Chap 008
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CHAPTER 8 Transportation
Factors Influencing Transportation Costs • Product-related factors – density – stowability – ease or difficulty of handling – liability
McGraw-Hill/Irwin
8-2
• Market-related factors – Degree of competition – Location of markets – Government regulation – Balance or imbalance of freight traffic – Seasonality – Domestic versus international movement
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Terms of Sale and Corresponding Buyer and Seller Responsibilities 1.Terms of Sale FOB Shipping Point, FREIGHT COLLECT Title passes to buyer Freight charges paid by buyer Seller
Buyer
Buyer pays freight charges. Buyer bears freight charges. Buyer owns goods in transit.
8-3 a
3.Terms of Sale FOB Shipping Point, FREIGHT PREPAID AND CHARGED BACK Title passes to buyer Seller
Buyer
Seller pays freight charges. Buyer bears freight charges. Buyer owns goods in transit. Buyer files claims (if any).
Buyer files claims (if any). Freight charges paid by seller, then collected from buyer by adding amount to invoice.
2.Terms of Sale FOB Shipping Point, FREIGHT ALLOWED Title passes to buyer Freight charges paid by seller Seller
McGraw-Hill/Irwin
Buyer
Seller pays freight charges. Seller bears freight charges. Buyer owns goods in transit. Buyer files claims (if any).
Source: Harold Fearon, Donald Dobler, and Ken Killen, The Purchasing Handbook, National Copyright © 2001 byManagement, The McGraw-Hill Companies, Inc. All rights reserved. Association of Purchasing 1993, McGraw-Hill.
Terms of Sale and Corresponding Buyer and Seller Responsibilities (cont.)
8-4b 8-3
4.Terms of Sale FOB Destination, FREIGHT COLLECT Title passes to buyer
Buyer pays freight charges.
6.Terms of Sale FOB Destination, FREIGHT COLLECT AND ALLOWED Title passes to buyer
Buyer bears freight charges. Seller
Buyer
Seller owns goods in transit. Seller files claims (if any).
Freight charges paid by buyer
Seller
Buyer
Buyer pays freight charges. Seller bears freight charges. Seller owns goods in transit. Seller files claims (if any).
Freight charges paid by buyer, then charged to seller by deducting amount from invoice.
5.Terms of Sale FOB Destination, FREIGHT PREPAID Freight charges paid by seller
Title passes to buyer
Seller
McGraw-Hill/Irwin
Buyer
Seller pays freight charges. Seller bears freight charges. Seller owns goods in transit. Seller files claims (if any).
Source: Harold Fearon, Donald Dobler, and Ken Killen, The Purchasing Handbook, National
Copyright by The McGraw-Hill Association © of 2001 Purchasing Management, 1993, Companies, McGraw-Hill. Inc. All rights reserved.
Five Basic Transportation Modes • • • • •
8-5 8-4
Motor Rail Air Water Pipeline
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Comparison of US Domestic Transportation Modes Economic Characteristics
McGraw-Hill/Irwin
Motor
Rail
Air
Water
8-6a 8-5
Pipeline
Cost
Moderate
Low
High
Low
Low
Market coverage
Point-topoint
Terminal-toterminal
Terminal-toterminal
Terminal-toterminal
Terminalto-terminal
Number of competitors
Many
Moderate
Moderate
Few
Few
Predominant traffic
All types
Low-moderate value, moderatehigh- density
High value, low moderate density
Low value, high density
Low value, high density
Average length of haul
Short to long Medium to long
Medium to long
Medium to long
Medium to long
Equipment capacity (tons)
10-25
5-125
1,000-60,000 30,0002,500,000
50-12,000
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Comparison of US Domestic Transportation Modes (cont.) Service Characteristics
McGraw-Hill/Irwin
Motor
Rail
Air
Water
8-7b 8-5
Pipeline
Speed Availability
Moderate High
Slow Moderate
Fast Moderate
Slow Low
Slow Low
Consistency (delivery time variability)
High
Moderate
High
Lowmoderate
High
Loss and damage
Low
Moderatehigh
Low
Lowmoderate
Low
Flexibility (adjustment to shipper’s needs)
High
Moderate
Low
Low
Lowmoderate
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Nonoperating Third Parties
8-8 8-6
• • • •
Freight forwarders Shippers’ associations or cooperatives Transportation brokers Intermodal marketing companies or shippers’ agents • Third-party logistics service providers
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Major U.S. Agencies Regulating Transportation • • • •
8-9 8-7
Surface Transportation Board Department of Transportation Federal Maritime Commission Federal Energy Regulatory Commission
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
International Distribution Shipping Options
8-10 8-8
Landbridge Rail
Landbridge
Minilandbridge Microbridge Rail
Truck/rail All-water All-water
McGraw-Hill/Irwin
Source: Adapted from David L. Anderson, “International Logistics Strategies for the Eighties,” Proceedings of the Twenty-Second Annual Conference of Copyright1984, © 2001 The Companies, Inc. All rights reserved. the National Council of Phyisical Distribution Management, p. 363.by Used by McGraw-Hill permission of the Council of Logistics Management.
Factors Influencing Transportation Costs • Product-related factors – density – stowability – ease or difficulty of handling – liability
McGraw-Hill/Irwin
8-2
• Market-related factors – Degree of competition – Location of markets – Government regulation – Balance or imbalance of freight traffic – Seasonality – Domestic versus international movement
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Terms of Sale and Corresponding Buyer and Seller Responsibilities 1.Terms of Sale FOB Shipping Point, FREIGHT COLLECT Title passes to buyer Freight charges paid by buyer Seller
Buyer
Buyer pays freight charges. Buyer bears freight charges. Buyer owns goods in transit.
8-3 a
3.Terms of Sale FOB Shipping Point, FREIGHT PREPAID AND CHARGED BACK Title passes to buyer Seller
Buyer
Seller pays freight charges. Buyer bears freight charges. Buyer owns goods in transit. Buyer files claims (if any).
Buyer files claims (if any). Freight charges paid by seller, then collected from buyer by adding amount to invoice.
2.Terms of Sale FOB Shipping Point, FREIGHT ALLOWED Title passes to buyer Freight charges paid by seller Seller
McGraw-Hill/Irwin
Buyer
Seller pays freight charges. Seller bears freight charges. Buyer owns goods in transit. Buyer files claims (if any).
Source: Harold Fearon, Donald Dobler, and Ken Killen, The Purchasing Handbook, National Copyright © 2001 byManagement, The McGraw-Hill Companies, Inc. All rights reserved. Association of Purchasing 1993, McGraw-Hill.
Terms of Sale and Corresponding Buyer and Seller Responsibilities (cont.)
8-4b 8-3
4.Terms of Sale FOB Destination, FREIGHT COLLECT Title passes to buyer
Buyer pays freight charges.
6.Terms of Sale FOB Destination, FREIGHT COLLECT AND ALLOWED Title passes to buyer
Buyer bears freight charges. Seller
Buyer
Seller owns goods in transit. Seller files claims (if any).
Freight charges paid by buyer
Seller
Buyer
Buyer pays freight charges. Seller bears freight charges. Seller owns goods in transit. Seller files claims (if any).
Freight charges paid by buyer, then charged to seller by deducting amount from invoice.
5.Terms of Sale FOB Destination, FREIGHT PREPAID Freight charges paid by seller
Title passes to buyer
Seller
McGraw-Hill/Irwin
Buyer
Seller pays freight charges. Seller bears freight charges. Seller owns goods in transit. Seller files claims (if any).
Source: Harold Fearon, Donald Dobler, and Ken Killen, The Purchasing Handbook, National
Copyright by The McGraw-Hill Association © of 2001 Purchasing Management, 1993, Companies, McGraw-Hill. Inc. All rights reserved.
Five Basic Transportation Modes • • • • •
8-5 8-4
Motor Rail Air Water Pipeline
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Comparison of US Domestic Transportation Modes Economic Characteristics
McGraw-Hill/Irwin
Motor
Rail
Air
Water
8-6a 8-5
Pipeline
Cost
Moderate
Low
High
Low
Low
Market coverage
Point-topoint
Terminal-toterminal
Terminal-toterminal
Terminal-toterminal
Terminalto-terminal
Number of competitors
Many
Moderate
Moderate
Few
Few
Predominant traffic
All types
Low-moderate value, moderatehigh- density
High value, low moderate density
Low value, high density
Low value, high density
Average length of haul
Short to long Medium to long
Medium to long
Medium to long
Medium to long
Equipment capacity (tons)
10-25
5-125
1,000-60,000 30,0002,500,000
50-12,000
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Comparison of US Domestic Transportation Modes (cont.) Service Characteristics
McGraw-Hill/Irwin
Motor
Rail
Air
Water
8-7b 8-5
Pipeline
Speed Availability
Moderate High
Slow Moderate
Fast Moderate
Slow Low
Slow Low
Consistency (delivery time variability)
High
Moderate
High
Lowmoderate
High
Loss and damage
Low
Moderatehigh
Low
Lowmoderate
Low
Flexibility (adjustment to shipper’s needs)
High
Moderate
Low
Low
Lowmoderate
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Nonoperating Third Parties
8-8 8-6
• • • •
Freight forwarders Shippers’ associations or cooperatives Transportation brokers Intermodal marketing companies or shippers’ agents • Third-party logistics service providers
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Major U.S. Agencies Regulating Transportation • • • •
8-9 8-7
Surface Transportation Board Department of Transportation Federal Maritime Commission Federal Energy Regulatory Commission
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
International Distribution Shipping Options
8-10 8-8
Landbridge Rail
Landbridge
Minilandbridge Microbridge Rail
Truck/rail All-water All-water
McGraw-Hill/Irwin
Source: Adapted from David L. Anderson, “International Logistics Strategies for the Eighties,” Proceedings of the Twenty-Second Annual Conference of Copyright1984, © 2001 The Companies, Inc. All rights reserved. the National Council of Phyisical Distribution Management, p. 363.by Used by McGraw-Hill permission of the Council of Logistics Management.
