CHAPTER 7

Transportation Management
 Learning Objectives
 To examine the background of the
transportation management function

 To discuss the functions of transportation

management

 To identify the role negotiations play in the

transportation management function

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 Learning Objectives
 To examine the new options available for
private carriage

 To understand the purpose of freight

consolidation

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 Industrial Transportation
Management
 Key Terms  Key Terms

– Bill of lading – Hazardous

– Demurrage and material
detention – Loss and damage
– Diversion – Private
– Expediting transportation

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 Industrial Transportation
Management
 Key Terms  Key Terms
– Rate and service – Shipment
negotiations consolidation
– Tracing
– Rate determination
– Transit privileges
– Reconsignment
– Reparations

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 Rate Determination and
Negotiation Activities

 Rate Determination
 Freight Classification
 Rate and Service Negotiations
 Rate Regulatory Bodies

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 Rate Determination
 Often located on carrier Web sites
 Information needed for rate determination may include:
– Origin and destination by city or zip code
– Whether carrier will load/unload
– Dimensions (cube) of load
– Number of units
– Weight
– National Motor Freight Classification number
– Description of material to be moved

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Figure 7-1: Page from a Catalog by AW
Direct Showing Shipping Charges

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 Figure 7-2: Page
from a Port of
Houston Tariff
Showing Some
Loading,
Unloading, and
Wharfage Charges

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 Freight Classification
 Freight classification values relate to
handling characteristics of freight
 May apply to National Motor Freight
Classification Committee for change in
classification
 Goods in foreign trade list commodities by
harmonized number of Harmonized Tariff
Schedule of the United States (TSUSA)

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 Figure 7-3:
Motor Carrier
Classification
Docket
Proposal for
Changing the
Classification
of Spark Plugs

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 Rate and Service Negotiations
 Both rates and service levels may be
negotiated
 Long-term relationships are encouraged
 Negotiations are subject to antitrust laws

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 Rate Regulatory Bodies
 U.S. Department of Commerce Foreign
Trade Zone Board
 Department of Transportation committees
 House of Representatives subcommittees

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 Private Transportation
 Private transportation is used when firms own and
operate their own trucks, railcars, barges, ships,
and/or airplanes
– Wal-Mart has largest private truck fleet in U.S.
 7,767 tractors and 26,117 trailers
 Private trucking provides
– Improved level of customer service
– Advertising on the trucks
– May be less expensive

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 Documentation
 Bill of lading
– Straight bill of lading
– Order bill of lading
– Long-form bill of lading
– Preprinted short-form bill of lading
 Freight bill

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 Figure 7-6:
A Long-Form Bill
of Lading

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 Figure 7-7:
A Preprinted
Short-Form
Bill of Lading

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 Freight Payment and Audit
Services
 Freight bills must be paid within a specific
number of days
 Payment services are used
 To detect duplicate billings
 To ensure that proper rate was charged

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 Routing
 Shippers have the right to select the carriers
along the route to shipment destination
 More often need to be specified for hazmat
 Generally are computer generated
 Alternative routes and carriers are also
important

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 Diversion and Reconsignment
 Diversion occurs when the shipper notifies
the carrier, prior to arrival, of a change in
destination
 Reconsignment occurs when the shipper
notifies the carrier, after arrival, of a change
in destination

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 Tracing and Expediting
 Tracing is the attempt to locate lost or late
shipments
– Done by computer at no cost
 Expediting is rapidly moving a shipment through
a carrier’s system.
 Both of these are less likely to be used today
since shipments can be pinpointed en route and
carriers provide better on-time performance

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 Loss and Damage
 Shippers and carriers try to resolve first
– What is the full actual loss?
– Concealed loss or damage
– Who takes possession of damaged goods after
claim settled?
 If unresolved, moves to court system

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 Transit Privileges
 Transit privileges allow cargo to be stopped
en route between origin and destination to
be unloaded, stored, or processed and then
reloaded for delivery to original destination
 Often used in household goods moving and
storage industry

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 Reparations
 Reparations are payments made to a shipper
by a carrier that has charged illegally high
rates in the past
 Also collected when carriers do not live up
to terms of contracts with shippers

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 Demurrage and Detention
 Demurrage is a penalty payment made to the
railroad for keeping a railcar beyond the time
when it should be released back to railroad
 Detention is the word used in the trucking
industry
 Carriers do not want equipment used as
temporary warehouse by shipper or consignee

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 Transportation of Hazardous
Materials
 Hazardous material is a substance or material
in a quantity and form which may pose an
unreasonable risk to health and safety or
property when transported in commerce
– Must be moved safely
– Labeled with placard
– Must have 24-hour hotline used in event of spills

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 Figure 7-12:
Specialized
Container with
Sump to Capture
Hazardous
Waste Leaks
from Barrels

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 Consolidating Small Shipments
 Shipments > 150 and < 500 pounds
 To get a lower rate, shipment consolidation
may occur: aggregating customer orders
across time or place or both

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Figure 7-13: The Transportation Manager
Consolidates Shipments Whenever He or
She Can

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