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Lecture Logistics management: Lecture 19 - Dr. Khurrum S. Mughal

In this chapter, the following content will be discussed: Appreciate the role and importance of transport in the logistics chain, understand the general principles underpinning transport in logistics, identify the various carriers and characteristics, apply principles and theories in designing own distribution system. | 1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 19 1 6-2 Rate Types Line haul rates Class Freight classification of items (National Motor Freight Classification of Selected Products) Rate tables of tariffs Contract rates Drayage (local delivery) Commodity and contract rates Specific rates for given shipment sizes for specific products moving between designated points Special service charges Extra charges Diversion and reconsignment Stop-off privilege example Should always check to see if shipment can be declared at the next higher weight break for a lower rate and lower total charges Table 6-5 Table 6-4 Suppose we wish to ship 15,000 lb. (150 cwt.) of wheat flour from New York to Los Angeles by truck. The trucker offers a 40% discount from the published tariff. What is the transportation charge? From the freight classification table, this is item number 1090--00. It shows a minimum weight of 36,000 lb., which is greater than this shipment size. Therefore, the class rating is 55, or less-than-truckload. From the class 100 tariff, the rate is 6065, or $60.65 per cwt. With a 40% discount, the effective rate is (1- .40) x 60.65 = $36.39. The shipment charges are 0.55 x 36.39 x 150 = $3,002.18. Class Rate Example CR (2004) Prentice Hall, Inc. 6-11 Break Weight where: Break Weight = Weight above which the next higher weight break rate should be used for lower transport costs RateNext = Rate for next higher weight break WeightNext = Minimum weight of next higher weight break RateCurrent = Rate for true weight of shipment. Question Suppose 9,000 lb. of Class 100 merchandise is to be shipped from New York to Dallas. From Table 6-4, the rate would be $52.21/cwt. However, should the shipment be priced at the next higher weight break rate of $40.11/cwt. for a lower cost? CR (2004) Prentice Hall, Inc. 6-12 Break Weight (Cont’d) Since the 9,000 lb. shipment size exceeds the break weight of 7,682 lb., size as if a 10,000 lb., shipment for a total cost of $40.11x 100 = $4,011. Otherwise, the shipment would have cost $52.21x90 = $4,699. Answer CR (2004) Prentice Hall, Inc. Calculate break weight 6-13 6-6 Stop-Off Privilege Example CR (2004) Prentice Hall, Inc. Suppose 3 shipments of J=8,000 lb., K=12,000 lb., and L=10,000 lb. originating at I are to be delivered in the following way. 6-7 Stop-Off Privilege Example (Cont’d) The better choice All volume to the farthest stop Load, lb. Points Rate, $/cwt. Charges 8,000 I to J 3.05 $244.00 12,000 I to K 3.35 402.00 10,000 I to L 3.60 360.00 Total $1006.00 Load, lb. Points Rate, $/cwt. Charges 30,000 I to L 3.00 $900.00 3 stops at $15 each 45.00 Total $945.00 CR (2004) Prentice Hall, Inc. 6-8 Private carrier costing Service Reliability Short Order Cycle Times Emergency Response Capability Improved Customer Contact Costs: Fixed Costs Operator Costs Vehicle Operating Costs CR (2004) Prentice Hall, Inc. 6-9 Rate Profiles By distance Rates vary with the distance between origin and destination in the following manner CR (2004) Prentice Hall, Inc. 6-10 Rate Profiles (Cont’d) By volume Rates by shipment size have the following characteristic CR (2004) Prentice Hall, Inc.