Freight Transport: Strategies, Services, and Cost Analysis
Freight Transport: Decisions and Strategies
Summary: Chapter 5
Transport Services and Features
Freight users have a wide range of services available, revolving around five basic modes:
- Water (sea)
- Rail
- Air
- Truck
- Pipeline
A shuttle service offers a set of performance characteristics at a fixed price. The variety of transportation services is almost unlimited.
The optimal service balances quality and cost. Key factors in this decision include:
- Price
- Transit time
- Transit time variability
- Loss and damage
Price
Air is the most expensive mode. Trucking is 11.5 times more expensive than rail, which is 4 times more expensive than sea. Maritime and pipeline transport are the most economical.
Transit Time and Variability
Transit time is the average delivery time from origin to destination. For comparison, it’s best to measure transit time door-to-door.
Variability refers to differences in delivery times between shipments, reflecting service reliability. Shipments with the same origin, destination, and mode may vary due to:
- Climate effects
- Traffic congestion
- Number of stops
- Time to consolidate shipments
Rail has the highest variability, while air has the lowest. However, when variability is related to average transit time, air may be the least reliable, and trucking the most.
Loss and Damage
This is a crucial factor in carrier selection, impacting product condition and customer service. Delayed or damaged goods increase inventory costs and delay orders.
Selection of Transport Service
The choice of transport mode depends on service characteristics. Transit time (speed) and variability (reliability) are key, followed by cost.
Balancing Basic Costs
When transport isn’t a competitive advantage, the best option balances transport costs with indirect inventory costs. Speed and reliability affect inventory levels for both seller and buyer. Slower and less reliable services lead to higher inventory levels.
Inventory carrying costs can offset lower transport costs. The favored service offers the lowest total cost, aligning with customer service goals.