What do Carriers Attempt to Do?
Serve some transportation niche profitably
Need to ask some questions
What types of service am I going to provide?
Price
Speed and reliability
Accessibility and geographic scope
Capabilities (heat protection, refrigeration, liftgate, etc…)
Security
Bonded
Safety
Damage
How can I provide these services at a profit?
Can I obtain a cost advantage over competition?
To answer these questions, we must look closely at operations
and a firm’s operating system or network
There are three generic operations that firms perform to different
degrees
Linehaul
Pickup and Delivery
Sort/terminal
Linehaul
Think of loaded vehicles traveling between cities
What does linehaul efficiency look like?
Equipment in constant motion
Equipment full (both weight and cube capacity) at all times (density)
Traffic flows balanced
24/7 operation
Pickup and Delivery (P&D)
Think of UPS drivers stopping at every other house and delivering
packages
What does P&D efficiency look like?
Vehicles get filled (emptied) with few stops
Short distances between stops
Short distances between terminals and stops (stem time)
24/7 operation
Sort/Terminal
Think of an airport passenger terminal except with packages that
don’t sort themselves
What makes Sort operations efficient
Short distances to move between vehicles
Cross dock operations versus holding shipments on dock
Larger shipments
Heavy flows between origins and destinations
How do carriers blend these operations?
Trade-offs exist
Long-haul TL
Mostly linehaul
Short haul TL
Like long-haul, but more use of P&D
Might need a terminal from which to dispatch trucks
LTL
Heavy use of Sort to increase efficiency of linehaul and P&D
Short-haul uses point to point network
Speed more important than efficiency
Shorter distance decreases savings from Sort operations (full trucks have a
shorter distance to go)
How would you describe Federal Express’s network?
Why did Fed Ex start with a single terminal in Memphis?
How do the various modes use sort, P&D, and linehaul?
Transportation involves networks and systems. Firms
design their networks to fit their mission and strategy.
To a large extent, firms trade-off one cost
(sort,P&D,linehaul) for another to obtain the lowest total
cost for some particular type of service.