Chapter 15 - Purchasing transportation services. Chapter 15 provides an in-depth analysis of transportation costs. With JIT systems transportation costs are magnified. Some of the transportation costs include such activities as selecting the mode of transportation to be used in moving a particular shipment.
Trang 1Purchasing and Supply Chain Management
3rd edition
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Chapter 15:
Purchasing Transportation Services
Purchasing and Supply Chain Management 3rd edition, Copyright 2013 W.
C. Benton Jr., All rights reserved
Trang 2Content
• Major activities related to purchasing transportation
• Mode selection
• Carrier selection
• Rate determination
• Thirdparty outsourcing
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Trang 3Transportation Activity
of most manufacturing firms
• In 2009, transportation revenues were approximately $1.1 trillion
• More than 50,000 private trucking fleets in the United States
• Factors associated with cost:
• Frequency
• Product type
• Volume of shipments
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Trang 4Inbound Freight
• Usually a component of materials costs
• e.g., F.O.B. delivered
alternative modes
• Rail
• Air
• Truck
• Ocean cargo
• Intermodal transportation (ocean, rail, truck)
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2012
Trang 5Transportation and Purchasing Management
• Purchasing’s role in transportation:
• Facilitates the movements of raw materials and component parts from suppliers through the firm’s manufacturing process to the ultimate customers
• Often the most costly and timeconsuming activity
• Requires extensive planning to meet delivery schedules
• Requires knowledge of basic transportation decision making
activities
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Trang 6Mode Selection
• Each of the modes has specific operating and cost
characteristics
• e.g., cost, reliability, and speed
• The buying professional must evaluate the trade off
between characteristics and select the most appropriate transportation mode
• Typical decisions:
• When speed is critical, high cost modes are selected
• Under normal operating conditions, ontime deliveries and service quality modes are preferred
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Trang 7Characteristics of Rail
• Cost structure is characterized by high fixed costs
• Majority of the fixed costs are unrelated to volume
• Theoretical pricing advantages:
• Has the largest share of the tonmiles in the United States
• Most bulk commodities are initially shipped by rail and later shifted to motor carriers
• Generally less expensive than air and truck modes
• Lack of flexibility
• Shipping from terminal to terminal
• The primary products shipped via rail:
• Lumber, iron, steel, coal
• Automobiles
• Grains
• Chemicals
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Trang 8Truck Mode
• Industry composition:
• Forhire carriers
• e.g., United Parcel Service
• Private carriers
• 2/3 of intercity truck tonmileage
• 50,000 private trucking fleets
• Industry characteristics:
• Fragmentation and high competition
• Ships majority of highvalued commodities movements
• Delivery of the largest portion of fresh fruit and minerals
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Trang 9Air Mode
• Domestic air cargo market in 2009
• Approximately $252.2 billion
• 4.5 billion tons carried over 40.1 billion miles
• Average shipment was 10.8 pounds
• Industry characteristics:
• Only premium and emergency goods are shipped
• Highestcost shipping mode
• Major categories are computer components, electronics, and fashion goods
• An integral strategic weapon for firms that compete on a fast delivery, lowinventory strategy
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Trang 10Water Mode
• Classification categories:
• Industry characteristics:
products
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Trang 11Pipeline Mode
• In 2009, $399.6 billion in revenues
• Industry characteristics
• Used to transport lowvalued, nonperishable products
• e.g., oil, diesel fuel, jet fuel, kerosene, and natural gas
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Trang 12Carrier Selection
specific carrier within the mode must be determined
movement of a product from one location to another
to use:
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Trang 13Carrier Evaluation
• Routine evaluation of the performance in terms of:
• Consistency of service
• Quality of service
• Key competitive criteria:
• Price
• Ontime deliveries
• Loss and damage claims
• Billing accuracy
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Trang 14Rate Determination
• General factors affecting freight rate:
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1. Shipping weight per cubic
foot
2. Liability for damage
3. Perishability
4. Liability for damage to other
commodities being transported
5. Liability for spontaneous
combustion or explosion
8. Ease or difficulty in loading and unloading
9. Excessive weight
10. Excessive length
6. Susceptibility to theft
7. Value per pound in
comparison with other articles
11. Care or attention necessary in loading and transporting
12. Trade conditions
13. Value of service
14. Competition with other commodities transported
15. Quantity offered as a single consignment
Trang 15Rate Negotiation
• Deregulation has made negotiations very important
• Involves:
• Planning
• Analysis
• reviewing
• Influenced by the characteristics of the:
• Current business environment
• Organization
Trang 16ThirdParty Outsourcing
• The decisions to transfer logistics activities to a third party
• Must include all of the parties that will be affected
• Combine freight
• Organize transportation councils
• To simplify the negotiations process
• To reduce price
• Fewer third parties
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Trang 17ThirdParty Outsourcing (cont.)
• Negotiation process:
1) Prequalify a set of carriers
2) Bid by identifying and communicating to the thirdparty base all
data needed 3) Enforce a common bid format for accurate evaluation
4) Thirdparty contract
• Detailed and specific operation section
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Trang 18Shipping documentation
• Definition
• Also called bill of lading
• Serves as the basic contract
• Specifies the commodities and quantities shipped, routing, rates, and carrier liability
• Serves as a receipt for delivery
• Classification:
• Order
• Notify bills of lading are negotiable and are similar to letters of credit
• Sales/purchase orders
• Convey the passage of title and are legal documents
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Trang 19Terminology
• Freight Terms
• Prepaid
• The shipper owns the freight
• Collect
• The consignee owns the freight
• Prepaid/collect beyond
• There is a shipper’s prepayment portion of the freight and the consignee is responsible for the balance of the payment
• Third party
• Establishes that neither the consignor nor the consignee owns the payment process function
• Prepay and add
• The shipper advances the charges to the carrier and then bills the beneficiary an amount that approximates or equals the actual freight charges
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Trang 20Questions?
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