7.13 Discussion and Practice

  1. Consider the following scenarios:

    How would you get the product from its point of origin to its final destination? Which mode(s) are best for each? What else should a transportation manager evaluate?
    Scenario 1Standard domestic transportation move: Breakfast cereal from Chicago, IL to Phoenix, Arizona (dry truckload).
    Scenario 2Large volume of natural gas from North Dakota to Florida.
    Scenario 3Large volume of soybeans from Iowa farm to New Orleans port for export to China.
    Scenario 4Shipping footwear from Vietnam to Memphis, TN distribution center.
    Scenario 5Fashion merchandise from Hong Kong to Cincinnati, OH.

  2. Rank the five modes based on their relative performance across four important dimensions: CO2 Emissions, Speed, Variable Costs, and Capacity (1=best performance; 5=worst performance).

    Mode, performance per ton/mile Co2 Emissions Speed Variable Cost Capacity
    Air, including take off & landing
    Ocean ship
    Rail
    Truck
    Pipeline

  3. You recently got a job offer from an entrepreneurial start-up that makes and sells ultra-healthy, crunchy snacks like kale chips and popcorn (spinach popcorn, seaweed popcorn, honey popcorn, and more). You are in charge of transportation. The product is very light for the amount of space it takes up. The owners are very irritated because they note, "I was told that it costs $3,000 to ship 40,000 lbs from our DC to Reno, NV. Now you are telling me that it costs $3,000 to ship 25,000 lbs. Are you sure that you are getting the best deal for us?

    1. Explain why you have to pay the full truckload price. Be sure your new bosses understand the tradeoffs between weight and cube.

    2. Using the ideas from less-than-truckload pricing, further explain how it may make sense to pay the full truckload rate even for smaller shipments.

  4. As a consumer, when you buy items online, you like free shipping (don't we all). You expect the items to show up fit for use. If they are damaged, you expect the seller to replace them. Simply put, the seller bears the liability.

    1. From a business standpoint, explain the difference between FOB origin and FOB destination—that is, discussion liability and ownership issues.

    2. What terms in international shipping are similar to FOB origin and FOB destination? Why are there so many more options and variations of terms in international shipping?

  5. When shipping a product, your choice of mode varies based on the characteristics of the item you are shipping. For example, you would probably choose different modes to get a new sofa delivered from Pottery Barn than you would to get a textbook from Amazon.com (don't forget, you need the book for class in two days). Assuming that you are just making the "modal choice" decision, for each of the items (and scenarios) below, do the following:

    Your Selection Criteria Options
    Competitive rates (Cost per ton mile )
    Door-to-door delivery time (Speed)
    Transit time reliability
    Freight loss & damage
    Shipment tracking
    Claims processing
    Impact of the environment (pollution/CO2)
    Special equipment availability
    Items to consider:
    Coal (over 1000 miles, same land mass)
    Human organs used for transplant with the same country/continent, over 1000 miles.
    Grain used for production of beer (over 1000 miles)
    5,000 lbs/ 2271 kilos Specialized parts used in manufacturing equipment, average value

    1. Rank order the top 4 mode selection criteria that you think would be important for that particular item.

    2. Specify which mode you would recommend. If you choose intermodal, specify the combination of modes that would make up intermodal.

  6. When you order an item online, you evaluate trade-offs about the shipping—for example, should you pay for next day air or can you wait for ground freight. Similarly, a logistics manager needs to be able to analyze the effect one decision will have on other logistics activities.

    1. Redraw Figure 7-13 in topic 7.9 using inventory level as the horizontal (x) axis.

    2. What insights do you have about the effect inventory level has on other logistics costs?

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