Chapter 11 Flashcards
What is a supply chain and how is transportation important to it?
A supply chain is a network of organizations separated by distance and time, and transportation provides the critical links between these organizations, allowing goods to flow between their facilities. With efficient and effective transportation capabilities, organizations can extend the reach of their supply chains beyond local supplier capabilities and market demand, build global supply chains that leverage low-cost sourcing opportunities, and compete in new markets.
Why is transportation service availability critical to demand fulfillment in the supply chain?
The need for transportation is derived from customer demand, and a shortage of transportation capacity can strand inventory in the system, leading to empty shelves and lost sales. Efficient transportation allows organizations to effectively fulfill customer demand and compete in the market.
How does transportation efficiency promote supply chain competitiveness?
Cost-effective transportation provides access to higher-quality, lower-priced materials and promotes production economies of scale, while low-cost transportation improves demand fulfillment opportunities. By keeping transportation expenses reasonable, the total landed cost of a product can be competitive in multiple markets.
What are the key factors that make transportation service effective in the supply chain?
Inexpensive transportation is of little value to a supply chain if the product does not arrive as scheduled and damage-free to the correct location. High-quality, customer-focused transportation delivers the right product at the right time, in the right quantity and quality, at the right cost, and to the right destination. Additionally, transportation can create supply chain flexibility by offering a range of transit times and service options.
How does transportation influence supply chain design, strategy development, and total cost management?
Transportation service availability, capacity, and costs affect the number and location of supply chain facilities in a network. Transportation capabilities must align with the company’s goals, and intentional tradeoffs should be made between transportation and related activities to optimize supply chain efficiency. Proper management of transportation processes is needed to efficiently and effectively operate an organization’s supply chain, and leading organizations have already moved in this direction.
What are the issues that inhibit the synchronization of transportation with other supply chain activities?
There are several issues that inhibit the synchronization of transportation with other supply chain activities, including supply chain complexity, competing goals among supply chain partners, changing customer requirements, and limited information availability. Additionally, offshore manufacturing creates major transportation challenges, and transportation capacity constraints pose another challenge to organizations needing to move freight through the supply chain. Finally, transportation rate variation adds to the complexity of the transportation function.
Organizations face several transportation challenges in their supply chains, including:
Supply chain complexity: Supply chain partners may have competing goals and limited information availability, which can inhibit the synchronization of transportation with other supply chain activities.
Offshore manufacturing: The reliance on global supply chains that extend from countries like China and India can lead to greater expenses, longer transit times, and higher risk of supply chain disruptions.
Changing customer requirements: Growing demand for smaller, more frequent deliveries can limit opportunities to move product in economical container load quantities. Compression of order cycle times results in higher delivery costs and extended fulfillment operation hours. The desire for real-time shipment visibility requires technological strength.
Transportation capacity constraints: Major bottlenecks and delays occur when transportation demand outstrips carrier and facility capacity. During peak delivery season, port facilities must grapple with a surge of containers and highways are clogged with truck traffic.
Transportation rate variation: Capacity, freight volume, and fuel costs each influence the rates charged by carriers. As volume increases and capacity becomes constrained, rate increases become a real possibility.
Governmental requirements: Government regulation of transportation has historically focused on competition and pricing, but regulation is growing in areas where the transportation industry has the potential to impact the safety of citizens, quality of life, and protection of commerce. Protection of the traveling public, environmental sustainability, and the ongoing threat of terrorism are all addressed by governmental regulation.
What are the five modes of transportation that supply chain managers can choose from when moving freight?
The five modes of transportation that supply chain managers can choose from when moving freight are truck, rail, air, water, and pipeline.
What is intermodal transportation?
Intermodal transportation combines the use of two or more of the basic modes of transportation to move freight from its origin to destination.
What are some of the differences between the modes of transportation?
Each mode of transportation has different economic and technical structures, provides different levels of service quality, handles different volumes and types of freight, has different cost structures, carrier types and service offerings, equipment variety, and current industry trends.
What is the dominant mode of transportation in terms of the value and volume of goods moved?
The trucking industry is the dominant mode of transportation in terms of the value and volume of goods moved.
Are the results skewed based on ton-miles?
Yes, the results are less skewed based on ton-miles, which is an output measurement combining weight and distance, or tonnage multiplied by miles transported. Trucks tend to focus on local and regional markets while the other modes provide long distance moves of larger freight quantities.
What is the most widely used mode of transportation in the U.S. domestic supply chain?
Motor carriage, or trucking, is the most widely used mode of transportation in the U.S. domestic supply chain.
What makes trucking a popular mode to move high-value, time-sensitive goods?
The sophisticated U.S. highway network facilitates trucking flows, giving motor carriers excellent accessibility to virtually all freight shipping and receiving locations. Combined with the industry’s excellent service capabilities, this accessibility makes trucking a popular mode to move high-value, time-sensitive goods.
How many motor carriers are there in the trucking industry and what range in size?
The trucking industry is made up of 532,024 interstate motor carriers and intrastate hazardous materials motor carriers, ranging in size from single-truck, owner-operator service providers to large transportation conglomerates like UPS.
What contributes to the vast number of carriers in the motor carrier industry?
There are no significant barriers to entry that make it impossible for small carriers to compete, as the equipment and licensing costs are within the reach of most organizations. Additionally, most expenses are related to freight movement, making trucking a high-variable-cost, low-fixed-cost business, with wages and benefits, fuel, maintenance, and tires driving the cost structure of trucking companies. Lastly, fixed costs are minimal as most trucking companies do not have extensive terminal and equipment needs, and the U.S. government builds and maintains the highways, with motor carriers paying for highway use through fuel taxes, licenses, and other user fees.
What types of commodities are handled by the trucking industry?
Much of the freight moved by the trucking industry is regional in nature, moving within a 500-mile radius of the origin. Some of the primary commodities handled by this mode include consumer-packaged goods, electronics, electrical machinery, furniture, textiles, and automotive parts.
What are the two types of trucking operations in the industry?
The trucking industry is comprised of for-hire and private fleet operations. For-hire trucking companies move freight for other organizations, while private fleets transport freight that is owned by the organization that is operating the trucks.
What percentage of trucking companies are for-hire carriers, private carriers, and hybrid carriers?
Roughly 48 percent of trucking companies are for-hire carriers, 42 percent are private carriers, 8 percent are hybrid for-hire/private carriers, and the balance are other types of carriers.
What are the three general types of for-hire carriers?
The three general types of for-hire carriers are truckload (TL) carriers, less-than-truckload (LTL) carriers, and small package carriers.
What is the difference between TL and LTL carriers?
TL carriers handle single shipments that use the full cubic capacity of the trailer or exceed 15,000 pounds and provide direct service. LTL carriers move multiple shipments ranging from 150 pounds up to 15,000 pounds in each trailer and use a hub-and-spoke network of local and regional terminal facilities to sort and consolidate shipments moving to a particular market area.
What are some challenges faced by the trucking industry?
The trucking industry faces challenges related to labor, costs, and competition. The American Trucking Association estimates that the current shortage of 48,000 drivers could rise to 175,000 by 2024. Trucking companies may not be able to recoup rising labor, insurance, and maintenance expenses despite using fuel surcharges to pass along rising energy costs. Finally, competition continues to be fierce within the trucking industry as well as with other modes of transportation.
What are the three general types of for-hire carriers?
The three general types of for-hire carriers are truckload (TL) carriers, less-than-truckload (LTL) carriers, and small package carriers.
What is the average distance per shipment via for-hire trucks and private trucks?
The average distance per shipment is 508 miles via for-hire trucks and 58 miles via private trucks.
What is the current shortage of truck drivers estimated to be by the American Trucking Association?
The current shortage of truck drivers is estimated to be 48,000, but it could rise to 175,000 by 2024.
What are some of the challenges faced by the trucking industry?
The trucking industry faces challenges related to labor shortages, rising costs of fuel, insurance, and maintenance, and fierce competition within the industry and with other modes of transportation.
What are some examples of small package ground carriers in the US?
Some examples of small package ground carriers in the US are UPS, FedEx Ground, and the United States Postal Service.
How much freight is moved by railroads annually in the United States?
Nearly 2.2 billion tons of freight are moved by railroads annually in the United States.
What makes rail transportation a high ton-mile mode of transportation?
The combination of volume and the average shipment length of 805 miles makes rail transportation a high ton-mile mode of transportation.
How many railroads are there in the United States and how many dominate the industry?
There are 575 railroads in the United States, but the industry is dominated by seven Class I railroads. These carriers generated $70.5 billion of freight revenue and handled 28.8 million carloads and 12.8 million intermodal trailers and containers.
What are some of the challenges that the rail industry must overcome in order to compete for higher-value, more profitable freight?
Nagging perceptions of rail being a slow, inflexible, and inconsistent mode are challenges that the rail industry must overcome in order to compete for higher-value, more profitable freight.
What are some of the primary commodities handled by railroads in the United States?
Primary commodities handled by railroads in the United States include coal, chemicals, farm products, minerals, food, and other basic materials. Railroads also handle some high-value goods, primarily automobiles and intermodal containers filled with imported finished goods.
What are the two types of carriers in the rail industry?
The two types of carriers in the rail industry are linehaul freight carriers and shortline carriers.
What is the difference between linehaul freight carriers and shortline carriers?
Linehaul freight carriers provide service between major markets and customers within those markets, while shortline carriers provide the local and regional links between individual customers and the national rail network of the Class I railroads.
What types of freight can be transported by rail?
Railroads can move almost any type of freight—liquid or gas, slurry or solid, hazardous or harmless—in very large quantities.
What are the three primary ways rail equipment can be organized and transported?
Rail equipment can be organized and transported in one of the three following primary ways: manifest trains, unit trains, and intermodal trains.
What is a manifest train?
A manifest train is a train that contains a mixture of equipment and freight for multiple customers. These mixed trains travel through multiple rail yards where railcars may be added to or removed from the train, depending on their destination.
What is a unit train?
A unit train is a train that moves an entire block of railcars carrying a single commodity from the origin to a single destination. This eliminates the need to stop for time-consuming rail yard classification activities.
What is an intermodal train?
An intermodal train is a special type of unit train that focuses on the long-distance or linehaul movement of intermodal containers and trailers. These trains move products from ports and other high-volume locations to markets where the containers are offloaded and transferred to customers via trucks.
Can rail transportation be used for international movement of commodities and containers?
Yes, rail transportation can be used for cross-border movement of commodities and containers, but there are constraints on international rail transport including limited border crossing points and differing track gauges between countries.
What is a land bridge routing in the rail industry?
A land bridge routing is an international strategy that combines ocean and rail modes, where a container travels from one location to another via ocean vessel and then via train. For example, a container travels from Tokyo to Seattle via ocean vessel, from Seattle to New York via train, and onward to Rotterdam via ocean vessel.
What are some challenges faced by the rail industry?
A: Some challenges faced by the rail industry include captive shippers served by a single railroad wanting rate relief, external factors such as fluctuating economic conditions and severe weather events, and capacity being an ongoing problem. Railroad companies have responded with massive capital expenditures for infrastructure improvements, equipment purchases, and new employees.
Q: What historical perspective did people have about air cargo transportation?
A: Historically, air cargo transportation was viewed as an expensive, emergency mode.
Q: What factors have spurred the demand for air transportation in recent times?
A: The growth of e-commerce, global supply chains, and lean inventory initiatives have spurred the demand for air transportation.
Q: What advantage does air transportation have over water carriers in terms of global transit times?
A: The speed of airplanes combined with frequent scheduled flights can reduce global transit times from as many as 30 days by water carrier to one or two days by air carrier.
