SCMT 309 1st EditionFinal Exam Study GuideChapter 10: Transportation- Introductiono Transportation involves the physical movement of goods between origin and destination pointso The transportation system links geographically separated partners and facilities in a company’s supplyo Transportation facilitates the creation of time and place utility in the supply chaino Transportation also has a major economic impact on the financial performance of businesses - Role of Transportation in Supply Chain Managemento Transportation provides the critical links between these organizations, permitting goods to flow between their facilities o Transportation service availability is critical to demand fulfillment in the supply chaino Transportation efficiency promotes the competitiveness of a supply chain- Challenges to Carrying out This Roleo Supply chain complexity Everyone is connected to everyone, basically One of the biggest challenges is finding freight to fill your truck on the way back to your starting destinationo Competing goals among supply chain partnerso Changing customer requirements The needs of customers are changing, making everything even more complexo Limited information availabilityo Synchronizing transportation with other supply chain activities One of the biggest problems with truck drivers is they will arrive at their destination and the consumer is not ready for them. The drivers are waiting. Youneed to synchronize your schedules with the customerso Transportation capacity constraints pose a challenge Truck drivers pose a threat with their noise and pollutiono Rising transportation rates present another major concern for organizations o The transportation industry is impacted by governmental requirements that affect cost structures and service capabilitieso Regulation is growing in areas where the transportation industry has the potential to impact the quality of life, the safety of citizens, and the growth of commerce- Modes of Transportationo Motor Carriers Most widely used mode of transportation in the domestic supply chain Made up of 573,469 private, for hire, and other U.S. interstate motor carriers 68% of the money used in trucking transportation is used for intercity transportation compared to local service There are no significant cost economies of scale that make it impossible for small carriers to compete High variable cost, low fixed cost The government builds and maintains the highways, and motor carriers pay for highway use through fees such as use taxes and licensing charges PepsiCo operates the largest private trucking fleet in the US For-hire trucking companies move freight for other organizations to the tune of $5 trillion worth of goods and 32.5% of US freight tonnage. There’s 3 types of for-hire carriers- Truckload (TL) carriers- handle single large shipments per trailer that exceed 15,000 pounds or use the full cubic capacity of a trailero TL carriers provide direct service, picking up the load at the origin point and delivering it directly to the destination without stopping at freight handling terminals- Less-than-truckload (LTL) carriers- move multiple shipment ranging from 150 pounds up to 15,000 pounds in each trailer. o National LTL carriers use a hub and spoke network of local and regional terminal facilities to sort and consolidate shipments moving to a particular market areao Regional LTL carriers focus their efforts on a particular area of the country- Small package carriers- handle shipments up to 150 pounds and move multiple shipments on a single van or trucko Use networks similar to LTL carriers to move freight efficiently throughout the countryo USP and FedEx Ground are the 2 largest small package ground carriers o Railroads 7 Class I railroads revenues in excess of $290 million- Class I- Linehaul railroads with revues in excess of $379 milliono BNSF Railway, CSX Transpiration, Norfolk Southern Railway, Union Pacific Railroad All are the dominant carriers in the industry None services the entire country by itself; they work together via interline agreements to provide coast to coast rail service- Class II- you own a few railroads- Class III- smaller railroads Activity levels have been achieved despite a lack of direct accessibility to all parts of the supply chain Railroads are “natural monopolies”- Good for consumers; where it’s better to have 1 rather than 2 because of the nature of the costs Two carrier types:- Linehaul freight carriers- provide service between major markets and customers within those marketso Move freight in container, carload, and unit train quantitieso Long distance- Shortline carriers- provide the local and regional links between individual customers and the national rail network of the Class I railroadso Serve smaller markets, handle local delivery service, and facilitate the interline process- activities that the long-haul carriers no longer find profitableo Short distance High fixed costs, low variable cost Robber Baron- Carnage, Rockefeller; people who laid the foundations but their behavior would most likely be criminal today 1887 Act to Regulate Commerce- regulated the railroad industry for the first time Interstate Commerce Committee (ICC)- made sure that transportation did what they were supposed to be doingo Air Carriers 491 air cargo carriers- Combination carriers- move freight and passengers, often on the same trip, with cargo loaded in the belly of the aircrafto Delta, United, and American handle the most freight ton-kilometers each year- Air cargo carriers- focus exclusively on the movement of letters and envelopes, packages, and freighto Some provide scheduled daily service through a highly coordinated network, while others provide on demand service for customers who need more immediate, direct transportation or the full capacity of the aircrafto Integrated carriers- provide door to door service, a consistent schedule of pickup and delivery windows, and standard expedited service through their hub and spoke networks They dominate the US domestic market for next day andsecond day movement of letters, small packages, and small shipmentso Nonintegrated carriers- provide on demand, air-only service from airport to airport Rely on freight forwarders or the customer to provide delivery service to and from the airport Advantages of these carriers are the speed and flexibility of unscheduled direct service and the