Transportation Strickland Exam 1
How does transportation affect the environment?
Exploits natural resources, pollutes the environment,
What was the justification used to pass legislation to build the U.S. Interstate Highway System?
For national defense and commerce
Define transportation risk.
Freight movement with probability of occurrence and potential impacts on supply chain
Place Air, Truck, Rail, Water, and Pipeline in descending order of ton-miles of freight in U.S.
Truck, rail, pipeline, water, air
Which mode of transportation moves the most tons of freight in the USA?
Trucking
T/F A skimming price is a high price intended to attract a market that is insensitive to price, and it is a means to maximize profit.
True
T/F A transportation shipment of 75 tons for 125 miles would be 9375 ton-miles.
True
T/F According to a Zurich Insurance LTD study, nearly 14% of supply chain disruptions around the world have a financial cost in excess of $1.1 million
True
T/F Air transportation has more passenger-miles than railroads and bus services combined.
True
T/F In 2030, it is estimated that 60% of the world's population that will live in urban areas.
True
T/F In value of service pricing, prices should be related to value of the commodity-- the higher the value of the commodity the higher the price to transport it should be.
True
T/F Insurance is a common method of risk transfer.
True
T/F It is possible to achieve a 12 to 18 month ROI on a TMS investment.
True
T/F Not putting all your "eggs in one basket" is a hedging strategy.
True
T/F Product density, stowability and handling, and liability are classification factors used to determine the rating of a specific commodity.
True
T/F TMS software sales are projected to reach $30 billion by the end of 2025.
True
T/F The 3 major flows in a supply chain are products, information, and money.
True
T/F The first successful airplane flight occurred in 1903.
True
T/F The main objective of deregulation in transportation was to create market-driven pricing of transportation services free from regulatory intervention.
True
T/F The use of aerodynamic devices and low rolling resistance tires can result in a net fuel savings of 10% or more.
True
T/F Third degree price discrimination is defined as charging different prices to different buyers who use the same commodity or service.
True
T/F Transportation has been described as the glue that holds the supply chain together.
True
T/F Under transportation regulation, the amount found in a Tariff as payment to a carrier for performing a given transport service is called a rate.
True
What are the top 3 countries in imports in order?
USA, China, Germany
Which countries (in order) were the top 5 importers in 2015?
USA, China, Germany, Japan, France
What are the key planning support capabilities of a TMS?
routing and rating, executing the shipment across multiple modes, tracking and tracing loads, and freight settlement.
Aggregate transportation expenditures are approx. what percentage of GDP?
9%
A deliberate product contamination risk is called:
Tampering
What is the glue that hold the supply chain together?
Transportation
What is the glue that holds a supply chain together?
Transportation
If a product costs $10 to produce the firm expects to get 10% margin on the cost to produce and transportation per unit costs are $1 what is the least price the firm is likely to accept for the product?
$12
What is the correct formula for price elasticity of demand?
% change in quantity demanded divided by the % change in price
What % of U.S. GDP does transportation account for, and where does it stand relative to housing, food, and healthcare?
10.2% transportation, 17.8 housing, 15.4 health care, 9.7 food
What % of average household expenditures in the U.S. goes to transportation, and where does it stand relative to other categories?
16.7 goes towards transportation, housing is 33%, insurance and pensions is 10.9, food is 13
What are some important milestones in U.S. transportation?
1866 transcendental railroad system complete, 1904 Panama Canal opens, 1940 national transportation policy statement
What are the 3 main phases in the evolution of the supply chain concept?
1960's- Physical Distribution 1980's- Business/Integrated Logistics 1990's- Supply Chain Management
In what decade did senior managers begin to recognize the profit potential associated with proper supply chain management?
1990's
Based upon Lardner's law, if transportation costs is cut in half how much does the relevant market increase?
300%
External supplier that performs all of the logistics functions:
3PL
A transportation shipment of 20 tons for 2000 miles would be how many ton-miles?
40,000 ton miles
How much can you expect to reduce freight costs if you implement a TMS?
6-10%
What were the $ level of imports, exports, and the difference for the USA in 2015?
800-900 Million
The top 30 countries account for approx. _% of the worlds exports?
84%
Define "capability"
Ability of a carrier to provide special service requirements
Define "accessibility"
Ability of the transportation provider to move freight between a specific origin and destination - inability to do this results in added costs and transit time for the shipper
Explain the concepts of absolute advantage and comparative advantage, how they are different, and why they are relevant to transportation
Absolute- Better than everyone in one thing Comparative- Better than some in something worse than some in something
What type of transportation demand is inelastic, and what type is elastic?
Aggregate demand is inelastic, freight transportation demand is elastic
Which mode of transportation other than light duty vehicles is the most important in terms of passenger miles is most important in USA?
Air
Explain "economies of scale" and how this relates to the impact of lowering transportation costs.
As production of a good increases the cost of producing each additional unit falls, it relates to the impact of lowering transportation cost
What two types of costs can be used to base prices upon in Cost-of-Service pricing?
Average cost approach- rates based on average or fully allocated costs, Marginal cost/Variable cost approach- rates based on the cost of producing one more unit of the output
What is Value-of-Service pricing based on?
Base the price floor off of the cost of service and then the ceiling is how much people value the service for (elasticity of demand), also if the commodity being shipped is high valued the price of transportation should be higher because you know the company can pay for it-also includes more risk and more expensive equipment
Define "security"
Be able to provide safe transport of goods to prevent damage which would increase inventory or stock out price
What are some examples of the historical significance of transportation?
Caused a growth of our nation through the expansion to the west, through the aid of the railroad system, network of roads for the military
How have transportation routes affected population distribution?
Caused an increase in suburban growth, people settling near waterways
What are the top 3 countries in exports in order?
China, USA, Germany
Which countries (in order) were the top 5 exporters in 2015?
China, USA, Germany, Japan, Netherlands
What was the primary reason for the creation of the U.S. interstate road way system?
Defense
A truck breakdown is what kind of risk?
Delivery delay
During which presidential administration was legislation passed in support of the interstate highway system?
Eisenhower
What is an ELD and what does it do?
Electronic logging device, wirelessly controls information about the truck and how long the driver has been going for
T/F Approximately 10% of the freight ton-mile traffic in the U.S. is carried by air.
False
T/F China is expected to have the largest population of any country in 2050
False
T/F Costing the risk mitigation is one of the four steps in the risk management process.
False
T/F Demand for transportation at the macro level is elastic, while demand for transportation at the micro level is inelastic.
False
T/F Europe is the continent that will have the largest number of megacities by 2015.
False
T/F Increasing the deductible on an insurance policy is a risk avoidance strategy.
False
T/F Maersk Lines is teaming with Microsoft to use Blockchain technology in ocean shipping.
False
T/F Reliability is the transportation service characteristic defined as the trustworthiness of the carrier.
False
T/F The United States has the largest export trade flow in the world.
False
T/F The demand for transportation is considered an Independent Demand.
False
T/F The primary reason for the creation of the U.S. interstate roadway system was to promote commerce.
False
T/F The simplest way to eliminate risk is risk reduction.
False
T/F The supply chain management concept captured the attention of senior level executives in many organizations starting in the 1970's.
False
T/F The transportation industry created 37% of greenhouse gas emissions in 2015.
False
T/F The two parameters involved in risk assessment are cost and impact.
False
T/F The use of ELDs in trucking was mandated by the U.S. Congress effective December 2016.
False
T/F Truck platooning is an autonomous concept that does not use human drivers.
False
T/F Under pure competition, there are many sellers and the product is heterogeneous.
False
T/F Using the least cost service provider is a transportation risk reduction strategy.
False
T/F Various studies indicate that the use of a TMS helps an organization reduce freight costs by 12 to 20%.
False
What is the difference between a head haul and a backhaul?
Head haul- When somebody needs to send something somewhere they fill a container of goods, Backhaul- When you have an empty container from the head haul and you need to get it back to the origin and you want to fill the container for whatever amount of money you can get
Not putting all your eggs in one basket is what type of transportation risk strategy (and what category does this fall in)?
Hedging (risk reduction)
What conditions exist in Pure Competition?
High number of sellers, small size of buyers/sellers, homogenous product differentiation, low barriers to entry, high demand elasticity
What is the only average household expenditure that is higher than transportation?
Housing
What are the 3 major societal function categories with higher percentages of GDP than Transportation?
Housing, healthcare and food
Define business continuity planning.
Identify and develop procedures to ensure operational continuity
What are the 4 steps in the risk management process?
Identify, analyze, manage, review
What are the 4 steps in the transportation risk management?
Identify, analyze, manage, review
Define transportation risk management.
Identify, asses, and avoid/ minimize/ eliminate risks
How are land values affected by transportation routes?
If there is a heavy amount of transportation routes, generally the value of land will increase, land is more useful and accessible
What are the 2 parameters used to assess risks?
Impact and probability
What is the most common type of risk transfer?
Insurance
Define transportation disruption.
Interruption of trade flow caused by nature and human caused incidents
Define "landed cost" and explain why this concept is important in transportation
Landed cost - is the price of the product after adding on transportation, taxes, tariffs etc. It is important to transportation because if you do not know your landed cost then you do not have an accurate account of how much you are spending and making - difficult to calculate profit - greater the distance shipped generally the greater the cost
What are the conditions for pure competition?
Large numbers of sellers, nobody dominates market, unrestricted entry, homogenous product or service
What percentage of ton mile traffic in the US is carried by air?
Less than 1%
Place Air, Rail, Bus, and Light Duty Vehicles in descending order of passenger-miles.
Light duty vehicles, air, bus, rail
Define "transit time"
Longer the transit time means higher inventory levels and carrying costs, can affect level of inventory held by a shipper and the receiver as well as the associated carry cost if holding that inventory
Describe monopolies and oligopolies.
Low number of sellers, Large size of sellers and buyers, heterogeneous product differentiation, High barriers to entry, low demand elasticity, Monopoly- One big company can run the market and change the price to their liking, Oligopoly- A couple of big companies that run the market
If everything else is the same, why is the price to ship a full truckload quantity less than the sum of the prices for LTL quantities that fill up the same size truck?
Make more stops and that makes handling costs higher, pay for more labor and hope that other people are shipping towards the same destination you are, paying more for the higher amount of moving parts
What's the current state of self-driving trucks?
Mercedes has its "Future Truck 2025" already on the highways. Apple and Microsoft are involved. There is another combined effort by Waymo/Google/Alphabet that is working out kinks in technology. Uber successfully produced a self-driving truck that hauled a load of Budweiser beer on a 120-mile trek through Colorado. Another autonomous concept involves truck platooning. The startup Peloton is working on platooning trucks, or groups of vehicles that communicate via a wireless connection that helps them time their movements and within the next couple of years, the system will allow the lead driver to take over the steering, while the drivers at the wheels in the other vehicles could snooze, catch up on paperwork, or take a break.
Explain place, time, and quantity utility.
Place utility - reduction of transportation cost, need to have efficient transportation to allow for competitive sales at market, Time utility- demand for a particular commodity may only exit during certain periods of time - if product arrives when there is no demand - product is useless, Quality utility - goods will arrive without damage in right quantity
What are some major contributing factors influencing global flows and trade?
Population size, land, technology, Globalization, Urbanization
What factors are used to determine classification?
Product density, stowability/handling, liability
What classification factors are used to determine the rating of a specific commodity?
Product density- Impacts use of carrier's vehicle and the cost per hundredweight, Stowability and handling- Cost carrier will incur in securing and handling the product, Liability- Value of product and susceptibility to damage
What are the 6 primary categories of risk?
Product loss, contamination, product damage, delivery delay, security breach, supply chain interruption
What are the 3 supply chain flows?
Product, Information, Finance
What are the 3 flows in the supply chain concept, and where does demand fit in?
Product, Information, Money
What is the difference between a rate and a price, and how has economic deregulation impacted the use of these terms?
Rate- Doesn't take into account the market and is based on the lawful amount a carrier can charge for their services, Price- More about the value of the service that the carriers give to you by moving goods because the price is based on the market, Before deregulation the government said what states carriers could operate in and how much they could charge and after deregulation the demand from the market impacted the price
Name one potential benefit of block chain to SCM:
Reduce paperwork, reduce costs, increase transparency, reduce fraud
What are the benefits of a TMS?
Reduced order cost, consolidation, saves 6-10% to have a good TMS
Define "reliability"
Reliability is the consistency of the transit time. Must be reliable in the project times of arrival of the inventory to avoid over stocking or sell outs, minimize stock out costs
Reverse logistics systems are developed for what purpose?
Returning unacceptable products
What is the simplest way to eliminate risk?
Risk avoidance
What are the 4 categories of risk management strategies?
Risk avoidance, Risk reduction, Risk transfer, Risk retention
Name one of the tactical and operational planning capabilities of a TMS:
Routing and scheduling, carrier selection, mode selection, load consolidation
Define "elasticity"
Sensitivity of customers to a change in price
What is truck platooning?
Technology that allows groups of vehicles that communicate via a wireless connection that helps them time their movements and within the next couple of years, the system will allow the lead driver to take over the steering, while the drivers at the wheels in the other vehicles could snooze, catch up on paperwork, or take a break.
What environmental event significantly increased the visibility of industrial transportation safety?
The Exxon Valdez accident
Reliability in transportation is defined as what?
The consistency of transit time
Define "derived demand"
The demand to transport a product in a given location usually depends on the existence of demand to consume or use that product in a distant location- freight not usually transported to another location unless there is a need for the product
What is business continuity planning?
The processes and procedures a business puts in place to ensure their essential functions work during disaster
Explain Lardner's Law
The reduction in transportation cost is actually greater for longer distances than for short ones because of the fixed charges. If a supplier can cover the transportation cost in their price range, an increase in the distance over which this given amount will cover the transport of goods will increase the market area of the product in an even greater ratio
Define landed cost.
The total amount it costs to get the product to the customer (source price + transportation price + any add on)
Give an example of how Blockchain is expected to be used in transportation.
The transportation industry is slowed by poor documentation and the sheer complexity in the plans to transport goods around the world and how many people that have to sign off on the plan. Because of this, IBM and Maersk are working together to get real time document exchange to happen and that will integrate shipping processes and partners, and establish evaluation frameworks through increased transparency and trusted access.
What do reverse logistics systems do?
The way back through the supply chain - RETURNS
Why do retailers now have the power in the supply chain?
They represent the consumer
What are the transportation measurement units for passengers and freight?
Ton-mile and passenger-mile
What is the definition of landed cost?
Total cost of a product to get to the destination (Cost of product at the source, transportation costs, and add ons like insurance or loading costs)
Which mode of transportation has had the greatest impact on the location of major cities?
Water
What 3 basic criteria are typically most important in determining how much to charge or pay for a shipment?
Weight, kind of commodity(classification), zip to zip route
What 3 basic criteria are most important in determining how much to charge or pay for a shipment?
Weight, zip to zip route, and kind of commodity (classification)
Value of service pricing is best defined as:
What the traffic will bear
Explain the bull whip effect.
Without good info flow there is uncertainty so if there is a big switch in inventory amount at the end of the chain it hurts everyone in the chain
What is different about Monopolistic Competition from the above?
You want to differentiate your product enough is that people may want to buy your product over the other big players in the market, maybe even pay more for it, buying beer at a football game that is cold rather than warm bulk at a Walmart
What are some examples of sustainability initiatives?
aerodynamic, low rolling tires, eld, elogy-alternate fuel for ocean bound shipping
What are ELDs and how are they used in trucking?
used to electronically record a driver's Record of Duty Status, replacing the paper log book drivers have traditionally used to record their compliance with hours of service (HOS) requirements. Syncs with the engine to automatically record the time and be more accurate