Chapter 13 Transportation ManagementChapter 13 Transportation Management.ppt
- 1. CHAPTER 13 Transportation Management Copyright © 2015 Pearson Education, Inc.
- 2. Learning Objectives • To explain contemporary transportation management • To discuss how rates are determined • To learn about modal and carrier selection Copyright © 2015 Pearson Education, Inc. 13-2
- 3. Learning Objectives • To distinguish among various transportation documents • To illustrate select activities associated with making and receiving shipments • To learn about transportation service quality Copyright © 2015 Pearson Education, Inc. 13-3
- 4. Transportation Management Key Terms • Amodal shipper • Bill of lading • Class rate system • Commodity rate • Concealed loss or damage Copyright © 2015 Pearson Education, Inc. 13-4 • Demurrage • Density • Detention • Documentation • Expediting • FOB destination
- 5. Transportation Management Key Terms • FOB origin • Freight bill • Freight claims • Rate • Routing Copyright © 2015 Pearson Education, Inc. 13-5 • Routing guide • Stowability • Tracing • Transportation Management
- 6. Contemporary Transportation Management Copyright © 2015 Pearson Education, Inc. 13-6 • Transportation management ─ refers to the buying and controlling of transportation service by either a shipper or consignee1 • Transportation is the most costly logistics activity 1 Source: John J. Coyle, Edward J. Bardi, and Robert A. Novack, Transportation, 6th ed. (Mason, OH: South-Western, 2006).
- 7. Contemporary Transportation Management Copyright © 2015 Pearson Education, Inc. 13-7 • Transportation managers also involved in other operations of the firm – Marketing – Manufacturing – Outbound shipping – Purchasing
- 8. Rate (Pricing) Considerations • Rate Determination – One key responsibility of transportation managers – Rate • Price charged for freight transportation – Fare • Prices charged for passenger transportation Copyright © 2015 Pearson Education, Inc. 13-8
- 9. Rate (Pricing) Considerations • Rate Determination – Weight x rate = transportation charge – Transportation rates based on three factors • Product • Weight • Distance Copyright © 2015 Pearson Education, Inc. 13-9
- 10. Rate (Pricing) Considerations • Rate Determination – Commodity rate • One specific rate for every possible combination of product, weight, and distance – Class rate system • System to simplify rate determination • Freight classification used to simplify the number of commodities • National Motor Freight Classification (NMFC) Copyright © 2015 Pearson Education, Inc. 13-10
- 11. Rate (Pricing) Considerations Copyright © 2015 Pearson Education, Inc. 13-11
- 12. Rate (Pricing) Considerations • Rate Determination – Factors used for determine product’s freight classification • Density – refers to how heavy a product is in relation to its size – Viewed as primary factor for setting a product’s classification • Stowability – refers to how easy the commodity is to pack into a load – possible considerations involve the commodity’s ability to be loaded with hazardous materials and ability to load freight on top of the commodity Copyright © 2015 Pearson Education, Inc. 13-12
- 13. Rate (Pricing) Considerations • Rate Determination – Factors used for determine product’s freight classification • Ease of difficulty of handling – refers to challenges to handling that might be presented by a commodity’s size, weight, and so on • Liability for loss and damage – considers, among others, a commodity’s propensity to damage other freight, its perishability, and its value Copyright © 2015 Pearson Education, Inc. 13-13
- 14. Rate (Pricing) Considerations • Rate Determination – Weight groups are used to simplify shipment weight – Weight group examples: • <500 lbs (highest rate) • 500-999 lbs • 1000-1,999 lbs – Distances are simplified through rate basis numbers • Zip codes are replacing rate basis numbers Copyright © 2015 Pearson Education, Inc. 13-14
- 15. Rate (Pricing) Considerations Copyright © 2015 Pearson Education, Inc. 13-15
- 16. Rate (Pricing) Considerations • Rate Determination – Commodity Classification Standards Board develops and maintains commodity freight classifications – Shippers prefer lower classification number (lower rate) – Carriers prefer higher classification number (higher rate) – Transportation managers can appeal a commodity’s classification Copyright © 2015 Pearson Education, Inc. 13-16
- 17. Rate (Pricing) Considerations Copyright © 2015 Pearson Education, Inc. 13-17
- 18. 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 Copyright © 2015 Pearson Education, Inc. 13-18
- 19. Rate (Pricing) Considerations Copyright © 2015 Pearson Education, Inc. 13-19
- 20. Rate (Pricing) Considerations • Rate and Service Negotiations – Domestic terms of sale • When freight charges are paid for a particular domestic shipment – Transportation cost analysis Copyright © 2015 Pearson Education, Inc. 13-20
- 21. 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 Copyright © 2015 Pearson Education, Inc. 13-21
- 22. 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 Copyright © 2015 Pearson Education, Inc. 13-22
- 23. Documentation • Documentation – Serves practical function • What, where, and how much is being transported – Potentially provides legal recourse – Transportation department is responsible for completing all documents needed to transport the firm’s products Copyright © 2015 Pearson Education, Inc. 13-23
- 24. Documentation • 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 Copyright © 2015 Pearson Education, Inc. 13-24
- 25. Documentation Copyright © 2015 Pearson Education, Inc. 13-25
- 26. Documentation • Freight bill –Invoice submitted by the carrier requesting to be paid –Freight bill-paying service – Automated service in attempt to pay carriers within a specific number of working days Copyright © 2015 Pearson Education, Inc. 13-26
- 27. Documentation • Freight bill –Internal audits • Conducted to detect current errors that result in overcharges and to • Correct these errors in the future –External audits • Work is performed by an independent third party to detect errors in freight bills Copyright © 2015 Pearson Education, Inc. 13-27
- 28. Documentation Copyright © 2015 Pearson Education, Inc. 13-28
- 29. Documentation • 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 • Refers to situation where loss or damage is not apparent until after a shipment has been unpacked and inspected Copyright © 2015 Pearson Education, Inc. 13-29
- 30. 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 Source: John E. Tyworth, Joseph L. Cavinato, and C. John Langley, Traffic Management: Planning, Operations, and Control (Prospect Heights, IL: Waveland Press, 1991). Copyright © 2015 Pearson Education, Inc. 13-30
- 31. 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 Copyright © 2015 Pearson Education, Inc. 13-31
- 32. Making and Receiving Shipments Copyright © 2015 Pearson Education, Inc. 13-32
- 33. Making and Receiving Shipments • Demurrage and Detention – Demurrage – Penalty payment made to the railroad for keeping a railcar beyond the time when it should be released back to railroad – Detention – Same concept as demurrage except it usually refers to the trucking industry Copyright © 2015 Pearson Education, Inc. 13-33
- 34. Making and Receiving Shipments • Routing – Process of determining how a shipment will be moved between origin and destination1 – Routing guide • Example of routing • Document that can provide a variety of shipment-related information 1 http://www.cscmp.org/sites/default/files/user_uploads/resources/downloads/glossary.pdf Copyright © 2015 Pearson Education, Inc. 13-34
- 35. Making and Receiving Shipments • Tracking and Expediting – Tracking • Refers to determining a shipment’s location during the course of its move – Expediting • Involves the need to rapidly move a shipment to its final destination Copyright © 2015 Pearson Education, Inc. 13-35
- 36. 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 Copyright © 2015 Pearson Education, Inc. 13-36
- 37. Transportation Service Quality Copyright © 2015 Pearson Education, Inc. 13-37
- 38. 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. Copyright © 2015 Pearson Education, Inc.