Mode/Carrier Selection

 step 1


 step 2
Modal Choice
 basic mode

 intermodal Specific Carrier

 legal type
 step 3


 individual carrier Transport

 provider
CARRIER SELECTION DETERMINANTS :-
 selection determinants are :-
 costs
 service performance
1.Transportation costs-
o Includes rates,

o Will differ from one mode to another

o Earlier focus was on TC, but now on tradeoff betn
service provided & operation costs
o
2. Service performance :-


1.Transit time – Total time elapsing from the time the

consignor makes the goods available for dispatch until
the carrier delivers it to consignee.

2.Reliability- consistency of transit time a carrier provides

q

§
 Product differentiation-
 Reliable transit time will lead to :-

 Shorter dependable transit time than competitor

can reduce inventory & stockout costs , increases
sales
 Sales are sensitive to consistent service
 Log mgr must concentrate on carrier transit time &
reliability to differentiate itself
3. Capability :-


 Carrier’sability to provide equipment & facilities required

by movement of particular commodity
 Ex. Equipments providing controlled temperature/
humidity & specialized handling facilities


4. Accessibility :-


 Carrier’s ability to provide service over a certain route

 Geographic limits of carrier’s route network (rail/water)
authorization of regulatory authorities for operations
 are constraints for accessibility
 Carrier’s inability to meet desired capability & availablility
puts it out of the race
5. Security :-
 Arrival of goods in same condition they were, when
given to carrier
 Common carriers are held liable for all loss &
 damage
 Firm incurs cost when carrier loses/ delivers them in
damaged condition
 Unsafe service- oppportunity costs of profits foregone
 To guard against opportunity costs, firm increases
inventory costs
 Continous use of unsafe carrier will adversely affect
customer satisfaction & sales
Importance ranking of carrier Selection Determinants:


1. Transit time reliability/ consistency 1

2. Door to door transportation rates or costs 2
3. Total door to door transit time 3
4. Willingness of carrier to negotiate rate changes 4
5. Financial stability of carrier 5
6. Equipment availability 6
7. Frequency of service 7
8. Pickup & delivery service 8
9. Freight loss & damage 9
10.Shipment expediting 10
11.Quality of operating personnel 11
12.Shipment tracing 12
13.Willingness of carrier to negotiate service changes 13
14.Scheduling flexibility 14
15.Line-haul services 15
16.Claim processing 16
17.Special equipment 17
Transportation Alternatives…

9
 Chapter 9 Management of Business Logistics, 7th Ed.
10
Types of Intermodal Services
Figure 9-6
Operational Mode of Transportation

Lambert, "Fundamentals of Logistics Management," McGraw-Hill, 1998, p236

- 14
-
Air Cargo Services
 Airways :-
  Advantages

 Operational
Disadvantages Mode of Transportation.
[Coyle, pp337 -
371]

Characteristics of Transportation Mode.

Individual ranking within operating characteristics

Operating Transportation Mode

Characteristic Rail Highway Water Pipeline Air
s
Dependability 3 2 4 1 5
Speed 3 2 4 5 1
Frequency 3 1 4 5 2
Availability 2 1 4 5 3
Capability 2 3 1 5 4
Economic Efficiency 3 4 2 1 5
Energy Efficiency 3 4 2 1 5

- 12 -
 Comparison of Transport Modes

Mode Speed Depend- Frequency of Availabil- Flexibility Cost

ability in Shipments ity in in Handling
Meeting Different
Schedules Locations

Rail Average Average Low Low High Average

Water Very slow Average Very low Limited Very high Very low
Truck Fast High High Very Average High
extensive
Pipeline Slow High High Very limited Very low Low

Air Very fast High Average Average Low Very high

24
 Intermodal :-
 Use of more than one mode of transportation
to move a shipment to its destination
 Most common example: rail/truck
 Also water/rail/truck or water/truck
 Carrier offer services to public by publishing a rate
 Increased global trade has also increased use of
intermodal transportation
 More convenient for shippers (one entity
provides the complete service)
 Maximizes the primary advantages &
minimize their disadvantages
 Key issue involves the exchange of information
to facilitate transfer between different transport
modes
 Chapter 9 Management of Business Logistics, 7th Ed.
26
Types of Intermodal Services
Figure 9-6
 Birdyback- combines accessibility of motor carrier
 with speed of airline
 Fishyback- combines accessibility of motor carrier
 with low cost of water carraige
 Piggyback- combines accessibility of motor carrier
 with low cost of rail service
 A transportation co. providing modal services is able
to utilize efficient & economical modal services to
meet shipper’s needs
 Problem-Carrier hesitates to coordinate with others
when it can provide the service on its own
Intermodal Transportation: Containerization
 Referred to as Container-on-Flat-Car (COFC); goods are

Chapter 9 Management of Business Logistics, 7th Ed.

placed in a large box, where they are untouched until
they arrive at the consignee's unloading dock.
 Reduces theft, damage,

 multiple handling costs and

 intermodal transfer time.

 Changes materials handling from labor intensive

 to capital intensive and may reduce costs from
 10 to 20%.

28
Containers
 Containers are boxes usually of metal, that are 8 feet
wide, 8 feet high, and 20, 30, or 40 feet long.

 They can be loaded at the point of origin, closed, locked,
shipped by truck, transferred to rail, to ship, to truck,
and delivered at destination.

 They greatly speed the process of loading and
unloading, reduce handling costs.

 One other big advantage is that containers minimize
possible substantial losses from pilferage in transit-
especially at dockside.

29
 Containers…
 Some countries, such as Japan, do not permit
the 9l/2 -foot-highcontainers because they will
not fit under road bridges.

 If your shipment is too small to have your own
container and too heavy to go by air, you
would ship by less than container load (LCL).

 A consolidator would put your goods with
others' into a container, so that the goods still
travel by container.

 There are delays on both ends for loading and
unloading from the container.

30
Transportation.
[Coyle, pp337 - 371]

Legal Forms of Transportation.

Public Private

Common Contract Exempt Ownership Leasing Combination

Products Territory Organization

Regular Irregular
Route Route

Scheduled Non scheduled Radial Nonradial

Service Service Service Service

- 5 -
PRIVATE CARRIERS :-
 owned by a firm, not for hire.
 Not subject to eco. Regulations
 Must not consider transport as primary biz
 Move enough volume to achieve eos
 Need for specialized equipment
 Control over the fleet
 Increased flexibility in scheduling and routing
 Reduced transportation costs
 Huge capital investment

 FOR-HIRE CARRIERS-
 Common :-

 Serve general public without discrimination

 Charge reasonable rates

 Highly regulated

 Protect public interest

 Transport all types of products

 Same service for similar movements

 No huge capital investment required
 More control

 Time & effort required to negotiate contracts and

performance levels
 Exempt carriers :-
 Exempted from eco. Regulations of rates / services

 Operates in free market place

 Supply & demand determines rates, service and

capacity
 Becomes exempt by hauling certain products or nature
of operations
Transportation Rates.

Categories of Rates.
 :- :-
There are two types of charges assessed by carriers.
1.Line haul rates

2.Accessorial charges

 Line haul rates :- line-haul rates are charged for the movement of goods

between two points in different areas.

Accessorial charges cover all other payments made to carriers for

transporting, handling, or servicing a shipment.

Line-haul rates can be grouped into four types : (1) class rates,

(2) exception Rates, (3) commodity rates and (4) miscellaneous rates.

․
 Line haul rates can be grouped into 5
types :-
1.class rates
2.Exception rates
3.Commodity rates
4.Contract rates
5.Freight-all-kinds rates
1.Class rates :-
 charge to move a specific product betn
two locations is called as ‘rate’.
 Groups the products into different classes
for pricing
 This reduces the no. of transportation
rates
 Product’s specific classification is called
as class rating
 By identifying class rating of a product,
rate per hundred weights betn the
destinations can be determined

2. Exception rates :-


 Rates charged to shipper will be less than

published class rates.
 This rates are used for specific areas of
origin & destination
in case of competition or large
demand
o Classes are changed when exceptional
rates are published
3.

Commodity rates :-
 rates are charged on the basis of
commodities shipped in large quantities
betn two locations on regular basis


4. Contract rates :-


 there is an written agreement betn both

the parties
 different rates are applied in these
situations
 Negotiations are possible
 There’s demand for these services
because of EOS being achieved


5. Freight –all-kind-rates :-


 Can ship any type of product

 Are popular with wholesalers,
manufacturers shipping variety of
products to retail customers on retail
basis.
 Rates are applied to shipments instead of
products
 Carrier provides the shipper with a rate
per shipment based on the costs
incurred on providing different kinds of
services
Transportation Rates.

Other Transportation Rate System.

Distance rate system.

 Distance rates are mileage rates and are based on the tapering rate

principle, in which rates increases at a slower rate than distance. This

reflects the effect of fixed terminal costs associated with a shipment.

Blanket rate systems

. A blanket rate does not increase as distance increases; the rate remains
The same for all points in the blanket area the carrier designates. The
postage stamp rate is one example of a blanket rate.

Rates based on route.

 In addition to being a class or a commodity rate and a distance or a
 The Supply Chain of a Manufacturing Company

44
Typical Flow of LTL Shipments
Pickup
demand

Delivery to Line-haul movement

terminal to
terminal
unloading Consolida Unloading
ading tion and
loading

Sorting Sorting Sorting

Loading Unloading Loading

into line - into
haul delivery
trailers units
Origin TerminalTransfer TerminalDestination Terminal
(break -
bulk)
Line-haul movement
Delivery
 Freight Forwarders

Freight forwarders are private companies

that combine less-than carload or less-than
truckload shipments from several different
businesses deliver them to their destinations.
By combining shipments, freight
forwarders can often obtain truckload or
carload rates and lower transportation costs
for shippers.
46
 Customs Brokers
 The customs broker is another valuable
link in the chain.
 The broker might be integrated with the
freight forwarder or might be an
independent company.
 Brokers provide-

advice on customs classification,

fill out the forms necessary to clear
goods through customs,
pay duties for the importer, and notify
47

the importer that the goods are