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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? RateNext xWeight Next Break Weight  RateCurrent where: Break Weight = Weight above which the next higher weight break rate should be used for lower transport costs RateNext = Rate for next higher weight break WeightNext = Minimum weight of next higher weight break RateCurrent = Rate for true weight of shipment. CR (2004) Prentice Hall, Inc. 6-12 Break Weight (Cont’d) Answer Calculate break weight 40.11x100 Break Weight  76.82, or 7,682 lb. 52.21 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 $40.11x 100 = $4,011. Otherwise, the shipment would have cost $52.21x90 = $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) First, we compare the costs without the stop-off privilege. This would be to price as if each shipment is a separate shipment from I. Suppose we know the rates. Hence, Load, lb. 8,000 12,000 10,000 Points 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 N o w , w e p r i c e w i t h t h e s t o p o f f p r i v i l e g e . W e a s s u m e t h a t a l l t h e v o l u m e ( 3 0 , 0 0 0 l b . ) i s t o b e d e l i v e r e d t o t h e f a r t h e s t s t o p a n d w e u s e t h e r a t e t o t h a t p o i n t ( $ 3 . 0 0 / c w t . ) . A s m a l l s t o p o f f c h a r g e o f $ 1 5 . 0 0 i s m a d e f o r e a c h s t o p i n c l u d i n g t h e l a s t s t o p . H e n c e , Rate, Load, lb. Points $/cwt. Charges 30,000 I to L 3.00 $900.00 The better All volume to the farthest stop CR (2004) Prentice Hall, Inc. 3 stops at $15 each Total choice 45.00 $945.00 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