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1)Answer the questions

  1. What is the amount of the documentation required for important exports?

  2. Give a definition of the Bill of Lading.

  3. What does the Freight Bill contain of?

  4. How credit terms vary?

  5. Who defines the limits of carrier responsibility?

2)Make the word combinations from the following words

1.bill of a) credit

2.letter of b) certificate

3.transmittal c) receipt

4.insurance d) instructions

5.dock e) invoice

6.delivery f) of origin

7.export g) invoice

8.commercial h) lading

9.certificate i) declaration

10.consular j) letter

Unit 5. Transport Decisions.

If you are planning for one year, grow rice. If you are planning for twenty years, grow trees. If you are planning for centuries, grow men.

  • A Chinese proverb

Part 1. Transport Service Selection.

Transportation is a key decision area within the logistics mix. Except for the cost of purchased goods, transportation absorbs, on the average, a higher percentage of logistics costs than any other logistics activity. Although transport decisions express themselves in a variety of forms, chief among these are mode selection, carrier routing, vehicle scheduling, and shipment consolidation. Methods for dealing with these important decisions will be illustrated in this unit.

The selection of a mode of transportation or service offering within a mode of trans­portation depends on a variety of service characteristics. McGinnis found that six variables are key to transport service choice: (1) freight rates, (2) reliability, (3) transit time, (4) loss, damage, claims processing, and tracing, (5) shipper market considera­tions, and (6) carrier considerations. Although freight rates are important and can be the determinant of choice in some situations, service remains more important over­all. As Evers noted, "Timeliness and availability are quite important for each mode while firm contact, suitability, restitution, and cost are of lesser importance." Other studies support the same idea. Considering that transportation service cannot be selected if it is not available leaves transit time (speed) and transit time variability (dependability) as the key factors for service choice followed by cost. In the United States, shippers rank reliability ahead of cost and other service variables.

  1. Basic Cost Trade-Offs

When transportation service is not used to provide a competitive advantage, the best service choice is found by trading off the cost of using a particular transport service with the indirect cost of inventory associated with the performance of the selected mode. That is, speed and dependability affect both the shipper's and the buyer's inventory levels (both order quantity stock and safety stock) as well as the amount of inventory that is in transit between the shipper's and buyer's locations. As slower, less reliable services are selected, more inventory will appear in the channel. Inventory-carrying cost may be in trade-off with lower cost for the transportation service. Given alternatives, the favored service will be the one that offers the lowest total cost consistent with customer service goals while meeting customer service objectives.

The effects of transportation performance, similar to those on inventory, can be seen on production scheduling. Production systems operating with little or no raw material inventories are highly vulnerable to delays and shutdowns from transport performance variability.

Trucking offers the lowest total cost, even though rail transport offers the lowest rate and air transport offers the lowest inven­tory cost. With trucking, transit time can be reduced to five days, and the inventory levels at each end of the channel can be reduced by 50 percent.