Contemporary Logistics
Twelfth Edition
Chapter 12
Transportation
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Transportation (1 of 4)
• Transportation
– The actual, physical movement of goods and people between two
points
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Transportation (2 of 4)
• Transportation influences or is influenced by the following logistics
activities:
– Transportation costs are affected by the location of the firm’s
plants, warehouses, vendors, retail locations, and customers
– Inventory requirements are influenced by mode of transportation
used
– Transport mode selected influences packaging, and carrier
classification rules dictate packing choice
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Transportation (3 of 4)
• Transportation influences or is influenced by the following logistics
activities:
– Type of carrier used dictates a manufacturing plant’s materials
handling equipment and the design of receiving and shipping
docks
– Order-management philosophy that encourages maximum
consolidation of shipments between common points enables a
company to give larger shipments to its carriers and take
advantage of volume discounts
– Customer service goals influence the type and quality of carrier
and carrier service selected by the seller
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Transportation (4 of 4)
• Five different types, or modes, of transportation include:
– Air
– Motor carrier (truck)
– Pipeline
– Rail
– Water
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Comparing and Contrasting
Transportation Infrastructure
• Wide disparities in the various infrastructures exist between highly
populated countries
• Lack of infrastructure makes it difficult to use that transportation mode
domestically
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Table 12.1: Infrastructure Statistics in
Several Countries
cvSource: The World Factbook, www.cia.gov, 2016.
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Transportation Modes (1 of 16)
• The attractiveness of a particular mode depends on the following
attributes:1
– Cost
– Speed
– Reliability
– Capability
– Capacity
– Flexibility
Drawn from David J. Bloomberg, Stephen LeMay, and Joe B. Hanna, Logistics (Upper Saddle River,
1
NJ: Prentice Hall, 2002), Chapter 7.
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Transportation Modes (2 of 16)
• 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
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Transportation Modes (3 of 16)
• Airfreight
─ Examples of products that move by air:
▪ Auto parts and accessories
▪ Cut flowers and nursery stock
▪ Electronic or electrical equipment (e.g., iPods)
▪ Fruits and vegetables
▪ Machinery and parts
▪ Metal products
▪ Photographic equipment, parts, and film
▪ Printed matter
▪ Wearing apparel
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Transportation Modes (4 of 16)
• Airfreight
─ Reliability is problematic due to delays caused by:
▪ Congestion and resultant delays with air passenger
transportation (belly freight)
▪ Weather (e.g., fog, snow, thunderstorms)
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Transportation Modes (5 of 16)
• Motor carriers
– Most important business user of the Interstate Highway System
– Primary advantage is flexibility
– Cost is generally lower when compared to airfreight
– Less-than-truckload (LTL) versus truckload (TL)
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Transportation Modes (6 of 16)
• 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
▪ Operate through a system of terminals
▪ Prominent LTL carriers include:
─ ABF Freight System
─ FedEx Freight
─ UPS Freight
─ YRC Freight
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Transportation Modes (7 of 16)
• Motor carriers
– Less-than-truckload (LTL)
▪ Process
– From each terminal small trucks go out to customers, delivering
and picking up shipments
– Shipments are taken to a terminal where loaded to line-haul
trucks
– Line-haul to terminal near destination
– Shipments loaded to smaller trucks for local delivery
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Transportation Modes (8 of 16)
• Motor carriers
– Truckload (TL)
▪ Focus on shipments less than 10,000 pounds
▪ Exact weight depends on the product
▪ Close to the amount that would physically fill a truck trailer
▪ Possible that large shipments from several customers can be
consolidated
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Transportation Modes (9 of 16)
• Motor carriers
– Truckload (TL)
▪ Prominent TL carriers include:
– J.B. Hunt
– Schneider National
– Swift Transportation
– Werner Enterprises
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Transportation Modes (10 of 16)
• Motor carriers
– Truckload (TL)
▪ Process
– Shipments tend to move directly from the shipper’s location
to the consignee’s location
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Transportation Modes (11 of 16)
• Pipelines
– Only mode without vehicles
– No need for vehicle operators
– Transportation is one way
– Most reliable mode
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Transportation Modes (12 of 16)
• 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
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Transportation Modes (13 of 16)
• Railroads
– U.S. dominated by four freight carriers:
▪ Burlington Northern (west of the Mississippi)
▪ CSX (east of the Mississippi)
▪ Norfolk Southern (east of the Mississippi)
▪ Union Pacific (west of the Mississippi)
– Domination can limit service and pricing options
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Transportation Modes (14 of 16)
• Railroads
– Neither “best” or “worst” on any of the six attributes
– Superior to air, motor, and pipeline, but inferior to water in ability to
transport different kinds of products
– Less flexibility than motor carriers, but more when compared to air,
water, and pipeline
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Transportation Modes (15 of 16)
• 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
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Transportation Modes (16 of 16)
• Water
– Somewhat unreliable
▪ Drought
▪ Icing
▪ Aging lock system
– Slow average speeds
– Relatively inexpensive
– Focuses on lower value bulk commodities handled by mechanical
means
– Many different kinds of products can be carried
– Carries greater volumes than rail or truck
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Intermodal Transportation (1 of 4)
• 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 2
This definition comes from Barton Jennings and Mary C. Holcomb, “Beyond Containerization: The
2
Broader Concept of Intermodalism,” Transportation Journal 35, no. 3 (1995): 5–13.
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Intermodal Transportation (2 of 4)
• Intermodal transportation
– Two or more modes work closely together to utilize advantages of
each mode while minimizing their disadvantages
– Example:
▪ Piggyback transportation
– Trailer-on-flatcar
– Container-on-flatcar
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Intermodal Transportation (3 of 4)
• Containers
– Moved by mechanical devices (e.g., container crane)
– Provide significant reduction in freight handling costs
– Are interchangeable among rail, truck, and water carriers
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Figure 12.1: Various Types of Intermodal
Surface Containers
Source: Ports of the World, 14th edition, CIGNA Property & Casualty
Companies.
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Transportation Specialists (1 of 6)
• 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)
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Transportation Specialists (2 of 6)
• Freight forwarders
– Give volume discounts to customers shipping large quantities of
freight at one time
– TL rates less than LTL rates because
▪ Shipper loads the goods, and 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-pound shipment than for 250-pound shipment
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Transportation Specialists (4 of 6)
• Brokers
– Companies that look to match a shipper’s freight with a carrier to
transport it
– Can handle both LTL and TL
– Those handling LTL shipments consolidate them and then give to
motor carriers, freight forwarders, or shippers’ associations
– If handling TL shipments, brokers retain a carrier and receive a
portion of transportation charges
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Transportation Specialists (5 of 6)
• Third-party logistics companies (3PLs)
– Find clients with complimentary transportation needs to maximize
equipment utilization
– Should reduce transportation costs to clients
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Transportation Specialists (6 of 6)
• Parcel carriers
– Parcels are packages weighing up to 150 pounds
– Parcel carriers are companies that specialize in transporting parcels
– Parcel carriers include:
▪ U.S. Postal Service – Retail Ground
▪ United Parcel Service (UPS)
▪ FedEx Express
▪ Greyhound Package Express
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Transportation Regulation (2 of 8)
• Level and degree of regulation varies from country to country
– For example, 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
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Transportation Regulation (3 of 8)
• 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
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Transportation Regulation (4 of 8)
• 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
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Transportation Regulation (5 of 8)
• Safety regulation
– 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 three broad roles associated with
marine (water) transportation:
▪ Safety
▪ Security
▪ Stewardship
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Transportation Regulation (6 of 8)
• 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 1870s due to a belief that transportation
companies would not act in the public’s best interest without
government regulation3
Donald V. Harper, Transportation in America, 2nd ed. (Englewood Cliffs, NJ: Prentice Hall, 1982),
3
Chapter 19.
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Transportation Regulation (7 of 8)
• Economic regulation
– Resulted in two key economic regulatory bodies:
▪ Interstate Commerce Commission (ICC)
▪ Civil Aeronautics Board (CAB)
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Transportation Regulation (8 of 8)
• Economic regulation
– Deregulation began in the 1970s
▪ CAB was eliminated in 1985
▪ ICC was legislated out of existence in 1995
– A new agency, the Surface Transportation Board (STB), was
created
– Economic deregulation has allowed greater freedom with respect to
pricing and service options
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Legal Classification of Carriers (1 of 3)
• 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
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Legal Classification of Carriers (2 of 3)
• For-hire 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
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Legal Classification of Carriers (3 of 3)
• For-hire 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
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