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Transportation
Infrastructure
Transport functionality, principles and
participants
Transportation regulation
Transportatio...
Overview of transportation infrastructure
• Transport functionality, principles
and participants
• Transportation regulati...
Transport functionality primarily consists of
product movement services
• Product movement is the movement of inventory to...
Transport also functions as storage services for
products while in a vehicle
• In-transit inventory is captive in the tran...
Two fundamental transport principles
• Economy of scale is the cost per unit weight decreases as the size
of the shipment ...
Transport participants
• Shipper
• Consignee (Receiver)
• Carrier and Agents
• Government
• Internet
• Public
Role and perspective of participants
• Shipper and consignee have a common interest in moving goods
from origin to destina...
Role of the Internet in transportation
• The Internet now provides the vital communications links
between the transactiona...
Transportation regulation by the government
focuses on
• Economic regulation seeking to make transportation equally
access...
Transportation structure
• Consists of rights-of-way,
vehicles, and carriers operating
within five basic modes
• A mode id...
Rail mode has historically handled the largest
number of ton-miles within continental US
• Track mileage has declined by
o...
Truck mode has expanded rapidly since the end of
World War II
• Nearly 1 million miles of
highways in U.S.
• Key benefits ...
Water mode is the oldest form of US transport
dating back to the birth of our nation
• Percentage of ton-miles
has stayed ...
Pipeline mode accounts for about 68 percent of all
crude and petroleum ton-mile movements in US
• Have the highest fixed c...
Air mode is the newest and least utilized transport
mode for freight
• Accounts for only 1% of
intercity ton-miles
• Faste...
Comparison of fixed and variable cost
structure of each transport mode
Table 8.4 Cost Structure For Each Model
Operating characteristics used to classify
transport modes
• Speed is the elapsed movement time from origin to
destination...
Highway transport is appealing partly due to
its relative ranking across characteristics
Note: Lower is better
Table 8.5 R...
Transportation service is achieved by
combining modes
• Traditional carriers are firms that provide service using only one...
Package service provides both regular and
premium service
• Package service is growing rapidly with the rise in e-
Commerc...
Piggyback is an intermodal transport that
integrates rail and motor service
• Most widely used systems are
– Trailer on a ...
Containerships are oldest form of intermodal
transport
• Loads a truck trailer, railcar or
container onto barge or ship fo...
Coordinated air-truck is commonly used to
provide premium package services
• Many smaller cities lack
airfreight services
...
Non-operating intermediaries do not own their
own equipment
• Freight forwarders—businesses that
consolidate small shipmen...
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Transportation Infrastructure | Transport functionality | Principles and participants | Transportation regulation | Transportation structure | Transportation service |

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Transportation Infrastructure | Transport functionality | Principles and participants | Transportation regulation | Transportation structure | Transportation service |

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Transportation Infrastructure | Transport functionality | Principles and participants | Transportation regulation | Transportation structure | Transportation service |

  1. 1. Transportation Infrastructure Transport functionality, principles and participants Transportation regulation Transportation structure Transportation service
  2. 2. Overview of transportation infrastructure • Transport functionality, principles and participants • Transportation regulation • Transportation structure • Transportation service
  3. 3. Transport functionality primarily consists of product movement services • Product movement is the movement of inventory to specified destinations – Restrictive element—in-transit inventory is “captive”, usually inaccessible during transportation – Flexible element—inventory can be diverted during shipment to a new destination • Transportation consumes time, financial, and environmental resources – Transportation is more than 60% of the cost of logistics – Impacts traffic congestion, noise and air pollution
  4. 4. Transport also functions as storage services for products while in a vehicle • In-transit inventory is captive in the transport system – Managers strive to reduce in-transit inventory to a minimum • Product can also be stored in vehicles at origin or destination (trailers, trucks, railcars, etc) – Usually more expensive than traditional warehousing • Must pay rental or demurrage charges on vehicles used for storage • Diversion occurs when a shipment destination is changed after a product is in transit
  5. 5. Two fundamental transport principles • Economy of scale is the cost per unit weight decreases as the size of the shipment increases – At least until you totally fill the carrying vehicle! – Cost decreases because the fixed cost of the carrier is allocated over a larger weight of shipment • Economy of distance is the cost per unit weight decreases as distance increases – Often called the tapering principle – Longer distances allow fixed cost of the carrier to be spread over more miles, lowering the per mile charge • Goal is to maximize the size of the load and distance shipped while still meeting service expectations
  6. 6. Transport participants • Shipper • Consignee (Receiver) • Carrier and Agents • Government • Internet • Public
  7. 7. Role and perspective of participants • Shipper and consignee have a common interest in moving goods from origin to destination within a given time at the lowest cost • Carriers desire to maximize their revenue for movement while minimizing associated costs • Agents (brokers and freight forwarders) facilitate carrier and customer matching • Government desires a stable and efficient transportation environment to support economic growth • Public is concerned with transportation accessibility, expense, and standards for security, safety and the environment
  8. 8. Role of the Internet in transportation • The Internet now provides the vital communications links between the transactional participants (shipper-carrier- consignee) – Replacing phone and fax technologies • Web-based enterprises provide information marketplaces – Freight matching – Fuel, equipment, parts and supplies purchases
  9. 9. Transportation regulation by the government focuses on • Economic regulation seeking to make transportation equally accessible and economical to all without discrimination – Government created infrastructure (roads, canals, ports) – Intended to prevent carriers from taking advantage of suppliers while ensuring long-term financial stability for carriers • Social regulation which takes measures to protect public safety and environment – Department of Transportation (DOT) (1966) has active role in hazardous material safety and driver safety – Hazardous Materials Transportation Uniform Safety Act (1990) took precedence over state and local regulations
  10. 10. Transportation structure • Consists of rights-of-way, vehicles, and carriers operating within five basic modes • A mode identifies basic transportation method or form – Rail – Highway – Water – Pipeline – Air
  11. 11. Rail mode has historically handled the largest number of ton-miles within continental US • Track mileage has declined by over half since 1970 • Traffic shifted from broad range of commodities to hauling specific freight in traffic segments – Carload – Intermodal – Container • New technologies include articulated cars, unit trains and double-stack cars
  12. 12. Truck mode has expanded rapidly since the end of World War II • Nearly 1 million miles of highways in U.S. • Key benefits include – Speed of transit – Ability to operate door-to-door • More efficient than rail for small shipments over short distances • Dominate freight moves under 500 miles and from manufacturing to wholesalers to retailers • Many companies run their own truck fleets as well (e.g. WalMart)
  13. 13. Water mode is the oldest form of US transport dating back to the birth of our nation • Percentage of ton-miles has stayed between 19 and 30% since 1960’s • Ranks between rail and truck in fixed cost • Right of way (canals and rivers) maintained by Federal government
  14. 14. Pipeline mode accounts for about 68 percent of all crude and petroleum ton-mile movements in US • Have the highest fixed cost and lowest variable cost of all modes • Unique transportation mode – Can operate 24 hours a day, 7 days a week – No emissions – No empty container or vehicle to return • Not flexible, and limited to liquids and gases
  15. 15. Air mode is the newest and least utilized transport mode for freight • Accounts for only 1% of intercity ton-miles • Fastest of all the modes • Fixed cost is 2nd lowest but variable costs are extremely high • Most products air-shipped have high value, high priority or extreme perishability
  16. 16. Comparison of fixed and variable cost structure of each transport mode Table 8.4 Cost Structure For Each Model
  17. 17. Operating characteristics used to classify transport modes • Speed is the elapsed movement time from origin to destination • Availability is ability of a mode to service any given pair of locations • Dependability is the potential variance from expected delivery schedule • Capability is the ability to handle any load size or configuration • Frequency is the quantity of scheduled movements a mode can handle
  18. 18. Highway transport is appealing partly due to its relative ranking across characteristics Note: Lower is better Table 8.5 Relative Operating Characteristics by Mode Lowest rank is best
  19. 19. Transportation service is achieved by combining modes • Traditional carriers are firms that provide service using only one of the five basic transport modes – E.g. trucking firm or an airline • Package service uses intermodal transportation (ground and air) to handle small shipments or parcel deliveries – E.g. USPS, Fedex, or UPS • Intermodal transportation combines two or more modes to take advantage of the inherent economies of each and provide an integrated service at a lower total cost – E.g. piggyback service integrating rail and motor service • Nonoperating intermediaries include several business types that do not own or operate equipment – Act to broker services by other firms
  20. 20. Package service provides both regular and premium service • Package service is growing rapidly with the rise in e- Commerce and Internet consumer sales • Ground package service offers regular delivery within metropolitan areas and between cities – United Parcel Service (UPS), Federal Express Ground and United States Postal Service (USPS) • Air package service is a premium service to deliver certain packages door-to-door by next-day or second-day – Integrates truck and air modes seamlessly
  21. 21. Piggyback is an intermodal transport that integrates rail and motor service • Most widely used systems are – Trailer on a flatcar (TOFC) – Container on a flatcar (COFC) • Trailer or container is hauled by truck at origin and destination – Railcar hauls for portion of intercity travel • A variety of coordinated service plans have been developed
  22. 22. Containerships are oldest form of intermodal transport • Loads a truck trailer, railcar or container onto barge or ship for the line-haul movement on inland waterways • Land bridge concept moves containers in a combination of sea and rail transport – Common for containers moving from Europe to Pacific Rim • Transfer of freight between modes often requires handling containers and imposition of duties – Function of ports is to make this seamless and fast • Port throughput is big concern for supply chain managers
  23. 23. Coordinated air-truck is commonly used to provide premium package services • Many smaller cities lack airfreight services • Costs can leveraged with delivery time by linking the modes
  24. 24. Non-operating intermediaries do not own their own equipment • Freight forwarders—businesses that consolidate small shipments from various customers into bulk shipment for a common carrier for transport • Shipper associations and agents— groups of shippers who employ an agent to consolidate purchases and shipments for them – E.g. garment industry in New York • Brokers—intermediaries that coordinate transportation arrangements for shipper, consignees and carriers, operating on a commission basis Sampling of Non-operating Intermediaries

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