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Chapter Five Transportation InfrastructureI. Learning objectives and requirements 1. to understand the transportation functionality, principles, and participants2. to know well transportation modes3. to know some transportation services including traditional carriers, package services, inter-modal transportation, and non-operating intermediariesII. Learning contentsSection I. Transportation Functionality, Principles, and Participants1. Main contents1) Transportation Functionality . Transportation enterprises provide two major services: product movement and product storagea) Product Movement Whether in the form of materials, components, work-in-process, or finished goods, the basic value provided by transportation is to move inventory to the next stage of the business process. The primary transportation value proposition is product movement up and down the supply chain.b) Product Storage A less visible aspect of transportation is product storage. While a product is in a trans-portation vehicle, it is being stored. Transport vehicles can also be used for product storage at shipment origin or destination, but they are comparatively expensive storage facilities.Another form of temporary product storage is diversion.2) Transportation Principles There are two fundamental economic principles that impact transportation efficiency: economy of scale and economy of distance.a) Economy of Scale Economy of scale in transportation is the cost per unit of weight decrease as the size of a shipment increases.b) Economy of DistanceEconomy of distance refers to decreased transportation cost per unit of weight as distance increases.3) Transportation Participants (P.331 figure 11-1)Unlike most commercial transactions, transportation decisions are influenced by six parties: (1)shipper; (2) destination party, traditionally called the consignee; (3) carriers and agents; (4) government; (5) Internet; and (6) the public.a) Shipper and Consignee The shipper and consignee have a common interest in moving goods from origin to destination within a given time at the lowest cost.b) Carrier AgentsThe carrier, a business that performs a transportation service, desires to maximize its revenue for movement while minimizing associated costs.c) Government The government has a vested interest in transportation because of the critical importance of reliable service to economic and social well-being. Government desires a stable and efficient transportation environment to support economic growth.d) InternetA recent development in the transportation industry is a wide assortment of Internet based services.e) Public.The final transportation system participant, the public, is concerned with transportation accessibility, expense, and effectiveness as well as environmental and safety standards2. Key concepts and pointsTransportation Functionality, Product Movement, In-Transit Inventory, Diversion, Product Storage, Transportation Principles, Economy of Scale, Economy of Distance, Transportation Participants ,Shipper and Consignee, Carrier Agents, Government, Internet, Public3. Issues of applicationTransportation is a very visible element of logistics. Consumers are accustomed to seeing trucks and trains transporting product or parked at business facilities. Few consumers fully understand just how dependent our economic system is upon economical and dependable transportation. Students are expected to understand the transportation functionality and underlying principles of transport operation. Further, they are expected to compare and contrast the transportation principles of economy of scale and economy of distance; and illustrate how they combine to create efficient transportation. Section II. Transportation Modes1. Main contents1) Rail Historically, railroads have handled the largest number of ton-miles within the continental United States.2) Motor Highway transportation has expanded rapidly since the end of World War 11. To a significant degree the rapid growth of the motor carrier industry has resulted from speed and ability to operate door-to-door.3) Water Water is the oldest mode of transport. The original sailing vessels were replaced by steam-powered boats in the early 1800s and by diesel in the 1920s. A distinction is generally made between deepwater and navigable inland water transport.4) PipelinePipelines are a significant part of the U.S. transportation system.5) Air The newest but least utilized mode of transportation is airfreight. The significant advantage of airfreight lies in the speed with which a shipment can be transported.6) Modal ClassificationTable 11-5 ranks modal operating characteristics with respect to speed, availability, dependability, capa- bility, and frequency. (i)SpeedSpeed refers to elapsed movement time.(ii)AvailabilityAvailability refers to the ability of a mode to service any given pair of locations.(iii)DependabilityDependability refers to potential variance from expected or published delivery schedules.(iiii)CapabilityCapability is the ability of a mode to handle any transport requirement, such as load size.(iiiii)FrequencyThe final classification is frequency, which relates to the quantity of scheduled movements.2. Key concepts and pointsRail, Motor, Water, Pipeline, Air, Modal Classification, Speed, Availability, Dependability, Capability, Frequency3. Issues of applicationStudents shall be able to describe the five modes of transportation, identifying the most significant characteristic of each after learned this section. Further, they shall be able to figure out why motor carrier freight transportation is the most preferred method of product shipment.Section III. Transportation Service1. Main contents1) Traditional Carriers The most basic carrier type is a transportation firm that provides service utilizing only one of the five basic transport modes. Focus on a single operational mode permits a carrier to become highly specialized. 2) Package Service Package services represent an important part of logistics, and the influence of carriers in this segmentis increasing due to their size and inter-modal capabilities.3) Inter-modal Transportation Inter-modal transportation combines two or more modes to take advantage of the inherent economies of each and thus provide an integrated service at lower total cost.4) Non-operating Intermediaries Non-operating intermediaries economically justify their function by offering shippers lower rates for movement between two locations than would be possible by direct shipment via common carrier.2. Key concepts and pointsTraditional Carriers, Package Service, Inter-modal Transportation, Non-operating Intermediaries3. Issues of applicationStudents shall be able to answer what the economic justification for the recent rapid growth of premium package services is.III. Review Questions1. Compare and contrast the transport principles of economy-of-scale and economy-of-distance. Illustrate how they combine to create efficient transportation.2. Describe the five modes of transportation, identify
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