CH 12 Transportation PDF

CHAPTER 12
Transportation
Copyright © 2015 Pearson Education, Inc.

Transportation
The actual, physical movement of goods and

people between two points.
Copyright © 2015 Pearson Education, Inc. 12-2

Transportation
Transportation influences or is influenced by the logistics
activities:
• Transportation costs are affected by node location
– plants, warehouses, vendors, retailers, and customers
• Inventory requirements are influenced by mode
– high-speed/high-priced transportation require smaller
amount of inventory, whereas slower/less-expensive
transportation requires larger amount of inventory
• Packaging requirements are dictated by mode, and
carrier classification rules dictate package choice

Transportation
…Transportation influences or is influenced by the
logistics activities:
• Materials handling equipment and design of the docks
are dictated by mode
– Rail crane, forklift, conveyer, airplane loader
• Management philosophy influence logistics activities:
Maximum consolidation of loads achieved with order-
management technology reduces costs (e.g., advantage
of volume discounts)
• Customer service goals influence the type and quality
of carrier
• Customer service goals influence carrier choice

Comparing and Contrasting
Transportation Infrastructure
a Number of paved runways over 3047 meters (~ 10,000 feet)

b gauge = 1067 meters Gauge (the distance between the inner sides of two parallel rail truck)

Transportation Modes
Five different types or modes of transportation
include:
• Airfreight
• Motor carriers (truck)
• Pipelines
• Railroads
• Water

The attractiveness of a particular mode depends
on the following attributes:
– Cost: Price that a carrier charges to transport a
shipment
– Speed: Elapsed transit time from pickup to deliver
– Reliability: Consistency of delivery
– Capability: Amount of different types of product be
transported
– Capacity: Volume be carried at one time
– Flexibility: Ability to deliver the product to the
customer
Source: Drawn from David J. Bloomberg, Stephen LeMay, and Joe B. Hanna, Logistics (Upper Saddle
River, NJ: Prentice Hall, 2002), Chapter 7.

• Public policy can affect a mode’s performance on these
attributes
• Construction cost of Interstate Highway System were primarily

paid for by the U.S. government (90%), with remaining
construction costs paid for by state government
• U.S. railroads have been responsible for the construction cost

of their truck system
• Railroads has substantial disadvantage relative to motor

carriers, and this cost disadvantage must be captured in
railroad pricing practices
© 2008 Prentice Hall 6-8

Airfreight
– Generally the fastest mode for transportation; traveling between
500 and 600 miles per hour; exceeds any other form of
transportation
– Expensive
– Need accessorial service (transportation service from shipper to
airport), if needed, adds transportation cost and time
– Limited capacity
– Boeing 737: 1850 cubic feet belly-space, Boeing 747: 5950 cubic feet
belly-space
– Best suited for high-value, lower-volume urgent, perishable or time-
specific deliveries
– Dimensional weight used for rates; an estimated weight that is
calculated from the length, width and height of a package

Airfreight
─ Examples of products that move by air:
• Auto parts and accessories
• Cut flowers and nursery stock
• Electronic or electrical equipment, i.e. iPods
• Fruits and vegetables
• Machinery and parts
• Metal products
• Photographic equipment, parts, and film
• Printed matter
• Wearing apparel

Airfreight
─ Reliability is problematic due to delays
caused by:
• Weather (fog, snow, thunderstorms)
• FedEx primary cargo hub in Memphis, Tennessee due to no
foggy conditions
• Congestion and resultant delays with air
passenger transportation (belly freight)

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) vs. Truckload (TL), a
way of classifying motor carriers

Motor Carriers
─ Less-than-truckload (LTL)
– Range 150 to 10,000 pounds
– Too big to be handled manually, too small to fill a
truck
– LTL trucks carry shipments from many shippers
– Prominent LTL carriers include:
─ ABF Freight System
─ FedEx Freight
─ UPS Freight
─ YRC (formerly Yellow Freight and Roadway)
Motor Carriers
• Less-than-truckload (LTL)
– Process
• Local pick-up
• Origin terminal used to load aboard line haul
• Line haul to terminal near destination
• Destination local delivery on smaller trucks
• Consignee receives

Motor Carriers
• Truckload (TL)
– Focus on shipments > 10,000 lbs
– Close to the amount that would physically fill a
truck trailer
– Usually involve only one customer
– Possible that large shipments from several
customers can be consolidated

Motor Carriers
• Truckload (TL)
– Process
• Shipments tend to move directly from the shipper’s
location to the consignee’s location

Motor Carriers
• Truckload (TL)
– Prominent TL carriers include:
• Schneider
• National
• J.B. Hunt
• Swift Transportation,
• Werner Enterprises

Motor Carriers
• Highway weight and size restriction limits motor carrier
ability
– Max gross vehicle weight of 80K pounds
– Max length and wide for tractor trailer (e.g., 102 inches wide)
• Speed limits and hours-of-service rules potentially affect
motor carrier service
– Limitation on truck driver hours per day
– Highway speed limits based on safety concerns
• Reliability is due to delays caused by:
– Weather (fog, snow, thunderstorms); e.g., bridge crossing
– Congestion (increased travel demands, roadway incidents,
contraction)

Pipelines
• Only mode without vehicles; no vehicle-related
disruptions
– No need for vehicle operators
• Pilot, ship captain’s compensation in excess of $100K
• Vehicle operators engage work stoppages (e.g., strikes)
• Most reliable mode
– Unaffected weather conditions
• Transportation is one way
– lack of a backhaul reduces potential excess capacity issues
– backhaul – any return load taken after delivery
• Transports large product volumes
Pipelines
• Tend to be the slowest mode (e.g., increase
overall transmit times, additional inventory)
• Accommodates only liquid, liquefiable or
gaseous products
• High fixed costs, but relatively low cost per
unit due to large product volume

Pipelines characterized
• Crude oil pipelines
– Gathering Lines; start at
oil-well and carry it to
concentration points. (6
inches or smaller diameter)
– Trunk Lines; carry it from
concentration points to oil
refineries
• Product pipeline; carry
products (e.g., gasoline,
aviation fuel) from
refineries to tank farms
located near customer
Pipelines
Slurry systems • E.g., Black Mesa pipeline,
• Allow bulk commodities to transports pulverized coal from
become liquefiable by grinding northern Arizona to an electric-
the solid material to a certain generating station in southern
particle size, mixing it with a Nevada, over a distance of 273
liquid to form a fluid muddy
substance, pumping that miles
substance through a pipeline,
and then decanting the liquid
and removing it, leaving the
solid material; water is the
most common liquid used in
slurry systems

Railroads
• BNSF, Canadian National, Canadian Pacific, CSX Transportation,
Kansas City Southern, Norfolk Southern, Union Pacific
• U.S. dominated by four carriers
– Burlington Northern (BN) (west of the Mississippi)
– CSX (east of the Mississippi)
– Norfolk Southern (NS) (east of the Mississippi)
– Union Pacific (west of the Mississippi)
– Domination limits service and pricing options
– Reliability issues link to adverse weather conditions
– U.S. railroads death with blizzards, severe flooding, tornadoes, and
tropical storms that have damaged ad destroyed many miles of trucks,
in recent years

Railroads
– Neither “best” or “worst” on any of the six attributes
(capability, capacity, cost, flexibility, reliability, speed)
– Carry much more weight than a truck trailer but less
than a barge (flat-bottomed boat carrying freight)
– Superior to air, motor, and pipeline, but inferior to water
when transporting different kinds of products (capability)
• Less flexibility (ability to deliver product to customer)
than motor, but more when compared to air, water, and
pipeline

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

Water
• Lakes, rivers, canals, ocean between different ports
(e.g., Great Lakes, Mississippi, Alaska, Hawaii, etc.)
• Focus on the inland waterways, primarily rivers
– Vessels, barges
• Relatively inexpensive, when compare air, rail and motor
• Focus on lower-value bulk commodities handled by
mechanical means (pumps, scoops, conveyors, etc.)
• Many different kinds of products can be carried (e.g.,
petroleum related products, coal, farm products)
• Carry greater volumes than rail or truck

Water
Somewhat unreliable (e.g., weather related consideration)
• 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 alternate 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.

Water
• Lock system contributes to transport
unreliability
– Lock system (a lock raises or lowers barges so they
can meet the rivers level as they move upstream or
downstream)
• Transit times affected by direction of travel
(e.g., upstream movement)

Intermodal Transportation
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
Two or more modes are

employed to utilize advantages of
each while minimizing their
disadvantages. E.g., piggyback
transportation

Containers
• Important type of equipment
in intermodal transportation
• Large reusable steel boxes
used for intermodal shipments
• Moved by mechanical devices
(e.g., cranes)
– Interchangeable among rail,
truck, and water carriers
– Provide significant reduction in
freight handling costs

Containers
• Specialized intermodal
containers available
– End loading fully enclosed
– Ventilated
– Refrigerated
– Liquid bulk
– Flat bulk
– Airfreight containers (Unit
Load Devices - ULDs)

Containers
– Measured by TEU’s (20-foot equivalent unit)
– Allowed for land bridge services
– refers to the transport of containers by rail
between ports on either side of a land mass, such
as North America
– Hawaii - Panama Canal – Europe, whereas Hawaii –
U.S. West Cost – U.S. East Cost (on railcars) - Europe

Transportation Specialists
Provide value-added services to customers
• Freight forwarders
• Air forwarders
• Shippers Associations
• Brokers
• Third party logistic companies
• Parcel Carriers

• Freight forwarders
– Can be thought of consolidators of freight
– 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
– 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
– Typically offers pickup and delivery service but does not perform
the line-haul service (done by motor carriers or railroads)

• Shipper’s Associations
– Similar to air and freight forwarders but are not-
for-profit organizations
– Providing a large number of transportation-related
services for their members, some focus on
achieving lowest rate (e.g., full-service, rate-
negotiator)
– Primarily focused on achieving the lowest rates for
members

• Brokers
– Companies that look to match a shipper’s freight with
a carrier to transport it
– Handle both Less-then Truckload and Truckload
– May consolidate LTL shipments and then give to
motor carriers, freight forwarders, or shippers’
associations
• Third party logistics companies (3PLs)
– Find clients with complimentary transportation needs
to maximize equipment utilization
– Exel logistic (3PLs) handle transportation service for
Chrysler and Ford repair parts

• Parcel carriers
– Companies that specialize in transporting parcels,
packages that weigh up to 150 pounds
– Parcel carriers include:
• USPS - 70 pound; offer delivery to mailing address
• UPS and FedEx - 70 – 150 pounds; offer pickup and
delivery services
– Use truck and air transportation
• Greyhound Package Express – 100 pound
– use other carrier company for same-day-service;
whereas use own buses standard service

Transportation Regulation
• The five modes are influenced by federal, state
and local government regulations
• Regulation has implications for transportation
companies also for shippers’ logistic system
• Regulation
– Costs money
– Needs to be codified
– Enforced by government agencies
• E.g., mandatory retirement for commercial pilot
upon reaching 65 years of age, before was 60;
lightening requirements in truck trailers
• Level and degree of regulation varies from
country to country
– i.e. 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
• 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 (e.g., carbon monoxide,
nitrogen oxides emission standards)
• Resource conservation (e.g., enforce fuel efficiency)

• Safety Regulation
– Department of Transportation (DOT) is the federal
agency responsible for transportation safety
regulations
– Federal Aviation Administration (FAA) has primary
responsibility for air transportation safety;
operates airport towers and air traffic centers
– Federal Motor Carrier Safety Administration
(FMCSA) is focused on reducing crashes, injuries,
and fatalities involving large trucks and buses.

• 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 safety regulation
responsibilities for marine safety considerations

• 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 1870’s due to a belief that
transportation companies would not act in the
public’s best interest without government regulation
• Interstate Commerce Commission (ICC), rail, motor, inland
water, oil pipelines
• Civil Aeronautics Board (CAB), air transportation

• Economic de-Regulation
– Beginning late 1970s, due to deregulation, some
government agency was eliminated
• Civil Aeronautics Board (CAB) was eliminated, in 1985
• Interstate Commerce Commission (ICC) was eliminated with
functions transferred to a new agency, the Surface
Transportation Board (STB), in 1995
• Has primary responsibility for resolving railroad rate and
service disputes and potential rail mergers
– Economic deregulation has allowed greater freedom
with respect to pricing and service options
Legal Classification of Carriers
• 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 (e.g., common carriers have
more extensive economic regulation than
contract)

• Common carriers
─ Serve the general public
─ Four specific obligations: to serve, to deliver, to charge
reasonable rates, and to avoid discrimination in pricing and
service
• Contract carriers
─ Offer specialized service to customers on a contractual basis
─ Contract specifies the compensation to be received, the services
to be provided, the type of equipment to be used, among
others
─ No obligation to serve the general public or to treat customers
on an equal basis

• Exempt carriers
─ Exempted from economic regulation due to legislation
─ Usually local and typically transport such items as
agricultural goods, newspapers, livestock, and fish
─ Private carriers
─ Companies whose primary business is other than
transportation and provide their own transportation
service
– Also exempt from economic regulation
– Frito-Lay, Kraft Foods, Marathon Petroleum, Walmart

• Private carriers
– Advantage
• Equipment can serve as a rolling billboard that allows an organization
to promote itself
• Operational control, 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.
• Also provide important competitive advantages to an organization and
many private truckers utilize their drivers as the organization’s familiar
and consistent face to their customers.
– Disadvantage
• Costly, in part because of the capital expenditures that are necessary
to own or lease the relevant vehicles
• High managerial costs, many private fleets require at least one full-
time employee to manage the various responsibilities such as vehicle
selection, vehicle maintenance, and so on

Copyright Notice
All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

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CHAPTER 12

Copyright © 2015 Pearson Education, Inc.

The actual, physical movement of goods and

Copyright © 2015 Pearson Education, Inc. 12-2

Copyright © 2015 Pearson Education, Inc. 12-3

Copyright © 2015 Pearson Education, Inc. 12-4

a Number of paved runways over 3047 meters (~ 10,000 feet)

Copyright © 2015 Pearson Education, Inc. 12-5

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• Construction cost of Interstate Highway System were primarily

• U.S. railroads have been responsible for the construction cost

• Railroads has substantial disadvantage relative to motor

© 2008 Prentice Hall 6-8

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Two or more modes are

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