Logistics Management LSM 730 Lecture 19 Dr Khurrum

Logistics Management LSM 730 Lecture 19 Dr. Khurrum S. Mughal 1 -1

Rate Types ·Line haul rates -Class >Freight classification of items >(National Motor Freight Classification of Selected Products) >Rate tables of tariffs -Contract rates -Drayage (local delivery) ·Commodity and contract rates -Specific rates for given shipment sizes for specific products moving between designated points ·Special service charges -Extra charges -Diversion and reconsignment -Stop-off privilege example 6 -2

Class Rate Example Suppose we wish to ship 15, 000 lb. (150 cwt. ) of wheat flour from New York to Los Angeles by truck. The trucker offers a 40% discount from the published tariff. What is the transportation charge? From the freight classification table, this is item number 1090 --00. It shows a minimum weight of 36, 000 lb. , which is greater than this shipment size. Table 6 -4 Therefore, the class rating is 55, or less-than-truckload. From the class 100 tariff, the rate is 6065, or $60. 65 per cwt. With a 40% discount, the effective rate is (1 - . 40) x 60. 65 = $36. 39. The shipment charges are 0. 55 x 36. 39 x 150 = $3, 002. 18. Table 6 -5 Should always check to see if shipment can be declared at the next higher weight break for a lower rate and lower total charges CR (2004) Prentice Hall, Inc. 6 -11

Break Weight Question Suppose 9, 000 lb. of Class 100 merchandise is to be shipped from New York to Dallas. From Table 6 -4, the rate would be $52. 21/cwt. However, should the shipment be priced at the next higher weight break rate of $40. 11/cwt. for a lower cost? where: Break Weight = Weight above which the next higher weight break rate should be used for lower transport costs Rate. Next = Rate for next higher weight break Weight. Next = Minimum weight of next higher weight break Rate. Current = Rate for true weight of shipment. CR (2004) Prentice Hall, Inc. 6 -12

Break Weight (Cont’d) Answer Calculate break weight Since the 9, 000 lb. shipment size exceeds the break weight of 7, 682 lb. , size as if a 10, 000 lb. , shipment for a total cost of $40. 11 x 100 = $4, 011. Otherwise, the shipment would have cost $52. 21 x 90 = $4, 699. CR (2004) Prentice Hall, Inc. 6 -13

Stop-Off Privilege Example Suppose 3 shipments of J=8, 000 lb. , K=12, 000 lb. , and L=10, 000 lb. originating at I are to be delivered in the following way. CR (2004) Prentice Hall, Inc. 6 -6

Stop-Off Privilege Example (Cont’d) Load, lb. Points 8, 000 12, 000 10, 000 I to J I to K I to L Rate, $/cwt. 3. 05 3. 35 3. 60 Total Charges $244. 00 402. 00 360. 00 $1006. 00 Rate, Load, lb. Points $/cwt. Charges 30, 000 I to L 3. 00 $900. 00 3 stops at All volume to $15 each 45. 00 the farthest stop Total $945. 00 CR (2004) Prentice Hall, Inc. The better choice 6 -7

Private carrier costing ·Service Reliability ·Short Order Cycle Times ·Emergency Response Capability ·Improved Customer Contact ·Costs: ·Fixed Costs ·Operator Costs ·Vehicle Operating Costs CR (2004) Prentice Hall, Inc. 6 -8

Rate Profiles By distance Rates vary with the distance between origin and destination in the following manner CR (2004) Prentice Hall, Inc. 6 -9

Rate Profiles (Cont’d) By volume Rates by shipment size have the following characteristic CR (2004) Prentice Hall, Inc. 6 -10