6-1

Transport Fundamentals
CR (2004) Prentice Hall, Inc.
Chapter 6
When the Chinese write the word crisis, they do
so in two charactersone meaning danger, the
other opportunity.
6-2
Transport Fundamentals in
Planning Triangle
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Transport Strategy
Transport fundamentals
Transport decisions
Customer
service goals
The product
Logistics service
Ord . proc. & info. sys.
Inventory Strategy
Forecasting
Inventory decisions
Purchasing and supply
scheduling decisions
Storage fundamentals
Storage decisions
Location Strategy
Location decisions
The network planning process
P
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O
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C
O
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T
R
O
L
L
I
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Transport Strategy
Transport fundamentals
Transport decisions
Customer
service goals
The product
Logistics service
Ord . proc. & info. sys.
Inventory Strategy
Forecasting
Inventory decisions
Purchasing and supply
scheduling decisions
Storage fundamentals
Storage decisions
Location Strategy
Location decisions
The network planning process
CR (2004) Prentice Hall, Inc.
6-3
Transport System Defined
CR (2004) Prentice Hall, Inc.

Performance
- Average transit time
- Transit time variability
- Loss and damage
- Other factors including availability, capability,
frequency of movement, and various less
tangible services


Cost
- Line haul
- Terminal/local
- Accessorial or special charges
6-4
Transport Choices
CR (2004) Prentice Hall, Inc.
Primary intercity carriers
- Air
- Truck
- Rail
- Water
- Pipe


Coordinated services
- Piggyback
- Birdyback
- Fishyback


Small shipment carriers
-
UPS
-
Federal Express
-
Postal services
-
Bus Package Express



Agents
-
Freight forwarders
-
Shipper associations



Others
-
Autos
-
Bicycles
-
Taxis
-
Human
-
Electronic

6-5
Importance of Modes
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By Products Hauled

Air -- very high - valued, time sensitive products

Truck -- moderately high - valued, time sensitive
products. Many finished and semifinished goods

Rail -- low - valued products including many raw
materials

Water -- very low - valued products moved domestically,
high - valued if moved internationally

Pipe -- generally limited to petroleum products and
natural gas
6-6
Importance of Modes (Contd)
By Volume Moved

Percent
Transportation of total
mode volume

Railroads 36.5%
Trucks 24.9
Inland waterways 16.3
Oil pipelines 22.0
Air 0.3
Total 100.0

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6-7
Performance Overview
Air generally fast over long distances and a fair
degree of relative variability
Water is very slow and moderately reliable
Pipe is very slow but reliable
Truck is moderately fast and reliable
Rail is slower and less reliable than truck
Relative Costs of Performance
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Price,
Mode /ton - mile
Rail 2.28
Truck 26.19
Water 0.74
Pipeline 1.46
Air 61.20

6-8
Legal
Classification
Common carriers
Contract carriers
Private
Agents
Documentation
Bill of lading
Freight bill
Freight claims
Free trade zones
Documentation
Modes
International
Transportation
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6-9
Foreign (Free) Trade Zone
Products from
abroad
Products to
foreign
markets
No duties paid
C
u
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o
m
s
To domestic
markets
Duties paid
Manufacturing
and/or storage
Duty free zone
Products from
abroad
Products to
foreign
markets
No duties paid
C
u
s
t
o
m
s
To domestic
markets
Duties paid
Manufacturing
and/or storage
Duty free zone
CR (2004) Prentice Hall, Inc.
6-10
Rate Types
Line haul rates
-Class
>Freight classification of items
>Rate tables of tariffs
-Contract rates
-Drayage (local delivery)
Commodity and contract rates
-Specific rates for given shipment sizes for specific
products moving between designated points
Special service charges
-Extra charges
-Stop-off privilege example
Private carrier costing
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Should always check to see if shipment can be declared at the
next higher weight break for a lower rate and lower total charges
Table 6-5
Table 6-4
Suppose we wish to ship 15,000 lb. (150 cwt.) of wheat
flour from New York to Los Angeles by truck. The
trucker offers a 40% discount from the published tariff.
What is the transportation charge?
From the freight classification table, this is item number
1090--00. It shows a minimum weight of 36,000 lb.,
which is less than this shipment size. Therefore, the
class rating is 55, or less-than-truckload. From the
class 100 tariff, the rate is 6065, or $60.65 per cwt.
With a 40% discount, the effective rate is (1- .40) x
60.65 = $36.39. The shipment charges are 0.55 x
36.39 x 150 = $3,002.18.
Class Rate Example
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6-11
Break Weight

where:
Break Weight = Weight above which the next higher weight break rate
should be used for lower transport costs
Rate
Next
= Rate for next higher weight break
Weight
Next
= Minimum weight of next higher weight break
Rate
Current
= Rate for true weight of shipment.
Question Suppose 9,000 lb. of Class 100 merchandise is to
be shipped from New York to Dallas. From Table 6-4, the
rate would be $52.21/cwt. However, should the shipment be
priced at the next higher weight break rate of $40.11/cwt. for
a lower cost?
CR (2004) Prentice Hall, Inc.
Current
Next Next
Rate
xWeight Rate
ht Break Weig
6-12
Break Weight (Contd)
lb. 7,682 or , 82 . 76
21 . 52
100 11 . 40
Weight Break
x
Since the 9,000 lb. shipment size exceeds the
break weight of 7,682 lb., size as if a 10,000 lb.,
shipment for a total cost of $40.11x 100 = $4,011.
Otherwise, the shipment would have cost
$52.21x90 = $4,699.
Answer
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Calculate break weight
6-13
6-14
Stop-Off Privilege Example
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Suppose 3 shipments of J=8,000 lb., K=12,000 lb.,
and L=10,000 lb. originating at I are to be delivered
in the following way.
6-15
Stop-Off Privilege Example (Contd)
First, we compare the costs without the stop-off privilege. This would be to
price as if each shipment is a separate shipment from I. Suppose we know
the rates. Hence,
Now, we price with the stop-off privilege. We assume that all the volume
(30,000 lb.) is to be delivered to the farthest stop and we use the rate to
that point ($3.00/cwt.). A small stop off charge of $15.00 is made for each
stop including the last stop. Hence,

The better
choice
All volume to
the farthest stop
Load, lb. Points Rate, $/cwt. Charges
8,000 I to J 3.05 $244.00
12,000 I to K 3.35 402.00
10,000 I to L 3.60 360.00
Total $1006.00

Load, lb.

Points
Rate,
$/cwt.

Charges
30,000 I to L 3.00 $900.00
3 stops at
$15 each

45.00
Total $945.00

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6-16
Rate Profiles
By distance
Rates vary with the distance between origin
and destination in the following manner
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6-17
Rate Profiles (Contd)
By volume
Rates by shipment size have the following
characteristic
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