CHAPTER 8

Transportation
 Factors Influencing 8-2

Transportation Costs

• Product-related • Market-related factors

factors – Degree of competition
– density – Location of markets
– stowability – Government regulation
– ease or difficulty of – Balance or imbalance
handling of freight traffic
– liability – Seasonality
– Domestic versus
international movement

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
 Terms of Sale and Corresponding 8-3 a

Buyer and Seller Responsibilities

1.Terms of Sale FOB Shipping Point, FREIGHT COLLECT 3.Terms of Sale FOB Shipping Point, FREIGHT PREPAID
AND CHARGED BACK
Title passes to buyer Buyer pays freight charges. Title passes to buyer Seller pays freight charges.
Buyer bears freight charges. Buyer bears freight charges.
Freight charges paid Seller Buyer owns goods in transit.
by buyer Buyer owns goods in transit. Buyer
Buyer files claims (if any).
Buyer files claims (if any).
Seller Buyer Freight charges paid by seller, then collected
from buyer by adding amount to invoice.

2.Terms of Sale FOB Shipping Point, FREIGHT ALLOWED

Title passes to buyer Seller pays freight charges.

Seller bears freight charges.
Freight charges paid
by seller Buyer owns goods in transit.
Buyer files claims (if any).
Seller Buyer

Source: Harold Fearon, Donald Dobler, and Ken Killen, The Purchasing Handbook, National
McGraw-Hill/Irwin Copyright
Association © 2001 byManagement,
of Purchasing The McGraw-Hill Companies, Inc. All rights reserved.
1993, McGraw-Hill.
 Terms of Sale and Corresponding 8-4b
8-3

Buyer and Seller Responsibilities (cont.)

4.Terms of Sale FOB Destination, FREIGHT COLLECT
Title passes to buyer Buyer pays freight charges.
Buyer bears freight charges.
Seller Buyer Seller owns goods in transit.
Seller files claims (if any).
Freight charges paid by buyer
6.Terms of Sale FOB Destination, FREIGHT COLLECT AND
ALLOWED
Title passes to buyer Buyer pays freight charges.
Seller bears freight charges.
Seller Buyer Seller owns goods in transit.
Seller files claims (if any).
Freight charges paid by buyer, then charged to
seller by deducting amount from invoice.

5.Terms of Sale FOB Destination, FREIGHT PREPAID

Freight charges paid by seller Seller pays freight charges.

Seller bears freight charges.
Title passes to buyer
Seller owns goods in transit.
Seller files claims (if any).
Seller Buyer

Source: Harold Fearon, Donald Dobler, and Ken Killen, The Purchasing Handbook, National
McGraw-Hill/Irwin Copyright
Association ©
of 2001 by The
Purchasing McGraw-Hill
Management, 1993, Companies,
McGraw-Hill. Inc. All rights reserved.
 Five Basic Transportation Modes 8-5
8-4

• Motor
• Rail
• Air
• Water
• Pipeline

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
 Comparison of US Domestic 8-6a
8-5

Transportation Modes
Motor Rail Air Water Pipeline
Economic
Characteristics
Cost Moderate Low High Low Low
Market Point-to- Terminal-to- Terminal-to- Terminal-to- Terminal-
coverage point terminal terminal terminal to-terminal

Number of Many Moderate Moderate Few Few

competitors

Predominant All types Low-moderate High value, Low value, Low value,
traffic value, low high density high density
moderate- moderate
high- density density

Average length Short to long Medium to Medium to Medium to Medium to

of haul long long long long
Equipment 10-25 50-12,000 5-125 1,000-60,000 30,000-
capacity (tons) 2,500,000

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
 Comparison of US Domestic 8-7b
8-5

Transportation Modes (cont.)

Motor Rail Air Water Pipeline
Service
Characteristics
Speed Moderate Slow Fast Slow Slow
Availability High Moderate Moderate Low Low

Consistency High Moderate High Low- High

(delivery time moderate
variability)

Loss and damage Low Moderate- Low Low- Low

high moderate

Flexibility High Moderate Low- Low Low

(adjustment to moderate
shipper’s needs)

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
 Nonoperating Third Parties 8-8
8-6

• Freight forwarders
• Shippers’ associations or cooperatives
• Transportation brokers
• Intermodal marketing companies or
shippers’ agents
• Third-party logistics service providers

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
 Major U.S. Agencies Regulating 8-9
8-7

Transportation
• Surface Transportation Board
• Department of Transportation
• Federal Maritime Commission
• Federal Energy Regulatory Commission

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
 International Distribution 8-10
8-8

Shipping Options

Landbridge
Rail
Landbridge
Minilandbridge
Microbridge
Rail
Truck/rail

All-water
All-water

Source: Adapted from David L. Anderson, “International Logistics Strategies for the Eighties,” Proceedings of the Twenty-Second Annual Conference of
McGraw-Hill/Irwin Copyright1984,
the National Council of Phyisical Distribution Management, © 2001
p. 363.by The
Used by McGraw-Hill Companies,
permission of the Council Inc.
of Logistics All rights reserved.
Management.