PART II
ANSWERS TO END-OF-CHAPTER QUESTIONS
CHAPTER 12: TRANSPORTATION
12-1. Why is transportation important to a firm’s supply chain operations?
Transportation influences, or is influenced by, many logistics activities such as the fact that
transportation costs are directly affected by the location of plants, warehouses, vendors, retail locations,
and customers. Inventory requirements are influenced by the mode of transport used and the transport
12-2. Why is it important to know about the characteristics of a country’s transportation infrastructure?
Because an increasing number of shipments is being transported between multiple countries,
knowledge of a country’s infrastructure can help avert potential transportation problems. For example,
some countries may have few airports with 10,000-foot runways, which might reduce the feasibility of
12-3. Discuss the speed of airfreight transportation in terms of the line-haul and accessorial service.
When one thinks of air transportation, one immediately thinks of speed, particularly on the line-haul
(terminal-to-terminal movement of freight or passengers); modern jet aircraft are capable of traveling
12-4. Why is the reliability of airfreight transportation somewhat problematic?
On the one hand, air’s tremendous speed relative to the other modes offers the opportunity to “make up
lost time” that isn’t possible with the other modes. However, because so much airfreight is belly
12-5. How do truckload operations differ from less-than-truckload operations?
Less-than-truckload (LTL) shipments range from about 150 to 10,000 pounds; truckload (TL) carriers
focus on shipments of greater than 10,000 pounds, although the exact weight depends on the product.
12-6. How do speed limits and hours-of-service rules potentially affect motor carrier service?
Several states mandate a two-tier speed limit policy in which the maximum speed for motor carriers is
lower than for automotive vehicles, which potentially means longer transit times by truck. However,
12-7. What are advantages and disadvantages to a pipeline’s lack of vehicles?
The advantages include that there is no need for vehicle operators and that the likelihood of work
stoppages by operating employees is small. The lack of vehicles also means that transportation is one
way, and the lack of a backhaul reduces potential excess capacity issues. In addition, the pipeline’s lack
12-8. What are pipeline slurry systems? How do they function?
Slurry systems allow bulk commodities to become liquefiable by grinding the solid material to a certain
particle size, mixing it with a liquid to form a fluid muddy substance, pumping that substance through a
12-9. Discuss the drawbacks to rail transportation.
There is a level of market concentration and domination in railroading that creates limited service and
pricing options for potential customers. U.S. railroads have exhibited rather uneven reliability in recent
years in part because of severe weather conditions that have destroyed and damaged many miles of
12-10. How do weather conditions influence the reliability of inland water carriers?
Drought creates problems because when water levels drop below acceptable levels, barges are forced to
reduce their loads or barge traffic might be halted altogether, situations that require alternative means
12-11. Discuss the positive attributes of inland water transportation.
Inland water transportation is relatively inexpensive to users, particularly when compared to rail and
truck transportation. Moreover, many different kinds of products can be carried. Of the modes with
12-12. How do containers help to facilitate intermodal transportation?
Containers—large reusable steel boxes used for intermodal shipments—are moved by mechanical
devices such as container cranes. Companies need only handle a container and not the freight inside of
12-13. What are freight forwarders? How do they function? What services do they perform?
Freight forwarders can best be thought of as consolidators of freight. They function by consolidating
shipments from small shippers, buying transportation in volume rates, and then charging shippers a rate
12-14. What is a shippers’ association?
Shippers’ associations perform basically the same functions as surface and airfreight forwarders, except
shippers’ associations do not operate as profit-making organizations. Although shippers’ associations
12-15. Discuss the various options that are available to parcel shippers.
Parcel shippers, which send packages weighing up to 150 pounds, have a variety of options such as
Retail Ground, a service of the U.S. Postal Service. Retail Ground has definitive size (130 inches in
combined length and girth) and weight limitations (approximately 70 pounds). United Parcel Service
12-16. List several environmental regulations and describe their impact on transportation.
With respect to noise, the Environmental Protection Agency (EPA) is responsible for enforcing noise
emissions from transportation equipment such as rail locomotives and truck tractors. In terms of air
12-17. Pick three modes of transportation, name the federal agency responsible for safety regulation for
each of the modes you’ve picked, and provide a safety-related role or responsibility for each mode.
Air: Federal Aviation Administration; airspace and air traffic management.
Motor carriers: Federal Motor Carrier Safety Administration; reduce crashes, injuries, and
fatalities involving large trucks and buses.
12-18. Define what is meant by economic regulation. Why is transportation economic deregulation
important?
Economic regulation in transportation refers to control over business practices and activities such as
entry and exit, pricing, service, accounting and financial issues, and mergers and acquisitions.
Economic deregulation of transportation is important because it allowed transportation companies
12-19. How does a common carrier differ from a contract carrier?
A common carrier has agreed to serve the general public by assuming four specific obligations: to
serve, to deliver, to charge reasonable rates, and to avoid discrimination in pricing and service. A
12-20. Discuss advantages and disadvantages to private transportation.
One advantage to private transportation is that the equipment can serve as a rolling billboard that
allows an organization to promote itself. Operational control is another advantage to private
transportation, in part because shipments can move at a time convenient to the company, as opposed to
A key disadvantage is that private transportation can be quite costly, in part because of the capital
PART III
CASE SOLUTIONS
CASE 12-1: HDT TRUCK COMPANY
Question 1: Assume you are Vanderpool. Draft the comparison Pon just requested.
Many students will calculate transportation costs. For the movement via Chicago, they will choose to
use rail. The following tables show the comparison.
Via Chicago Costs ($)
Vessel charter 72,000
Load and block ($20/trk) 2,000
Rail rate at $90/trk 9,000
Via Baltimore Costs ($)
Load and block ($30/trk) 3,000
Rail rate at $448/trk 44,800
Question 2: Which of the two routing alternatives would you recommend? Why?
In terms of transportation costs only, the chartered vessel is cheaper. However, when taking into
account cash flows and the value of money, the Baltimore route becomes advantageous. Assume we
use the charter vessel. It should arrive on May 30 and HDT will be paid. However, if trucks are sent
total cost now becomes $150,938.50—which is more expensive than using Baltimore.
Question 3: Assume that the buyer in Saudi Arabia has made other large purchases in the United States
and is considering consolidating all of its purchases and loading them onto one large ship, which the
buyer will charter. The buyer contacts HDT and, although acknowledging its commitment to buy FAS
Question 4: Answer Question 3 with regard to changing the terms of sale to delivery at port in
Baltimore. The buyer would unload the trucks from the railcars.
The answer for Question 3 holds here as well. Note that HDT still has responsibility for getting the
railcars.
Question 5: Is there an interest rate that would make HDT change from one routing to another? If so,
what is it?
Let i equal the rate of interest. Refer to answers to Questions 1 and 2.
Substituting .053 into the left side of the relevant equation (i.e., shipping via Chicago) above yields a
Question 6: Assume that the cost to HDT of borrowing money is 12 percent per year. Because the
buyer will pay for trucks as they are delivered, would it be advantageous for HDT to pay overtime to
speed up production, ship the trucks as they are finished via the Port of Baltimore, and collect its
payment earlier? Why or why not?
The selling price of each truck is still $172,000. Each day that HDT must wait for payment costs [(.12 x
amount.