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Domestic Transportation - Freight Bill Paying With week 5 upon us, we will turn our focus and discussion to domestic transportation which consists of three modes: ground, air, and intermodal. All three modes are vital to retail companies to get their product to market on time every time with speed and ease (Hazen & Lynch, 2008).

Let’s look at these a little further…

Ground transportation is considered to be all shipments moved over-the –road. All of us at some point or another have seen these big rigs driving down the road. Ground transportation has two distinct types of movement which is full truckload and less than truckload shipments. Full truckload shipments are those shipments in excess of 36,000 pounds and usually do not make additional stops between pick-up and delivery like the partial or less-than-truckload shipments. Two primary benefits of truckload shipments are cost and time. A retailer will save on transportation costs and savings by moving more volume filling a truck to max capacity than that of LTL loads. Likewise, a retailer will save time because the carrier will not be stopping at various drop-off points for smaller loads or to reconsolidate the load (Hazen & Lynch, 2008).

So, that brings us to the less-than-truckload or LTL shipments. As I mentioned, LTL are shipments that do not fill the truck to full capacity and may be a consolidation of various types of shipments with different shippers. Therefore, often times it takes an LTL carrier more time, money, and effort to get a smaller load to the retail location versus that of a full-truckload shipment. Among LTL carriers are the long-haul and short-haul carriers. Long haul carriers will move freight anywhere within the contiguous U.S. while short-haul carriers normally choose a specific geographic area and move freight and product within shorter distances from point A to point B. Another term that fits within these short haul movements is milk-run deliveries and direct deliveries. A milk run delivery is scheduling several deliveries to multiple retail customers but the product originates from one central location. An example of a milk-run delivery is an auto parts manufacturer distributing parts to its retail customers within a specific region, state, or city. The truck will load all of the local orders on the truck and will be delivered to the manufacturers’ retail customers within the given geographic area. These are small quantities that are delivered throughout the day much like the milk-man that delivered milk to customers on specific delivery days and times (Hazen & Lynch, 2008).

Direct deliveries differ from milk-run deliveries in that these loads are moved from the manufacturer or point of pick up to one delivery or destination point. No additional stops are made in direct deliveries. The main types of documents needed for ground transportation are bill of lading, carrier freight bill, and delivery receipt. The bill of lading contains all of the information regarding the load or shipment. For example, shipper, consignee, weight, product, payment options, etc. The three primary purposes of the bill of lading are the title of goods, contract of carriage, and a receipt for the shipper for goods received for transport (Hazen & Lynch, 2008).

Next, is the carrier freight bill--This is a standard document for the carrier to receive payment for transporting the shipment (Hazen & Lynch, 2008).

Last, is the delivery receipt--This is a document that the carrier uses as “proof of delivery.” The consignee signs the receipt as evidence that the carrier delivered the shipment. Most companies paying for carrier and transportation services will not pay the carrier without this document.

Air transportation is another mode within domestic transportation. This mode of transport is used for those critical shipments that need quick delivery but it is very costly. Some of the better known air transporters are companies such as Fed Ex and UPS. Air transportation provides freight forwarders with additional cargo which often times reduces the shipping cost for customers requiring more space and buy in bulk quantities. Again, most of us know and use FedEx and UPS but for retailers needing a product shipped quickly and in larger quantities, air transportation is the mode to use (Hazen & Lynch, 2008).

The main document used for air transportation is the air waybill. This is comparable to the bill of lading we discussed earlier. The air waybill contains at least the shipper’s information, consignee information, and the gross weight of the shipment, the delivery time, and the party responsible for paying for the freight charges (Hazen & Lynch, 2008).

Now that we understand a little more about ground and air transportation let’s look at intermodal.

Intermodal transportation includes shipments moving by container via water, by train, or by truck. Intermodal transportation uses various modes of transportation in a combined effort to get bulk quantities to the end user. These types of shipments can contain any kind of product from automobiles to large quantities of socks. Containers come in all shapes and sizes and are dependent on the type and size of product being transported. Using intermodal transportation means the product will be loaded and unloaded several times before it is delivered to the destination point. The product or container may be unloaded from the ship or vessel to a truck or train. In the end, the product is loaded and unloaded several times before arriving at its destination. This can be advantageous from a cost perspective but not necessarily from a “damaged” goods perspective. It is important that retail companies do their due diligence in understanding the process for loss and damage claims as a way to protect themselves from these types of losses during transport (Hazen & Lynch, 2008).

According to the article "Transportation Modes: An Overview" (n. d.) each transportation mode has key operational and commercial advantages and properties. However, contemporary demand is influenced by integrated transportation systems that require maximum flexibility in the respective use of each mode. As a result, modal competition exists at various degrees and takes several dimensions. Modes can compete or complement one another in terms of cost, speed, accessibility, frequency, safety, comfort, etc… (Rodrigue, Slack, and Comtois, n. d., n. p.). There are three main conditions that insure that some modes are complementing one another:

•Different geographical markets. It is clear that if different markets are involved, modes will permit a continuity within the transport system, particularly if different scales are concerned, such as between national and international transportation. This requires an interconnection, commonly known as a gateway, where it is possible to transfer from one mode to the other. Intermodal transportation has been particularly relevant to improve the complementarity of different geographical markets (Rodrigue, Slack, and Comtois, n. d., n. p.).

•Different transport markets. The nature of what is being transported, such as passengers or freight, often indicates a level of complementarity. Even if the same market area is serviced, it may not be equally accessible depending of the mode used. Thus, in some markets rail and road transportation can be complementary as one may be focusing on passengers and the other on freight (Rodrigue, Slack, and Comtois, n. d., n. p.).

•Different levels of service. For a similar market and accessibility, two modes that offer a different level of service will tend to complement another. The most prevailing complementarity concerns costs versus time (Rodrigue, Slack, and Comtois, n. d., n. p.).

Lastly, the article "Transportation Modes: An Overview" (n. d.) states thus, there is modal competition when there is an overlap in geography, transport and level of service. Cost is one of the most important considerations in modal choice. Because each mode has its own price/performance profile, the actual competition between the modes depends primarily upon the distance traveled, the quantities that have to be shipped and the value of the goods (Rodrigue, Slack, and Comtois, n. d., n. p.). While maritime transport might offer the lowest variable costs, over short distances and for small bundles of goods, road transport tends to be most competitive. A critical factor is the terminal cost structure for each mode, where the costs (and delays) of loading and unloading the unit impose fixed costs that are incurred independent of the distance traveled (Rodrigue, Slack, and Comtois, n. d., n. p.).

When looking at the overall domestic transportation arena, it is important to know who is responsible for the freight costs. Is the shipment going to be paid by the consignee or the shipper? If the consignee is paying for the freight charges this is called collect. If the shipper pays for the freight charges it is referred to as prepaid. If you completely trust your customer you can always use cash on delivery. This means your shipment will be delivered and the carrier will assume responsibility for collecting the fee before the shipment is offloaded to the customer (Hazen & Lynch, 2008).

Video - Multimodal transport

Video Transportation Costs - FOB Pricing

Published on Jul 21, 2015

This video explains what is meant by multimodal transport. Contrary to belief, multimodal transport does not mean using different modes of transport.