SCM 3516 Exam 1

railroad Market Structure and Competition

'Oligopolistic' •Small number of large carriers •With the merger trend, intra-modal competition is reduced. Number of carriers is small in part due to (a) Large financial barriers to enter/ maintain and operate and (b) Financial attractiveness of mergers and consolidations. •In 1920, there were 186 Class I; by 2008 the number declined to '7'! Differentiated Oligopoly •Railroad's economic structure has developed into a fine differentiated oligopolistic market. •There are small number of very large railroads and they serve somewhat different market areas! •Often lead to reduced intra-modal competition as they operate in different regions.

Economic Impact of Transportation

-Increases Capacity to move people/ goods -Reduces Cost -Reduces Transit Time -Increases Reliability -Increases Accessibility -Promotes Economic Activity

issues in trucking

-driver shortage -hours of service -driver retention -ELD mandate -truck parking -CSA -driver distraction -infrastructure/congestion/funding -driver health/wellness -economy

Factors Influencing Modern Supply Chains

-globalization -technological advancement -consumer enlightenment -supply chain integration and consolidation -government regulation and policies

measuring air carrier efficiency

1. Operating ratio: measures the portion of operating income that goes to operating expenses. Operating ratio = expense / revenue 2. Load factor: measures the percentage of a plane's capacity that is utilized. Load factor = no. of passengers / total no. of seats Like LTL, the operating ratio in this industry is typically between 90 - 95. Airlines have load factors in the 70 - 80% range. Size of the plane, load factor, cost, and profitability are related.

NVOCC

A Non Vessel Operating Common Carrier is a cargo consolidator who does not own any vessel, but acts as a carrier legally by accepting required responsibilities of a carrier who issues his own bill of lading. In Jan 2016, Amazon became a NVOCC; signaling how actively amazon wants to takeover the transportation part!

Transportation demand

A request to move between two points Freight demand is measured in ton-miles Transportation demand is derived - Demand to move a product depends upon the demand to consume it.

Class I railroads

AAR classification criteria: generate revenue of $447M or more annually •America's seven class I railroads operate in 44 states and the District of Columbia. •Employ 90% of U.S. railroad workers and bring in more than $447 million in annual revenue. •Account for nearly 70% of the industry's mileage.

Shortline and Regional railroads

AAR classification criteria: operate at least 350 route miles and revenues are between $40M - $447M •30% of U.S. freight rail mileage moves along America's 560 short line and regional railroads, which receive traffic from Class I railroads for final delivery. •Some are small operators handling a few carloads a month. Others cross state lines and approach class I size. •Short line and regional railroads operate in every state except Hawaii and employ 10% of U.S. railroad workers.

local - Switching and Terminal railroads

AAR classification criteria: these are below the regional criteria; includes railroads that provide only switching* and terminal service. *Switching is a type of operation done within the limits of a yard; consists of making up and breaking up trains, storing and classifying cars, serving industries within yard limits, and other related purposes. Many ports and industrial areas include their own small railroads that pick up and deliver goods. This type of railroad also moves traffic between other, larger railroads.

jones act maritime shipping

Also known as the Merchant Marine Act of 1920 Requires goods shipped between American ports to be carried out exclusively by ships built in the United States, and to have U.S. citizens as its owners and crews. Issues: •Salt operation in NY/NJ, 2014 •Puerto Rico, Hurricane Maria, 2017

Environmental Cost of Transportation

Although transportation provides economy with numerous benefits, these positive aspects are not without some associated social costs Exploitation of natural resources - reduction in air quality, atmospheric ozone, water quality, and increase in noise, acid rain, etc.

cost structure of maritime shipping

Approximately 15% of costs are fixed; 85% are variable •Waterways are provided by nature and maintained, improved and controlled by the government. •Carriers pay user charges - lock fees, dock fees and fuel taxes for the use of facilities. •User charges are directly related to the volume of business.

types of motor carriers

Biggest Categorization: For-hire Vs. Private •For-hire carriers - Service providers that earn profits by transporting freight for others. •Private carriers - Businesses that own and operate trucks for transporting their own goods. They do not charge a fee, but the provider incurs the cost!

private water carriers

Cannot be hired and only transports freight for the company that owns or leases the vessel. They are excluded from federal economic regulation. categorized by international or domestic

measuring railroad freight

Carload: is the basic unit of measure •It is the quantity of goods that can be carried in a railroad freight car. •Can vary in size and capacity •Increase in average car size -> reduction in number of car loadings -> improvement in carload productivity!

common and contract carriers

Common carriers serve the general public. They transport for a fee. Such carriers have set rates. The common carrier is liable for loss or injury to goods or passengers. Contract carriers serve shippers. They charge rates which are set by contract with the shipper. This allows them to discount their rates for volume shipments. *for-hire carriers

Evolution of Supply Chain Concept

Concept evolved in three phases: 1. 1960s: physical distribution concept Physical distribution means handling, movement, and storage of goods. Objective - to find lowest total distribution cost. Example: transportation mode or carrier selection 2. 1980s: business logistics or integrated logistics Adds analysis of inbound (sourcing side) to the outbound physical distribution side. Development facilitated by -Economic deregulation of transport in U.S. -Rising degree of international or global sourcing -Opportunities for cost savings through integrated management and coordination -Reduce empty back-haul 3. 1990s: supply chain management concept SC can be viewed as a pipeline for effective and efficient flow of products, materials, services, information and money from the supplier through intermediaries to the customer. It is a system of connected networks between the original vendor and the ultimate final consumer.

Disadvantages of Air Freight

Cost is the biggest downside Size and weight limitation; The world's biggest airplane built - AN-225 can lift only 250 tons. In contrast, the largest container ship - OOCL Hong Kong, can lift more than 190,000 tons! Is weather dependent and can cause delays in shipping services.

Common Carrier

Could be any carrier that transports goods or people for any person or company and is responsible for any possible loss of the goods during transport. It provides services to the general public under license or authority provided by a regulatory body. It holds itself out to provide service to the general public without discrimination for the "public convenience and necessity" Common carriers typically transport persons or goods according to defined and published routes, time schedules, and rate tables upon the approval of regulators.

Service Components of Freight Demand

Critical service characteristics and related supply chain cost impacts: −Transit time −Reliability (consistency of transit time) −Accessibility (ability to move direct service) −Capability: "special" service requirements −Security: safety of goods

Rail road, landbridge and supply chain connection

East Asian trade has given rise to a new push to U.S. railroads. The sheer volume of inbound cargo from Asia to North America has made it cost-prohibitive to haul all those goods over congested U.S. highways. Rail companies have strengthened their networks and upgraded their equipment to handle these containers and provide a nearly seamless transition from cargo ship to freight train to truck or any combination in between.

air carrier economies of scale and density

Economies of scale exists with large-size planes. However, larger planes are more expensive to operate per hour than smaller planes! Economies of density exists when significant volume flows between two cities -This is important for carriers to achieve full capacity utilization -Successful strategy for new entrants.

eminent domain

Eminent domain refers to the power of the government to take private property and convert it into public use. The Fifth Amendment provides that the government may only exercise this power if they provide just compensation to the property owners.

railroad operating ratio

Expense/ Revenue Smaller is preferred! Growing economy, truck driver shortage and increased demand spilled over to rail, is helping reduce OR for RR.

driving time regulations

Federal limits on the maximum hours an individual may drive or do "on-duty" work Maximum limits •11 hrs driving, 14 hours "on-duty" •No driving after 60 hrs on-duty in 7 days or 70 hours on-duty in 8 days •Drivers must be off for 10 consecutive hours before working the maximum hour limits

fishyback and birdyback

Fishy Back: It is a combination of road and water transport. They utilize waterways, which are one of the least expensive methods for line- haul movement. The concept loads a truck trailer, railcar, or container on to ship for the line-haul move. Such services are provided in coastal waters between Atlantic and Gulf ports, from the great lakes to coastal points and along inland navigable waterways. Birdy Back: It is a combination of rail/road with airways, since air fright must eventually transport from the airport to the final delivery destination.

Micro-level Perspective

Focuses on small details and daily interactions. It aims to understand the effect of transportation on an individual product or business. A well-developed transportation network can enable organizations: -to make strategic changes -reduce costs -increase customer service levels with little disruption to its overall supply chain flow

Terminals in Rail Operation

Freight Terminals •Bulk (dedicated facilities for either loading or unloading) •Ro/Ro (roll-on/ roll-off; needs ramp and large parking space) •Breakbulk •Intermodal (container) Switching Terminals •Are important for assembling, sorting and breaking down train units based upon the cargo, and their origins and destinations.

Place Utility

Having the product at a place where it can be sold Reduction in transportation costs permit market areas to purchase products from distant suppliers that might only be produced locally at a higher price An efficient transportation system creates place utility

water carrier competiton

INTERMODAL - Some competition •With air on the international leg. •With rail for dry bulk commodities (grain, ores, coal) •With pipelines for oil and petroleum products •With trucks, due to restricted accessibility. INTRAMODAL •Moderate on domestic leg •Intense on international waterways

Extent of Market Area

Impacted by landing cost and transportation costs Transportation Increases Market Area Higher landed cost, shorter distance covered Reduction in transportation costs can increase the extent of market area - businesses can reach farther and faster!

trucking cost structure

In TL operation, •70-90% of total cost is variable •Fixed costs are very low -Public investment in highway system -Small increments of capacity can be added -TL operations do not need terminals For LTL operation, fixed costs are higher due to the terminal system. •Largest components of variable cost - labor and fuel. •Driver cost: 20% of total operating costs •Total labor costs consume approximately 55% of each of a carriers' dollar revenue •Intercity drivers are paid by miles •Local city drivers are paid by hours. •Fuel cost: 13% of total operating costs

motor carrier competition

Intense rivalry within trucking sectors due to: •Large number of of-hire carriers •Competition between of-hire and private. In TL, competition between the providers control the industry. In LTL, competition is intense between the top carriers. Since trucking provides the last mile linkage, in most cases, it is not seen in competition with other modes of transportation (rail, water, air), but is considered as complementary.

railroads intermodal competiton

Intermodal (between modes) Intense for non-bulk traffic •Some modes offer service advantages over railroads (e.g. truck or air) •Other modes offer price advantages over railroads (e.g. inland waterways) Staggers Rail Act of 1980 •Helped railroads to become more price competitive •Helped railroads to develop more customized responses to customers' level of service needs

air carrier competiton

Intermodal: Very limited for 500+ mile trips −In Freight: some competition from motor carriers, domestically. −In Passenger: limited competition from personal automobile travel, rail, and bus service, domestically. Intramodal: Intense −New entrants create overcapacity -> reduce fares −Operational costs are high - union labor, high cost of debt, which causes weaker airlines to exit. mergers & acquisitions: A number of airlines were pushed into bankruptcy post the slowdown, resulting in a number of mergers and acquisitions over the last decade. - The sector suffered combined losses of over $52 billion between 1977 to 2009. competing factors Passenger travel: −Price, Frequency and Timing of aircrafts• Cargo: −Price, Weight and Completeness of the requested service (door-to-door service)

rail land bridge

Land bridge is used in the intermodal freight transport sector in reference to a containerized ocean freight shipment that travels across a large body of land for a significant part of the trip, en-route to its final destination. Ex. Freight originating from East Asia and destined to Europe via US, where a train is used from coast to coast in the US.

landed cost

Landed cost = Product Cost + Transport cost Impact of transportation cost on a product's demand focuses on 'Landed cost' of a product Determines: -Value of transport service -Extent of Market Area

types of maritime shipping ports

Landlord Ports: •The port authority owns the wharves, which it then rents or leases to a terminal operator (usually a stevedoring company). •The operator invests in cargo-handling equipment (forklifts, cranes, etc.), hires dockworkers to operate such lift machinery and negotiates contracts with ocean carriers to handle the unloading and loading of ship cargoes. Operational Ports: •The port authority builds the wharves, owns the cranes and cargo-handling equipment, and hires the labor to move cargo in the sheds and yards. •A stevedore, or labor management company, hires dockworkers to lift cargo between the ship and the dock, where the port's laborers pick it up and bring it to the storage site.

railroad economies of scale

Large EOS among RRs due to high fixed costs. Increase in output (traffic) does not proportionally increase the total costs; only variable costs increase.

LTL carriers

Less-Than-truckLoad carriers provide service to shippers who tender shipments lower than the minimum truckload quantities (carries between 50lbs. - 10,000 lbs). •They consolidate several shipments that are going to the same general geographic area in one truck. •LTL shipments are usually defined as those weighing less than 10,000lb. •Need consolidation centers and terminals. •Pick-up or delivery (PUD) terminal •Break bulk terminals •Relay terminals •Needs large capital to begin. •YRC and XPO are large LTL operators. *for-hire carriers

air carrier cost structure

Like TL, air carriers face low fixed and high variable costs Low fixed costs (20% of operational costs) -Due to government investment in operating infrastructure High variable costs (80% of total operation costs) •~ 40% attributable to flight operations •~ 10% for maintenance •~ 14% for aircraft and traffic servicing •~ 5% for depreciation •fuel and labor costs Fuel costs -rising fuel costs have major impact on operating costs of airlines -According to Boeing's website, the 747 burns 1 gallon of fuel every second and approximately 5 gallons of fuel per mile. Labor costs -Variety of job skills required by an airline -Pilots, flight engineers, attendants, communications personnel, mechanics, ground crew, administrative

types of motor carrier vehicles

Line Haul, City Straight and Special Vehicles Line-haul vehicles •Typically tractor-trailer combination with 3+ axles •Used for long distance transport •Hauls maximum of 80,000lb typically. •Carrying capacity: function of vehicle dimensions and density of cargo City (straight) trucks •Smaller than line-hauls •Used for pick-up and delivery (PUD) •Typically 20-25 foot long •Growing use of 28 foot line haul trailers for PUD •Saves multiple handlings of cargo and time Special vehicles •e.g. open-top, flatbed, tank trailer, refrigerated, high cube

local and intercity carriers

Local carriers pick up and deliver freight within commercial zone of a city. The intercity carriers operate between specifically defined commercial zones. Local carriers frequently work in conjunction with intercity carriers to pickup and deliver freight. *for-hire carriers

air freight Service Characteristics

Major service advantage is: Speed (~500 mi/hr.) However, travel time advantage is seen to be off-set by: -Low flight frequency from low-density communities -Indirect routing (due to hub and spoke networks) -Air traffic and ground congestion -Delays in security clearance They work on a hub-and-spoke approach

evolution of maritime shipping

Maritime shipping evolved as three distinct eras: 1. Before container shipping •Back then, goods were carried in individual barrels, sacks and wooden crates. •Process was slow, difficult, labor intensive and cumbersome. Today we call this practice as break-bulk shipping. 2. Containerization and 'Inter-modalism' •On 26 April 1956, Malcom McLean's sent its maiden voyage from Port Newark to Houston. •A reinforced deck carrying 58 metal container boxes and 15,000 tons of bulk petroleum. •Was successful and in no time, had the order to take back to NJ. This gave birth to containerization. •The next logical step was to standardize the container sizes so that they could be efficiently transferred and stacked on to other vehicles. •All equipment was built to fit a single size specification. •In 1961, the International Organization for Standardization (ISO) set container sizes: 20' and 40'. •A 20-foot container is referred as a TEU (Twenty Equivalent Unit) and is the industry standard reference. 3. Globalization •On 23 April 1966, Sea-Land's Fairland sailed from Port Elizabeth, NJ to Rotterdam, Netherlands with 236 containers. •This was the first international voyage of a container ship and the beginning of a new era. •Container shipping began to soon prove its worth. The industry began to grow to the point where it quickly became the backbone of global trade.

number of motor carriers

More than 600,000 carriers are registered on file. The motor carrier industry consists of a large number of small companies. Almost 87% operate with 6 or fewer trucks! Minimal capital requirement in TL.

economies of scale in trucking

No major EOS in trucking •Large number of small companies in TL segment, suggests that small-sized operations are competitive. economies of utilization (use) •Present in LTL operations where fixed costs are higher due to terminals.

measuring maritime traffic

Non-containerized maritime traffic is commonly measured in deadweight tons (DWT). DWT = Cargo Wt. + fuel + ballast water + supplies + crew Container traffic is measured in TEUs. ballast water provides stability and maneuverability to a ship

Invoices in International Trade

Proforma invoice: −Provided by the exporter (seller) to importer (buyer) −Importer does not need to pay any amount on proforma invoice until importer's final decision to order commodity Commercial invoice: −First official document when commodity is about to get ready −Proof of sales agreement Freight invoice: −Price of transportation cost −Prepaid at origin or collected at destination

railroad cost structure

Railroads have high % of indirect fixed costs in short run because •RRs own and maintain their own networks (rights-of-way) •terminals (freight yards) •rolling stock (locomotives) Variable costs •Labor •Fuel

Price Elasticity of Demand

Sensitivity of customer demand to price change •Usually the number is negative, as in most cases a reduction in the price, will increase the demand, or vice-versa. •Positive elasticity occurs only when the demand increases, when prices are increased! •Greater than 1, product is elastic (customer is affected by price change). •Between 0-1, product is inelastic (customer is unaffected by price change).

Service Elasticity of Demand

Service elasticity depends on: −Transit times −Reliability as service increases, revenue increases as service decreases, revenue decreases

Transportation & Socio-economic Benefits

Socio-economic refers to how the society is affected by transportation systems. When transportation system is efficient -> it saves time and cost, provides better accessibility to markets, employment and additional investments. When deficient -> it results in missed opportunities and lower quality of life.

unit trains

Specialized, one commodity trains •Direct origin to destination movement •Run on priority service schedules •No stops in-transit •Higher car utilization •Used frequently for coal and grain shipments •Disadvantage: empty backhauls

LTL & LT market structure

TL market •Offers freedom of entry, discounting and lack of regulatory constraints. •Market is monopolistic. LTL market •Capital constraint for entry. •Companies control and influence each other. •Market is oligopolistic (few sellers, barriers to entry)

Transportation Service Index

TSI measures the movement of freight and passengers combined, to yield a monthly measure of transportation services output. The numbers are seasonally-adjusted

Time Utility

The demand for a product exists only during certain time periods 'Lardner's Law of Squares' - if the speed of transportation doubles, the potential area of service quadruples

motor carriers

These are companies or individuals that operate trucks and buses. The industry means more than a vehicle transporting goods from one location to another; extends to include freight forwarders, shipper's agents, consolidators, break-bulk agents, distributors and warehouse owners.

airline mergers and market structure

These mergers resulted in the consolidation of capacity with the top 4 US airlines in the industry, namely American, United, Delta, and Southwest Airlines. At present, these airlines hold almost 85% of the market share, as opposed to only 65% share (on average) held by the top 4 US airlines in the past. As a result, these airlines currently operate as an informal oligopoly and control the dynamics of the overall air travel market.

for-hire air carriers

They ship cargo for others and charge them a fee for the service. No longer regulated by federal govt. Majority of air movements by 'for-hire' carriers are carried by ~151 carriers. services: -all cargo -commuter -charter -international

private air carriers

They transport company personnel or freight in planes to support their own business. Dominance is in transporting personnel Subject to federal safety regulations administered by the Federal Aviation Adm. (FAA) 500+ US corporations operate private air fleets.

Supply Chain Flows

Three key flows: 1. Product -forward and reverse logistics 2. Information - demand or sales data, Point-of-sales data to minimize the bull whip effect 3. Financial/ Cash (traditionally considered backwards)

Significance of Water Transport

Today, 90-95% of world trade moves on sea. If this trend continues, it is projected that the value of U.S. foreign trade will be equivalent to 35% of the Nation's GDP by 2030 and 60% by 2050. The industry supports 13M jobs globally.

Quantity Utility

Transportation gives assurance that the goods will arrive without damage in the right quantity In recent years with higher importance placed on minimizing safety stock inventories, quantity utility has gained all the more importance Special bracing, blocking, and/ or strapping, along with temperature control, helps ensure damage-free delivery

Micro-economic measurement

Transportation helps determine economic value of products Place utility: -creation of economic value through transport cost reduction -Landed cost of transportation Time utility: Law of squares in transport and trade (Lardner's law) Quantity utility

Location of Economic Activity

Transportation plays an important role in the location of cities and industrial facilities Around the world: -Water -> developed major cities -> other cities developed along the rivers -Rail -> cities and industrial facilities grew -Motor carriers -> developed suburbs

truck drivers

Truck drivers are often classified as •'owner-operators' (small business people who own, maintain and drive their own commercial motor vehicles) or, •'company-drivers' (who work as employees in a company). It is important to understand the difference between the two as they both have different need and motivation to drive a truck. driver shortage: •Major impact on TL carriers •Contributing factors -Federally imposed CDL requirements -Stringent rules on drug and alcohol abuse -Demanding, unattractive life-style

TL carriers

TruckLoad carriers provide service to shippers who tender sufficient volume to fill a truckload shipment. •Specialize in hauling large shipments for long distances. •TL shipments usually weigh 20,000-30,000 pounds. •Do not need terminals - a driver picks up a load from a shipper and carry the load directly to the consignee, without transferring the freight from one trailer to another. •Needs less capital to begin. •J.B. Hunt and Schneider National are large TL carriers. •Terminals in TL are designed to accommodate drivers and equipment, not freight! *for-hire carriers

trucking and supply chain link

Trucks are an important link in the logistics chain. The "last-mile" or "final-mile" delivery, in which consumer products are delivered to the home has become a crucial part of our supply chain. Rail, air and ship transport are confined in their flexibility, and therefore truck transport becomes the last leg of the journey.

trucking distance

Trucks are ideal to move freight up to 600 miles. In 2015, approximately 50 percent of the weight and 37 percent of the value of goods were moved less than 100 miles between origin and destination. About 7 percent of the weight and 17 percent of the value of goods were moved more than 1,000 miles.

trucking in the US

Trucks haul 70% of the nation's industrial products by value and ~65% by weight. To move 10.5 billion tons of freight annually, it uses 3.4 million heavy-duty Class 8 trucks and over 3.5 million truck drivers. Truck transportation = 10 * (water transportation$)

significance of trucking

Trucks today deliver ~ 70% of all freight and move 10.5B tons of freight. If trucks stop: •Significant shortages will occur in as little as 3 days for perishable items. •Supplies of clean drinking water will run dry in 2-4 weeks. •Hospitals and nursing homes will exhaust supplies in as little as 24 hours. •Fuel supplies will start to run out. •Garbage will be everywhere. •Manufacturing, banking and retail will come to a stand still.

Service Innovations by Railroads

Were designed to increase service levels. Piggyback services offered by RRs combined their long-haul cost-efficiency with flexibility of trucks Piggy Back is a service combination of rail and road. Here, containers are placed on railway flat-cars and transported to a terminal, from where they are placed on trailers and transported by roads. RRs developed three different innovations: •Trailer-On-Flat-Cars (TOFC) •Container-On-Flat-Cars (COFC) •Unit trains

Transportation and Political Development

While the transportation industry is deregulated, government intervention is often required in designing newer and feasible routes, fund highway and port projects and develop harbors and waterways. Two important concepts:• Common carrier regulation •Government's right of eminent domain

What if the Transport System Slows Down?

Within 6 - 12 hrs. assembly lines will come to a stop. Within 24 hrs. many hospitals will run out of essential supplies. Within 48 hrs. many service stations will run out of fuel. Within 72 hrs. grocery stores will run out of perishables.

Transportation Provides

access to people, places, and products It shapes our economy, society, environment, and political structure. It is an essential element of our daily life

Freight Transportation Intensity

an indicator that shows the actual freight activity required to produce a unit of good/ service in a nation FTI = total ton miles/total GDP Decline in the ratio reflects that actual freight activity required to produce a unit of good/ service in the nation's GDP has declined -Macro-level - a shift in the economy from goods to more services -Micro-level - increase in freight transportation productivity (time in transit, accessibility to ports, and security of goods)

LTL terminals

break bulk terminals •Provides consolidation and dispersion services •Serves as an intermediate point where freight with common destinations is combined in a single trailer. •Customers rarely contact break-bulk terminals. relay terminals •Freight is not touched in these facilities. •It is necessitated by hours-of-service regulations •"Sleeper team" is an alternative.

for-hire water carriers

categorized by international or domestic types of domestic for-hire carriers: for-hire exempt •They charge a fee for their service, however they are exempt from the economic regulations by the STB. •They are exempt when transporting bulk commodities (grain, coal, gravel, oil etc.) over waterways. •Dominate the for-hire segment of the industry. regulated for-hire •Classified as either common or contract carriers •Economic regulation administered by the Surface Transportation Board (STB). •A very small number exist internal carriers •Operate on inland navigable waterways - U.S. Rivers & lakes •They use barge and tugboats. •Tugs move vessels in crowded harbors, narrow canals, or those that cannot move by themselves. •Tugboats are strongly built and are powerful for their size. Some are ocean-going. costal carriers •Operate along coasts (Atlantic, Pacific, & Gulf of Mexico) •Inter coastal -between East and West coast via Panama Canal. •Use oceangoing vessels primarily; some oceangoing barges are also used.

inelastic demand

insensitive to price change as price increases, revenue increases as price decreases, revenue decreases price elasticity of demand between 0 - 1 = inelastic

GDP

measures size of an economy; it is the annual market value of all goods and services made within a country's border GDP = Consumer spending + Industry investment + Government spending + Net exports Does not include intermediate goods, non-production transaction (selling used items) and non-market activities (e.g. household fixes)

current air carrier issues

safety and security: Although air transport has low accident rates, it is always in media. Factors affecting airline safety -Airport security and threat of airline terrorism -Substance abuse, drug testing policies, alcohol consumption guidelines -Fatigue due to late night shifts sustainability: -Environmental Impact due to Aircrafts is a growing concern globally. -Efforts are underway to reduce emissions and increase operational efficiency but it requires high investment in technology and infrastructure.

elastic demand

sensitive to price change as price increases, revenue decreases as price decreases, revenue increases price elasticity of demand > 1 = elastic

trucking service characteristics and advantages

•Accessibility (Door-to-door service) •Speed - enables faster delivery under 600-miles •Universal connector to all modes. •Small carrying capacity - inventory advantage •Lower damage rates - pneumatic tires and suspension system in the vehicles. •Dedicated tracks (as in rail or water) are not required.

current railroad issues

•Accidents •Alcohol and drug abuse •Technology -Train, yard control systems, "smart" equipment •Uncertain future of smaller railroads •Insensitive customer service, in case of larger companies •Drayage for intermodal service

rail characteristics

•Average Length of Haul ~ 875mi •Average train speed 25 miles/hr (40 miles/hr for priority trains). •Mainly deals in carload freight. Railroads carry wide variety of low-value-to-weight products, both bulk and non-bulk. -coal -farm products -chemicals -Nonmetallic minerals (stone, glass, lime, etc.)

types of for-hire carriers

•Common or contract •Local, intercity or both! •General freight or specialized freight carriers •Truckload (TL) Vs. Less-than-truckload (LTL), and Hybrid: Heavy LTL!

water carriers

•Companies that operate vessels on waterways for transporting goods/people. •They carry both domestic and international freight •It is known to be the first principal form of long distance freight and people transport. •Passenger transportation in maritime is very limited in today's age. −Cruise ships and recreational boats for primarily for leisure. •For the most part, it is the freight that is carried over global waterways.

Benefits of Water Transport

•Economies of scale - with large carrying capacity, cost per unit is very less. •Opens up new markets for selling and purchasing. •Compared with trucks and trains, ships have fewer major accidents. •Causes lesser air and noise pollution than trucks and rail.

advantages of railroads

•Facilitates long distance travel. •Is quick and cheaper to transport bulky items. •Is the safest form of transport. •Has a large carrying capacity. Moreover, it is elastic and can be varied by adding or removing the wagons. •They are very fuel efficient.

advantages of air freight

•Fastest mode of shipping •Arrival and departure times of flights are highly reliable •Tightly managed airport controls reduce cargo exposure to theft and damage. •Quicker transit times -> less need for warehousing and inventory. •Air shipments require less heavy packing than ocean shipments. •Many airlines have a large network of destinations -> covers almost the entire world and can reach every corner of the planet!

Innovation in Trucking - India's 'Rivigo'

•Founded in 2014, is an integrated 'driver-relay' system. •Each driver drives no more 4-5 hours/ day •At the end, he hands over the truck to another driver and bring back another truck to his original location. •Enables the company to run a truck 22-23 hours a day and 1,000kms per day. •Reduces transit times by 50-70%.

operating ratio in trucking

•Measures operating efficiency •Benchmark of financial viability. •Operating ratio = Expenses/Revenue •An operating ratio of 94 indicates that 94c of every revenue dollar is consumed in expenses; leaving 6 cents to cover interest costs and return to the owners. •LTL operate between 93 - 96. •TL operate between 80 - 85. •Lower the operating ratio, the more profitable and efficient the carrier.

advantages of piggyback services

•Reduced fuel consumption •Reduced road congestion and road damage •Lower emissions •Double-stack COFC trains greatly improves rail equipment and train productivity

limitations of railroads

•Requires large investment. •Is inflexible in routes and timings •Cannot provide door to door service. •Intermediate loading or unloading involves greater cost, more wear and tear and wastage of time. •Is unsuitable and uneconomical for short distances and small traffic of goods. •Involves much time and labor in booking and taking delivery of goods as compared to motor transport.

alliances in ocean shipping

•Severity of competition can be understood by understanding alliances in ocean shipping. •Alliances are a type of cooperative agreement among ocean carriers to cover different trade routes. •In other words, it is a group of shippers who have aligned together for common goals in a way that benefits everyone, not just the carriers themselves, but also the customers by obtaining better rates, routes, and transit times for their shipments. •Three alliances (2M alliance, ocean alliance and The alliance) represent nearly 85% of global container trade, more than 75% of global container capacity and 96% of all East-West trades' container capacity.

Limitations of Maritime Shipping

•Slow mode •Weather-related service disruptions •Hurricane Irma disrupts cargo ships in the Caribbean Sea •Accessibility is limited; cannot provide door-to-door service.

growth of motor carrier industry

•The first motor truck was built in 1896 in Germany. •In 1917, Ford had produced what may be considered the first pickup truck made in America — the Ford Model TT. The economic growth following WWII, and the development of the interstate highway system, encouraged the rapid growth of trucking industry in the US

Units of transportation measurement

−Quantity times distance (weight-distance) −Used in transportation statistics, and planning