BMGT 370 Final Exam
Be familiar with the role of large oil companies in the development of pipelines.
- 19th century, pipelines were originally used to feed other transportation (water and railroad) -In early 20 century, most pipeline own by the large firms (control oil industry -After WWII, pipelines were ordered to operate as common carriers as the need grew to move oil and oil products from the oilfields in Texas and Oklahoma to markets in the northeast. -According to Champlin Oil Case, all pipelines must allocate a certain percentage of their capacity to common carrier service.
Explain why the vast majority of pipelines are common carriers.
- Champlin Oil Case. This case prevented vertical foreclosure -small independent producers were required to have access to pipeline transportation to get their products to the market and effectively compete
What role does the Department of Transportation play in the transportation sector
-Advising the president -National transportation policy development -10 operating administrations have statutory responsibilities -Rulemaking -Important concerns are safety, security, and consumer and economic issues
How do are 3PLs related to outsourcing
-Any PL, 1-5 are examples of outsourcing. -1PL is simply where a shipper decides to hire a carrier to transport their goods rather than shipping it themselves, Private Carriage. - As you move from 1-5, you are outsourcing more of the supply chain functions.
Understand the importance of water transportation in the economic development of the U.S. and world economies
-First form of long-distance freight & people transport -Most important/efficient form of transport until development of railroads in mid-18th century -Today, water transport remains viable for the movement of basic raw materials, and plays a primary role in global commerce transportation.
What role does the judiciary play in transportation?
-Interpret transportation laws, regulations, and executive orders -Reconcile transportation conflicts
What are the factors contributing to the talent gap in SCM?
-Low percentage of supply chain majors -Low awareness of supply chain as career path -Perceived lack of opportunity in supply chain roles -Generational differences in career expectations -Gaps between most important and best aspects of job
How would you describe the market structure of pipelines?
-The pipeline industry has a small number of very large carriers that dominate the industry (oligopoly) -High startup cost -The existence of economies of scale make parallel competing lines uneconomic -requirements for entry and associated legal cost -Dominance of large oil company
Identify the range of activities typically outsourced to 3PLs.
-domestic transportation -warehousing -international transportaion -freight auditing -logistics -IT services
List the reasons against 3PL use
-logistics is a core competency of company -control over outsourced functions would diminish -company has more expertise than 3pl -logistics is too important -security and outsourcing
What have been the carriers' responses to the fuel issue?
-night delivery strategies -fuel surcharges and contract closures -service capacity network and rationalizaton -improved operational efficiency through fleet upgrades and equipment replacement -reduce cruise speeds -technology solutions
List the reasons for 3PL use
-opportunity for cost reductions -focus on core competencies -improve customer service -improve return on assets -access to emerging technology -expansion to unfamiliar markets
Know the significance of this mode as to commodities, volume, distance, and revenue.
1. 19% of total U.S. freight ton-mile was moved via pipeline in 2015 2. 967 billion ton-miles of U.S. freight were moved via pipelines in 2015 3. 4% of the total intercity transportation revenues earned by pipelines in 2012 4. 161,000 miles of oil pipelines in 2014 5. 1,586,000 miles of natural gas pipelines in 2014
List and define the service options for intercontinental air transportation?
1. Combination carriers - move freight and passengers 2. Air cargo carriers - exclusively move freight Scheduled or charter options 3. Integrated carriers - air and ground delivery equipment 4. Nonintegrated carriers - airport to airport service combined with freight forwarder or customer ground transport
Identify factors that may contribute to delivery delay.
1. Congestion: overurdened roadways, railways, ports, bottlenecks 2. Delivery Delay: Companies that rely upon JIT delivery or sourcing goods from far east 3. Poor Weather: areas of extreme climate conditions, snow, and ice 4. Equipment Malfunction: -mechanical: breakdowns of delivery vehicles -Problems with frieght handling equipment at transfer facilities
Identify and discuss factors that might contribute to the degradation of products in transit.
1. Contamination: risk to pharmaceutical goods and other consumables that increases as trip distance/time increases 2. Climate Control Failure: Failure to provide a stable climate inside the container challenge with fruit, veggies, biomedical, chem 3. Product Tampering: Deliberate contamination of goods after they have been manufactured 4. Exposure to Contaminants Risk of freight coming in contact with understandable substance exposure through products and equipment
principles for Organizing the Private Fleet
1. Cost Constrained Fleet: Avoid intra organizational conflicts caused by incompatibility of departmental demands and the private fleet goals 2. A profit centered fleet: Eliminate a users misconception that private trucking is free transportation 3. Position in the organization: Centralized Decentralized
Describe and explain the types of specialty services offered by 3PLs.
1. Dedicated: contract carriage- Serve as a customer's private fleet with a customized turnkey 2. Drayage: specialize in short-haul movement of intermodal containers from origin to ocean ports and rail yards and from these facilities to their ultimate destination. 3. Pool distribution: Move a large quantity of product in bulk to a specific market or regional terminal to be offloaded and sorted by customer. 4. Merge in transit: Unite shipments from multiple suppliers at a specified merge point located close to the end customer. 5. Last mile delivery: A new breed of last mile service providers, covering the final dock-to-door or store-to-door delivery with value-added services such as inside delivery, product assembly, installation, and testing.
major issues facing water carriers today
1. Drug & alcohol abuse 2. Port Development： -Competitive economic vs. public concern for environment - Growth of multicarrier alliances and larger ship deployment
Identify the various types of transportation and integration offerings of 3PLs
1. Freight Movement: -for hire carriage -contract carriage -time define services 2. Freight Management -carrier selection -contract compliance -performance analysis 3. Intermediary Services -surface fowarding -air forwarding -freight brokerage 4. Specialty Services: -dedicated contract carriage -drayage -pool distribution
operating characteristics of pipelines
1. Gathering lines: -Bring oil from the fields to storage areas -Relatively short distance movement -Small diameter laid on ground surface 2. Crude trunk lines: -Move crude oil from gathering stations to tank farm or refineries -Long distance movement -Large diameter laid underground surface 3. Finished product trunk lines: -Move product from refineries to market area terminals -Long distance movement -Large diameter lines laid underground
Risk Management Process
1. Identify: Determine the potential transportation disruptions 2. Analyze: Evaluate the likelihood and impact of each disruption 3. Manage: Apply risk management and mitigation strategies 4.Review: Monitor and update the plan; identify new risks
What factors might contribute to supply chain interruptions caused by poor execution of day-to-day operations, and transport-related forces
1. Industry Consolidation: times of slack volume or high energy prices 2. labor disruptions: occur in times of work related disputes notably when rely on unionized labor 3. Capacity Shortages: occur during peak economic growth impacts customers
List the factors that could contribute to security breaches.
1. Lax security processes: failure to establish strong practices 2. Unprotected Transfer Facilities: Ease of facility entry and access promotes product theft 3. Shipment Control Failures: Lack of freight visibility and access control to product transit goods
Identify and discuss the major risk management strategies.
1. Risk Avoidance: eliminate risk by not performing activity associated with risk 2. Risk Transfer: transfer financial risk to 3rd party (insurance, 3pl) 3. Risk Reduction: Reduce likelihood of risk or mitigate severity of financial loss 4. Risk Retention: Risks are minor, better to absorb
Identify and briefly discuss the role of regulatory agencies involved in transportation
1. Surface Transportation Board (STB) 2. Federal Maritime Commission (FMC) 3. Federal Energy Regulatory Commission (FERC) 4. Federal Railroad Administration (FRA) Implementing the laws regulating economic and safety elements of transportation
Define the various intermediary services.
1. Surface forwarding: pick up, assemble, and consolidate shipments, then hire carriers to transport and deliver the consolidated shipments. 2. Air forwarding: Consolidate small shipments for long-haul movement, primarily using major passenger and freight airlines. 3. Freight Brokerage: (match up buyer and seller) Represent carrier seeking freight or shipper seeking capacity. 4. Intermodal marketing: Act as facilitators or arrangers of rail transportation service . 5. Shippers Association: Nonprofit transportation membership cooperatives arrange for the domestic or international shipment of members' cargo.
Identify the key goals or justifications for the government's involvement in transportation.
1. Tie together spatiallyseparated communities 2. Facilitate U.S. economic activity 3. Fundamental to national defense 4. Public investment, operation, and maintenance 5. Framework for allocation of resources 6. Balance environmental, energy, economic, and social stakeholder interests
Be familiar with the responsibilities of the executive, legislative and independent regulatory commissions.
Executive and Legislative Branch: Congress 1. Make law 2. Create and oversees federal agencies and department ensure implementation of law 3. Executive branch is to carry out and enforce laws though: Secretary of Transportation, White House Office of Management and Budget independent regulatory commissions: Administrative bodies interpreting vague terms in laws for developing regulations Surface Transportation Board - railroads Federal Maritime Commission - international water carriers Federal Energy Regulatory Commission - interstate electricity transmission and hydropower natural gas and oil pipelines Federal Railroad Administration - safety operations of railroads
Be familiar with the competing perspectives of the exporter and the importer related to risk of payment.
Exporters: Risk of not getting paid by the importer Would like cash in advance but may lose business to more lenient competitors Importers: Risk related to shipment delivery and product quality Would like open account but may lose excellent suppliers Letter of credit (LC) and Documentary collection (DC) protects both parties from respective risks by introducing banking intermediaries
What factors should be considered in evaluating financial and transportation risks. e.g., financial risks and transportation perils.
Financial Risks: -Cargo owner risks -Significant dollar limitations on ocean and air carrier liability -In case of damage or delay, burden falls on cargo owner to prove that carrier was at fault Transportation Perils -Considerable ocean-related perils -Cargo movement -Water damage -Overboard losses -Jettison -Fire -Stranding -General average -Others (e.g., port strikes freight contamination
pipeline cost structure
Fixed costs: -High proportion of fixed costs -Right of way ownership's -Pumping stations and terminal facilities -Key fixed cost elements: property taxes, depreciation, return to investors, and preventative maintenance Variable Costs: -Low proportion of variable costs -Pipelines do not operate vehicles that are frequently a major source of variable expense. -labor costs low due to automation -fuel costs low
Describe the types of 3PLs based on primary services.
1. Transportation based: Business origin in freight movement -move freight, manage transportation operations, operate fulfillment centers, develop logistics solutions 2.Distribution based: Business origin in the public or contract warehousing -Focus on inventory management, warehousing, and order fulfillment, but may also provide transportation services 3. Forwarder based : Includes freight forwarders, brokers, and agents that primarily facilitate the flow of goods on behalf of customers -arrange transportation services for LTL shipments, air cargo, and ocean freight; facilitate international freight movements 4. Financial based: Specialize in monetary issues and financial flows in the supply chain -freight rating, freight payment, freight bill auditing, accounting, freight visibility, electronic payment, carrier compliance 遵守reporting, freight claims 5. Information based: Digitized activities that were previously performed manually or required the use of licensed software -online freight brokerage services, cargo planning, routing & scheduling; Internet access (pay per use) to TMS, WMS, performance management tools
Define and discuss ancillary services such as international freight forwarders and non-vessel operating common carriers.
Ancillary Service: -Providing expertise and specialized services to deal with scale and complexity of transportation -Identifying and booking optimum routes, modes, and carriers -Consolidating freight to lower transportation rates -Providing other trade-related services Non vessel Operating Common Carriers: -Do not own ships, but regularly book container berths on ships at advantageous rates -Resell the booked space in smaller increments to shippers -Enable shippers to move small volumes of containers and LCL quantities of cargo -Consolidate LCL quantities to fill containers -Receive containers at the destination and deliver contents to each final destination
Be familiar with Traffic and Infrastructure as an issue for global supply chains.
Congestion causes direct operating cost increases for carriers and customers, causes indirect social costs, threatens u.s. Economic health and growth, and threatens national security• •motor carriers, revenues to maintain and improve highways need to grow as congestion spreads •railroads, increased demand requires additional investments in rail tracks and equipment, double tracks offer simplest solution •water carriers, inland waterways and sea ports are most congested,west coast container handling capacity is pressing.
Identify the main Congressional Committees and Industry Associations that form the institutional framework for developing and influencing transportation policy.
Congressional Committees •Senate Committees: Committee on Commerce, Science and Transportation •Committee on Environment and Public Works Various subcommittees: House Committees: Transportation and Infrastructure Committee• Energy and Commerce Committee• Other committees Industry Associations: •American Trucking Association• National Industrial Transportation League •National Shippers Strategic Transportation Council Association of American Railroads
Understand the private cost and control criteria.
Cost: by function, fuel, interest Performance: miles operated, empty miles, total driving
What factors are most important in determining the rate structure for ocean transportation?
Determined by carrier cost structure, commodity, freight volume, origin and destination, ancillary services, type of service Liner rates based on service contracts between shippers and carriers, which include a basic rate, mandatory surcharges, and costs for extra services Charter rates are individually negotiated based on the type of charter (voyage or time) and services required
Compare and contrast 3PL decisions with private carrier decisions
Important operating costs: Driver cost - Over-the-road drivers paid based on total mileage, single or double trailers, fringe benefits -City drivers paid based on hourly rate, fringe benefits Fuel cost: -Fuel mileage of vehicles is important - Justification of special equipment to enhance fuel efficiency
What role do oil companies play in the ownership of pipelines?
Individual, vertically integrated oil companies •Jointly owned pipeline companies •Others: -Railroads -Independent oil companies -Other industrial companies
intermodal and intramodal competition in the water sector.
Intermodal (between modes): 1. Railroad For dry bulk commodities (grain, coal) 2. Focused around central U.S. river system and the Great Lakes Pipeline For bulk liquids (petroleum, chemicals) Intramodal (within water transport): 1. Limited degree of competition → due to small # of carriers in the industry
intermodal and intramodal competition for pipelines
Intermodal Competition: 1. Limited competition from other modes 2. Water carriers are principal competitors due to competitive rates and costs, and type of commodities hauled 3. Truck carriers complement rather than compete Intramodal competition: -Limited competition among pipelines due to: 1. Small number of companies 2. Oligopolistic market structure 3. Economies of scale and high fixed costs has led to joint ownership of large-diameter pipelines. 4. High capital costs preclude duplication of facilities
identify the main factors that would be considered in modal selection for global trade.
Mode characteristics: 1. Accessibility Capacity Transit time Reliability Safety Cost 2. Nature of a product — size, durability, and value 3. Shipment characteristics — size, route, and required speed
What impact would price volatility of fuel have on the various modes?
Motor Carriers: -Highly fuel intensive -Congestion impact -Very sensitive to fuel price volatility and price increases Water Carriers: -Fuel efficient -Sensitive to price increases due to fuel consumption volume, and dependence on trucks and rail for intermodal services Railroads: -Relatively fuel efficient compared to trucking -Higher fuel prices benefit rail as trucking is more sensitive Airlines: -Most fuel intensive and sensitive to price increases -Responded with fuel surcharges, equipment changes, and flight elimination Pipelines: -Very fuel efficient and insensitive too fuel price increases
Compare and contrast the policies of nationalization and privatization.
Nationalization: The process of a government taking ownership, financing, and operation of a company or industry Privatization: The opposite of nationalization; when a government transfers of ownership of a company or industry to a privately owned entity True forms of nationalization are rare in the U.S. transportation system.The Alaska Railroad owned by the state of Alaska (formerly owned by the DOT) Nationalization outside the United States: Railroads and airlines in foreign countries are examples of nationalization. Movement towards railroad privatization in some countries.
Discuss the differences between modal and carrier selection.
Number of options available: Modal selection: more options Carrier selection: fewer options Frequency of the decision: Modal selection: more long-range Carrier selection: more active and frequent engagement
Understand sustainability as a global supply chain issue. Go green
Reason : -Reduce carbon footprint -Fuel price variations -Corporate responsibility -Brand reputation -Competitive pressures -Stakeholder pressure -Regulation Impact : -Fuel efficiency -Packaging -Facilities -Waste disposal Systems Impact: -"Do not ship air" -Less-than-capacity dispatches and empty backhauls -Freight matching, mixing, and consolidation -Product packaging -"Do not ship water" -Add water close to point of consumption -Add less water Initiatives: -Short-run improvements -Long-run changes -SmartWay Transport Partnership EPA initiative (2004) -Transportation providers, large shippers, non-profits -Tools and recommendations to save fuel and reduce emissions
List the main carrier selection criteria.
Reliability Response to emergencies Freight damage experience Type of service provided Technical capabilities Information sharing Financial stability Total transit time
Describe the types of 3PLs based on ownership of assets
Resource ownership: 1. Asset-based: Owns assets and labor force needed to run transport and logistics activities •Examples: UPS, J.B. Hunt, Exel, Ryder, FedEx -Advantages: readily available capacity, permanent employees, and direct control of the customers' freight •User concerns: potential for bias toward 3PL's own internal resources in developing solutions for customers 2. Non-asset based: Contracts with other firms to provide services rather than owning the required assets •Examples: C.H. Robinson, XPO Logistics, Kuehne + Nagel, CEVA Logistics •Advantages: more flexible vs. asset-based 3PLs, unbiased decision making •User concerns: subject to competition for capacity from external providers, more intensive relationship management required
how to address transportation risk
Risk management: identify, analyze, assess, control, avoid/minimize/eliminate risks
What tool is predominant in a management strategy to transfer risk?
Shift insurance company though cargo insurance -Make sense in these circumstances: Risks too high to self-absorb -Fragile product -Susceptible to theft -Severe disruption to operations
Discuss impacts of the routing selection decision on shippers and carriers.
Shipper: -Impacts on transportation cost, product availability, and cargo security -Transit time and on-time performance -Helps avoid risky locations -Helps avoid poorly equipped ports and congested border crossing points Carriers: -Impacts on efficiency and operation costs -Maximize equipment capacity utilization -Minimize tolls, port costs, and route-related surcharges -Land-bridge options for intermodal transportation
What are the responsibilities of the states in transportation?
The regulation of transportation in the United States began at the state level, and later federal level, under the common law system. Interstate commerce is subject to federal regulations administered by the Surface Transportation Board (STB). Intrastate commerce is subject to state regulations that vary from state to state, but generally are patterned after federal economic regulations.
What does the term vertical foreclosure
situation that exists when one element of the supply chain is controlled by one or a small number of intermediaries acting in concert keep competitors from having access to the supply chain and markets. This is a matter of anti-trust concern and, in essence, lessens competition.
What are the legal forms of transportation found in water transportation?
A. For-Hire Exempt Regulated Common Contract B. Private
Define and differentiate liner, charter, and private maritime service.
Liner service - regular voyages on fixed routes with set ports of call Charter service - hiring ship for direct point-to-point service Private service - privately owned or leased ships by importers or exporters
To what extent are pipelines subject to economies of scale?
Pipelines have the greatest level of economies of scale of all transportation modes
Understand the difference between 1PLs and 5PLs.
1PL - A first-party logistics provider is a firm or an individual that needs to have cargo, freight, goods, produce or merchandise transported from a point A to a point B. The term first-party logistics provider stands both for the cargo sender and for the cargo receiver. 2PL - A second-party logistics provider is an asset-based carrier, which actually owns the means of transportation. Typical 2PLs would be shipping lines which own, lease or charter their ships; airlines which own, lease or charter their planes and truck companies which own or lease their trucks. 3PL - A third-party logistics provider provides outsourced or 'third party' logistics services to companies for part or sometimes all of their supply chain management functions. 4PL - A fourth-party logistics provider is an independent, singularly accountable, non-asset based integrator who will assemble the resources, capabilities and technology of its own organization and other organizations, including 3PLs, to design, build and run comprehensive supply chain solutions for clients. 5PL - A fifth party logistics provider will aggregate the demands of the 3PL and others into bulk volume for negotiating more favorable rates with airlines and shipping companies. Non asset based, it will work seamlessly across all disciplines. LSP Logistics service providers can refer to any or all of the above More number more outsourcing downside expensive and lose control.
cost structure of water carriers
85% Variable: 1. User charges(lock fees, dock fees, and fuel taxes) are variable in nature. 2. Major variable expenses are line-operating costs, operating rents, and maintenance. 15% Fixed: 1. Low fixed-cost structure can be attributed in part to public aid in construction and maintenance of waterways. 2. Fixed costs include depreciation & amortization and general expenses.
Identify the advantages and criticisms of nationalization.
Advantages of nationalization of transportation: -Services can be provided that would not exist under private ownership. -Capital can be attracted at favorable rates. Criticisms of nationalized transport organizations: -Slow to innovate -Unresponsive to the general public -Dependent on large management staffs -Subject to political influence
advantages and disadvantages of pipelines.
Advantages: 1. Low service rates 2. Low loss and damage rates 3. Warehousing function (3-5 mph) 4. High delivery dependability Disadvantages: 1. Limited responsiveness due to slow speed 2. Limited geographic flexibility 3. Limited variety of products carried 4. Precludes small shipments
Know the operating and service characteristics of pipelines
Commodities hauled include: 1. Oil and oil product Natural gas 2. Coal and coal products Service Characteristics: -Pipelines are limited in the markets they serve and commodities they can haul -Pipelines are the only mode that is unidirectional with no backhaul
What is the basis of economic regulation, e.g., common law, statutes?
Common Law(president, what happen in the past, most is common law): •Court follows earlier judicial precedent and establishes new precedent in interpreting laws •Fits free-market economy well •Developed early regulation of transportation Statutory Law (Congrass make a new law): •Specifically enacted by legislative bodies •Because of broad nature it needs to be interpreted by courts •In the United States this leads to close relationship with common law State Regulation: -States started to create state laws regulating transportation in response to granger movement -State and federal laws needed coordinated oversight through various government entities
Identify the various areas of regulation for transportation, e.g., economic, safety, security, social.
Economic Regulation: -To transform monopolistic industries into competitive ones by -Determining if a firm can enter an industry -Determining which market(s) a firm can serve in that industry -Determining the prices that a firm can charge customers -Deregulation rolled back regulation to leave the STB regulating railroads because of its tendency towards monopoly -The STB regulates railroad Rates, classifications , rules, practices, routes, services, facilities, acquisitions, abandonments Common carrier duties Antitrust Regulation: Mechanisms of antitrust regulations Sherman Antitrust Act (1890), Clayton Act (1914), Robinson-Patman Act (1936), Reed-Bulwinkle Act (1948), Motor Carrier Act (1980), Staggers Act (1980), creation of Federal Trace Commission (FTC) (1914) -Economic deregulation exposed many antitrust violations. Important antitrust violations in transportation services Per se violations - price fixing, division of markets, boycottstying agreements; illegal regardless of economic harm caused Rule of reason violations - \exclusive deals, requirements contracts, joint bargaining, joint action among affiliates;\ only illegal if economic harm can be proved Safety Regulation: Establishes minimum level of safety for public and the environment More important after economic deregulation to protect safety concerns from productivity pressures Covers operations, personnel qualifications, vehicles, equipment standards, service hours for operators, movement of hazardous materials, environmental safety, etc. Adds direct costs to transportation providers to offset indirect social costs resulting from deaths, injuries, and pollution Originates from Congressional laws, federal agencies and departments, and state governments Security Regulation: To protect the security of the transportation system from terrorist attacks, organized by the Department of Homeland Security (DHS) and administered through: The Coast Guard (USCG), Transportation Security Administration (TSA), Customs and Border Protection (CBP) Key security legislation to balance protection of people with the need for unencumbered global trade: Aviation and Transportation Security Act (2001), Maritime Transportation Security Act (2002), Security and Accountability for Every Port Act (2006), Implementing Recommendations of the 9/11 Commission Act (2007) Continuously evolving to deal with new threats
operating characteristics of terminals as they relate to water transportation.
Functions: 1. Facilitate ship loading/unloading 2. Facilitate intermodal transfers 3. Provide temporary storage in port areas Characteristics: 1. Ship terminals require significant capital investment 2. Most are publicly provided & operated 3. Large bulk commodity shippers may own & operate private terminals 4. New focus on mechanization of materials-handling systems
Be familiar with the main transportation documents used for international shipments.
Invoices •Commercial invoice accompanies shipment, or sent directly to importer or bank involved •Used by governments to assess import duties• Precision is paramount •Proforma invoice •Consular invoice Exports: Export license authorizes exportation of specific goods in specific quantities to specific destinations. Shipper's Export Declaration is a source document for official U.S. export statistics Certificate of End Use is provided by government of importing country to confirm legitimate use of exported product Other documents to facilitate collection of export taxes or control of export quotas. Import •Certificate of Origin completed by exporter and certified by independent organization in country of export to attest to the origin of the specified goods. •Certificate of Inspection completed by independent inspector to confirm authenticity of goods and accuracy of commercial invoice •Importer Security Filing required by U.S. Customs and Border Protection for cargo arriving by vessel to ensure cargo safety and security, and to identify high risk shipments Transportation: Manifest 证明 identifies cargo, owner, ports of origin and destination, handling instructions, etc. Cargo, freight, and hazardous goods forms Bill of Lading: a contract of carriage between cargo owner and carrier Different forms for different modes of transport Packing List: a detailed inventory of shipment contents Shipper's Letter of Instruction details handling requirements of shipment
What is the primary rationale for the economic regulation of transportation?
Market structures can take varying forms along the extremes of pure competition and monopoly spectrum. Imperfections in the marketplace in a free-enterprise economy provide the rationale for government intervention to create and maintain conditions that allow economical use of resources by private enterprise
The regulations private carriers are subject to
Private carriers are exempt from federal economic regulations in the United States, but subject to federal and state safety requirements . -Driver qualifications -Driving practices -Vehicle parts and accessories -Accident reporting -Driver hours of service -Vehicle inspection and maintenance -Hazardous materials transportation -Vehicle weight and dimensions
List the three factors most important to risk assessment
Probability—the likelihood of the risk occurring Impact—the consequences if the risk does occur Proximity—the anticipated timing of the risk
categories or types of transportation risk
Product Loss Pilferage - stolen goods. Jettison - throw cargo overboard for the safety of the ship. Piracy/hijacking.
Understand the 3PL Relationship Development Process.
Step 1 :Perform Strategic assessment: focuses on understanding transportation and logistics needs and the overall business strategies. Step 2 : Decision to Form Relationship: Evaluate whether transportation and logistics is core competency in terms of expertise, strategic fit, and ability to invest. The absence of any of these may suggest that the use of 3PL services is appropriate. Drivers: Compelling reasons to partner -Asset/Cost efficiency -Customer service -Marketing advantage -Profit stability/Grow Facilitators: Supportive corporate environmental factors -Corporate compatibility -Management philosophy and techniques -Mutuality of commitment to the relationship -Symmetry on key factors Step 3 :Evaluate Alternative: Transactional or relational Uses drivers and facilitators to identify the most appropriate type of 3PL relationship Transactional or "arm's length" relationships Step 4： Select Partner: Partner should be selected only after close consideration of the credentials of the top candidate 3PLs is made. -Interact with the final candidates on a professionally intimate basis. -Achieve consensus -Establish a consistent understanding of the final selection and what is expected from the chosen service provider. Step 5 : Structure Operating Model Clarify each party's responsibilities, activities, processes, and priorities that will drive day-to-day operations. Step 6: Implementation and Continuous Improvement Duration of the overall implementation process depends on the complexity of the new relationship, and continuous improvement is key to the future success of the relationship.
Be familiar with the Strategic Needs of 3PL Users.
Strategic innovation Technological Strength Capacity access Talent availability Omni-channel agility Sustainability expertise Future requirement
strengths and weaknesses (constraints) of water transportation.
Strengths: 1. Low-cost transport for large volumes over medium/long distances 2. Relatively large carrying capacity 3. Fuel efficient Constraints: 1. Slow speed (slowest for dry cargo) 2. Vulnerable to ice, flood & drought 3. Limited accessibility 4. Packaging requirements for high-value goods
identify the steps in the global transaction process
Transaction: -Terms of trade -Cargo insurance -Terms of payment Distribution: -Mode selection -Carrier selection -Route selection -Delivery execution Communication: -Documentation -Visibility -Customs clearance
Strategies for reducing empty back-haul miles
Trip leasing: Lease agreement between a private carrier and another firm or another private carrier. - A single trip of no more than 30 days -The private carrier responsible for licensing & record keeping - A copy of trip lease agreement must be carried in the vehicle during the trip Carry Exempt commodities: -Agricultural products (grain, fruits, vegetables), -Horticultural goods (Christmas trees) -Newspapers -Used shipping containers
Understand the cost and equipment ramifications of private trucking operations.
Two basic equipment questions: What type of equipment should be selected? Should this equipment be purchased or leased? Two Types of Lease: 1. Full Service Lease: leased vehicle plus operating support services (pop for trucks and tractors that require maintenence) 2. Finance Lease: Financing equipment common for trailers
Be familiar with the rate structures utilized by international air carriers.
Value of service rates - depend on demand for service on traffic lane, price of product and emergency conditions related to move Cost of service rates - depend on space utilization (density) of cargo; shipping charges are based on: TACT reference guidelines The greater of the actual weight or dimensional weight of cargo Container rates relate to a minimum weight in the container (cost based)
What are the major fixed and variable costs?
Variable: 1. Line-operating costs 2. Operating rents 3. Maintenance Fixed: 1. Depreciation & amortization
