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LOGISTICS AND SUPPLY CHAIN MANGEMENT

TRANSPORTATION MODES AND SELECTION

Logistics is: “The process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.“ Logistics is necessary to:  Move goods from suppliers to buyers  Move finished goods to the customer Products have little value to the customer until they are moved to the customer’s point of consumption  Time utility- products are delivered at the right time.  Place utility- products are delivered to the desired location.

Transportation  Means of conveyance or travel (of goods and services) from one place to another .

Contract carriers serve specific customers under contractual agreements. .Legal Forms of Transportation Transportation service companies are classified legally as either common.  Contract carriers.  Common carriers.not bound to serve the general public.offer transportation services to all shippers at published rates between designated locations without discrimination. or private carriers. contract. exempt.

. livestock. or newspapers. coal.exempt from regulation of services & rates & if they transport certain exempt products like produce.not subject to economic regulation & typically transports goods for the company owning the carrier.  Private carrier. Exempt carriers.

MODES OF TRANSPORTATION       Motor Air Rail Water Pipeline Intermodal .

frequent shipments  DISADVANTAGES  Speed  Capacity  Range .Motor (Trucking)  ADVANTAGES:  1970’s – economic deregulation of interstate traffic  Lower costs  Accessibility  Small.

Air  ADVANTAGES Premium transportation Speed delivery Range DISADVANTAGES Price Non-direct points Add-on charges  .

Rail ADVANTAGES  Lowest overall cost per unit weight  Consistent time schedule  Recommended with most commodity types  Weather .

 DISADVANTAGES  Inflexibility  Potential damage of goods  Ineffective with small shipments .

Water (Ships)     Large volumes Long distances Slower than air travel Limited access .

Pipeline     Transport of homogeneous materials Lower transportation costs than other modes Higher initial costs Unable to transport a variety of materials .

Intermodal  Use of various transportation modes  Containers  More popular due to globalization .

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 Intermodal marketing companies (IMCs) act as intermediarie  s between intermodal rail carriers & shippers. .Third-Party Logistics Services.  Transportation brokers.  Integrated logistics service providers provide services for a fee.handle transportation requirements of shippers.  Shipper’s Associations.consolidate shipments to fill trucks or rail cars.intermediaries facilitate use of the transportation alternatives. legally authorized to act as agents on shippers behalf.  Freight forwarders.non-profit orgs that move member’s cargo. Consolidate members’ shipments to get volume discounts.

Pricing     Handling characteristics Distance freight is moved Weight of freight Costs inversely related to speed of service .

 Value-of-Service Pricing. negotiating prices is more common. exception rates. .  Terms of Sale. As volume increases.rates can be classified a number of different ways. Classified as class rates.Since the deregulation.services priced at market bearing competitive levels. commodity rates. the fixed costs portion goes down.  Pricing Negotiation. Cost-of-service pricing. & miscellaneous rates.price includes transportation FOB destination free on board to the shipment’s destination. A profit maximizing pricing approach.  Rate Categories.vary based on fixed & variable costs.

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United Parcel Service  Small package shipper  Business built around transportation  Effective intermodal transportation .

UPS .Methods  Trucks  Small. frequent shipments  Deliver directly to homes and businesses  Air  Time sensitive shipments  Small packages (long distances) .

 Rail  Transcontinental distances  Used primarily in intermodal transport  Sea  Door to door ocean shipping  Weekly departures between major ports .

Conclusion  Each mode of transportation has its own strengths and weaknesses  The effectiveness of each mode depends on several factors including distance. and timeliness  Services exist to help choose the best modes of transportation . price.