Transportation System
The transportation system is the physical link
connecting a company´s customers, raw
material suppliers, plants, warehouses, and
channel members – the nodes (fixed points
where the goods come to halt).
Modal Choice
 Basic modes (rail, water, truck, air,
pipeline),
 Intermodal transportation (uses two or
more modes to provide service, e.g. railtruck, rail-water).
Carrier Selection Determinants I.
Firms use to evaluate the alternative modes various
criteria:
 transportation
cost (include the rates, minimum
weights, loading and unloading facilities, packaging,
special services),
 transit time (includes the time for pickup, delivery,
terminal handling, and for movement between origin
and destination terminals),
Carrier Selection Determinants II.
 reliability (the consistency of the transit time a carrier
provides),
 inventory and stockout costs (lower transit times
result in lower inventories, but if the transit time is not
consistent, the firm must increase the inventories),
 capability (the carrier´s ability to provide the
equipment and facilities the movement of a particular
commodity requires),
Carrier Selection Determinants III.
 accessibility (the availability of carrier routes and
terminals in shipping location, the geographic limits
of a carrier´s route network – rail lines or
waterways),
 security (the arrival of goods in the same condition
they were in when tendered to the carrier).
Railways - Advantages
railways are capable of transporting all
commodities,
 huge capacity allows the railways to be a
decreasing-cost industry,
 primarily long-distance, large-volume movers of
low-value, high-density goods (forest, mines,
agriculture),
 relatively low rates,
 weather conditions disrupt rail service less than
they disrupt the service of other modes.

Railways - Disadvantages
 the accessibility of rail transportation does
have limitations,
 require a large investment in terminals,
equipment, and trackage to begin operation,
 rather long transport time (the carrier
consolidates boxcars into train units),
 moving goods by rail requires considerable
packaging and resultant packaging costs.
Motor Carriers - Advantages
 the motor carrier can provide transportation service to all
shippers,
 move high-value commodities requiring personalized
service,
 require the low capital (low fixed cost),
 does not require extensive terminal and equipment
investment and does not invest in its own highway (the
government builds and maintenance the highway, and the
carrier pays for highway use),
 high availability to provide service to any location (high
accessibility),
 lower transit time than rail and water, but higher than air.
Motor Carriers - Disadvantages
 high variable cost,
 relatively high rates,
 weather conditions and highway traffic can
disrupt motor service,
 motor carries transport primarily
manufactured commodities over relatively
short distances.
Water Carriers - Advantages
 primarily long-distance movers of low-value,
high-density cargoes that mechanical devices
easily load and unload (mineral, agricultural,
forest products),
 lower cost than for rail, motor and air,
 water carrier requires no investment for the
way, only capital necessary for equipment.
Water Carriers - Disadvantages
 slow movement (the highest transit time of
all modes),
 weather conditions affect operations (ice and
low water levels),
 water transport has greatly limited
accessibility (shippers have to use additional
land transport).
Air Carriers - Advantages
 air carriers do not invest in a airway,
 speed (the lowest transit time over long
distances),
 necessary for moving emergency shipments
or shipments that are highly perishable.
Air Carriers - Disadvantages
 the principal business is the passenger
movement,
 cost structure consists of high variable costs
in proportion to fixed costs,
 quite high equipment cost,
 high transport cost (rate),
 limited accessibility (firms must use land
carriers to transport freight to and from airport),
 weather conditions can interrupt air service
(increased transit time).
Pipelines - Advantages
 low variable costs,
 low rates,
 weather conditions do not disrupt service.
Pipelines - Disadvantages
 not suitable for general commodity
transportation (inability to transport solids),
 limited accessibility,
 quite slow speed (< 15 km/h),
 high fixed costs,
 high investment in the line, terminals, and
pumping stations.