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Chapter 6: Transport Fundamentals. Skip Transit Privileges (pp. 172-175) Five Modes. Intermodal and International. Regulation/Deregulation. Costs & Rates. Documentation. Transportation. Most important component of logistics cost. Usually 1/3 - 2/3 of total cost.

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chapter 6 transport fundamentals
Chapter 6: Transport Fundamentals

Skip Transit Privileges (pp. 172-175)

  • Five Modes.
  • Intermodal and International.
  • Regulation/Deregulation.
  • Costs & Rates.
  • Documentation.
transportation
Transportation
  • Most important component of logistics cost.
    • Usually 1/3 - 2/3 of total cost.
  • Shapes economy and society.
  • Links production and consumption.
  • Increases competition, availability and variety.
  • Permits economies of scale in production.
five modes of transport
Five Modes of Transport

% of Total % of Total % of Total

Mode US Intercity US Tons US Transport.

Ton-miles Cost

Water 15 15 5

Railroad 38 25 8

Truck 28 43 80

Air 0.4 0.1 4

Pipeline 18 16 3

trends for intercity ton miles
Trends for Intercity Ton-Miles
  • Water use will increase.
  • Rail use will decrease.
  • Truck use will stay about the same.
  • Air use will increase.
    • Fastest growth, but small %.
    • High growth between US & Asia.
  • Pipeline use will stay about the same.
water
Water
  • Products: Nonperishable bulk cargo.
    • Liquids, minerals, grain, petroleum, lumber, etc.
  • System:
    • Mississippi system: 55% of traffic; 11,000 miles; 7500 miles over 6 ft. deep.
    • Coastal & other: 35% of traffic; 17,000 miles.
    • Great Lakes: 10% of traffic; 95,000 square miles.
  • Average trip:
    • Internal: 400-500 miles.
    • Coastal: 2000 miles.
water1
Water
  • Public ownership of waterways.
  • Slow speed: 5-10 mph
  • Very large size:
    • 1 barge = 35 ft. x 195 ft.
    • 1 barge = 1500 tons (3,000,000 lbs).
    • Up to 40 barges per tow (60,000 tons).
    • Can haul very large objects.
  • Disruptions of service: drought, flood, ice.
water transport st louis
Water Transport & St. Louis
  • St. Louis is major inland port.
    • Most northern ice-free port.
  • Loads/unloads 50-100 barges each day.
  • Above St. Louis: 15 barges per tow.
  • Below St. Louis: 30-45 barges per tow.
  • St. Louis - New Orleans travel time?
    • 1053 miles.
inland waterways information
Inland Waterways Information
  • Inland water transportation is about a $3.5 billion annual industry.
  • Over 11,000 federally maintained linear miles of navigable waterways.
  • Corps of Engineers manages the infrastructure, Coast Guard manages the navigation.
slide9

37 Lock Sites

  • 1,200 Miles of River
1999 upper mississippi illinois waterway commodity flows

Commodity

Tons

% of Total

Agriculture

59,212,908

44.3%

Coal

25,288,293

18.9%

Aggregates

15,056,445

11.3%

Chemicals

8,571,485

6.4%

Petroleum

8,430,536

6.3%

Ores

3,312,471

2.5%

Iron & Steel

5,565,281

4.2%

Other

8,281,576

6.2%

Total

133,718,995

100.0

1999 Upper Mississippi – Illinois Waterway Commodity Flows
slide13
Rail
  • Products: Heavy industry, minerals, chemicals, agricultural products, autos, etc.
    • 60% of coal; 67% of vehicles; 68% of paper and pulp
  • System: 120,000 miles of line.
    • 1.2 million rail cars.
    • Most are boxcars or hoppers.
  • Average trip: 700 - 800 miles.
slide14
Rail
  • Private ownership of right-of-ways.
    • Few very large US railroads.
    • Mergers lead to fewer, larger railroads.
  • Average speed: 20-25 mph.
    • 80% of time spent loading, unloading & waiting.
  • Large size:
    • 1 car = 80-100 tons.
    • Average 60-80 cars per train.
    • 2-5 locomotives per train.
    • Most shipments are CL (carload).
trucks motor carriers
Trucks (Motor Carriers)
  • Products: Medium and light manufacturing, food, clothing, all retail goods.
  • System: 3,800,000 highway miles.
    • 42,500 miles of Interstates.
  • Average trip:
    • Truckload (TL): 200-300 miles.
    • Less-than-truckload (LTL): 600-700 miles.
trucks motor carriers1
Trucks (Motor Carriers)
  • Public ownership of roadways.
    • Many, many trucking companies (>300,000).
    • Most are very small.
    • Truckload (TL): > 10,000 lbs.
    • Less-than-truckload (LTL): < 10,000 lbs.
  • Door-to-door service.
  • Small size:
    • 1 trailer = 40,000 lbs.
    • 40-53 feet long (small trailers are 28.5 ft.)
    • Can have 2 or 3 trailers per tractor in some places.
slide17
Air
  • Products: Perishable and time sensitive goods.
    • Flowers, produce, electronics, mail, emergency shipments, documents, etc.
  • System: 160,000 miles.
  • Average trip: 1300 miles.
slide18

Air

  • Public ownership of airways.
    • Terminal & ground facilities may be privately owned.
  • Very fast: 500-600 mph.
    • Door-to-door service requires trucks.
  • Size:
    • Large aircraft can carry 100 tons.
    • Can carry 8x8x40 ft containers.
  • Aircraft are very expensive to buy and operate.
pipeline
Pipeline
  • Products: Petroleum, oil, natural gas.
    • 3/4 of all crude petroleum.
  • System: 170,000 miles.
    • Texas has 1/4 of total.
  • Very dependable.
  • Can store large amount in transit.
slide20

Pipeline

  • Private ownership of pipelines.
  • Very slow, but large capacity.
    • Can move 24 hr/day, 7 days per week.
  • Size:
    • 4-26 inch diameter.
    • Alaska pipeline: 48” diameter; moves 2 million barrels per day.
  • No vehicles!
mode comparison
Mode Comparison

Relative Delivery Product

Mode Price Time Value Damage

Water 1 4 1 1

Railroad 3.5 3 2 4

Truck 35 2 3 3

Air 80 1 4 2

1=fastest 1=least 1=least

Size: 1 barge = 15 rail cars = 60 trucks

slide22

Intermodal Services

  • Combine two or more modes.
    • Rail+Truck or TOFC: trailer on flat car.
  • Used by 70% of shippers.
  • Containers:
    • 8’ x 8’ x 20’ (TEU) or 8’ x 8’ x 40’ (2 TEU’s)
    • Pack at origin; do not open until destination.
    • Used extensively in ocean transportation.
    • Large ships may carry >4000 20’ containers.
slide23

Small Shipments

  • Many options:
    • LTL motor carriers, US Postal Service, UPS.
  • Freight Forwarders:
    • Do not own long haul equipment.
    • Handle transportation for shippers.
    • Can consolidate small shipments and arrange TL service.
  • Express shipments:
    • Federal Express, US Postal Service, UPS.
slide24

International Transportation

  • Water is most important mode.
    • 99% of world trade volume by weight.
    • 50% of world trade volume by value.
  • Top US ports:
    • By tons: Houston, New Orleans, New York, Norfolk.
    • By value: LA/Long Beach, New York, Seattle/Tacoma, Houston.
  • Air handles 21% of world trade volume by value.
slide25

Imports and Exports in Billions of $ (2000)

Mexico Canada Europe Pacific Rim

US Exports 100 150 170 190

US Imports 135 230 240 415

US Imports & Exports

slide26

International Transportation

  • Legal issues, regulation and documentation can be extensive and detailed.
  • Political issues important.
  • Foreign trade zones encourage international transportation.
  • Regional free trade agreements:
    • NAFTA, European Community.
slide27

Pacific Ocean Transportation

  • U.S. - Asia travel: 13-15 days
  • Major ports:

Hong Kong Seattle/Tacoma

Kaohsiung (Taiwan) Long Beach/LA

Pusan (Korea) San Francisco

Mumbai (Bombay, India)

Sydney (Australia)

slide28

Atlantic Ocean Transportation

  • Travel between U.S. and:
    • Europe: 10-12 days
    • South America: 20-30 days
    • South Africa: 35-40 days
  • Major ports:
    • Europe: Liverpool (England), Antwerp (Belgium), Rotterdam (Netherlands), Bremerhaven & Bremen (Germany), Genoa (Italy), Oporto (Portugal), Istanbul (Turkey).
    • South America: Buenos Aires (Argentina), Santos & Porto Alegre (Brazil).
    • South Africa: Durban, Capetown, Port Elizabeth.
    • U.S.: Houston, New Orleans, New York, Norfolk.
slide29

Problems at Ports

  • Container imbalances.
    • More into U.S. than out of U.S.
  • Congestion - in water and on land.
  • Labor issues:
    • Lockout on U.S. west coast ports: 2002
  • Inspections into U.S.
    • Security.
    • Animal (insect) pests and diseases.
slide30

Transportation Regulation

  • 1800’s: Railroad boom:
    • Near monopoly on inland transportation.
    • Led to abuses of shippers.
  • 1887: Railroads regulated:
    • Rates must be reasonable, fair and published.
    • ICC established for enforcement.
  • Other modes:
    • 1906: Pipelines regulated.
    • 1935 - 1940: Motor carriers, airlines and water carriers regulated.
slide31

Features of Regulation

  • Government control over:
    • Rate adjustments.
    • Entry, expansion, acquisition & merger.
    • Safety.
  • Principle: Service change must benefit customers.
    • Burden of proof on carriers.
  • Little incentive for improved service.
slide32

Deregulation

  • Transportation Deregulated: 1977-1985:
    • Rate can be changed as long as reasonable.
    • Entry, expansion, acquisition & merger rules relaxed.
    • Safety still addressed at federal and state level.
  • Burden of proof shifted to shippers.
  • Major changes for carriers and shippers.
slide33

Deregulation Outcomes

  • Many new carriers, especially trucking firms.
  • Larger carriers created.
    • Existing carriers expand.
    • Many mergers & acquisitions.
  • Lower rates (?)
  • Good or Bad?
slide34

Transportation Costs

  • Fixed Costs:
    • Vehicles.
    • Infrastructure (road, rail, pipeline, navigation, etc.).
    • Terminal facilities.
    • Administration.
  • Variable: Proportional to distance or volume.
    • Fuel, labor, handling, pickup & delivery, taxes.
  • Cost structure varies by mode.
    • Railroads: High fixed cost; Low variable cost.
    • Trucks: Low fixed cost; High variable cost.
slide35

Transportation Costs

  • Allocating costs to shipments can be very complicated.
    • Many shipments move on same vehicle.
    • Marginal cost for additional shipment may be very low or very high.
    • Traffic imbalances (backhauls).
  • How to incorporate backhauls (return trips)?
    • Allocate all costs to forward haul?
    • Allocate some costs to backhaul?
slide36

Transportation Rates

  • Rate is price carrier charges for service.
    • Should reflect costs and value of service.
    • Linehaul rate + additional charges for special services.
  • Line-haul rate from origin terminal to destination terminal.
  • Additional charges for terminal services, extra protection, stop-offs, etc.
slide37

Line-haul Rates

  • Depend on product, distance and volume (weight).
  • Strong economies of scale:
    • Cost per cwt decreases with weight.
    • Cost per mile decreases with distance.
  • Under regulation, pricing was very complicated.
    • Rating or classification system for EVERY product.
  • Simpler now, and negotiation is important.
slide38

Line-haul Rates

  • Carriers offer discounts from published rates.
    • Published rates may be based on rating system.
    • FAK (Freight-all-kinds) rate applies to any product.
  • Rates may be negotiated based on:
    • Products.
    • Lane.
    • Volumes on a given lane.
    • Volume of business overall.
slide39

Additional Charges

  • Pickup and delivery.
  • Changing destination.
  • Use of multiple carriers.
  • Switching in rail yards.
  • Demurrage and detention: retaining vehicles longer than agreed.
slide40

Documentation

  • Bill of Lading: Legal contract between shipper and carrier.
  • Freight Bill: Charge for service
  • Freight Claim:
    • For loss, damage or delay.
    • For overcharges.
  • Much more documentation is usually required for international transportation.