Humber College Post Graduate Supply Chain Management Program

SCM 5000 Distribution One Transportation Assignment (Mid Term Assignment)

Professor: Natalie Kotikova – Winter 2022

Instructions:

1. Complete this assignment using this file. Save the file “Distribution 1 Mid Term
Assignment Your Name” prior to submission. Do not alter the font size, type, margins, or
any other formatting associated with this file.

2. Upload this file prior to the due date in Blackboard. Safe assign will be used to assist in
determining instances of plagiarism or the use of external resources.

3. This is an individual assignment. Instances of group collaboration will result in academic

misconduct for each involved, and at minimum a zero on this assignment.

4. Use only materials presented in this course (textbook readings, learning modules,
discussion boards, blackboard videos and live classes). It is not acceptable to use
external sources in this assignment.

5. There is no prescribed word limit/length for this assignment. As a guideline, consider a

1,000 words response a typical median per challenge question. At the post-graduate
level, you are expected to explain in sufficient detail your response. Your paper is to be
formatted in a full sentence discussion form, limiting the use of tables or bullet points.
Your ability to communicate and stay focused is important. Remember to spell and
grammar check your paper prior to submission. Grammatical and spelling mistakes will
reduce the overall confidence of your report. Each challenge is worth equal weight.

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Challenge 1. The Modes of Transportation

Compare and contrast the modes of transportation against each other. For example, you may
consider their overall capacity to move cargo and/or their relative costs to each other.

Complete response to this challenge will include in-depth comparison of the modes strengths
and weaknesses against each other. The only sources to be used for this discussion are those
found in your textbook, the course site, the course modules, and course discussion boards.

It is needless to say that the organization that can move the freight in the most effective way
wins the competition. An organization’s supply chain mainly consists of six modes of
transportation - Rail, Truck, Water, Air, Pipeline, and Intermodal. Each has its own set of
benefits and drawbacks. Out of all these, Land, Water, and Air are the 3 most often used in
transportation. The best form of transportation depends on several parameters: Type of Cargo
being transported, distance to be covered, amount of time, and cost required. Land
Transportation is the most affordable and adaptable. Short-distance travel is best done by road,
which can be categorized in Trucks, whereas long distance is done by Rail. People use cars and
trucks for short-distance ground transportation to get from one location to another. Rail
frequently makes fewer stops along their route than cars or trucks, but they are typically slower
than those vehicles.

For long distances and heavy loads, sea transportation is optimal. Ships can move a lot of cargo
as compared to the other modes, but they typically take a lot of time. Ships may transport more
freight in a given amount of space than either railways or airplanes can. Here, in order to suffice
short - distances and time-bound cargo, air transportation is best. Despite being faster than
ships, airplanes cannot carry as much cargo as a Ship can. Airplanes require a lot of capital in
various forms such as Fuel, security fees, etc. and due to this reason, it is not considered an
ideal choice for transportation. Although they are the most expensive, airplanes are the fastest
form of transportation. In order to establish the optimum transportation system for a specific
circumstance, many forms of transportation can also be integrated. A consignment of cargo, for
instance, might be transported by truck to a port, where it is loaded onto a ship for the drawn-
out voyage across the ocean.

Due to the several additional procedures required in air shipping, the cost of doing so is
typically higher than the cost of doing so via sea freight. For instance, once cargo reaches an
airport, it needs to be loaded onto trucks and transported there. Because there are no trucks or
dockside tools needed, this operation takes time and resources that are not needed when items
are transported by ship.

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Challenge 2. Transportation Pricing

Explain how pricing for transportation services is developed by carriers in the five modes of
transportation. Be specific to include what factors go into the creation of transportation rates
and include at least one example of a pricing calculations (these are to be original examples,
created entirely by yourself).

Complete responses here will discuss the factors that a transportation provider needs to
consider and then descriptions of the standard forms of pricing that how pricing is created in
each mode including different volume of cargo presented to a carrier (if applicable). The only
sources to be used for this discussion are those found in your textbook, the course site, the
course modules, and course discussion boards.

Transport costs are expenses that providers of transportation services bear on their own. They
are separated into fixed (infrastructure) and variable (operational) expenses, which depend on
a variety of elements such as location, infrastructure, legal requirements, energy, and the
methods used to convey people and goods. Transactions, shipments, and the friction of
distance are the three main elements that affect transportation costs. The pricing for
transportation services is explained below:

Train:
There are four ways to determine train pricing, and they are as follows:
1. Pricing per ton-mile and ton-kilometer (rate per ton-kilometer, freight, and distance between
origin and destination)
2. Carload pricing (Freight, Capacity per rail car, Distance between the origin and Destination)
3. Unit Train Pricing (Distance, Car/Unit Train, and Rate/KM)
4. Pricing for intermodal container road transportation is affected by a number of variables,
including Weight and Distance.
Typical Rail Costs include
i. Fixed Costs 30%:(Tracks, rights-of-way (land), terminals, rolling stock, property taxes, etc.
ii. Semi-variable Costs 20% (Maintenance of tracks and rights-of-way, etc.)
iii. Variable costs 50% (Labour, fuel)

Truck:
Pricing for Truck Loads: To acquire prices using this method, we must first determine the
cargo's freight class. The National Motor Freight Traffic Association (NMFTA) establishes freight
class. The merchandise that we are transporting determines the freight class.
Cost factors that impact the operation of truck fleets:
i. Fixed (Publicly owned, costs recovered by gas taxes, tolls, Terminals)
ii. Semi-variable (equipment - lease vs own, Maintenance, Insurance, Licenses
iii. Variable (>60%) - [Employee wages and benefits ~25.3%, Payments to owner-operators
~22.1%, Fuel ~15.1%, Tolls]

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Water:
i. Function of commodity, distance, weight, volume (Significant ancillary fees at ports)
ii. General cargo…use higher of weight/measure (W/M) - [Based on 1 tonne per cubic metre]
iii. Containerized goods - [Per standard container (20 ft or 40 ft), Origin to destination, Freight
forwarders combine several shipper’s LCL shipments to benefit from CL rates]

Example:
Cargo with dimensions of 2m x 2m x 5m weighing 4 metric tonnes.
• Measure = 20 M3 (cubic meters) x 1 tonne per M3 = 20 tonne
• Weight = 4 tonnes
• Rate Quote = $250 W/M
• 20 > 4
• M>W therefore price charged is 20 x $250 =$5000

Air:
Cargo pricing is dependent mainly on weight and/or cubic dimensions. Some shipments that
have a very low density can be assessed as an over-dimensional charge, usually based on 8 to
10 pounds per cubic foot. This over-dimensional charge is used to gain more appropriate
revenue from shipments that take up a lot of space but do not weigh much. Other factors
affecting the price paid to ship freight via air transportation include completeness of service
and special services

Pipeline:
The pipeline price is mainly dependent on the following parameters
i. diameter,
ii. length,
iii. available inlet compression,
iv. minimum delivery pressure and
v. other physical parameters.

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Challenge 3. Containerization

After graduating Humber’s Supply Chain Post Graduate program, you have been asked to
attend a career fair where prospective students have the chance to speak to recent graduates
of the program. One prospective new student approaches you and mentions that they heard
about freight being containerized in the different modes of transportation and was curious
about the benefits and detriments it provides.

How would you respond to the prospective student?

Complete responses here will describe the primary type of containerization used in each mode
and the benefits and detriments of each. The only sources to be used for this discussion are
those found in your textbook, the course site, the course modules, and course discussion
boards.

Well, I would say that the container used as a load unit for the transportation of freight is
becoming more common. Containerization permits easy handling between modal systems. It
refers to the increasing and generalized use of the container as a load unit for freight
transportation. Containerization basically involves the procedures where cargo from other
modes of transportation is either replaced by the intermodal container which is accepted as a
means of freight distribution. It is also distributed spatially as more and more transport systems
become capable of handling containers. Freight mobility benefits from containerization in a
number of ways which are explained below:
i. Helps in reducing transportation costs
ii. Cheaper inventory costs
iii. With higher service quality including reliability.

The development of intermodal transportation and containerization are mutually inclusive, self-
strengthening, and rely on a set of driving forces linked with technology, infrastructures, and
management. The usage of containers shows the complementarity between freight
transportation modes by offering a higher fluidity to movements and standardization of loads.
The container has substantially contributed to the adoption and diffusion of intermodal
transportation, which has led to profound mutations in the transport sector. By reducing
handling time, labor costs, and packing costs, container transportation allows considerable
improvement in the efficiency of transportation. Thus, the relevance of containers is not what
they are – simple boxes – but what they enable; Intermodalism. Globalization could not have
taken its current form without containerization. The varying shapes and measurements of the
containers that shipping companies utilized were some of the demerits.

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Challenge 4. Reflection on Transportation

Reflect on your experience in this class for the first half of this course, specifically on the topic
of transportation and your own individual experience and learnings. Complete responses here
will consider the outcome of your experience in this course (so far) in a critical reflection. A
reflection is purposeful contemplation of your own individual experience and connection to the
learnings.

The experience has been great so far. I learned a variety of ways by which goods are
transported from place to place and how the movement is accomplished. The need of
transporting large quantities of goods over long distances at high speeds in comfort and safety
has been an index of civilization. It has turned the landscape of the modern transport system.
Mainly transportation by Rail, Road, and Trucks has been booming so far.

I also learned that in order to supply and demand effectively, we must establish a proper mode
of transport. This proper mode of transport selection is considered on a variety of parameters
that are crucial. Good transportation also supports a firm’s strategy in achieving desired profits
and revenue. They evaluate the transportation function based on a combination of
transportation costs and then select the best possible match. The course also helped me
understand that the primary goal of any business lies in its transportation. This is especially true
in larger enterprises. In addition to this, good transportation is not only in selecting the best
mode but also includes multiple other parameters like ERPs, ordering systems, transportation
management systems, etc. These are required and are cohesively glued together to attain the
desired result of transportation. The glue is responsible for moving the materials from one
place to another. It can also be said that without visibility into the transportation, there will be
delays, costs, and maybe backlogs. These occurrences have the potential to disrupt production
plans, possibly leading to idle labor or potential revenue losses.

Individual experience:
Once I requested a delivery from Dubai for my sister. My friend from Dubai was expected to
bring that item with him while coming. He lives in the Northern part of India, whilst I live in the
southern part. In light of the fact that we still had a few days before my sister's birthday, we
initially opted to go with a straightforward courier option to have it delivered from his location
to mine. Unfortunately, he was unable to arrive before my sister's birthday since he had to
delay his travel due to a family situation. At that moment, I made the decision to sign up for
DHL and select the Air Transport option for my courier, which allowed me to receive my
package quickly, that is before my sister’s birthday. I chose that option since my package
needed to be transported in a very careful manner and was quite delicate. Overall, I would say
that this experience was a fantastic match for the air transportation method I learnt about in
this semester's Distribution class.