Contemporary Logistics

Twelfth Edition, Global Edition

Chapter 12
Transportation

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Learning Objectives (1 of 2)
12.1 To compare and contrast transportation infrastructures
in several countries
12.2 To identify the five modes of transportation and learn
about their respective characteristics
12.3 To discuss intermodal transportation
12.4 To describe several types of transportation specialists

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Learning Objectives (2 of 2)
12.5 To explain how different types of regulation impact
transportation
12.6 To identify the legal classification of transportation
carriers

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Transportation (1 of 4)
• Transportation
– The actual, physical movement of goods and people
between two points

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Transportation (2 of 4)
• Transportation influences or is influenced by the following
logistics activities:
– Transportation costs are affected by the location of the
firm’s plants, warehouses, vendors, retail locations, and
customers
– Inventory requirements are influenced by mode of
transportation used
– Transport mode selected influences packaging, and
carrier classification rules dictate packing choice

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Transportation (3 of 4)
• Transportation influences or is influenced by the following
logistics activities:
– Type of carrier used dictates a manufacturing plant’s
materials handling equipment and the design of
receiving and shipping docks
– Order-management philosophy that encourages
maximum consolidation of shipments between common
points enables a company to give larger shipments to its
carriers and take advantage of volume discounts
– Customer service goals influence the type and quality of
carrier and carrier service selected by the seller

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Transportation (4 of 4)
• Five different types, or modes, of transportation include:
– Air
– Motor carrier (truck)
– Pipeline
– Rail
– Water

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Comparing and Contrasting Transportation
Infrastructure
• Wide disparities in the various infrastructures exist
between highly populated countries
• Lack of infrastructure makes it difficult to use that
transportation mode domestically

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Table 12.1: Infrastructure Statistics in
Several Countries

Source: The World Factbook, www.cia.gov, 2016.

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 10

Transportation Mode Trend in Malaysia

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1-5
 11

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1-5
Transportation Modes (1 of 16)
• The attractiveness of a particular mode depends on the following
attributes:1
– Cost
– Speed
– Reliability
– Capability
– Capacity
– Flexibility

1
Drawn from David J. Bloomberg, Stephen LeMay, and Joe B. Hanna, Logistics (Upper Saddle River, NJ: Prentice Hall,
2002), Chapter 7.

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Transportation Modes (2 of 16)
• Airfreight
– Generally the fastest mode for shipment exceeding 600
miles
– Expensive
– Accessorial service, if needed, adds transportation cost
and time
– Best suited for high-value, lower-volume urgent,
perishable, or time-specific deliveries
– Dimensional weight used for rates

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Transportation Modes (3 of 16)
• Airfreight
─ Examples of products that move by air:
 Auto parts and accessories
 Cut flowers and nursery stock
 Electronic or electrical equipment (e.g., iPods)
 Fruits and vegetables
 Machinery and parts
 Metal products
 Photographic equipment, parts, and film
 Printed matter
 Wearing apparel

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Transportation Modes (4 of 16)
• Airfreight
─ Reliability is problematic due to delays caused by:
 Congestion and resultant delays with air passenger
transportation (belly freight)
 Weather (e.g., fog, snow, thunderstorms)

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Transportation Modes (5 of 16)
• Motor carriers
– Most important business user of the Interstate Highway
System
– Primary advantage is flexibility
– Cost is generally lower when compared to airfreight
– Less-than-truckload (LTL) versus truckload (TL)

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Transportation Modes (6 of 16)
• Motor carriers
─ Less-than-truckload (LTL)
 150 to 10,000 pounds
 Too big to be handled manually; too small to fill a truck
 LTL trucks carry shipments from many shippers
 Operate through a system of terminals
 Prominent LTL carriers include:
─ ABF Freight System
─ FedEx Freight
─ UPS Freight
─ YRC Freight

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Transportation Modes (7 of 16)
• Motor carriers
– Less-than-truckload (LTL)
 Process
– From each terminal small trucks go out to customers,
delivering and picking up shipments
– Shipments are taken to a terminal where loaded to
line-haul trucks
– Line-haul to terminal near destination
– Shipments loaded to smaller trucks for local delivery

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Transportation Modes (8 of 16)
• Motor carriers
– Truckload (TL)
 Focus on shipments less than 10,000 pounds
 Exact weight depends on the product
 Close to the amount that would physically fill a truck
trailer
 Possible that large shipments from several customers
can be consolidated

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Transportation Modes (9 of 16)
• Motor carriers
– Truckload (TL)
 Prominent TL carriers include:
– J.B. Hunt
– Schneider National
– Swift Transportation
– Werner Enterprises

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Transportation Modes (10 of 16)
• Motor carriers
– Truckload (TL)
 Process
– Shipments tend to move directly from the shipper’s
location to the consignee’s location

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Transportation Modes (11 of 16)
• Pipelines
– Only mode without vehicles
– No need for vehicle operators
– Transportation is one way
– Most reliable mode

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Transportation Modes (12 of 16)
• Pipelines
– Tend to be the slowest mode
– Accommodates only liquid, liquefiable, or gaseous
products
– Capable of transporting large product volumes
– High fixed costs, but relatively low cost per unit due to
large product volume

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Transportation Modes (13 of 16)
• Railroads
– U.S. dominated by four freight carriers:
 Burlington Northern (west of the Mississippi)
 CSX (east of the Mississippi)
 Norfolk Southern (east of the Mississippi)
 Union Pacific (west of the Mississippi)
– Domination can limit service and pricing options

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Transportation Modes (14 of 16)
• Railroads
– Neither “best” or “worst” on any of the six attributes
– Superior to air, motor, and pipeline, but inferior to water
in ability to transport different kinds of products
– Less flexibility than motor carriers, but more when
compared to air, water, and pipeline

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Transportation Modes (15 of 16)
• Railroads
– Superior to air and motor with regards to volume, but
inferior to pipeline and water
– Less expensive than air and motor, but more expensive
than pipeline and water
– Faster than pipeline and water, but slower than air and
truck

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Transportation Modes (16 of 16)
• Water
– Somewhat unreliable
 Drought
 Icing
 Aging lock system
– Slow average speeds
– Relatively inexpensive
– Focuses on lower value bulk commodities handled by
mechanical means
– Many different kinds of products can be carried
– Carries greater volumes than rail or truck
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Intermodal Transportation (1 of 4)
• Intermodal transportation
– Refers to transportation when using a container or other
equipment that can be transferred from the vehicle of
one mode to the vehicle of another mode without the
contents being reloaded or disturbed2

2
This definition comes from Barton Jennings and Mary C. Holcomb, “Beyond Containerization: The Broader Concept of
Intermodalism,” Transportation Journal 35, no. 3 (1995): 5–13.

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Intermodal Transportation (2 of 4)
• Intermodal transportation
– Two or more modes work closely together to utilize
advantages of each mode while minimizing their
disadvantages
– Example:
 Piggyback transportation
– Trailer-on-flatcar
– Container-on-flatcar

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Intermodal Transportation (3 of 4)
• Containers
– Moved by mechanical devices (e.g., container crane)
– Provide significant reduction in freight handling costs
– Are interchangeable among rail, truck, and water carriers

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Intermodal Transportation (4 of 4)
• Containers
– Airfreight containers (unit load devices, or ULDs) are
designed specifically for fuselage
– Are measured by TEUs (20-foot equivalent unit)
– Allowed for land bridge services

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Figure 12.1: Various Types of Intermodal
Surface Containers

Source: Ports of the World, 14th edition, CIGNA Property & Casualty Companies.

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Transportation Specialists (1 of 6)
• Freight forwarders
– Two types of domestic freight forwarders:
 Surface
 Air
– Exists by offering a service to shippers that must use LTL
rates because they do not generate enough volume to use TL
rates
– Typically offers pickup and delivery service but does not
perform the line-haul service (done by motor carriers or
railroads)

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Transportation Specialists (2 of 6)
• Freight forwarders
– Give volume discounts to customers shipping large
quantities of freight at one time
– TL rates less than LTL rates because
 Shipper loads the goods, and consignee unloads
trailer
 The load goes directly from shipper to consignee
without passing through terminals
 Paperwork, billing, and other administrative costs are
little more for a 25,000-pound shipment than for 250-
pound shipment

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Transportation Specialists (3 of 6)
• Air forwarders
– Consolidate shipments
– Tender to airlines in containers ready for loading
– Forwarders provide retailing function
– Airline provides wholesaling function
• Shippers’ associations
– Similar to air and freight forwarders but are not-for-profit
organizations
– Primarily focused on achieving the lowest rates for
members

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Transportation Specialists (4 of 6)
• Brokers
– Companies that look to match a shipper’s freight with a
carrier to transport it
– Can handle both LTL and TL
– Those handling LTL shipments consolidate them and then
give to motor carriers, freight forwarders, or shippers’
associations
– If handling TL shipments, brokers retain a carrier and
receive a portion of transportation charges

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Transportation Specialists (5 of 6)
• Third-party logistics companies (3PLs)
– Find clients with complimentary transportation needs to
maximize equipment utilization
– Should reduce transportation costs to clients

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Transportation Specialists (6 of 6)
• Parcel carriers
– Parcels are packages weighing up to 150 pounds
– Parcel carriers are companies that specialize in
transporting parcels
– Parcel carriers include:
 U.S. Postal Service – Retail Ground
 United Parcel Service (UPS)
 FedEx Express
 Greyhound Package Express

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Transportation Regulation (1 of 8)
• The five modes are influenced by federal, state and local
government regulations
– Examples:
 Mandatory retirement age for pilots in U.S.
 Placement of lighting on truck trailers
• Regulation
– Costs money
– Needs to be codified
– Is enforced by government agencies

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Transportation Regulation (2 of 8)
• Level and degree of regulation varies from country to
country
– For example, industrialized countries tend to have more
stringent transportation equipment emissions regulations
when compared to those of less industrialized countries
• Logisticians must understand:
– Relevant transportation regulations
– Cost and service implications of regulations

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Transportation Regulation (3 of 8)
• Environmental regulation
– Environment Protection Agency (EPA) is the federal
regulatory agency established to protect human health
and the environment
– Current concerns include:
 Noise and air pollution
 Resource conservation

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Transportation Regulation (4 of 8)
• Safety regulation
– Department of Transportation (DOT) is the federal
agency responsible for transportation safety regulations
for all five modes
– Federal Aviation Administration (FAA) has primary
responsibility for air transportation safety
– Federal Motor Carrier Safety Administration (FMCSA) is
focused on reducing crashes, injuries, and fatalities
involving large trucks and buses

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Transportation Regulation (5 of 8)
• Safety regulation
– Office of Pipeline Safety (OPS) is responsible for safety
considerations for natural gas and liquid pipelines
– Federal Railroad Administration (FRA) has primary
responsibility for safety in the U.S. railroad industry
– U.S. Coast Guard (USCG) has three broad roles
associated with marine (water) transportation:
 Safety
 Security
 Stewardship

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Transportation Regulation (6 of 8)
• Economic regulation
– Refers to control over business practices and activities
such as entry and exit, pricing, service, accounting and
financial issues, and mergers and acquisitions
– Regulation began in the 1870s due to a belief that
transportation companies would not act in the public’s
best interest without government regulation3

Donald V. Harper, Transportation in America, 2nd ed. (Englewood Cliffs, NJ: Prentice Hall, 1982), Chapter 19.
3

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Transportation Regulation (7 of 8)
• Economic regulation
– Resulted in two key economic regulatory bodies:
 International Maritime Organization (IMO)
 International Air Transport Association (IATA)

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Transportation Regulation (8 of 8)
• Economic regulation
– Deregulation began in the 1970s
 CAB was eliminated in 1985
 ICC was legislated out of existence in 1995
– A new agency, the Surface Transportation Board (STB),
was created
– Economic deregulation has allowed greater freedom with
respect to pricing and service options

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Legal Classification of Carriers (1 of 3)
• Transportation carriers are classified as either:
– For hire
 Common, e.g. bus, taxi.; which have a regular route
and stop stations. In shipping – liner service
 Contract, fixed time rental of hire. In shipping -
chartering
 Exempt – certain size, capacity, and route are
exempted from strict transport regulation, e.g. fishing
boat and sport boat.
– Private – such as yatch, government vessel.
• Classification is important because different levels of
economic regulation are applicable to different carriers
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Legal Classification of Carriers (2 of 3)
• For-hire carriers
– Common carriers
 Serve the general public
– Contract carriers
 Offer specialized service to customers on a contractual
basis
 No obligation to serve the general public or to treat
customers on an equal basis

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Legal Classification of Carriers (3 of 3)
• For-hire carriers
– Exempt carriers
 Exempted from economic regulation due to legislation
• Private carriers
─ Companies whose primary business is other than
transportation and provide their own transportation
service
– Also exempt from economic regulation

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Key Terms (1 of 3)
• Accessorial service • Exempt carriers
• Barge • Freight forwarders
• Broker • Intermodal transportation
• Common carrier • Land bridge services
• Consignees
• Contract carrier
• Department of
Transportation (DOT)

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Key Terms (2 of 3)
• Less-than-truckload (LTL) • Slurry systems
• Line-haul • Surface Transportation
Board (STB)
• Lock
• Twenty-foot equivalent unit
• Parcel carriers
(TEU)
• Piggyback transportation
• Terminals
• Private carriers
• Rail gauge
• Shippers’ associations

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Key Terms (3 of 3 )
• Ton miles
• Transportation
• Truckload (TL)
• Unit load devices (ULDs)

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