Chapter 9 The Transportation System

1
Chapter 9 - The Transportation System
2
Why was the Consolidated Freightways profile
included?
3
Controlling Inventory Costs

• Supply Chain consist of inventory being
  transported between activity centers
• Cost of Inventory ?(Transportation Cost Cycle
  stock Safety stock Handling Cost)

4
What Factors Affect Cost

• Transportation cost mode, carrier
• Cycle stock lead time
• Safety Stock variation in lead time
• Handling Cost - packaging

5
Transportation Cost as Percent of Wholesale Price
1959
6
Modes

• Water
• Maritime
• RO-RO
• Container
• Tankers
• Oil-bulk-ore
• Ocean Going Barge
• Intercostal
• River
• Rail
• Class I
• Class III
• Short Haul
• Private

7
Modes

• Truck
• For hire
• Private
• Air
• Airlines
• Commuters
• Taxis
• Freight
• Parcels

8
Pipeline

• Petroleum
• Other
• Links
• http//www.soils.rr.ualberta.ca/SoilPosters/pipeli
  ne.cfm

9
How important is each?
10
Cost by Mode

11
Visualization of Revenue

12
Number of Carriers

• Air
• Rail
• Water http//www.puc.state.oh.us/docket/regcomp/R
  R.html
• Motor
• Pipeline http//www.oilcareer.com/

13
Operating Characteristics of each Mode

• What is the competitive strength of each mode?
• What are the limitations of each mode?
• Compare Speed of each mode
• Compare operating area of each mode
• Compare distance each mode takes from origin to
  destination How far by water from Knoxville to
  New Orleans?

14
Carrier Costs

• Fixed Capacity Cost Incurred whether the firm
  operates or not
• Right of way
• Airport contracts
• Capital equipment
• Variable Capacity Cost Incurred when operated
  whether anyone uses it or not
• Equipment maintenance
• Fuel
• Operating crew
• Direct Delivery Cost Incurred when people or
  goods are actually transported
• Meals
• Travel agents commission

15
Economic of Capacity Organizations

• Fixed capacity cost fix regardless of activity
  level
• Scheduled capacity cost fixed regardless of
  load factor
• Out-of-pocket cost cost vary with load factor
• How does this structure affect the way the firm
  operates?

16
Fixed Capacity Cost

• Right of way
• Equipment
• Terminal costs

17
Scheduled Capacity Costs

• Crew
• Fuel
• Maintenance
• User charges
• Landing fees, tolls

18
Out of pocket costs

• Billing
• Travel agents fee
• Documentation
• Handling
• meals

19
Comparison of Costs
20
What is rail cost structure?

• Identify
• Fixed Capacity Cost
• Scheduled Capacity Costs
• Out of Pocket costs
• Strength low cost movement, few size
  constraints
• Weakness relocating cars, switching yards,
  small shipments
• Opportunities large single destination
  movements
• Threats decentralization, more flexible,
  smaller movement units

21
Motor Carrier Costs

• Identify
• Fixed Capacity Cost
• Scheduled Capacity Costs
• Out of Pocket costs
• Strength flexibility
• Weakness deadheading, seasonality
• Opportunities dispatching services
• Threats small parcel services

22
Water Carrier Costs

• Identify
• Fixed Capacity Cost
• Scheduled Capacity Costs
• Out of Pocket costs
• Strength large, slower moving shipments
• Weakness loading
• Opportunities synchronized movements of
  containers
• Threats air high value

23
Airline Costs

• Identify
• Fixed Capacity Cost
• Scheduled Capacity Costs
• Out of Pocket costs
• Strength fast
• Weakness heavy or large low value, local
  delivery
• Opportunities rapid delivery of high value
  items
• Threats improved synchronization of other modes

24
Pipeline costs

• Identify
• Fixed Capacity Cost
• Scheduled Capacity Costs
• Out of Pocket costs
• Strength continuous movement of liquids
• Weakness mixing, seasonality, time sensitive -
  multidestination
• Opportunities
• Threats

25
Joint and Common Costs

• Joint If you provide service you incur both
  costs return trip
• Common costs cost are common to all people
  using service

26
What are carrier concerns?

• Load balancing Why?
• Stable demand Why?
• Capacity Utilization Why?
• Handling Why?
• Consolidation, Disaggregation Why?
• Liability Why?
• Special services young children, COD, special
  delivery, negotiable bills of laden
• Compatibility of loads

27
History of Transportation

• Economic growth dependent upon available
  transportation
• Rivers costal cities, river fall lines,
  intercostals, Army Corp of Engineers, locks
• Rail post civil war, western frontier, high
  cost of right of way, Hugh subsidies
• Low rates where competition, high rates
  elsewhere, high rates to competing industries -
  discrimination
• Taxation of rights of way
• 1917 bankruptcy
• 1920 keep railroad viable
• 1940 regulate everyone
• 1975-1980 deregulation

28
Legal forms

• Through back to regulation
• Private
• Exempt
• Common
• Contract
• Who they can serve
• Liability standard

29
Liability Standard

• Liable for cargo
• Government quarantine
• Act of War
• Inherent nature of goods
• Act of shipper

30
Evolution of Regulation

• Motor carriers placed under same regulation as
  rail

31
Why is containerization important?

• Containerization
• Palletizing
• RORO
• Intermodal (What is critical factor?)

32
Why growth in small package carriers?

• What is their competitive advantage?
• What did they have to do to compete?
• One form of sorting

33
Agencies

• Brokers
• Shippers Association
• Freight Forwarders
• Intermodal Marketing companies
• What is their function?

34
What is role of land bridge?

• Water to port
• Rail to major port
• Water to rest of trip
• Common Routes