Chapter 2 transportation modalities (air road rail)

Transport ModalitiesAir Transport: Characteristics Routes: • Mainly intercontinental, to utilize speed advantage • short distances are trucked, under air cargo conditions Requirements: •

MODALITIES

PRESENTED BY: BICH HOAI, MSc

HO CHI MINH CITY UNIVERSITY OF TRANSPORT

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Port, Carrier, Port

Transport Chain Players

• Storage

• Transhipment: loading / discharge

• Movement of cargo: transport

• Exchange of information

Transport Chain Actions

Compiled by: Bich Hoai, MSc.

design and sell planes

buy and lease planes

Transport Modalities

Air Transport: Characteristics

Routes:

• Mainly intercontinental, to utilize speed advantage

• short distances are trucked, under air cargo conditions

Requirements:

• main port with extensive destinations / connections

• efficient + fast airport handling facilities

• air cargo forwarder with fast declaration possibilities

• fast connecting road collection / distribution services

Cargo:

• urgent shipments

• high value cargo (to save inventory costs, also floating stock)

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Intermodal and Intramodal

• Very limited intermodal competition for long

distance (500+ miles) trips

• Air has decided advantage in transport speed

• Freight: rising competition from time-definite motor

carrier service

• Passengers: some limited competition from personal automobile travel, rail, and bus service

• Intense intramodal competition

• Creates cycles of new entrants, excess capacity, reduced fares, carriers exiting markets

Competition

Service Competition

• Nature of passenger service competition

• Flight frequency on given route

• Timing of flights

• Meals, in-flight communications, other services

• No-frills alternatives intensify competition

• Advertising used to differentiate carriers

• Nature of competition for cargo, express traffic

• Published schedules and rates

• Door-to-door, time-definite service

Operating and Service Characteristics

Accessibility and Dependability

• Air travel is generally highly reliable

• Weather and congestion are the principal causes of schedule disruptions

• Sophisticated navigation systems facilitate operation in poor weather conditions

• Limited airport accessibility adds travel time and cost to air travel

• Limited accessibility is the principal service disadvantage of air travel

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Current Issues

Safety and Security

• Air transport has lowest accident rates

• Factors affecting airline safety

• Airport security and threat of airline terrorism

• Administrative agencies

• Security-related initiatives

• Substance abuse

• Drug testing policies, alcohol consumption guidelines

Current Issues

Technology

• Sophisticated equipment and programs facilitate the achievement of high speed transport

• Automated information processing programs

• Paperless, speeds processing through customs

• Improves shipment tracking

• Improves communication between connecting carriers

• Air traffic control system

• Potential to reduce operating costs, improve service, and safety

• Requires high cost investment for new technology on aircraft

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Shipping Airports Destination Airports

Schiphol HUB Transport

Incheon HUB

Enables application of bigger, more economical long-haul equipment

Equipment and Facilities

• Types of vehicles (aircraft)

• Many aircraft types

consumption, operating costs/hour

route

• Terminals (airports)

• Airports financed by government

• Air carriers and users pay for use

Upper deck

• Cockpit, 55 passengers;

Main deck

• Front: passengers cabin;

• Rear: cargo hold;

Bellies

• Cargo holds 1 – 4;

• Holds 1 + 2 in front of wing;

• Holds 3 + 4 behind wing;

• Holds 1 + 2 + 3 are palletized;

• Hold 4 is non- palletized

Passenger aircraft Boeing B747 300 / 400 Cargo capacity approx 25,000 kg

Combi aircraft Boeing B747M 300 / 400 Cargo capacity approx 50,000 kg

Full Freighter Boeing B747 300 / 400 Cargo capacity approx 110,000 kg

= Cargo hold

Transport Modalities

Air Transport: Aircraft

Transport Modalities

Air Transport: ULD Cargo Units

Pallet with net code P

Igloo with net code U

Lower deck container

code LD3

Main deck container B747

code MD3

Transport Modalities

Road Transport: Characteristics

WeakStrong

 JIT

solution (some countries are

land locked or there is no

continuity in rail networks)

need for visas for drivers (visa issuing delays, border delays)

and driver

consignments, valuables, perishables, over long distance

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Congestion …

Transport Modalities

Road Transport: Characteristics

Road Transport: Main Players in Europe

Transport Modalities

100 315.110

Total

92,3 290.777

Others

0,3 1.030

LKW Walter

0,4 1.200

Willi Betz

0,5 1.693

Norbert Dentressangle

0,6 1.791

Kuehne & Nagel

0,6 1.795

Gefco

0,7 2.240

Dachser

0,7 2.343

Geodis

1,1 3.430

DVS A/S

1,2 3.646

DHL Freight

1,6 5.165

Schenker

% mio €

Company

100 315.110

Total

92,3 290.777

Others

0,3 1.030

LKW Walter

0,4 1.200

Willi Betz

0,5 1.693

Norbert Dentressangle

0,6 1.791

Kuehne & Nagel

0,6 1.795

Gefco

0,7 2.240

Dachser

0,7 2.343

Geodis

1,1 3.430

DVS A/S

1,2 3.646

DHL Freight

1,6 5.165

Schenker

% mio €

Company

In NL only: 12,000 road transport companies

Top 10 Players in Europetogether have only

7.7 % of the Europeanmarket

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Current Issues

Safety

• Alcohol and drug abuse

• Industry response: substance abuse testing, treatment, and

prevention programs

• Programs focus on health and safety dangers, abstain from

moral judgments Include:

• Consistent, enforceable policies applicable to all employees

• Known policies for violations

• Counseling and rehabilitation services

• Hours-of-service and driver fatigue

• Vehicle size and weight concerns

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Current Issues

Technology

• Impact of satellite technology

• GPS systems for vehicle tracking and onboard

computers for communications

• Enhance management control

• Enable more efficient and timely communications between driver, management and customer

requests made by customers

• Enhancement of environmental safety in movement of hazardous materials

Road Transport: Equipment

Transport Modalities

Distribution Van

Truck + Trailer

Chassis + Swap Body

Tractor + Semi- Trailer

Truck + Semi-trailer

Swap body Van

Road Transport: Equipment

Transport Modalities

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• Cost price per tonkm -/- up to 25%.

• Less accident casualties

Source: www.tracontrailers.nl

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Competition and Market Structure

• Intense rivalry within trucking sectors and from private carriers

• Few capital or other constraints on entry

• Despite capital constraints on entry, national LTL segment faces intense competition from other

transport segments

• Market structure

• TL is monopolistically competitive

• National LTL is oligopolistic

Intermediate between shipper and carrier,

arranging additional- and return cargo

Groupage (Consolidation):

Combining various shipments,

maybe from different shippers,

on a single vehicle

Transport Modalities

Road Transport: Execution

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B Point-to-Point

A

B Hub-and-Spoke

A

B Fixed or Flexible Routing

Transshipment node Route node

Network node Unserviced node

Route

Alternative route

A2

B1 Double Hub-and-Spoke

A3

A1

B2 B3

Some routing options

Transport Modalities

Road Transport: Execution

You have an optimally designed transportation network?

Nicely scheduled using a constraint-based algorithm?

Transport Modalities

Road Transport: Execution

So, you face exceptions

in the supply chain.

These could cause the entire supply chain

to operate optimally; hence, you need:

sub-Dynamic (re-) routing

Terminal Management Decisions

• Number of terminals

• Desired degree of market penetration

• Trade-offs with length of peddle runs and with level of customer service

• Trend has been to reduce number of terminals

• Locations of terminals

• Influenced by hours-of-service regulations

• Consideration of backhauls between terminals

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Cost Structure

Fixed vs Variable Cost Components

• Cost structure: mix of fixed and variable costs

• Varies depending on the type of trucking operation

• For long-distance, tractor-trailer operation

• 70-90% of total costs are variable

• Fixed costs relatively low % of total costs

• Public investment in highway system

• Small increments of capacity can be added

• Few terminals needed

• For LTL operation, fixed costs are higher due to terminal system

• Highway user charges

• Note: these are the principal costs associated with daily operations

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Cost Structure

Labor Costs

• For a long-distance, tractor-trailer operation

• Total operating cost: $3.75/mile (2006)

• Driver cost: 20% of total operating costs

• Mileage rate for distance traveled (local delivery drivers paid an hourly rate)

• Hourly rate for loading/unloading, operating delays

• Total labor costs consume approximately 55% of each dollar of revenue

Cost Structure

Labor Costs

• Driving time regulations

• Federal limits on the maximum hours an individual may drive

or do “on-duty” work

• Maximum limits

• 11 hrs driving, 14 hours “on-duty”

• No driving after 60 hrs duty in 7 days or 70 hours duty in 8 days

on-• Drivers must be off for 10 consecutive hours before working the maximum hour limits

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Transport Modalities

Rail Transport: Geography

Avoiding the Panama Canal

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UIC Global Rail Corridors

Transport Modalities

Rail Transport: Geography

Pan – European Rail Corridors

Transport Modalities

Rail Transport: Geography

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Rail transport characteristics

• Domination begins to wane after 1920

• 1929: rail carried 75% of freight ton-miles

• Today: carries about 43% of freight ton-miles

• Some reasons for relative decline

inland waterways

superior service for passengers and mail

• Note: total rail ton-miles continue to grow

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Rail transport

Competition

• Intensity changed during 2nd half of 20th century

• Intramodal (between railroads) competition

• Current industry structure is a differentiated oligopoly

• Number of carriers is small in part due to

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Rail transport

Competition

• Intermodal (between modes) competition

• Very intense for non-bulk traffic

• Staggers Rail Act

customers’ level of service needs

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Rail transport

Competition

1980s following Staggers Act

• Early mergers made to expand capacity, create EOS

• Side-by-side mergers done to strengthen financial position and reduce duplication

• End-to-end mergers done to improve competitive position, first vs other RRs, then vs other modes, and service levels via fewer interchanges between

railroads

majority of track and carry majority of rail freight

Rail transport

Competition

• Abandonment of rail lines

• Context: early over expansion followed by increased competition between modes

• Most abandonments involve duplicate track or track serving small markets with little rail freight

• Some track taken over by smaller railroads

• Alternative uses for land

• Rails-to-Trails Conservancy

• Rail-banking program

Rail Haulage Market Share

Source: Trademco

Transport Modalities

Rail Transport: Market share

Operating and Service Characteristics

Service Innovations

• Piggyback service: intermodal service directed to bulk, manufactured products

non-• Includes both container-on-flatcar (COFC) and

trailer-on-flatcar (TOFC) services

• Definitions, basic differences between COFC and TOFC

• Accounts for second highest number of carloadings

• Competes directly with truckload (TL) service

• However, some TL carriers are also major customers of piggyback service

Operating and Service Characteristics

Service Innovations

• Competitive advantage piggyback service

• Combines cost-efficiency of RR long haul with flexibility of truck pick-up and delivery

• Principal disadvantage of piggyback service

• Transit time and on-time delivery performance

• To counter service disadvantage

• RRs create dedicated intermodal trains

• Trains run on regularly scheduled departures and priority operating schedules

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scanned, copied or duplicated,

or posted to a publicly accessible

website, in whole or in part.

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Operating and Service Characteristics

Service Innovations

• Public benefits of piggyback vs TL services

• Reduced fuel consumption

• Reduced road congestion and road damage

• Lower emissions

• COFC: component of international trade

• Land-bridge operations

• Substitutes rail for portion of ocean voyage

• Double-stack container trains

• Greatly improves rail equipment and train productivity

• Short run: means that capacity remains constant

• Estimated 30% of costs do not vary with volume due to high % of long-lived (durable) assets

• RRs own and maintain networks (rights-of-way) and terminals (freight yards)

demand

• Equipment: locomotives and rolling stock

• $ billions in annual capital expenditures

Cost Structure

Semi-Variable and Variable Costs

• Semi-variable costs: over 40% of total costs

• Includes maintenance of rights-of-way, structures and

equipment

• Often deferred during financially difficult periods

• Variable costs

• Labor: Largest component of variable costs

• 26.4% of each revenue dollar

• Unionized work force, 14 craft unions

• Work rules: productivity challenges and issues

• Fuel: 2nd largest component of variable costs

• Locomotives: increasingly productive and fuel efficient

• Delays at border crossings

(documentation, customs, formalities)

• Different gauge widths

and other technical / operational characteristics

• Differences in tariff structure and liability conditions

• Missing links and poor infrastructure / low commercial

speeds

• Absence of a direct consignment note between OTIF

and OSJD spheres of influence

Transport Modalities

Rail Transport: Application

RSC Maasvlakte:

containers from overseas;

growth 7 % per year

Rotterdam Maasvlakte

Transport Modalities

Rail Transport: Rail Service Centres

Rotterdam Eemhaven

Transport Modalities

Rail Transport: Rail Service Centres

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Rotterdam Eemhaven

Transport Modalities

Rail Transport: Rail Service Centres

Transport Modalities

Rail Transport: Development

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VTL – Vertical Tandem Lifting

Lifting two or more vertically connected

containers as a single lift

Transport Modalities

Rail Transport: Development

THANK YOU

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