1 Zachary Zinkgraf May 12 2013 BMGT 372 Final Study Guide Transportation Infrastructure Transportation Regulation History o 19th Century Railroads Monopolies collusion price gauging destructive competition 1887 Interstate Commerce Act Create Interstate Commerce Commission ICC o 1935 Motor Carrier Act regulation of common carrier highway transportation under ICC jurisdiction legal forms of for hire and motor carriers o 1938 Civil Aeronautics Act regulating air transport o 1978 Air Deregulation Act extended free market competition to all forms of passenger air transport o 1980 Rail and Motor Carrier Deregulation Act Current Transportation Regulation o Economic Regulation to provide dependable service and foster economic development Government invested in infrastructure as well as support and regulation for a system of privately held for hire carriers Regulated to ensure service availability stability and fair prices Accomplished by controlling entry rates and services Contemporary economic regulation dominated by free market competition and more or less regulated by antitrust laws o Social Regulation handling of hazardous material and rules related to maximum driver hours and safety Transportation Functions DOT has taken active role in controlling the transport and o Product Movement Critical component of commerce More than 60 of logistics cost is transportation Environmental impact o Product Storage not efficient but may be necessary for Transportation Principles Storage while in transit Storage at origin and destination Storage for destination diversion o Economy of Scale cost per unit of weight decreases as the size of shipment increases cheaper to fill up a truck o Economy of Distance decreased transportation cost per unit of weight as distance increases one shipment of 800mi cheaper than two of 400mi Transportation Participants 2 o Carrier Agents o Shipper Cosigner Consignee have the same interest in moving goods transportation of goods maximize revenue while from origin to destination within given time at lowest cost Related services pickup and delivery times predictable transit time zero loss and damage accurate and timely exchange of info and invoicing minimizing associated costs Seek to coordinate pickup and delivery times to consolidate many different shippers freight in order to achieve economy of scale and distance Brokers and freight forwarders are agents that facilitate carrier and customer matching environment to support economic growth Essential services at a reasonable cost o Public environmental security and safety standards carrier freight capacity with available shipments also marketplace to facilitate transactions Second internet based exchange relates to purchase of fuel equipment parts and supplies Also real time information Two marketplaces First exchange information for matching interest is accessibility expense and effectiveness as well as interest is to achieve a stable and efficient transportation o Government o Internet Classifications of Carriers o Common Carrier provide services to general public o Contract Carrier specific contracts in place with shippers o Private Carrier shipper owned carriers o Exempt Carrier exempt from regulation based on commodities carried Modes of Transportation o Rail Mostly common carriers Dominant intercity carrier until WWII High fixed cost low variable cost Most efficient in moving large tonnage over many miles Intermodal leader with TOFC COFC Motor Carriers o Truck intermodal rail piggy back ocean containers common contract private exempt carriers o Dominant intercity carrier since WWII to this day o Speed of delivery o Door to door service o Low fixed cost high variable cost o Most efficient for smaller shipments over fewer miles compared to rail However still very much used for larger loads over longer distance because of ease and flexibility o Truck Load TL o Less than Truck Load LTL o Specialized trucking Water Carriers 3 o Domestic and international water carriers o Common contract and private carriers o Extremely large bulk and break bulk shipments o Require water terminal at origin and destination o Limitations range of movement and slow speed o Advantages low cost and range of freight capability o Types of vessels containerships break bulk ships bulk ships roll on roll off ships auto carriers barge ships scientific ships barges etc Air Carriers o Advantage of air carriers Speed of shipment Reduced handling and damage Better security Reduced warehousing and inventory cost o Limitations Shipment cost Size and weight restrictions o Low fixed cost high variable cost o Most shipments moved in PAX aircraft bellies however big increase in all cargo aircraft due to great increase in air freight o FEDEX and UPS overnight services greatly increased air freight o Ideal for high value items perishables seasonal JIT emergency freight Pipeline o Move petroleum and natural gas products o Operates 24 7 365 o Empty back hauls o Limitations no flexibility in locations and commodities Intermodal Transportation o Combines two or more modes TOFC trailer on flat car COFC container on flat car o Ocean containerization Standard ocean containerization Land bridge Mini land bridge o Intermodal operations very equipment dependent NON OPERATING INTERMEDIARIES o Provide transportation services do not own equipment Forwarders for profit businesses that consolidate small shipments into a bulk shipment and then use a common surface or air carrier for transport Agents International Agents group of shippers establish an office or arrange an agent at the location of frequent merchandise purchases agent arranges for individual purchases to be delivered to local 4 facility When a sufficient volume of orders is accumulated a consolidated shipment is arranged Shipper associations voluntary nonprofit organizations where members collaborate to gain economies of scale related to small shipment purchases Brokers intermediaries that coordinate transportation arrangements for shippers consignees and carriers Transportation Operations Transportation Economics o Economic Drivers Distance directly contributes to variables expense Cost curve does not start at zero fixed costs and increases at a decreasing rate tapering principle Weight fixed costs of pickup delivery and administration are spread over incremental weight therefore cost per unit of weight decreases as load size increases Density hundredweight CWT higher density products allow fixed transport
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