Strategic Channel Intermediaries: Ports

• Port selection is a very important part of the international logistics strategy.

• Different ports often specialize in different types of shipments.

• Selecting the wrong port can add miles, time, and therefore cost to a shipment not appropriately routed.

• Overall door-to-door transit time and variability are important factors.

Customer Service

Providing the customer with what they need in a way that provides value to them

Make them happy!!!!

Who is your customer?

Elements of customer service

• Dependability

• Time

• Convenience

• Communications

• Honesty

• Knowledge of who they are and what they do!!!

Resource allocation

The difficulty comes in tailoring each country’s customer service mix

Cost vs. service

Barriers to Customer Service

• Controllable factors

–Short term decisions vs. long term benefits

• Uncontrollable factors

–Customers/employees/service providers, etc.

Customer Service Performance

Always learning, always improving

Know what your customers value and monitor the system you have in place to deliver it!

“If you do not measure it you cannot manage it”

“Make it easy for them to shop in your store”

What are the customer service variables that must be

addressed?

Global Transportation

The mode of transportation decided upon after evaluating the trade-offs must fit with the system

Speed/Reliability/Flexibility/Cost/Security

Profit Contribution

The Transportation System• The Role of Transportation

– Move the product– Provide advantage— “on time low cost ??”– Add value—Time and place

Supply Chain management

Logistics

Transportation

“Logistics managers are finding that they need to do

much more in terms of conceptualizing, designing, and implementing logistics

initiatives that may be effective globally”

IT IS A SYSTEM!!!!

John Coyle

Modes of Transportation

1. Water—Vessels, Barge

2. Motor -- Trucks

3. Rail

4. Air

5. Pipeline

Rail-Air-Road-Water-Pipeline

• Cost vs. Speed

• Packaging vs. risk of damage

• Flexibility vs. dependability

• Product vs. mode

Domestic Water Carriers

• Relatively low cost mode; do not own the rights-of-way; easy entry and exit.

• Typically a long distance mover of low value, bulk-type mineral, agricultural and forest products

• Low rates but long transit times

• Low accessibility but high capability

Domestic Water

• Internal water carriers- rivers• Great Lakes carriers• Coastal carriers• Intercoastal carriers

Long Distance – Low Value – High Density

Rail

One can move a great deal of product vs. road or air

Is it timely enough for your needs?

Limited access points

Rail

• Advantages– Low rates– Safety– Reliability

• Disadvantage– Accessibility– Transit time

Long distance- high volume

Intermodal Transportation

• Refers to use of two or more modes of transportation cooperating on the movement of shipment by publishing a through rate.

• Logistics managers are looking for the best way to move shipments and these often attempt to take advantage of multiple modes of transportation, each of which has certain

useful characteristics.

Intermodal Transportation

Cultural bias towards using only one mode and this makes change more difficult.

Is this still true today???

• Certain types have been fairly well developed, such as rail/water, motor/water, rail/motor, and motor/air.

Intermodal Transportation: Containerization

• “Land bridge” concept may apply for international shipments where oceans are separated by a large land mass.

• For example, containers moving from Japan to Europe may dock at Long Beach, CA, transfer the containers to a railroad, and reload the containers onboard another ship in Norfolk, VA., continuing on to a European port.

Intermodal Transportation: Piggyback

• Trailer-on-Flat-Car (TOFC)

• Over the road trailers ride in special rail cars.

• Takes advantage of motor flexibility and rail’s long haul economic advantage.

• Multiple service plans for shippers.

• Some railroads provide varying levels of service, differentially priced.

Intermodal Transportation: RoadRailers

• Newest concept referred to as a “RoadRailer”• Essentially a trailer that has been reinforced to ride

on a rail bogey and be coupled together directly without first being placed on a rail flat car

• Saves weight and locomotive power and thus fuel for the railroad

• Special lower rates• Motor competitive transit times

Pipelines• Advantages

– Low cost– Not disrupted by weather

• Disadvantages– Slow– Capabilities– Accessibilities

Security???

Motor Carriers• Advantages

– Accessibilities– Transit times– Reliability– Safe

• Disadvantages– High cost– Quantity?

Shipment size/transit time vs. carrying cost

Air• Advantage

– Transit time

• Disadvantage– Cost– Accessibility

Product must have a high weight to value ratio

Carrier Selection Determinants

• Transport cost• Transit time• Reliability• Accessibility• Capabilities• Security/Safety• Tasks performed• System constraints

The cheapest freight does not necessarily mean the least landed cost

Water

• Advantages– Low cost– Reliability

• Disadvantages– Slow– Accessibility

Types of Service

• Liner ships

Operate on a pre-established schedule with determined ports of call

• Tramp ships

Operate wherever the market dictates

Size of Vessels

Dead-weight tonnage• Definition

– The maximum weight that a ship can carry– Since the ship also carries bunker and stores, the

maximum weight that a ship can actually carry is lower than its dead-weight tonnage.

• Total capacity of ship expressed in long tons (2,240 pounds), or metric tons (2,204.6 pounds).

• The fuel that a ship carries on board and that it needs to travel is called bunkers

Size of Vessels

Gross and Net Tonnage • Gross Tonnage

– The total volume of a ship’s carrying capacity, measured as the space available below deck, and expressed in hundreds of cubic feet.

– The Gross Tonnage is the basis upon which ships pay taxes or pay fees to transit through a canal.

– Only measures capacity below deck.

• Net Tonnage – Obtained by subtracting the volume occupied by the engine

room and the spaces necessary for the operation of the ship (crew quarters, bridge) from the gross registered tonnage.

Size of Vessels

Displacement• Displacement tonnage

– The total weight of the ship, when fully loaded, measured by using the weight of the water being displaced.

• Light tonnage – The total weight of the ship, when empty, measured

by using the weight of the water being displaced.

• Handy: 20,000 - 35,000 tons.

• Handymax: 35,000 - 50,000 tons.

• Panamax: 50,000 - 75,000 tons.

• Suezmax: 75,000 -150,000 tons.

• Cape: 100,000-150,000 tons.

• Very Large BC: 150,000-300,000 tons.

• Ultra Large BC: 300,000-545,000 tons.

Vessel Sizes (BULK)

Ocean Going Vessels

• Types-- General Cargo, Bulk, Tanker, Container, RO-RO

• Size-Handy,Handymax, Panamax

Capesize

Non-Vessel-Operating Common Carriers

• Shipping companies that do not own ships• An NVOCC purchases space on a ship and

re-sells part of that space to companies needing to ship cargo.

• Shipping line is paid for space and weight whether or not the NVOCC resells the space (at a higher rate).

• NVOCC acts as a freight consolidator and aggregates Less-than-Containerload (LCL) freight into a full container.

• Columbia River / Egypt:

– 10,045 miles via Panama Canal

– 30 days + 2 days canal transit

– Total 32 days.

• Adelaide, Australia / Alexandria, Egypt:

– 7,675 miles via Suez Canal

– 23 days + 2 days canal transit

– Total 25 days.

PNW versus SC Australia to EGYPT

Major Canals

PanamaPanama

SuezSuez

Difference: 2,370 miles or 7 days 1 hour 17 minutes.

• Panamax: 7.0535 days x $10,000/day = $70,535.

• Fuel: 29 tons x $200/ton x 7.0535 days = $40,910.

• Total $111,445 / 60,000 tons = $1.86 per ton, 5 cents/bu.

PNW versus SC Australia to EGYPT at Market Average

• Difference: 2,370 miles or 7 days 1 hour 17 minutes.

• Panamax: 7.0535 days x $50,000/day = $352,675.

• Fuel: 29 tons x $200/ton x 7.0535 days = $40,910.

• Total $393,585 / 60,000 tons = $6.56 per ton, 17

cents/bu.

PNW versus SC Australia to EGYPT at Market Highs

Delivered Cost Counts!

Interesting Facts

- Bulkers typically run at 14 knots/hour, 336 Bulkers typically run at 14 knots/hour, 336 miles/day.miles/day.

- Burnes about 29 tons/day of fuel.Burnes about 29 tons/day of fuel.

-7,685 gallons per day.7,685 gallons per day.

HandymaxHandymax

Historical Earnings