Staying True to Transportation Fundamentals

Staying True to Transportation Fundamentals

In the last post we discussed the three fundamentals of transportation and logistics decision making: cost, consistency and transit time.  In this post, we will be examining the affect of applying these fundamentals to identify the appropriate mode of transport.  While these principles may not be universally applicable, a well-rounded understanding of them is universally useful. 

The weight given to each of the three fundamentals depends on the freight.  This concept is illustrated below:

 Freight Type     First Priority      Second Priority      Third Priority 
 Clothing & Shoes     Transit Time     Consistency     Cost
 Wood Pulp     Cost     Consistency     Transit Time
 Goods for Manufacturing     Consistency     Cost     Transit Time
 Refrigerated Freight     Transit Time     Consistency     Cost

As is shown above, certain freight will prioritize a quick transit time over low cost, where others will need consistent delivery of freight to be paramount.  Each mode of transportation can be broken down in regards to its ability to match these characteristic needs, as shown below:

 Mode      Best Performance Measure      Fair Performance Measure     Worst Performance Measure 
 Air     Transit Time (Fastest)     Consistency     Cost (Most Expensive)
 Truck     Transit Time     Consistency     Cost (Most Expensive Land Mode)
 Rail     Cost     Transit Time     Consistency (varies upon provider)
 Water     Cost (least expensive)     Consistency     Transit Time (slowest)

Air, as a freight transport option, furnishes a considerably faster transit time than terrestrial modes of transportation, but does so at a significantly higher cost.  Due to this characteristic, it is not viable under normal circumstances to blend air transport into an intermodal transportation network.  Consequently, truck, rail, and water are what will be examined in this post.  

In a (hypothetical) closed system - where federal/state transportation policies do not artificially sustain one mode versus another - the demand priorities of each freight type would naturally match up with the corresponding performance measures of each mode of transport (e.g. all wood pulp would move by water).  In order for this scenario to play out, each of these three modes of surface transportation would have to be available on a given trade lane.  

Intermodal transportation is in place because the transportation and logistics community has evolved to recognize the values of a seamless network of transportation options for the customer.  To illustrate this fact, here is an example: The customer (Sample Enterprises) is looking to do a long, overland move, but is not located directly on a rail line. However, SE is within a short truck haul of an intermodal rail facility.  The trucking company can haul SE's freight short haul to the rail facility, and do another short haul from the end rail station to the destination.  This moves SE's freight at the lowest possible cost.  Trucking companies have worked well with the rail community to exploit this fact and apply fuel savings and a reduction of driver hours when it makes sense for them to rail their customer's freight over the longest distance possible and truck the front and back end of the freight move.  However, this process is not often very well understood. 

Matching demand with performance characteristics of multiple modes of transport is the ultimate goal in long-term planning for economic sustainability for any country.  

One challenge to adhering to transportation fundamentals in the United States is a lack of the low-cost waterborne mode of transport.  As roads and bridges are expensive to build and maintain, they should not be treated like railroads or waterways.  

It is important to note that freight types that have "cost" as their number one priority often are operating on small margins.  When this is the case, the shipper is seeking to fit as much freight as possible in every unit of transport - this means loading heavy whenever possible.  The more weight that is shifted to our roads and bridges, the faster they deteriorate.  In order to optimize the movement of freight while minimizing waste, we must find a way for our shippers to access larger margins for every bit of product they produce or handle.    

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