Intermodal Transportation Curriculum for Secondary Education – Pilot Study

1. Intermodal Transportation Curriculum for Secondary Education – Pilot Study MODULE 4: Modal Selection Process and Transportation Decision WORKSHOP October 22 & 23, 2012 - Trent Lott Center, University of Southern Mississippi Prepared By: Dr. Tulio Sulbaran, Dr. Mohammad Rahman, Dr. MD Sarder, & Dr. Chad Miller Center for Logistics, Trade, and Transportation (CLTT) - The University of Southern Mississippi Under the Supervision of: Dr. Lemond Irvin & Mr. Brad Skelton `

2. Module 4: Learning Outcomes Big Ideas: Physical distribution aspects of intermodal transportation and mode selection Lecture Duration: Six sessions: 60 min One Case study: 20 min At the completion of this module students should be able to: • Intermodal system, its importance and the constraints • Common types of intermodal transportation • Performance rating analysis of modes and cost impacts • Transportation mode selection process • Mechanized loading equipment / technology • Intermodal risk and security management • Case Study: Analysis of measuring cost.

3. Learning Sessions Session I: Intermodal system definition, its importance, and constraints Session II: Common types of intermodal transportation Session III: Understand performance rating analysis of modes and cost impact Section IV: Transportation mode selection Session V: Mechanized loading equipment / technology Section VI: Intermodal risk and security management Case Study: Analysis of measuring cost

4. Session I: Intermodal System, definition, and importance of Intermodal System

5. Intermodal System, definition • There are a number of descriptions about what constitutes an ‘Intermodal System’ or ‘Intermodal Transportation Facility’. • Intermodal facility is a “state of the art” transportation interface that combines difference mode of transportations in one place. • According to the ‘American Public Transit Association’, • ‘Intermodal (multimodal) is those issues or activities, which involve or affect more than one mode of transportation, including transportation connections, choices, cooperation and coordination of various modes.

6. Intermodal Terminal • Intermodal System • Combines several modes of shipping-truck, water and rail • Key component is containers Source: http://www.avantetech.com/products/shipping/intermodal

7. Importance of Intermodal Facility Currently, transportation alone accounts for approximately 62.8% of every dollar spent on logistics in the United States • Grown considerably with increased use of containers • May be the only option for global trade • More convenient for shippers – one entity, one entry • Key issue – exchange of information to facilitate transfer between different modes • The United States spent 7.8 percent of its total GDP on logistics expenses in 2009. • The number rose to 8.3 percent of GDP in 2010 • From 1.08 trillion to $1.2 trillion, increase from 2009 to 2010.

8. Importance of Intermodal Facility • According to Council of Supply Chain Management Professionals (CSCMP), 2011. • Intermodal deals with 17% of revenues, which is second only to coal: 23% • Intermodal provides labor efficiency and fuel efficiency (50% savings over truck) • Downsides: inadequate speed, and reliability

9. Benefits of Intermodal Process • Collaborative planning, forecasting, and replenishment create greater economies of scale • Internet-based exchange of data and information • Significant decrease in inventory levels and costs and • More efficient logistics • Focus on core competencies

10. Features of Intermodal Terminal • Access to railroad and highway system • Area, configuration, and topography of site • Cost to acquire site and provide infrastructure • Adjacent land uses • Proximity to customer base • Ability to accommodate future growth • Local support • Provision for loading/unloading railcars • Box storage (long term or temporary) • Vehicle storage (railcars/trailers/chassis) • Check-in/check-out control • Vehicle and box servicing/repair • Security and lighting • Office and administration • Information systems • Vehicle scales

11. Constraints of Intermodal facility • Following could be the limitations associated with promoting intermodal • Physical • Inadequate existing infrastructure. • Poor coordination of loading and unloading activity; • Differing rail gauges. • Lack of land availability in close proximity to major ports, highways and rail access routes.

12. Constraints of Intermodal facility • Institutional • Conflicting customs and immigration procedures • Institutional blockages to the free flow of transit vehicles and cargo in the hinterlands; • Lack of coordination between different levels of government. • Personnel and Private Sector • Limited number of available trained personnel • Lack of private sectors participation • Lack of growing private sectors to increase road haulage

13. Session II: Common types of intermodal transportation

14. Common Transportation Modes Mode of transport: • Air • Road • Water • Rail • Pipeline! Growth in U.S. Domestic Freight by Mode 1980 – 2004 (Ton-Miles)

15. Freight Mode Capacity VLCC: very-large crude carriers

16. Factory Road Port Rail Inter Modal Factory Road Inter Modal Road Factory Road Inter Modal Rail Inter Modal Port Common Intermodal Freight Transfer Road to Port Road to Rail to Road Road to Rail to Port

17. Transportation by Air Advantages • Most expensive and fastest mode of freight transport • Lightweight, small packages <500 lbs, • Reliable, less theft Cost Component • Fixed cost low (Airport infrastructure) • Variable cost high (fuel, maintenance, security) Limitation • Limited capacity • Other transport modes required to take freight to-and-from airports

18. Transportation by Water Ocean, inland waterway system, coastal waters Advantages • Carrying large volumes of freight • primary means of international shipping • Dominant in global trade • Very large loads at very low cost Cost Component • Fixed cost is medium(vessels, handling equipment, terminals) • Variable cost is low (Economies of scale) Limitation • Limited to certain geographic areas • Quite a slow mode • Other transport modes required to take freight to-and-from airports

19. Transportation by Rail Advantages • Low-value, high-density, bulk products, raw materials • Good on speed, Dependability, • Capability to move larger quantities of freight • Move commodities over large distances Cost Component • Fixed cost is high (equipment and facilities) • Variable cost is relatively low (fuel, maintenance, security) Limitations • Not as economical for small loads, • Slower, less flexible than trucking • Limited situations (Rail line, stations limited)

20. Transportation by Road Advantages • Extremely flexible, Good on speed, • Consignor to consignee connectivity is universe • Significant fraction of the goods moved • Truckload (TL) (Low fixed cost, but imbalance between flows) • Less than truckload (LTL) (Small lots / Hub and spoke system) Cost Component • Fixed cost is Medium (Road, bridges) • Variable cost is low (Fuel, maintenance, security etc.) Limitations • Capability to move relatively smaller quantities per freight

21. Transportation by Pipelines Primarily for crude petroleum, petroleum products, natural gas Advantages • Dependability is excellent • Best for large and stable flows Cost Component • Fixed cost is high (land occupancy, construction and installation) • Variable cost is relatively low (routine maintenance, inspection/security Limitations • Used only in very limited situations Source: http://stakebuzz.com

22. Transportation Model Comparisons

23. Session III: Understand performance rating analysis of modes and cost impact

24. Physical Distribution • Physical • Supply • Products moving from supplier to manufacturer • “inbound” • Physical Distribution Products moving from manufacturer to customers • “outbound”

25. Channels of Distribution • Company may deliver directly to customers • Use other companies or individuals to deliver goods • Intermediaries • Wholesalers (agents) • Transportation companies (warehousers) • Channel distribution • “Any series of firms or individuals that participates in the flow of goods and services from the raw material supplier and producer to the final user or consumer.” • APICS 11th Edition Dictionary

26. Channels of Distribution • Transaction channel • negotiate, sell, contract • concerned with the transfer of ownership (and money) • Distribution channel • concerned with the delivery of goods or services

27. The Way Materials Move Depends on: • Channels of distribution being used • Types of markets served • Geographic dispersion • Number of customers • Physical characteristics of the product • Volume/quantity of products • Type of transportation available

28. Transportation Mode Performance

29. Relative Operating Characteristics

30. Section IV: Transportation mode selection

31. Transport Selection Decision Carrier Selection Determinants: • Costs • Transit time and reliability • Can be a competitive advantage • Lowers customers’ inventory costs • Capability • Accessibility • Security

32. Transport Selection Decision Carrier Selection Determinants and User Implications

33. Transport Selection Decision The Pragmatics of Carrier Selection • Transit time reliability • Negotiated rates • Consolidating shipments among a few carriers • Financial stability • Sales rep • Special equipment

34. Transport Selection Decision Source: Edward J. Bardi and T. S. Raghurathan, "Motor Carrier Selection in a Deregulated Environment," Transportation Journal 29, no. 1 (Fall 1989), 4-11.

35. Transportation costs • Fixed Costs • the costs that do not change with the volume moved • buildings, equipment, land • Variable Costs • Costs that change with the volume moved • fuel, maintenance, wages • Vary by flexibility and operating cost • Ways • road, water, air • Terminals • where goods are loaded or unloaded • Vehicles • equipment used to move goods

36. Transportation Costs • Ways • Land, water, road, space, how goods are moved • May be owned by the operator (railroad tracks), • operated by the government (roads, canals) or • River, ocean etc. • Terminals • Used to sort, load and unload goods • connection between line-haul and local deliveries • connection between different modes or carriers • dispatching, maintenance, administration • Vehicles • owned or leased by the carrier • Other costs • (fixed or variable) • Maintenance • Administration • Fuel • Labor

37. Intermodal Cost Analysis Question to be asked: • Should transportation be direct or through an intermediate site? • Should the intermediate site stock product or only serve as a cross-docking location? • Suppliers send shipments to an intermediate transit point • Freight are cross-docked and sent to buyer locations without storing • Should each delivery route supply a single destination or multiple destinations (milk run)?

38. Transportation Cost Elements • Transportation Cost Elements • Line haul • Pickup and delivery • Terminal handling • Billing and collecting

39. Line-Haul Costs (LHC) • Line-Haul Costs • Cost per hundred weight (cwt) • Total line-haul cost varies : • Cost per mile • Distance moved • Line-haul cost per cwt varies : • Cost per mile • Distance moved • Weight moved • Line-Haul Costs • (Distances) • Fuel, labor, depreciation • Approximately the same per mile whether full or empty • LHC = Total Line-Haul Cost • Distance Travelled

40. Example 1: Line-Haul Costs • For a given commodity, the line-haul cost is $2.5 per mile and the distance shipped is 100 miles. The total line-haul cost is therefore, $250. • If the shipper sends 60,000 pounds, the total line haul cost is the same as if 20,000 pounds were shipped. • However the line-haul cost per hundred weight (cwt) will vary. • What is the cost per weight for either situation? LHC60,000 lbs = $250×100 = $0.42 per cwt 60,000 LHC10,000 lbs = $ 250×100 = $1.25 per cwt 20,000

41. Example 2: Line-Haul Costs • For a particular commodity, line-haul cost is $3.00 per mile. • For a trip of 800 miles and a shipment of 50,000 pound (or, 500 cwt), what is the cost of shipping per cwt? • If the shipment is increased to 100,000 pound (or, 1000 cwt), what is the savings per cwt? Cost800 =($3.00 x 800) / 500 = $4.8 / cwt Cost1000 = ($3.00 x 800) / 1000 = $3.00 / cwt Savings = $4.8 - 3.00 = $1.8 / cwt

42. Example 3: Total Cost Concept A company normally ships a product by rail. Transport by rail costs $200, and the transit time is 10 days. However, the can be moved by air at a cost of $1000 and it will take one day to deliver. The cost of inventory in transit is $100 per day. What are the costs involved in the decision? Rail Air Transportation Cost $ 200 $1000 Inventory Carrying Cost 1000 100 Total $1200 $1100

43. Example 4: Shipping Cost • A company ships items fully assembled. • Items such as scooter, toys etc. • The average line-haul cost is $15.00 per mile, and the truck carries 200 assembled items. • The company decides to ship the items unassembled, which facilitate to ship 500 units in a truck. • Find the following: • Truck have a weight limitation • Some products have a low density and the truck is filled before the weight limitation is met • Therefore, load products or ship products unassembled to increase the weight shipped

44. Example 4: Shipping Cost (cont.) • Line-haul cost assembled • = $15.00/200 =$0.075/ item / mile • Line-haul cost unassembled • =$15.00/500 =$0.03/ item/mile • Savings per mile • =$0.075 - 0.03 = $0.045/item/ mile • Trip savings • = 300 miles x $0.045 / item/mile • =$13.5 per barbecue • Calculate line-haul cost • ($ / item) • 200 assembled items • 500 unassembled items • If the average trip is 300 miles, calculate both: • Savings per mile /item • Savings per item for 300 miles

45. Session V: Mechanized loading equipment / technology

46. Truck Types Counterbalanced Trucks (Electric/Gas/Diesel) Pallet Trucks Tow Trucks Stacker Trucks Narrow Aisle Trucks Reach Trucks Order Pickers

47. Mechanized Loading Technology • Mechanized loading technology offers flexibility, expandability, quality, and reliability in handling and storage of containers. Commonly Intermodal containers are 20 or 40 feet in length, and can weigh up to 100,000 pounds. • The loading/unloading equipment can moves simultaneously in both horizontal and vertical directions. • Some common equipment used in mechanized loading are : • Gantry crane • Straddle loader • Side loader • Reach loader

48. Marine Gantry Cranes • Gantry crane • supported by a mobile frame • which travels on the ground. • Used for transfer goods • 25–50 ton lift capacity • Span 32-76 ft • 5-8 container lift height Source: Intermodal Freight Transportation and RailroadsDavid B. Clarkem, University of Tennessee

49. Straddle Loader • Straddle loader • This equipment includes an upper • frame having a spreader for grasping the load and at least two traveling frames for receiving the load, and a lifting system connected to the upper frame and the plural traveling frames • Used for transfer/storage • Capacity 50 Ton • Span 15-20 feet • Turning radius 35 ft outside • Lifting height 2-5 container lift height Source: Intermodal Freight Transportation and RailroadsDavid B. Clarkem, University of Tennessee

50. Side Loader • Side loader • Used to Move long or bulky materials • in very narrow aisles. • 22–45 ton lift capacity • Turning radius 20 ft to 52ft • Requires aisles 30ft min to 75ft • 2-3 container lift height Source: Intermodal Freight Transportation and RailroadsDavid B. Clarkem, University of Tennessee