not the “best” or “worst” on any of the attributes
such as capability, capacity, cost, and so on. For example, railcars can carry much more weight
than a truck trailer but much less weight than a barge.
12-10. How do weather conditions influence the reliability of inland water carriers?
Drought creates problems because when water levels drop below acceptable levels, barges are
forced to reduce their loads or barge traffic might be halted altogether, situations that require
alternative means of transportation. Icing closes bodies of water and prevents year-round
operations. With flooding, there is too much water and while the disruptions from flooding tend
to be shorter than those associated with drought, any disruption negatively impacts transportation
reliability.
12-11. Discuss the positive attributes of inland water transportation.
Inland water transportation is relatively inexpensive to users, particularly when compared to rail
and truck transportation. Moreover, many different kinds of products can be carried. Of the
modes with vehicles, inland water transportation offers the greatest capacity (volume that can be
carried at one time).
12-12. How do containers help to facilitate intermodal transportation?
Containers—large reusable steel boxes used for intermodal shipments—are moved by
mechanical devices such as container cranes. Companies need only handle a container and not
the freight inside of it, which provides a dramatic reduction in freight handling costs. Because
the container is interchangeable among rail, truck, and water carriers, containers can be used in
intermodal applications and provide the advantages offered by each of several modes.
12-13. What are freight forwarders? How do they function? What services do they perform?
Freight forwarders can best be thought of as consolidators of freight. They function by
consolidating shipments from small shippers, buying transportation in volume rates, and then
charging shippers a rate somewhere between the non-volume rate and the volume rate. The
forwarder typically offers pickup and delivery services, but not line-haul service. In addition,
forwarders can specialize in certain cargoes, such as garment forwarders and forwarders that
specialize in animals.
12-5. How do truckload operations differ from less-than-truckload operations?
Less-than-truckload (LTL) shipments range from about 150 to 10,000 pounds; truckload
(TL) carriers focus on shipments of greater than 10,000 pounds, although the exact
weight depends on the product. LTL shipments are often too big to handle manually and
do not fill a truck, and LTL carriers transport shipments of many customers
simultaneously. Whereas LTL shipments are routed through terminals, TL shipments tend
to move directly from the shipper’s location to the consignee’s location.
12-6. How do speed limits and hours-of-service rules potentially affect motor carrier
service?
Several states mandate a two-tier speed limit policy in which the maximum speed for
motor carriers is lower than for automotive vehicles, which potentially means longer
transit times by truck. However, several states are in the process of eliminating the lower
maximum speed limit of truckers, which could potentially increase motor carriers’ length
of haul. Hours-of-service rules limit the number of hours that can be driven in a 24-hour
period as well as the number of hours that can be driven in a one-week period.
12-7. What are advantages and disadvantages to a pipeline’s lack of vehicles?
The advantages include that there is no need for vehicle operators and that the likelihood
of work stoppages by operating employees is small. The lack of vehicles also means that
transportation is one way, and the lack of a backhaul reduces potential excess capacity
issues. In addition, the pipeline’s lack of vehicles means that it is the most reliable form
of transportation because there are no vehicle-related disruptions and pipelines are
virtually unaffected by adverse weather conditions. However, the lack of vehicles means
that the relevant product must be forced through the pipeline, which means that pipelines
tend to be the slowest form of transportation.
12-8. What are pipeline slurry systems? How do they function?
Slurry systems allow bulk commodities to become liquefiable by grinding the solid
material to a certain particle size, mixing it with a liquid to form a fluid muddy substance,
pumping that substance through a pipeline, and then decanting the liquid and removing it,
leaving the solid material. Although water is the liquid most commonly used in slurry
systems, other liquids can be used.
12-9. Discuss the drawbacks to rail transportation.
There is a level of market concentration and domination in railroading that creates limited
service and pricing options for potential customers. U.S. railroads have exhibited rather
uneven reliability in recent years in part because of severe weather conditions that have
destroyed and damaged many miles of track and caused significant transit time delays.
Railroads present an interesting paradox in the sense that they are not the “best” or
“worst” on any of the attributes such as capability, capacity, cost, and so on. For example,
12-14. What is a shippers’ association?
Shippers’ associations perform the same functions as surface and airfreight forwarders, except
shippers’ associations do not operate as profit-making organizations. Although shippers’
associations tend to be thought of as providing a large number of transportation-related services
for their members, some shippers’ associations are primarily focused on achieving the lowest
rates and transportation costs for their members.
12-15. Discuss the various options that are available to parcel shippers.
Parcel shippers, which send packages weighing up to 150 pounds, have a variety of options such
as Retail Ground, a service of the U.S. Postal Service. Retail Ground has definitive size (130
inches in combined length and girth) and weight limitations (approximately 70 pounds). United
Parcel Service (UPS) and FedEx are also options for parcel shippers; their rates, unlike Retail
Ground, include both pickup and delivery. The weight limitations for UPS and FedEx range from
70 to 150 pounds, depending on the type of service purchased. Package services are also
available from Greyhound Lines, the primary intercity bus company in the United States, and
packages are limited to a maximum weight of 100 pounds.
12-16. List several environmental regulations and describe their impact on transportation.
With respect to noise, the Environmental Protection Agency (EPA) is responsible for enforcing
noise emissions from transportation equipment such as rail locomotives and truck tractors. In
terms of air pollution, the EPA has mandated that heavy-duty truck engines must meet stringent
emission standards. The EPA is also quite concerned with resource conservation, and improved
fuel efficiency and reduced consumption of petroleum have become important issues for many
transportation companies.
12-17. Pick three modes of transportation, name the federal agency responsible for safety
regulation for each of the modes you’ve picked, and provide a safety-related role or
responsibility for each mode.
Air: Federal Aviation Administration; airspace and air traffic management.
Motor carriers: Federal Motor Carrier Safety Administration; reduce crashes, injuries, and
fatalities involving large trucks and buses.
Railroads: Federal Railroad Administration; safety inspectors investigate five distinct
disciplines, such as hazardous materials, and operating practices, such as drug and alcohol issues.
Pipelines: Office of Pipeline Safety; establish and enforce regulations with respect to pipeline
design, construction, and operation. Inland water: U.S. Coast Guard; safety, security, and
stewardship of marine transportation.
12-18. Define what is meant by economic regulation. Why is transportation economic
deregulation important?
Economic regulation in transportation refers to control over business practices and activities such
as entry and exit, pricing, service, accounting and financial issues, and mergers and acquisitions.
Economic deregulation of transportation is important because it allows transportation companies
much greater freedom with respect to pricing and service options—two attributes that facilitate
the tailored logistics concept. In addition, the economic deregulation that occurred in the United
States has spurred economic deregulation (sometimes called liberalization) in many other
countries, and this movement has been particularly noticeable with respect to air transportation.
12-19. How does a common carrier differ from a contract carrier?
A common carrier has agreed to serve the general public by assuming four specific obligations:
to serve, to deliver, to charge reasonable rates, and to avoid discrimination in pricing and service.
A contract carrier offers a specialized service to customers on a contractual basis; the contract
specifies the compensation to be received, the services to be provided, and the type of equipment
to be used, among others. Unlike the common carrier, the contract carrier is under no obligation
to render services to the general public and only has to serve customers with whom it has
contracts.
12-20. Discuss the advantages and disadvantages of private transportation.
One advantage to private transportation is that the equipment can serve as a rolling billboard that
allows an organization to promote itself. Operational control is another advantage to private
transportation, in part because shipments can move at a time convenient to the company, as
opposed to a time that might be convenient for a carrier. Private transportation can also provide
important competitive advantages to an organization; private truck fleets allow organizations to
better serve key customers relative to the performance of for-hire carriers.
A key disadvantage is that private transportation can be quite costly, in part because of the
capital expenditures that are necessary to own or lease the relevant vehicles. Moreover,
managerial costs are often ignored or underestimated; many private fleets require at least one
full-time employee to manage various responsibilities such as vehicle selection, vehicle
maintenance, and so on.
13-3. Discuss how transportation managers could be involved with other operations of the firm.
Transportation managers assist marketing by quoting freight rates for salespeople, suggesting
quantity discounts that can be based on transportation savings, and selecting carriers and routes
for reliable delivery of products. They can help manufacturing by advising on packaging and
materials handling, and making certain that an adequate supply of transportation is available
when it is needed. Transportation managers can help the outbound shipping process by providing
simplified shipping or routing guides, drawing up transportation documents, and encouraging
shipment consolidations. They can also help purchasing by advising about methods to control the
costs and quality of inbound deliveries and by tracking and expediting lost or delayed shipments
of important inputs.
13-4. What are the three primary factors that determine transportation rates?
Transportation rates are based on three primary factors; one involves relationships between
different products in terms of their handling characteristics, such as the difference between
carrying 2,000 pounds of ballpoint pens and 2,000 pounds of live chickens. A second factor
involves relationships between shipments of different weights, such as shipments of 10 pounds
each versus shipments of 1,000 pounds each. A third factor involves relationships between
different distances a shipment is carried, such as from Boston, Massachusetts, to New York City,
New York, versus from Atlanta, Georgia, to Los Angeles, California.
13-5. Distinguish between a commodity rate and a class rate.
A commodity rate refers to determining one specific rate for every possible combination of
product, weight, and distance. Although commodity rates are good for dealing with demand-
specific situations, the number of commodity rates can become overwhelming because of how
many different products, weights, and distances that exist. Class rates simplify each of the three
primary rate factors. One example of product simplification is freight classification, which is
based on a product’s density, stowability, ease of handling, and liability to damage and theft.
13-6. Discuss the four factors used in determining a product’s freight classification.
Density, which refers to how heavy a product is in relation to its size, is viewed as the primary
factor for setting a product’s classification. Low-density products (low weight per cubic feet) are
assigned a higher classification because these products tend to cube out before they weigh out.
Stowability refers to how easy the commodity is to pack into aload, whereas ease or difficulty of
handling refers to challenges to handling that might be presented by a commodity’s size, weight,
and so on. The liability for loss and damage considers, among others, a commodity’s propensity
to damage other freight, its perishability, and its value.
13-7. Describe the potential tension that might exist between shippers and carriers with respect to
a product’s freight classification.
With respect to a product’s freight classification, the higher the classification rating, the greater
the relative charge for transporting the commodity. As such, shippers tend to prefer a lower
classification number (which translates into a lower rate), whereas carriers tend to prefer a higher
classification number (which translates into a higher rate).
13-8. Discuss how a transportation manager might take advantage of the trade-offs between price
and service.
The text provides two examples where monetary premiums were paid for meeting predetermined
service standards, and there can be monetary penalties for failure to achieve predetermined
service standards. For example, two-day delivery of product should be cheaper than next-day
delivery of product. Price and service tradeoffs are limited only by the transportation manager’s
creativity and ingenuity.
13-10. Why is the carrier selection process less straightforward than the modal selection process?
There are several reasons why the carrier selection process is less straightforward than the modal
selection process. First, while there are only five modes, there can be tens, hundreds, or even
thousands of carriers from which to choose in a particular mode. Second, there is a lack of
agreement as to the number of relevant factors that might be used in carrier selection; the number
of carrier selection factors evaluated in academic research has ranged from fewer than 10 to
more than 150.
13-11. Define what is meant by an amodal shipper, and discuss the factors that have contributed
to its growth.
An amodal shipper refers to a transportation manager who purchases a prespecified level of
transportation service (e.g., two-day delivery for a particular price) and is indifferent to the
mode(s) and/or carriers used to provide the actual transportation service. One reason for its
growth is that non-asset-based third-party logistics companies have the capability to develop
multimodal solutions to a client’s transportation problems. Amodalism is also aided by
companies such as UPS and FedEx which own companies that provide different types of
transportation services (e.g., air and expedited).
13-12. Discuss some of the basic functions performed by the bill of lading.
The bill of lading is the basic operating document in the transportation industry, and it functions
as a delivery receipt when products are tendered to carriers. The signed original bill of lading is
the shipper’s legal proof that the carrier received the freight. Furthermore, the bill of lading is a
binding contract, specifying the duties and obligations of both the carrier and shipper.
13-13. Distinguish between the straight bill of lading and the order bill of lading.
A straight bill of lading is printed on white paper. It states the name of the consignee in the
appropriate place, and the carrier is under a strict legal obligation to deliver the freight to the
named consignee and to no one else. An order bill of lading is printed on yellow paper, and the
name of the consignee is not specified. Order bills of lading guarantee that the customer pays for
the product prior to receipt.
13-14. What is a freight bill? Why should each freight bill be audited?
A freight bill is an invoice that is submitted by the carrier requesting to be paid. Each freight bill
should be audited to ensure that companies are not being charged too much (overcharges) for
transportation services.
13-15. Discuss the basic issues, conflicts, and problems involved in concealed loss and damage
claims.
Concealed loss and damage refers to a situation where loss or damage is not apparent until after a
shipment has been unpacked and inspected. Carriers are reluctant to pay concealed loss and
damage claims for two reasons. First, if the shipment came through the transportation process
with no exterior damage, then there is a strong possibility that the product was improperly
protected on the inside. If this is the case, then the carrier is exempted from liability because
improper packaging is the fault of the shipper. Second, the possibility exists that the consignee’s
employees broke or stole the products. The potential delicateness of concealed loss and damage
claims is the balancing act between acarrier 1) not wanting to pay claims caused by shipper or
consignee errors and 2) upsetting a shipper or consignee by seemingly implicating them in the
loss or damage.
13-16. Explain why smaller shipments are challenging to transportation managers.
The transportation manager faces the decision of whether and when to consolidate large numbers
of small shipments into small numbers of large shipments because it costs less on a per-pound
basis to ship larger quantities. However, it could take some time to accumulate the units and this
increased time could result in poorer service to the customer. A large number of small shipments
also means that there needs to be an information system capable of keeping track of each
shipment’s status. Moreover, while larger shipments may yield transportation cost savings, there
are inventory cost considerations to holding units during consolidation.
13-18. Explain how a routing guide might be used by a transportation manager.
Routing can be defined as the process of determining how a shipment will be moved between
origin and destination. A routing guide is a document that can provide a variety of shipment-
related information such as shipment preparation, freight invoicing, a list of preferred carriers,
and a list of which carrier or carriers to use for shipments moving between two points.
13-19. Distinguish between tracking and expediting.
Tracking refers to determining a shipment’s location during the course of its move and the
capability to track a shipment directly affects expediting, which involves the need to rapidly
move a shipment to its final destination.
13-20. What is a carrier performance scorecard? How might it be used by transportation
managers?
Carrier performance scorecards contain a list of relevant attributes (perhaps the same attributes
used to select carriers) and an evaluation of each carrier on every attribute. The performance
scorecard could be used as a diagnostic tool. For example, if an individual carrier’s performance
is below a certain number, then the carrier might be put on probation for a certain time period. If
performance does not show satisfactory improvement during the probationary period, then the
carrier might be fired.
