Chapter 5 Traffic Management

8/14/2019 Chapter 5 Traffic Management

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Chapter 5Chapter 5

Traffic ManagementTraffic Management


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5.15.1

Background and ScopeBackground and Scopeof Traffic Managementof Traffic Management


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Background and Scope

of Traffic Management senior management concerned about traffic

management because transportation is a major expense

item traffic manager is an important member of

management team traffic department plays a major role in

accomplishing physical movement flows traffic management is essential to the

attainment of logistics and firm objectives technical knowledge and specialization are

required in the traffic management area


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Traffic Management

Department responsible for planning, operating,

controlling of transportation & relatedservices for inbound and outbound

movements assists in arranging for thetransportation of goods to the customer

must be mindful of the interrelationshipsamong transportation decisions and

packaging, customer service,warehousing, materials handling, andinventory decisions


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Traffic Managers assist marketing by

quoting freight rates for salespeople suggesting quantity discounts selecting carriers and routes for delivery of products

assist manufacturing by advising on packaging and materials handling making adequate supply of transportation when needed

assist outbound shipping process by providing simplified shipping or routing guides drawing up transportation documents

encouraging shipment consolidations assist purchasing by

advising the costs and quality of inbound deliveries tracing and expediting lost or delayed shipments


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5.25.2

Rate Determination andRate Determination andNegotiation ActivitiesNegotiation Activities


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Negotiation

ActivitiesThe categories for rate-associated duties are: - published rate determination working with carrier classification regulatory board to

publish new, usually lower classifications

negotiating with a specific carrier for a contract rate tocarry most of the shippers business.

The categories are interrelated because they mayall involve rates for the same shipment, andwhichever category results in the lowest rate is theone utilized


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Rate Determination important to every traffic manager carrier has a legal obligation to determine

the correct rate

this is extremely complex and have a broadrange of interpretations many applicable rates can be found from

tariffs carrier representative typically uses the

rate that is easiest to find and usually is10% higher than the lowest applicablelegal rate

traffic manager must search many tariffsto find the lowest rate


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Freight Classification relate to the handling characteristics of

freight such classifications are taken as given in

contract negotiations between shippersand carriers

rate classification regulatory boards aremade up of carrier representatives

traffic managers appear before theboards to have the classification lowered combat the carriers attempts to increase

classification numbers


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Example Flashlights in boxes, without

batteries are designated LTL class

100 or TL class 55 with a minimumweight of 20,000 pounds

Flashlights with their normalcomplement of batteries are

considered LTL class 70 ortruckload class 45 with a minimumweight of 24,000 pounds


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classification committee felt thatflashlights without batteries were toolight

a truck with them would cube out

full but have unused weight capacity

Hence, they proposed classification of 150

LTL and 100TL, increase of 50 and 82percent, respectively


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Rate and Service

Negotiations contract carrier rate and

service negotiations are

bought to the table ofnegotiation

examples given in Pg 2 to 3


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The examples: - illustrate the various aspects of service that can

negotiate shippers are willing to pay for improved quality of

railroad service the burden of meeting the shippers obligations

and monitoring the carriers performance rests onthe shippers traffic manager

another service is for the carrier to assign one ormore vehicles to the exclusive use of the shipper

for a specified time e.g. a retail store may contract with one or more

truckers to help with holiday deliveries

Rate and Service

Negotiations


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Items include for

Negotiations contract duration contract termination renegotiations and reopening of contract transportation service level carrier insurance lead times

waiver of terms detention time articles and commodities covered how loss and damage claims are handled schedule of rates and charges estimated traffic volume billing procedures carrier equipment and drivers carrier notification requirements confidential contract Arbitration audit rights pallet loading proof of delivery adjustments to rates, and basis for charges


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another agreement must negotiateand administer is an average

weight agreement involves agreements as to weights of various

items shipped repetitively

so that each individual shipmentdoes not have to be weighed.

Rate and Service

Negotiations


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5.3 Carrier Selection5.3 Carrier Selection


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Carrier Selection Select the mode and the specific carrier are the

fundamental activities of the traffic department decision may not be exclusively determined by the

traffic manager decision to use more expensive forms of

transportation (airfreight) is by senior management initial decisions to locate facilities may based on

modal choice

e.g. site for a warehouse is the point where it wasmost cost-effective to have shipments go in by railand out by truck


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traffic managers made use of modal and multi-modalalternatives in transporting goods

an increase use of bids and negotiated rates to selectcarriers

traffic managers judge quality of service using tenmost important factors door-to-door rates or costs freight loss and damage experience claims-processing experience transit time reliability

experience with carrier in negotiating rate changes shipment tracing door-to-door transit time quality of pickup and delivery service availability of single-line service equipment availability

Carrier Selection


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Other factors in-transit privileges

diversion/reconsignment

will also influenced the decision

In fact, service provided by the

carrier is more important than costin selecting a carrier


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Weights give to CarrierService Factors

Carriers area of geographic coverage, 0.5 Carriers marketing efforts, 0.4 Carriers transit performance, 1.8 Equipment availability and cleanliness, 1.1 Customer service, 1.4 Pricing, 1.4 Billing accuracy and timeliness, 1.2

Loss and damage claims handling, 1.2 Carrier financial stability, 1.0


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5.45.4

PrivatePrivate

TransportationTransportation


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Private Transportation traffic managers frustrated with inconsistent service forced into

private trucking most firms also run a few small trucks and vans around plants or to

and from the post office and airport growth of private trucking is related to a number of factors

improved level of customer service advertising of products

traffic manager uses both private carriage and contract carriage has a good working knowledge of the operating costs in better position to evaluate the merits of carrier rate proposals

Petroleum companies like to have deliveries to filling stations

made in tank trucks carrying their brand name, rather thanhaving the stations tanks filled from an unmarked truck


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private trucking less expensive than motorcommon carriers

typically when the private trucking operation isable to achieve full loads in both directions

e.g. a trailer can be designed to carry new autosin one direction and general freight in the other

private fleet managers use broker to ensure abackhaul load of products

decision for private trucking operation should becarefully researched and analyzed well in

advance one factor commonly ignored is the requirement

that the operations be managed by aprofessional, who is not the traffic manager

Private Transportation


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5.55.5

DocumentationDocumentation


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Documentation traffic department is responsible for completing

all of the documents to transport the products many carriers provide software for shipper to

generate all of the commonly used documents

shippers also have their order-processingsoftware, capable of generating documents

The most important single transportationdocument is the bill of lading

BOL functions as a delivery receipt when productsare tendered to carriers

the signed original of the bill of lading is theshippers legal proof that the carrier received thefreight


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Another basic document is thefreight bill

it is an invoice, submitted bythe carrier, requesting to bepaid

traffic manager must approveeach bill before it is paid

Documentation


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5.65.6

Freight Payment andFreight Payment andAudit ServicesAudit Services


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Freight Payment andAudit Services

Shipper-carrier contracts specify howearly bills must be paid

to meet these time limits, traffic

managers authorize some bill-payingorganizations, to pay the carriers once initiated, the carriers submit their

freight bills directly to the service the payment service treats the freight

bills as checks drawn on the shippersfreight account and then pays the carriers


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These payment plans are growing because shippers appreciate the convenience of the

payment service carriers support the concept because of the speed

provides summaries of the traffic activity that are usefulto shippers when planning for consolidation offer bill-auditing service some have the tariffs loaded into their computer

database and pre-audit the bill prior to paying it some shippers audit their freight bills by internal and

external auditors

audits are designed to detect current errors that result inovercharges and to correct these errors in the future

Freight Payment andAudit Services


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5.75.7

RoutingRouting


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Routing

shippers have the right to select the route totheir destination

other routing concerns with respect to hazardous materials movement

firms with excess inventory deliberately chooseslow routing, using the carrier as a temporarywarehouse

traffic manager must plan for contingencies andhave alternative routes, and sometimes, carriers

As a strategy, traffic manager sometimes gives asmall amount of regular business to differentmodes or carriers for insurance purposes


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5.85.8

DiversionDiversion

andandReconsignmentReconsignment


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Diversion andReconsignment

Diversion: shipper notifies the carrier,prior arrival in the destination, achange in destination

Reconsignment: occurs after the carhas arrived in the destination commonly used in conjunction with

order bill of lading traffic managersperform the diversion

and reconsignment functions quiteregularly for perishable goods


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5.95.9

Tracing and ExpeditingTracing and Expediting


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Tracing

tracing is to locate lost or late shipments traffic department may contact the carrier ask the carrier to trace the shipment

a no-cost service offered by common carriers tracing should be requested only when a

shipment is unreasonably late many carriers that monitor the progress of freight

movements throughout their systems

this enables almost instantaneous tracing by thecarrier


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no-cost service of common carriers involves notifying the carrier in advance of the need to

expedite or rapidly move the shipment carrier makes every effort to ensure that the shipment

is delivered to destination with maximum speed carrier must have sufficient lead-time to alert its

employees regarding the shipment to be expedited for railroads, alerting the yardmaster so that the

expedited car can be singled out when it arrives andswitched to the proper outbound train

motor carriers notify the operations manager of

terminal that the product will be flowing through andplaced on the next outbound vehicle

Expediting


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5.105.10

Loss and DamageLoss and Damage


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Loss and Damage traffic managers are involved settling claims with the carriers

concerning cargo loss and damage difficult to determine the exact dollar amount of the damage a key factor in determining the value of the full actual loss is the

word earned assume that retailer owned the products that damaged beyond

repair1. if the products destroyed were going into a general inventory

replacement stock retailer would recover the wholesale price plus freight costs

2. if the product is ordered especially for a customer claim based on the retail price because the profit would have

been earned if the carrier had properly performed its service


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Loss and Damage

Another difficult area involves concealedloss or damage

more difficult to handle because the

exterior package does not appear to bedamaged or tampered with

carriers are reluctant to pay because

1. strong possibility that the product

was improperly protected on theinside

2. possibility that the consigneesemployees broke or stole the products


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traffic mgrs and carriers work together to reducefreight claims

these benefits them both a policy issue is the salvage rights to the

damaged goods the carrier, or the carriers insurer, takes

possession of the damaged goods after payingthe freight claim

disadvantages to the shipper1. if the damaged goods can be sold, compete in

the marketplace with the shippers own product2. if a consumer buys a salvaged product that is

defective, they will go after the originalmanufacturer of the product

Loss and Damage


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5.11 Reparations5.11 Reparations


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Reparations

payments made to a shipperby a carrier that has charged

illegally high rates in the past traffic manager must be

assertive to protect the

interests of his or her companyeven if it involves alienatingcarriers


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5.125.12

Demurrage andDemurrage andDetentionDetention


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Demurrage andDetention

Demurrage is a penalty paid for keeping a rail carbeyond the time when it should be released back tothe carrier

Detention is same for the trucking industry

carriers concern: equipment will be used astemporary warehouses by either shippers orconsignees

handling demurrage and detention are importantresponsibilities for traffic managers

traffic managers who are large users of railcars,enter into averaging agreements with the railroads

in this system, a credit is received every time theshipper or consignee releases a railcar one dayearly, and a debit is recorded each time a car issurrendered to a carrier one day late


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5.135.13

Transportation ofTransportation ofHazardous MaterialsHazardous Materials


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Transportation ofHazardous Materials traffic manager must see the materials are moved safety there are legal requirements pertaining to the training of

personnel to handle the materials the packaging of the product the marking and labeling of the packages the placarding of the vehicles that transport the

materials the information required on shipping documents

only certain routes may be used to move the cargo colour, symbols, and numbers of the placards seen on

truck trailers, containers, and railcars identify thehazardous properties of the products being carried


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5.145.14

Consolidating SmallConsolidating SmallShipmentsShipments


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Consolidating SmallShipments Shipments < 500 pounds, handled relatively fast and

inexpensively by Postal system or UPS it cost less on a per-pound basis to ship a larger

quantity traffic manager is trying to consolidate large numbers of

small shipments into small number of large shipments Figure 5-1 all consolidation involve the aggregation of customer

orders across time or place or both Aggregation across time

shipper holds orders or delays purchases to consolidate

shipments rather than ship each order immediately Aggregation across place

the consolidation of shipments to different destinationswithin the general area


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problems for tworeasons

trucking companies are reluctant to acceptcertain small shipments because of theirphysical characteristics often light in weight and called balloon traffic

e.g. toys and furniture

common carriers are reluctant to accept

small shipments, often feel that they losemoney on low volume customers


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traffic manager must be innovative tocompensate for the high cost and poorservice given to small shipments by the

following approaches: -1. Use interfirm consolidation, or

shipper cooperatives.

2. Use intrafirm consolidation, i.e., the

traffic manager seeks ways toconsolidate shipments within his or herown firm.

problems for tworeasons


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Consolidation For intrafirm consolidation

study of the firms past shipments to locateconsolidation possibilities

use of either make-bulkor break-bulkdistributioncentres

products move rapidly through these facilities A consolidation, or make-bulk, centre (Figure 5-2) A break-bulk operation, similar to putting our waste

materials into a three-compartment recyclingcontainer

staff separates the goods into different containers areperforming a break-bulk operation

shipping company will perform a make-bulk operationby consolidating the containers from the individualfirm and ship the goods to other countries


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Consolidation

Shippers must study the rate structures of UPS todetermine at which point it is least expensive totender the shipments to the parcel carrier

computer programs that make consolidation

easier are now available these programs consider store time commitments order sizes equipment constraints, and road speeds and distances

there is also an order-splitting and consolidationfeature that can be set to deal with >TL splits toprevent overflows and

Chapter 5 Traffic Management

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