Chapter 13 transportation management

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CHAPTER 13

<b>Transportation Management</b>

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Learning Objectives

• To explain contemporary transportation management

• To discuss how rates are determined

• To learn about modal and carrier selection

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Learning Objectives

• To distinguish among various transportation documents

• To illustrate select activities associated with making and receiving shipments

• To learn about transportation service quality

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Transportation Management Key

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Transportation Management Key

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Contemporary Transportation Management

• Transportation management

─ refers to the buying and controlling of

transportation service by either a shipper or

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Contemporary Transportation Management

• Transportation managers also involved in other

operations of the firm

<small>– Marketing</small>

<small>– Manufacturing</small>

<small>– Outbound shipping– Purchasing</small>

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Rate (Pricing) Considerations

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Rate (Pricing) Considerations

• Rate Determination

– Weight x rate = transportation charge

– Transportation rates based on three factors • Product

• Weight • Distance

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Rate (Pricing) Considerations

• Rate Determination

– Commodity rate

<small>• One specific rate for every possible combination of product, weight, and distance</small>

– Class rate system

<small>• System to simplify rate determination</small>

<small>• Freight classification used to simplify the number of commodities</small>

<small>• National Motor Freight Classification (NMFC)</small>

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Rate (Pricing) Considerations

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Rate (Pricing) Considerations

• Rate Determination

– Factors used for determine product’s freight classification

<small>• Density</small>

<small>– refers to how heavy a product is in relation to its size– Viewed as primary factor for setting a product’s </small>

<small>classification </small>

<small>• Stowability</small>

<small>– refers to how easy the commodity is to pack into a load– possible considerations involve the commodity’s ability to </small>

<small>be loaded with hazardous materials and ability to load freight on top of the commodity</small>

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Rate (Pricing) Considerations

• Rate Determination

– Factors used for determine product’s freight classification

<small>• Ease of difficulty of handling</small>

<small>– refers to challenges to handling that might be presented by a commodity’s size, weight, and so on</small>

<small>• Liability for loss and damage</small>

<small>– considers, among others, a commodity’s propensity to damage other freight, its perishability, and its value</small>

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Rate (Pricing) Considerations

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Rate (Pricing) Considerations

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Rate (Pricing) Considerations

• Rate Determination

– Commodity Classification Standards Board develops and maintains commodity freight

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Rate (Pricing) Considerations

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Rate (Pricing) Considerations

• Rate and Service Negotiations

– Both rates and service levels may be negotiated due to economic deregulation

– Allows transportation managers to take advantage of trade-offs between price and service

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Rate (Pricing) Considerations

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Rate (Pricing) Considerations

• Rate and Service Negotiations

– Domestic terms of sale

<small>• When freight charges are paid for a particular domestic shipment</small>

– Transportation cost analysis

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Modal and Carrier Selection

• Two-step process

– First determine appropriate mode(s)

– Then select carrier(s) within the chosen mode(s)

• Carrier selection is more challenging

– Difficult to be aware of every possible carrier – Lack of agreement on the number of relevant

factors

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Modal and Carrier Selection

• Amodal shipper

– Refers to a transportation manager who purchases a prespecified level of transportation service and is indifferent to the mode(s) and or carrier(s) used to provide the actual transportation service.

• Research indicates shippers are more

interested in transportation metrics than in modes

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• Documentation

– Serves practical function

<small>• What, where, and how much is being transported</small>

– Potentially provides legal recourse

– Transportation department is responsible for

completing all documents needed to transport the firm’s products

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• Bill of lading

– Functions as a delivery receipt when products are tendered to carriers

• Bill of lading classifications

– Straight bill of lading – Order bill of lading

– Long-form bill of lading

– Preprinted short-form bill of lading

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Documentation

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• Freight bill

– Invoice submitted by the carrier requesting to be paid

– Freight bill-paying service

<small>– Automated service in attempt to pay carriers within a specific number of working days</small>

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<small>• Work is performed by an independent third party to detect errors in freight bills</small>

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Documentation

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• Freight claims

– Refers to a document that notifies a carrier of wrong or defective deliveries, delays, or other delivery shortcomings

– Concealed loss or damage difficult for shippers and carriers

<small>• Refers to situation where loss or damage is not </small>

<small>apparent until after a shipment has been unpacked </small>

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Making and Receiving Shipments

• Key area of decision making in transportation management involves making and receiving shipments

– Refers to tactical planning and control of shipments along with supervision of freight loading and unloading

<i><small>Source: John E. Tyworth, Joseph L. Cavinato, and C. John Langley, Traffic Management: Planning, Operations, </small></i>

<i><small>and Control (Prospect Heights, IL: Waveland Press, 1991).</small></i>

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Making and Receiving Shipments

• Consolidating small shipments

– Shipments > 150 and < 500 pounds

– To get a lower rate, shipment consolidation may occur: aggregating customer orders across time or place or both

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Making and Receiving Shipments

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Making and Receiving Shipments

• Demurrageand Detention

– Demurrage

<small>– Penalty payment made to the railroad for keeping a railcar beyond the time when it should be released back to railroad</small>

– Detention

<small>– Same concept as demurrage except it usually refers to the trucking industry</small>

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Making and Receiving Shipments

• Routing

– Process of determining how a shipment will be moved between origin and destination<small>1</small>

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Making and Receiving Shipments

• Tracking and Expediting

– Tracking

<small>• Refers to determining a shipment’s location during the course of its move</small>

– Expediting

<small>• Involves the need to rapidly move a shipment to its final destination</small>

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Transportation Service Quality

• Macroenvironmental changes have caused organizations to demand higher levels of service quality

• Economic deregulation allowed for both price and service competition resulting in a need to measure performance

• Can measure performance through the use a performance scorecard

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Transportation Service Quality

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