Test Bank For Transportation A Global Supply Chain Perspective 9th Edition Robert A Novack Brian Gibson John J Coyle

Test Bank for Transportation: A Global Supply Chain Perspective, 9th Edition Robert A.
Novac
Test Bank for Transportation: A Global Supply Chain

Perspective, 9th Edition Robert A. Novack Brian
Gibson John J. Coyle
To download the complete and accurate content document, go to:

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perspective-9th-edition-robert-a-novack-brian-gibson-john-j-coyle/
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Chapter 08: Water Carriers and Pipelines
1. Water transportation is attractive to shippers for the movement of which commodities?
a. automobiles and construction machinery
b. large, bulky and oversized shipments
c. basic raw materials
d. inventory items
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Page 258
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
DATE CREATED: 8/8/2015 5:45 AM
DATE MODIFIED: 8/13/2015 2:54 AM
2. Which is the first major classification of water carriers?

a. company-owned and exempt carriers
b. for hire and private carriers
c. exempt and private carriers
d. regulated and exempt carriers
ANSWER: b
POINTS: 1
DIFFICULTY: Hard
3. Which best describes the domestic water carrier industry?

a. a limited number of small firms
b. large businesses with some offshore ownership
c. the carriers that report to the Surface Transportation Board's water section
d. the regulated carriers account for approximately one-fourth of the industry's total carriers
ANSWER: a
POINTS: 1
DIFFICULTY: Medium
4. Which category of carrier dominates the for-hire segment of the water carrier industry?
a. common
Copyright Cengage Learning. Powered by Cognero. Page 1

b. contract
c. exempt
d. regulated
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
5. The water carrier's principal competitor for the movement of grain, coal, and ores is which mode of transportation?
a. pipelines
b. Canadian and foreign owned water carriers
c. railroads
d. motor carriers
ANSWER: c
POINTS: 1
DIFFICULTY: Hard
6. Water carriers compete to a limited degree with motor carriers. In most cases, what is the main interaction between the
motor and water carriers?
a. to move shipments from one area at a port to another
b. to transport liquid cargo from a tanker to a refinery
c. to transport shipments too small for a barge to an area when they can be assembled into a large enough
quantity for a barge
d. to overcome accessibility constraints of water carriers, linking inland areas to the waterways
ANSWER: d
POINTS: 1
DIFFICULTY: Medium
7. Transit time via water transportation is the longest of the four primary modes commodities. This modal service
disadvantage has to be traded-off against the low-cost to the shipper for the transport of commodities. This tradeoff
usually makes water transport attractive for which commodities?
a. automobiles and construction machinery

b. large, bulky and oversized shipments
c. basic raw materials
d. inventory items
ANSWER: c
POINTS: 1
DIFFICULTY: Hard
8. Water carriage is recognized as being a catalyst for economic activity in a community. This recognition is used as a
justification for which of the following?
a. private investment in waterway construction
b. public investment in railroad construction as a connector for water transportation
c. public investment in and operation of ports
d. private investment in highway construction as a connector for water transportation
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
9. Public aid is given the water carriers in the form of waterway construction, development and maintenance. How do the
water carriers repay the government for the aid received?
a. by agreeing to haul government traffic free of charge
b. by paying a 25 percent surcharge on their income taxes
c. by paying user charges in the form of lock fees and fuel taxes
d. no repayment is made, all the aid offered is free of charge since both commercial carriers and private citizens
use the waterways for business and pleasure
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
10. Water carrier's intramodal competition is characterized by:

a. fierce and intense and ongoing efforts

b. very much a Lazes Faire or live and let live approach
c. very limited due the nature of industry
d. mandated by the ICC termination Act of 1995
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
11. The Supreme Court decided that the pipelines are required to operate as common carriers if a shipper of oil demands
their services. This decision is known as the:
a. Standard Oil Case.
b. Alaska North Slope Case.
c. Champlin Oil Case.
d. Hepburn Case.
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
12. Which is a significant factor allowing the pipelines to increase their capacity and move an increased amount of
tonnage?
a. larger pipe diameters
b. seamless pipe
c. major advances in technology
d. government regulations which require that the lines move product more quickly
ANSWER: a
POINTS: 1
DIFFICULTY: Medium
13. Pipeline accounts for 20% of the total intercity tonnage shipped in the U.S. However their revenues are only 4% of the
total intercity transportation revenues. Why is this?
a. high incidence of loss and damage

b. low reliability
c. Shipper's ability to negotiate lower rates because of intense completion among modes
d. low rates
ANSWER: d
POINTS: 1
DIFFICULTY: Medium
14. Which of the following best describes the oil pipelines in the United States?
a. primarily operated as private carriers on a not-for-hire basis
b. primarily operated as private carriers on a for-hire basis
c. primarily operated as common carriers on a for-hire basis
d. primarily operated as common carriers on a not for-hire basis
ANSWER: c
POINTS: 1
DIFFICULTY: Hard
15. Which two factors have contributed to joint ownership of large-diameter pipelines?
a. high variable costs of ownership and low rates
b. economies of scale and high fixed costs of ownership
c. government regulation and development funds
d. rail competition and the growth of domestic water transport
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
16. What medium is used to move coal in slurry lines?

a. compressed air
b. gas
c. water
d. vacuum
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
17. Which is a major advantage offered by the pipelines?

a. capability
b. low rates
c. long transit times with "storage in transit"
d. accessibility
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
18. The most serious threat to the pipeline industry are from which form of competition?
a. Canadian companies building new pipelines into the U.S.
b. natural gas powered pipeline
c. intramodal
d. intermodal
ANSWER: d
POINTS: 1
DIFFICULTY: Medium
19. Oil pipelines used for movement of products from storage areas and refineries to market-oriented tank farms are
classified as which of the following?
a. gathering lines
b. transmission lines
c. trunk lines

d. product lines
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
20. The pipelines provide their own rights of way, construct the pipelines and pumping stations, pay property taxes, and
provide for the preventative maintenance of their transportation networks. This contributes to the high proportion of which
of the following in the pipeline's cost structure?
a. variable costs
b. fixed costs
c. variable costs
d. revenue costs
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
21. Different grades of crude oil or products in the pipeline at the same time may not mix because of a technique which
keeps them separated. This is done with:
a. block
b. batching pig
c. batching ball
d. slurry
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
22. Which mode of transportation has costs that come closest to pipeline costs?
a. rail
b. motor
c. water
d. air
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
23. How many kilometers of waterways are there in the United States?
a. 15,000
b. 150,000
c. 26,000
d. 21,000
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
24. Which of the following is not a commodity that water and rail competes to move?
a. grain
b. coal
c. oil
d. chemicals
ANSWER: c
POINTS: 1
DIFFICULTY: Hard
25. As of 2014, how many short tons were transported by water in the U.S.?
a. Less than 1 million
b. Around 100 million
c. A bit more than 1 billion
d. More than 1 trillion
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
26. The most widely know case of drugs and/or alcohol resulting in a transportation disaster is?
ANSWER: The Exxon Valdez accident, where the captain was found to be intoxicated at the time of the
incident
POINTS: 1
DIFFICULTY: Medium
QUESTION TYPE: Subjective Short Answer
27. How many ports are there in the U.S.?

ANSWER: There are more than 300 ports.
POINTS: 1
DIFFICULTY: Easy
28. What Supreme Court Judgement resulted in the requirement for pipeline owners to act as common carriers if there was
service demand?
ANSWER: Champion Oil Case
POINTS: 1
DIFFICULTY: Easy
29. Approximately how much has operating revenue for natural gas pipelines increased between 2010 and 2014?
ANSWER: 96 percent
POINTS: 1
DIFFICULTY: Medium

30. According to the U.S. Department of Transportation what is the total investment in pipeline?
ANSWER: $21 Billion
POINTS: 1
DIFFICULTY: Medium
31. What is the nature of water transportation and trace the developmental importance of the mode.
ANSWER: Water transportation uses natural infrastructure as support. Unlike rail, and road, water
transportation enjoys a low infrastructure cost (except for canals). Whereas rail needs track, and
trucks need road, water is a naturally occurring medium. Rivers, inlands channels, and oceans can
be used to transport with very little modification. However water does require ports or other types
of load / unload facilities. These can be expensive and congested.
Water transportation has played an important role in the development of the U.S. The early settlers
used water as a means to access markets in England and Europe. Additionally water was used to
transport goods using inland rivers. Many of our major cities developed around water ports on the
coasts. Inland river and Great Lakes transportation provided access to inland settlements with
coastal cities. If one looks at a map, it becomes clear that waterways were a prime determinant of
population centers and the industrial and commercial concentration, particularly at port cities.
POINTS: 1
DIFFICULTY: Medium
QUESTION TYPE: Essay
32. Discuss and describe the competition as it relates to the water carriers.
ANSWER: The primary source of water carrier competition is not between different water carrier companies
but between water carriers and other modes of transportation. The relatively small number of water
carriers results in a limited degree of competition. This is because the number of carriers on a given
waterway is limited, there is little incentive for the water carriers to compete with one another by
lowering rates. Unlike the air carrier industry the water carrier do not bother to lower rates because
they realize that the rate decrease will most likely be matched.
Water carrier competition is primarily with other modes that transport similar commodities, that is
high volume, low cost types of commodities. Unsurprisingly the major water carrier competition is
with, rail and pipelines. Water carriers compete with railroads for the movement of dry bulk
commodities such as grain, coal, and ores. Within the U.S. along inland channels, rivers, and
waterways, rail and water transports similar commodities such as grain along the Mississippi and
Missouri river systems. Rail also competes with water to move coal, ores and grain in areas such as
Pennsylvania, West Virginia, Kentucky, Ohio, and along the Great Lakes.
In similar areas water carriers also compete with pipelines for the movement of bulk liquids
(petroleum and petroleum products). Bulk liquids (petroleum, petroleum products, and chemicals)
account for about one-third of the total tonnage transported by domestic water carriers. Bulk liquids
are important commodities to both modes, and vigorous competition exists for moving bulk liquids
along the Gulf, Atlantic, and Pacific coasts, as well as the Mississippi River system.
To a much more limited degree, water carriers compete with trucks. In general however, trucks, and
their much greater accessibility tend not to compete directly. Whereas trucks tie into inland areas
not served by water, trucks have difficulty competing on a long haul with barge movements where a
single has the payload capacity of 58 tractor trailers.
POINTS: 1
DIFFICULTY: Medium
REFERENCES: Pages 262-263
33. Why are water terminals provided by the public and operated by local government agencies?
ANSWER: Similar to highways water carriers terminals are funded and supported by government agencies.
The difference is that water ports tend to be supported by local agencies while highways are
supported by the federal government. Again, like the highways, ports are considered a catalyst to
economic activity in the community, and it is this belief that has spurred public investment in the
operation of ports.
In addition to public support some volume users of transportation invest in and operate port
facilities or shipper run terminals. The firms will typically work with the port authority and
purchase or lease land and then build facilities and infrastructure to support their operations.
Numerous facilities have be created by individual firms to handle such commodities as grain, coal,
and oil. Typically water carriers have the opportunity to use these private facilities owned by
shippers.
In addition to load / unload facilities most port authorities also have storage facilities that they rent.
The sheer volume of commodities that can be loaded on a ship necessitates some type of staging
facility to support loading and unloading ships.
POINTS: 1
DIFFICULTY: Hard
34. Discuss the cost structure of the water carrier mode and be sure to include fixed versus variable costs.
ANSWER: About 15 percent is of the water carrier's cost is fixed while nearly 85 percent is variable. Fixed
costs include depreciation and amortization while variable costs are fuel, labor and user charges.
This cost structure is similar to motor carriers--low fixed cost, high variable costs.
Like the trucks, and unlike rail, water carriers have relatively low fixed cost because the do not have
to own or have to provide for their waterways. Waterways are provided by nature, and typically the
government maintains, improves and controls them. That is similar to trucks and the highway, and
the opposite of Rail and the rail track system which is owned and maintained by the rail company.
The water carriers do pay user charges-lock fees, dock fees, fuel taxes-for the use of government-
provided facilities. These user charges are variable, and directly related to the volume of business.
The other variable cost include line-operating costs (cost of operating ships, barges, and facilities),
operating rents (cost of renting facilities and equipment), and maintenance.
POINTS: 1
DIFFICULTY: Hard
35. What is are at least two of the unique aspects of the pipeline industry?
ANSWER: The type of commodity transported, most pipeline operate as common carriers even though they are
primarily owned by the oil companies, and the relatively small numbers of pipeline companies
compared to the volume of product transport. Additionally pipeline is the only commodity that does
not have a back haul. Pipeline are configured to support the flow of product in a single direction.
POINTS: 1
DIFFICULTY: Easy
36. Explain the ownership patterns of the pipelines.

ANSWER: In general the oil companies own the pipelines. The oil companies have seen ownership of pipelines
as a way to control markets and exert dominance. Individual oil companies own the largest share of
pipeline. This is followed by pipelines owned by joint ventures. The remain, small percentage of
pipelines, is own by Railroads, independent oil companies, and other industrial companies.
During WW II the federal government briefly entered the pipeline business when it developed two
pipelines to bring crude oil and oil products from the oil fields of the Southwest to the Northeast to
ensure an uninterrupted flow of oil. After the war these two pipelines, known as the Big Inch and
the Little Inch, were sold to private companies after the war.
In some cases pipelines are joint ventures among two or more companies. This makes sense due to
the high capital investment necessary for large-diameter pipelines.
POINTS: 1
DIFFICULTY: Hard

37. What are the four major commodities transported by pipelines?

ANSWER: Pipelines primarily move four major commodities.
These commodities are crude oil and oil products, natural gas, coal, and chemicals.
Crude oil and oil makes of the bulk of the commodities moved through a pipeline. The bulk of
pipeline movements are crude oil and oil products. In 2001, crude oil and oil products accounted for
about 60 percent of total pipeline use. Between 1990 and 2006 pipelines have seen a 5.6% increase
in oil related freight ton miles.
Natural gas pipelines account for the second largest number of intercity pipeline ton-miles. Natural
gas pipeline companies produce about 10 percent of the gas they transport. Independent gas
companies produce the remaining 90 percent and transport it via the pipelines.
Coal pipelines account for the third largest volume. Because coal is not in a liquid form, coal does
not usually come to minds as a pipelinable commodity. Coal is converted into slurry in order to
move it through pipelines. Slurry is created by pulverized the coal and then mixing it with water in
a one-to-one ratio by weight. Once the coal has reached its destination, the water is removed and the
coal is ready for use. Coal pipelines use enormous quantities of water, which causes concern in
several western states where their installation has been proposed because there is a scarcity of water
and the water is not reusable (no backhaul).
Chemicals are the last of the four primary commodities shipped by pipeline. The three major
chemicals are anhydrous ammonia, which is used in fertilizer; propylene, which is used for
manufacturing detergents; and ethylene, which is used for making antifreeze.
These commodities meet the pipeline requirement for high volume and low cost, and these
commodities are either liquid or convertible to liquid. Pipelines offer low cost and low loss /
damage for these types of commodities.
POINTS: 1
DIFFICULTY: Medium
38. The pipeline mode of transportation has a small number of very large carriers. What are the reasons for this small
number of carriers?
ANSWER: There are four primary reasons for this for the small number of pipeline carriers.
First, barriers to entry. The start-up or capital costs for a pipeline are very high. Second, pipeline
economies of scale are achieved through the diameter of the pipe. As the pipeline diameter increase,
the capacity increases at an even greater rates. For instance a 50% increase in diameter results in
more than a 50% increase in capacity. However the cost increase for larger diameter pipes is much
less than the relative increase in capacity. Bigger pipes means less investment per mile when
compared with capacity. Also larger pipes means lower operating cost per barrel. Because of these
diameter related economies of scale duplication of capacity, competing lines, is uneconomical.
Third, procedural requirements to become a carrier, along with the associated legal costs for entry,
limit the number of pipeline companies.

Fourth, most of the pipeline capacity is dedicated to oil and natural gas. The pipelines are built to
supports movement of those commodities from the oil and gas fields to refineries or users. As such
the pipelines are typically built for the companies that own those fields. There is little opportunity
for reason another pipeline would therefore be use.
POINTS: 1
DIFFICULTY: Medium
39. Describe the relative service advantages and disadvantages of pipeline transportation.
ANSWER: Advantages: The major advantage of pipeline transportation is low rates and low loss and damage
of the commodity being transported. Due to the nature of the commodities being moved the pipeline
companies must have adequate warehouse space to stage products prior to pipeline induction. In
general pipeline companies therefore provide this storage for free and pipeline carriers assume full
liability for loss of damage. Additionally pipeline reliability is high, there is seldom a service
failure, pipelines are unaffected by weather. This dependability permits accurate forecasting for
scheduled deliveries and diminishing needs for safety stock.
Disadvantages: The primary disadvantage of pipeline is that the commodity must be in liquid form
and the mode is relatively slow speed. The slow speed can lead to higher level of inventory waiting
for movement. In addition pipelines have limited accessibility. The only way to extend this
accessibility is to transfer to rail car, tanker truck, barge or ocean tanker. Lastly pipeline operations
are single direction and do not support small quantity shipments.
POINTS: 1
DIFFICULTY: Hard
40. Define, describe and discuss the nature of intramodal and intermodal competition for pipelines.
ANSWER: Competition between pipeline companies (intramodal competition) is limited. This limitation is
caused by the small number of companies (slightly more than 100). The industry acts as an
oligopoly (few competitors with high barriers to entry). This oligopolistic structure leads to limited
price competition. The second reason for lack of intramodal competition is the economies of scale
and high fixed costs associated with pipelines. In the case where more than one company might
utilize a pipeline in a certain lane, such companies have partnered to for joint ownership of large-
diameter pipelines. This is because the construction of smaller parallel lines is not very efficient.
Further the high capital costs preclude duplication of facilities to a large extent.
From an intermodal competition perspective (competition between modes), the greatest threat to
pipeline industry comes from water. There is also potential competition from railroads and motor
carriers. Yet even with these forms of transportation, the level of competition is limited. Water
tanker operations are able to compete because their rates are similar with pipelines. However, the
limited coverage of water carrier service also limits its effective competitiveness. Trucks have
increased the number of products they carry that can also be carried by pipelines. However, truck
service complements rather than competes with the pipeline because trucks often perform a
distribution function for pipelines (i.e., delivery).
Due to the economies of scale and the low variables costs, once a pipeline has been constructed
between two points, it is difficult for other modes to compete.
POINTS: 1
DIFFICULTY: Medium
41. Describe the role of gathering lines and trunk lines in pipeline operations.
ANSWER: Gathering lines are smaller pipelines that go from an active well to a major trunk line. The trunk
lines go to an oil or gas field but do not go to individual wells. Gathering lines are relatively small
in diameter. They usually do not exceed 8 inches in diameter. In contrast trunk lines are usually 30-
50 inches in diameter. Gathering lines are frequently laid on the surface of the ground to ensure
ease of relocation when a well or field runs dry. Trunk lines, on the other hand, are usually seen as
permanent and are laid underground.
The term trunk line is often used in conjunction with oil movements and can refer to crude oil trunk
lines or oil product lines. Oil trunk lines move oil to tank farms or refineries in distant locations,
whereas oil product lines move the gasoline, jet fuel, and home heating oil from refineries to market
areas. Technically, any long-distance movement via a large-diameter, permanent pipeline implies a
trunk-line movement. Therefore, when coal, natural gas, or chemicals move via pipelines, that
movement is classified as trunk-line movement.
POINTS: 1
DIFFICULTY: Medium
42. Since pipelines transport liquids, how do they keep the various liquids from mixing together?
What happens in they do mix?
ANSWER: The pipeline companies are able to separate different type of commodities going through a pipeline.
If the commodities going through the line are different grades of crude oil, or if there are different
types of commodities going through the line at the same time the batches are separated by a rubber
ball, called a batching pig.
Additionally the companies plan the movement of commodities through the pipeline such that if
there is any mixing it is both limited and it is a mix between a lower grade product and a small
amount of higher grade product, in that event the mixing has no negative effect. Usually products
are scheduled one month in advance with kerosene moving first, then high-grade gasoline, then
medium-grade gasoline, then various offer produces, with home heating oil last. In addition, before
operations commence where different commodities are sent through the pipeline the pipeline is
typically cleaned. When commodities that are not very similar are sent through the pipeline the
pipeline is cleaned to prevent any contamination.
POINTS: 1
DIFFICULTY: Medium
43. Compare pipeline pricing to pricing by other modes, and describe how the pipelines price their services.
ANSWER: The major difference between pipeline and other modes of transportation is that pipelines do not use
freight classification system such as the system used by rail and truck. Pipelines are able to carry a
very limited number of goods. That limitation makes specialization of commodities rates
unnecessary. Pipeline rates are low. Pipelines carry 20% of the ton mile capacity but account for
4% of ton mile revenue.
The nature of pipeline operations (one-way movement, limited geographic coverage of points,
limited products, etc.) provides little opportunity to provide differential pricing practices. Pipelines
quote rates on a per-barrel basis (one barrel equals 42 gallons). Quotes for rates are typically point-
to-point or zone-to-zone. Also, minimum shipment sizes, usually called tenders, are required; these
range from 500 barrels to 10,000 barrels.
POINTS: 1
DIFFICULTY: Medium
44. What has happened to the volume of water cargo movement between 2000 and 2014? Why has this occurred?
ANSWER: Water carriers have seen an overall decrease in tonnage by approximately 7 percent between 2000
and 2014. Even though the rates have remained low, the demand has decreased. The reason for
this has been the transformation of the U.S. economy from a manufacturing economy, which
requires significant raw materials, to a service economy. Additionally, the advent of more evolved
supply chain management techniques, such as Just in Time, and other techniques designed to reduce
warehousing and inventory cost has benefited modes that offer better and more frequent service,
such as motor carriers.
POINTS: 1
DIFFICULTY: Medium
45. Discuss water transportation labor.

ANSWER: Water transportation has a similar labor rate as rail, and has a much higher labor rate than pipeline.
Test Bank for Transportation: A Global Supply Chain Perspective, 9th Edition Robert A. Novac
Water carrier uses one employee for every 2.72 million ton-miles. This is almost as efficient as rail
which is at 4.47 million ton-miles per employee. Pipeline, the most efficient, has 39.2 million ton
miles per employee. In comparison motor carriers have .4 million ton miles per employee.
For water operations labor is required for loading and unloading. Labor is also required for transfer
to connecting modes or to store freight waiting on movement. In general the low labor rates come
from the fact that bulk materials can be loaded using automatic devices.
POINTS: 1
DIFFICULTY: Hard
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2. Which is the first major classification of water carriers?

3. Which best describes the domestic water carrier industry?

Copyright Cengage Learning. Powered by Cognero. Page 1

a. automobiles and construction machinery

10. Water carrier's intramodal competition is characterized by:

a. fierce and intense and ongoing efforts

a. high incidence of loss and damage

16. What medium is used to move coal in slurry lines?

17. Which is a major advantage offered by the pipelines?

Copyright Cengage Learning. Powered by Cognero. Page 6

27. How many ports are there in the U.S.?

QUESTION TYPE: Subjective Short Answer

36. Explain the ownership patterns of the pipelines.

DATE CREATED: 8/8/2015 6:21 AM

37. What are the four major commodities transported by pipelines?

limit the number of pipeline companies.

45. Discuss water transportation labor.

Chapter 08: Water Carriers and Pipelines

Copyright Cengage Learning. Powered by Cognero. Page 17

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