Transport Management & Theory Practices (5)

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  • Movement of cargo between two major cities or ports , specially those more than about 1,500 kilometers or 1,000 miles apart. Read more: http://www.businessdictionary.com/definition/linehaul.html#ixzz2OL6EVM5m
  • Transport Management & Theory Practices (5)

    1. 1. Management of Transportation Seventh Edition Coyle, Novack, Gibson & Bardi © 2011 Cengage Learning Chapter 4 Transportation’s Role in Global Trade Execution 1© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
    2. 2.  Global shipment execution is complex  Involves multiple carriers from different modes  Many border crossings and long distance shipments  Flawless transportation execution requires:  Internal expertise and attention to detail  Strong relationships with capable service providers  Chapter organization  Global freight flows and key execution activities  Key players in global transportation execution  Customs clearance © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2
    3. 3.  Global freight: two primary service options  Direct service ▪ Direct origin-destination (one country to another country shipment), no interim stops-offs ▪ Typically between bordering countries ▪ Single mode of transport, typically motor carrier  Indirect service ▪ Typically, shipment requires multiple modes, i.e. intermodal transportation ▪ Multiple interim stops required to transfer freight between carriers or modes © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3
    4. 4. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 Figure 4-2
    5. 5.  Definition:Two or more modes used to move shipment from origin-destination  Facilitates global trade by combining inherent advantages of each mode  Greater accessibility is created for ocean or air line haul transport by combining with truck or rail  Overall cost efficiency can be achieved without sacrificing service quality or accessibility  Flexibility to suit the shipment situation © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5
    6. 6.  Model combination options – most frequently used combinations are:  Carrier, rather than shipper typically makes determination of which combination to use © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 Pick up Linehaul Delivery Truck Air Truck Truck or rail Ocean Truck or rail Truck Rail Truck
    7. 7.  Primary freight types  Containerized freight ▪ Freight loaded into/onto a container or pallet that is shipped to destination with no interim handling of freight ▪ Containers are efficient way to handle and ship freight ▪ Standard height and width specifications ▪ Ships and landside loading/unloading facilities designed to efficiently handle and store standard sized containers ▪ Five common container lengths © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7
    8. 8.  Containerized freight (continued) ▪ Container capacity expressed in twenty-foot equivalent units (TEU). ▪ TEU is a measure of containerized cargo capacity equal to one standard 20 ft. (length) by 8 ft. width container ▪ Accounts for 90% of non-bulk cargo worldwide ▪ Continued growth due to: ▪ Application of info. systems to track containers ▪ Development of intermodal terminals for efficient transfers of containers between modes ▪ New generation of ships, railcars and trucks specifically designed for containerized freight© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8
    9. 9. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 Figure 4-5
    10. 10.  Trans load freight ▪ Goods (shipments) handled individually, not put in containers or on pallets ▪ Typically consists of bulk raw materials that must be scooped, pumped, lifted, or conveyed when transferring between modes ▪ Due to weight and volume of typical shipment, air transport rarely used for linehaul ▪ Ocean, rail, and pipeline are primary modes used © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10
    11. 11.  Intermodal routing alternatives to all-water routing  Land bridge: movement from one seaport to another substituting rail for portion of ocean trip ▪ Two primary land bridge routes ▪ Asia-America-Europe  Rail substitutes for Panama Canal portion of trip  Shorter total transit time, larger ships may be used ▪ Asia (Japan, Southeast Asia)-Europe  SubstitutesTrans-Siberian rail across Russia for voyage around Cape of Good Hope or through Suez Canal © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11
    12. 12.  Mini-bridge ▪ A port is the origin or destination, rail and ocean transport are used for line haul ▪ Example: Seattle to Baltimore via rail coupled with ocean voyage from Baltimore to Rotterdam (called an ocean focused mini-bridge)  Micro-bridge ▪ Similar to mini-bridge except origin or destination is an inland port ▪ Example: St. Louis to Baltimore via rail coupled with ocean voyage from Baltimore to Rotterdam © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12
    13. 13. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13 Figure 4-6
    14. 14.  Intermodal challenges  Landside congestion ▪ U.S. seaport capacity, particularly Pacific coast ports ▪ Road and rail congestion on port access routes  Intermodal rail equipment shortages  Labor issues © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14
    15. 15.  Principal activities  Packing the freight to prevent damage ▪ Four potential in-transit problems to protect against ▪ Breakage ▪ Moisture ▪ Pilferage ▪ Excess weight ▪ Normally, air transport requires less protective packaging than ocean transport ▪ Proper carton markings is critical consideration © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15
    16. 16.  Insuring the goods against key risks ▪ Risks to international cargo shipments higher than for domestic shipments ▪ Typically, risk is managed by purchasing freightTypically, risk is managed by purchasing freight insuranceinsurance  Completing necessary documentation to control shipment ▪ Four primary documents ▪ Invoices ▪ Export and import documents ▪ Transportation documents © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16
    17. 17.  As in domestic transport, safety, security, and environmental impacts have high priority  Primary security-focused legislation ▪ MaritimeTransportation Security Act of 2002MaritimeTransportation Security Act of 2002 ▪ Container Security InitiativeContainer Security Initiative ▪ Advanced Manifest RulesAdvanced Manifest Rules ▪ Has been enhanced by the Importer Security Filing regulation, commonly known as the “10+2” rule © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17
    18. 18.  All modes, including pipelines, involved in global transport market  Most freight moving between continents (intercontinental) is shipped by ocean or air  Ocean carriers transport 98% of containerized trade volume and 60% of trade value  Most intra-continental freight moves by truck  The focus of this section is on intercontinental ocean and air transport © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18
    19. 19.  Service options  Liner service ▪ Ships sail on published, regular schedules > Kapal belayar di diterbitkan, jadual tetap ▪ Sail over fixed trade routes with pre-determined ports of call. Example route: ▪ Trans-Pacific between Asia and N. America ▪ Some may sail on “around the world” schedules ▪ Different types and sizes of ships used ▪ Ships assigned to routes based on capacity, draft and cargo handling capabilities ▪ May carry containers or break-bulk freight © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19
    20. 20.  Charter service ▪ Ships hired for specific voyage or period of time ▪ Ship owner leases (charters) vessel to customer (charterer) ▪ Four common types of charters ▪ Each varies on the basis for charging rates and on the degree of vessel control assumed by charterer ▪ Voyage and time charters, bareboat charter, demise charter  Private service ▪ Ship owed or leased on long-term basis by firm owning the goods transported ▪ Example: Chiquita Brands International’s fleet of refrigerated ships © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20
    21. 21.  Ship registry  Each ship operating in commercial service is registered in a country  Registration requirements vary by country  Most ships registered in “flags of convenience” nations rather than owner’s country of citizenship ▪ Offer advantageous fees and few regulations ▪ Most popular countries are: Panama, Liberia, China, Malta, and the Bahamas© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21
    22. 22.  Equipment (vessel) types  Containerships ▪ High capital cost but designed for quick unloading/loading ▪ Port turnaround time: 12 hours vs. days for break-bulk ships ▪ Enables higher ship utilization and return on investment ▪ Lower labor costs – lifting/moving done mechanically by dockside cranes, but, limited to ports with such crane systems ▪ Dominant vessel for packaged goods ocean shipping ▪ Number and size of vessels increasing  Largest Panamax ships carry 5,000TEUs  Post-Panamax ships introduced in 1996, 6,400TEU capacity  Newest post-Panamax vessel carries 13,800TEUs © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22
    23. 23. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23 Table 4-1
    24. 24.  Break-bulk ships ▪ Versatile, multi-purpose vessels ▪ Capable of carrying varied and unusual sizes of freight ▪ On-board crane systems increase flexibility – not limited to ports with dockside crane systems ▪ Smaller capacity but lower capital cost than containerships ▪ Varied sizes of freight increase loading/unloading labor intensity and greatly slow port turnaround times ▪ Declining share of international trade  RORO ships ▪ Specialized design enables wheeled vehicles to be driven on and off ship © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24
    25. 25.  Bulk carriers (vessels) ▪ Varied vessel types dedicated to specific type of bulk product ▪ Crude carriers (tankers) move petroleum products  Extremely large vessels, limited to deep water ports ▪ Dry-bulk carriers move grains, coal, ores, etc. ▪ Gas carriers move compressed gases like LNG  Combination ships ▪ Small but very flexible vessels with on-board cranes ▪ Capable of handling containers, break-bulk cargo, and wheeled vehicles on same vessel ▪ Thrive in serving smaller or developing markets © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25
    26. 26.  Rate structure – liner operations  Total cost (capital + operating) structure is largely fixed and common ▪ 80-90% total cost is fixed ▪ Large common costs associated with marketing, management and business development  Operating costs alone also largely fixed, meaning they do not vary with volume hauled ▪ Principal variable costs are for fuel and for loading and unloading operations © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26
    27. 27.  Due to high portion of fixed costs, liner services rely on value of service pricing to maximize total revenue earned per trip ▪ Rates may vary over a wide range depending upon the traffic’s price elasticity of demand  80% of liner cargo moves under negotiated contract rates ▪ Ocean Shipping Reform Act (OSRA) of 1999 ▪ Reduced influence of collective rate-making shipping conferences ▪ Fostered a more market-driven rate making environment, leading to a much higher % of cargo moving under contract rates © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27
    28. 28.  Rate structure – charter operations  Total costs are largely fixed  Charter rates are negotiated ▪ Rates are heavily influenced by supply-demand conditions that tend to be very fluid ▪ Negotiation process involves the ship owner and the charterer (customer) ▪ Typically each party negotiates through their shipbroker representative ▪ The product of the process is a charter party (contract) © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28
    29. 29.  Current issues  Aligning supply with demand ▪ Demand can fluctuate relatively quickly while adding capacity takes years and is capital intensive ▪ When demand rises, there tends to be periods of rising rates and capacity shortages until additional ships are built ▪ When demand falls, there tends to be a capacity surplus and rapidly falling rates  Rapidly fluctuation fuel prices, rising port fees  Environmental protection legislation  Freight security© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29
    30. 30.  Significance in global freight transport  Small % of tonnage traded internationally, but accounts for 35% of value  Air carriers focus on ▪ Small quantities of high value, low weight, semi- finished and finished goods ▪ Computers, precision instruments, electronics ▪ Pharmaceuticals, perishable foods, periodicals, fashion apparel © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30
    31. 31.  Service options – two primary types  Air cargo carriers ▪ Exclusively carry freight (no passengers) ▪ Customers have scheduled or charter service options ▪ Charter or on-demand services tend to be used in special circumstances, such as:  Emergencies, e.g. prevent production line shutdown  Oversize goods  Locations not served by scheduled service carriers  Customized services © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31
    32. 32.  Air cargo carriers (cont.) ▪ Integrated carriers - Examples: FedEx, UPS, DHL ▪ Provide door-to-door services focused on time-sensitive goods ▪ Offer consistent schedule of pick-up and delivery windows ▪ Offer high degree of shipment visibility ▪ Non-integrated carriers – Examples: Cargolux, Polar Air Cargo ▪ Provide airport-to-airport, unscheduled service ▪ Advantage: speed including potential for same day delivery ▪ Utilizes freight forwarders or customers for pick-up, delivery  Combination carriers ▪ Move freight and passengers, often in same plane ▪ Largest air cargo carriers © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32
    33. 33. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 33 Table 4-2
    34. 34.  Equipment types  Distinguished by configuration of plane  Air freighters dedicated solely to carrying freight ▪ Capable of carrying freight on pallets or in containers  Passenger planes - freight carried in plane belly ▪ Shipments tend to be smaller, not palletized or in containers  Combi aircraft ▪ Main deck can carry both people and freight © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 34
    35. 35.  Rate structure  High proportion of variable costs ▪ Fixed costs relatively low as carriers do not have to invest in rights-of-way or airport terminals  Rates based on combination of value and cost of service pricing principles  Rate setting must be very sensitive to cargo density ▪ Carriers calculate dimensional weight (dim weight) ▪ Low density cargo rates based on dim weight © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 35
    36. 36.  International air freight pricing ▪ Governed in part by International AirTransport Association (IATA) via the Air CargoTariff (TACT) ▪ Provides general guidelines for rate setting ▪ Carriers not required to use guidelines, major carriers do not ▪ TACT includes three types of rates ▪ General cargo rates, class rates, commodity rates ▪ Container rates ▪ Cost-based rate ▪ Rate applies to a minimum weight in the container © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 36
    37. 37.  Current issues  Aligning supply with demand ▪ During economic downturn, many planes grounded, routes cut, and service frequencies reduced  Fluctuating price of jet-fuel  Cost of security mandates ▪ Homeland security fees and cargo screening costs ▪ Security personnel training costs and salaries  Overall profitability of air cargo industry © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 37
    38. 38.  Trucking  Primary mode for intra-continental shipments  Inhibited by varying domestic regulations ▪ Truck dimension limits vary from country to country ▪ Safety regulations - speed limits, driver hours-of- service, inspection requirements - also vary ▪ Limitations on operations during certain hours of day  Rail and pipeline are principal other modes © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 38
    39. 39.  International freight forwarders  Primary role: help shippers reduce transport costs ▪ Primary approach: shipment consolidation  Other roles ▪ Help shippers navigate complexity of global transport ▪ Expertise in freight documentation, customs clearance  NonVessel-owning Common Carriers  Specialists in less-than-container load consolidation  Export packers  Experts in export cargo packing and marking© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 39
    40. 40.  Most intercontinental trade moves through seaports or airports  Most are owned by governments  Most are managed by port authorities ▪ Governmental or quasi-governmental public agencies ▪ Port authorities are financially self-supporting ▪ Port authorities have power to develop infrastructure, set user fees, and in some cases, levy taxes ▪ Examples: Port Authority of NewYork and New Jersey © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 40
    41. 41.  Thousands of seaports globally  Most freight moves through relatively small number of major ports  Port infrastructure dictates port capabilities  Cargo handling equipment  Water depth and water basin width  Number and size of ship berths  Size of marshalling yards and warehouses  Landside mode accessibility © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 41
    42. 42. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 42 Table 4-3
    43. 43.  Current issues  Increasing size of containerships  Security: challenge of maintaining compliance with dynamic government initiatives. ▪ In U. S., these initiatives include ▪ Container Security Initiative ▪ Security and Accountability for Every Port Act (SAFE)  Preparation for future growth or changing trade flows © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 43
    44. 44.  Most intercontinental air freight moves through airports serving passengers and cargo  A few new all-cargo airports are emerging ▪ Less congested and lower operating costs than multi- purpose airports  Infrastructure  Runway length and number determine capacity  Cargo handling equipment  Terminal and warehouse facilities© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 44
    45. 45.  Current issues  Adapting capacity to fluctuating demand conditions  Preparing for future growth  New security regulations require ▪ Better airport access control ▪ Better cargo screening facilities and equipment  Ground safety and air traffic control systems © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 45
    46. 46.  Can be very complex  Customs brokers provide expertise  In U.S., customs clearance is a six step process  Entry filing (document filing)  Goods arrival  Goods examination  Classification for charging of import duties  Taxation  Release of goods for domestic delivery © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 46

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