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  1. Commodity Ratesare for a large quantity of product which moves between two locations on a regular basis
    -Typical for most rail freight today

          

  2. Detention (motor)-charge for holding a truck for more than a few hours before unloading

          

  3. Reactive approachreplace the 18 traditional freight classifications of the National Motor Freight Classification (NMFC) with five cube groupings

          

  4. Auditinginvolves the shipper notifying carrier that it needs a specific shipment to move quickly and with no delays

          

  5. 1. Economic Drivers: Liability-Liability includes product characteristics that can result in damage
    -Carriers must pay for liability insurance or accept financial responsibility

          

  6. Administrative Activities: ControlControl responsibilities include tracing, expediting and driver hours of service administration
    -Tracing
    -Expediting
    -Tracking driver Hours of Service (HOS)

          

  7. 4. Rates and Rating Mechanicsis based on the classification rating, shipment origin, and destination

          

  8. DocumentationPrimary purpose of documentation is to protect all parties involved in the transaction
    -Bill of Lading
    -Freight Bill
    -Shipment manifest

          

  9. Pricing PracticesPricing practices have a direct impact on logistical operations
    -Traditionally, logistics pricing was "BUNDLED" into the price for a product or service
    -Trend has been to DE-BUNDLE these charges so they become separate and visible to the customer
    -Focus is still on DELIVERING VALUE to the customer

          

  10. Demurrage (rail)represents a carrier's method of charging for transportation services rendered
    Can be prepaid or collect

          

  11. Freight Forwarders:businesses that consolidate small shipments from various customers into bulk shipment for a common carrier to transport

          

  12. 1. Economic Drivers: Market Factors-Volume is important because vehicles are typically constrained more by cubic capacity than by weight loaded
    -Cost per unit of weight declines as product density increases
    -Higher density products allowed fixed transport costs to be spread over more weight

          

  13. Transit Servicescan be negotiated if a shipper needs to use a combination of carriers

          

  14. -Joint costs have a significant impact on transportation charges because-carrier quotations must include implied joint costs.
    -Either a back-haul shipper must be found
    -Or the joint cost must be covered by the original shipper from A to B and built into the quote.

          

  15. -Cube Ratesare the price in dollars and cents per hundredweight to move a specific product (i.e., class) between two locations

          

  16. 1. Economic Drivers: DensityWeight is the second major factor for most transportation costs

    -Cost per pound decreases as weight increases until the carrier vehicle is full
    -Relationship starts again for the next vehicle load
    -Small loads should be consolidated into larger loads to maximize scale economies

          

  17. Tracingis procedure to locate lost or late shipments
    i.e., tracking with RFID and GPS systems
    Proof of delivery

          

  18. Freight-All-Kind (FAK)rates allow a mixture of different products to be transported under a negotiated rating

          

  19. tapering principlePricing practices have a direct impact on logistical operations
    -Traditionally, logistics pricing was "BUNDLED" into the price for a product or service
    -Trend has been to DE-BUNDLE these charges so they become separate and visible to the customer
    -Focus is still on DELIVERING VALUE to the customer

          

  20. Product storage services-Demurrage (rail) charge for holding a railcar for more than 48 hours before unloading
    -Detention (motor) charge for holding a truck for more than a few hours before unloading

          

  21. -Class Ratescan be negotiated if a shipper needs to use a combination of carriers

          

  22. An effective logistics strategy must recognize four interrelated topics1.) Economic Drivers
    2.) Costing Methods
    3.) Carrier Pricing Strategy
    4.) Rates and Rating Mechanics

          

  23. -Densityrefers to the ability of product to be placed in itself or collapsed for better stowability

          

  24. Exception Ratesreplace the 18 traditional freight classifications of the National Motor Freight Classification (NMFC) with five cube groupings

          

  25. 1. Economic Drivers: Distance-Volume is important because vehicles are typically constrained more by cubic capacity than by weight loaded
    -Cost per unit of weight declines as product density increases
    -Higher density products allowed fixed transport costs to be spread over more weight

          

  26. 3. Carrier Pricing: Net-Rate Pricing Strategy-Net-rate is a simplified pricing format made possible by deregulation
    -Established discounts and accessorial charges are rolled into one all-inclusive price
    -Pricing is tailored to the individual customer's needs

          

  27. -Tracking driver Hours of Service (HOS) to comply with federal regulations

          

  28. 3. Carrier Pricing: Combination Strategy-Combination price is set at a value between cost-of-service minimum and value-of-service maximum
    -Most carriers use some form of combination pricing
    Common in highly volatile markets and changing competitive situations

          

  29. Joint Ratesreplace the 18 traditional freight classifications of the National Motor Freight Classification (NMFC) with five cube groupings

          

  30. Key elements of operational management-Equipment Scheduling and Yard Management
    -Load Planning and Routing
    -Advance Shipment Notification (ASN)
    -Movement Administration
    -Transportation Management System (TMS)
    -An integral information technology solution to help oversee day-to-day activities

          

  31. Shippers can reduce their risk of liability by-Liability includes product characteristics that can result in damage
    -Carriers must pay for liability insurance or accept financial responsibility

          

  32. Administrative Activities: Auditing & Claims AdministrationAuditing and claims administration is needed when services are not performed as promised

          

  33. Transportation Administration ActivitiesOperational Management
    Consolidation
    Negotiation
    Control
    Auditing and Claims Administration

          

  34. Special Rates and Services (continued)-Diversion and re-consignment allows changing the destination and/or consignee prior to arrival at the original destination
    -Split delivery is delivering portions of a shipment to multiple destinations

          

  35. 2. Costing Methods: Fixed Costs-Fixed costs must be paid even when the carrier is not operating its equipment
    -Fixed costs are not influenced by shipment volume
    -Includes vehicles, terminals, rights-of-way, information systems, and support equipment
    -Must be covered by contribution above variable costs on a per shipment basis

          

  36. Special Rates and Services-Diversion and re-consignment allows changing the destination and/or consignee prior to arrival at the original destination
    -Split delivery is delivering portions of a shipment to multiple destinations

          

  37. 1. Economic Drivers Influence RatesDistance
    Weight
    Density
    Stowability
    Handling
    Liability
    Market

          

  38. Claims can be-Loss and damage resulting from poor performance
    -Overcharge/undercharge when amount billed is different from expected

          

  39. Shipment Manifestlists the individual stops or consignees when multiple shipments are placed on a single vehicle

          

  40. Freight Billrefers to the ability of product to be placed in itself or collapsed for better stowability

          

  41. Administrative Activities: Consolidation-Seeking win-win agreements where both shippers and carriers share transportation consolidation and productivity gains
    -Collaborative negotiation: Both parties seek the lowest total logistical cost consistent with the shipper's needed service level (i.e. delivery time)

          

  42. Special Rates and Servicessinclude (see next few slides)
    FAK rates, Joint rates, Transit services, Split delivery, etc.

          

  43. Shipper Associations and Agents: groups of shippers who employ an agent to consolidate purchases and shipments for them

          

  44. -Classificationare the price in dollars and cents per hundredweight to move a specific product (i.e., class) between two locations

          

  45. Brokers:is procedure to locate lost or late shipments
    i.e., tracking with RFID and GPS systems
    Proof of delivery

          

  46. 2. Costing Methods: Variable Costs-Variable costs change in a predictable, direct manner in relation to some level of activity
    -Variable costs in transportation are only incurred if you operate the vehicle
    -Transport rates must cover these at the very least!
    -Generally measured per mile or per unit weight or both
    e.g., per ton-miles transported

          

  47. Expeditingis checking freight bills to ensure accuracy
    Pre-audit determines proper charges prior to payment
    Post-audit does the same after payment
    Pay particular attention to accessorial charges !

          

  48. Bill of Lading (BOL)is the basic document utilized in purchasing transport services
    Serves as a receipt and documents products and quantities shipped
    Specifies terms and conditions of carrier liability

          

  49. 1. Economic Drivers: Stowability-Liability includes product characteristics that can result in damage
    -Carriers must pay for liability insurance or accept financial responsibility

          

  50. Nestingrefers to the ability of product to be placed in itself or collapsed for better stowability

          

  51. 3. Carrier Pricing Strategies-Combination price is set at a value between cost-of-service minimum and value-of-service maximum
    -Most carriers use some form of combination pricing
    Common in highly volatile markets and changing competitive situations

          

  52. 1. Economic Drivers: WeightWeight is the second major factor for most transportation costs

    -Cost per pound decreases as weight increases until the carrier vehicle is full
    -Relationship starts again for the next vehicle load
    -Small loads should be consolidated into larger loads to maximize scale economies

          

  53. Administrative Activities: NegotiationControl responsibilities include tracing, expediting and driver hours of service administration
    -Tracing
    -Expediting
    -Tracking driver Hours of Service (HOS)

          

  54. 3. Carrier Pricing: Cost-of-Service Strategy-Value-of-service price is based on value as perceived by the shipper rather than the carrier
    -Higher margins than cost-of-service pricing
    -Depends on the value of the goods being shipped
    -Used for high value goods or when no competition exists
    e.g., 1980's FedEx overnight delivery

          

  55. -Rate Determinationis based on the classification rating, shipment origin, and destination

          

  56. 2. Costing Methods: Common Costs-Joint costs are unavoidably created by the decision to provide a particular service
    -For example, when a carrier elects to haul a truckload from point A to point B, there is an implicit decision to incur a joint cost for the back-haul from point B back to point A.

          

  57. Pricing Fundamentals of F.O.B. pricingDelivered pricing — the seller includes transportation in the product price

    Single Zone delivered pricing
    Buyer pays a single price regardless of where they are located
    Example, USPS First class letters

    Multiple Zone pricing
    Seller charges different prices for different geographic areas
    Parcel carriers use this

    Base Point pricing
    Final delivered price is determined by the product's list price plus transportation cost from a designated base point

          

  58. 2. Costing Methods: Joint Costs-Fixed costs must be paid even when the carrier is not operating its equipment
    -Fixed costs are not influenced by shipment volume
    -Includes vehicles, terminals, rights-of-way, information systems, and support equipment
    -Must be covered by contribution above variable costs on a per shipment basis

          

  59. 3. Carrier Pricing: Value-of-Service Strategy-Combination price is set at a value between cost-of-service minimum and value-of-service maximum
    -Most carriers use some form of combination pricing
    Common in highly volatile markets and changing competitive situations

          

  60. 4. Rates and Rating Mechanicsis based on the classification rating, shipment origin, and destination

          

  61. Pricing Fundamentals of Delivered PricingF.O.B (freight on board) pricing aka "free-on-board"

    F.O.B. Origin — seller states price at point of origin, and agrees to load a carrier, but assumes no further responsibility. Buyer selects carrier and mode, pays transportation and assumes the risk for in-transit loss or damage
    F.O.B. Destination — seller arranges for transportation and adds charges to the sales invoice. Title does not pass to the buyer until delivery is completed

          

  62. Proactiveis procedure to locate lost or late shipments
    i.e., tracking with RFID and GPS systems
    Proof of delivery

          

  63. 1. Economic Drivers: Handling-Volume is important because vehicles are typically constrained more by cubic capacity than by weight loaded
    -Cost per unit of weight declines as product density increases
    -Higher density products allowed fixed transport costs to be spread over more weight