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Questions and Answers
Which factor is NOT typically used to determine the mode selected for a shipment?
What is often excluded from the Bill of Lading (BOL)?
Which mode of transportation generally has the highest cost but offers faster speeds?
Which of the following best describes a 'commodity' in shipping terms?
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What is a common characteristic of contract rates compared to spot rates in shipping?
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Which type of fees can affect freight rates in addition to base costs?
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Which of the following best defines a 'shipper' in a transportation context?
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What is the primary purpose of the Bill of Lading?
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What primarily drives transportation pricing within a mode?
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What defines the cargo-carrying capacity of line-haul vehicles?
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What is a typical Operating Ratio for Less Than Truckload (LTL) carriers?
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Which of the following is NOT a method used in differential pricing?
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What are the two largest costs for carriers and private fleets?
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What is the main service characteristic that drives price across transportation modes?
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What is the Operating Ratio formula used to calculate?
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Which vehicle type is primarily used for nimble pickup and delivery within a city?
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What factor contributes to the variation in truckload rates when traveling in opposite directions between two markets?
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Which two companies have historically been the top parcel carriers in the US, outside of USPS?
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What service was crucial for the growth of the parcel industry?
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How are parcel rates generally determined by carriers?
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What types of transit services do parcel carriers usually offer?
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Which of the following is a common surcharge imposed by parcel carriers?
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What percentage of all retail sales does online shopping account for?
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What is the predicted growth of US parcel volume from 2019 to 2028?
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Study Notes
Contract Rates
- Customized agreements between shippers and carriers for specific routes.
Backhaul Rates
- Lower than forward haul rates due to lower demand.
- Carriers aim to cover costs on backhauls, often operating with empty trucks.
Parcel Shipments
- Limited to under 150 lbs.
Top Parcel Carriers
- FedEx and UPS historically dominate the market.
Parcel Industry Growth
- Fueled by premium guaranteed delivery services (1-day and 2-day).
Parcel Rate Quoting
- Based on weight (rounded up to the next pound) and destination zone.
Parcel Transit Services
-
Air Services: Expensive, with guaranteed on-time delivery.
- Same-day (very expensive)
- 1-day (Early AM, Mid-morning, End of day)
- 2-day (Early AM, End of Day)
- 3-day
- Ground: Less expensive, 3-5 day delivery from origin.
- Parcel Post: Least expensive, not guaranteed, 3-9 day service from origin.
Parcel Weight Increments and Charging
- Rates increase with higher weight and zone numbers.
Parcel Surcharges
- Used by carriers to recover margins:
- Fuel Surcharge
- Residential delivery surcharge
- Peak/pandemic surcharge
- Delivery area surcharge (extended zip codes)
- Oversized/DIM charges (odd-sized or underweight cartons)
- Third-party billing fee
Online Retail Growth
- Over 16% of all retail sales happen online.
Parcel Volume Growth
- Expected to nearly double (2x) from 2019 to 2028.
Amazon Logistics
- Amazon now delivers more packages in the US than FedEx and UPS.
- Amazon Air has a fleet of around 100 aircraft.
Regional Parcel Carriers
- Smaller than UPS and FedEx, serving specific geographical areas.
Warehouse Automation Systems
- Receiving/Shipping: Autonomous Guided Vehicles (AGV), robots for conveyor systems, automated loading and unloading systems.
- Pallet & Case Movement: AGV, de-palletizers, conveyors, bin shuttles, pallet shuttles.
- Storage: Bin carousels, Automated Storage and Retrieval Systems (AS/RS) with stacker cranes.
- Picking: Conveyors, AGV, picking robots.
Shipping Terminology
- Carrier: A company that transports goods via land, sea, or air.
- Shipper: The party that tenders or ships the goods for transportation.
- Consignee: The party to whom goods are shipped and delivered.
- Commodity: The product being shipped.
Orders vs. Shipments
- Order: A request for goods or services.
- Shipment: An amount of goods sent together to a location.
Bill of Lading (BOL)
- A transportation document containing the contract of carriage between shipper and carrier.
- Includes: Shipper, carrier, consignee, tracking number, freight terms, order number shipped, commodity shipped.
- Typically does not include price.
- One BOL corresponds to one shipment, consisting of one or more orders and commodities.
Key Factors in Mode Selection
- Shipment size/weight
- Required transit time (speed)
- Product characteristics
- Cost
Mode Comparison (Speed & Cost)
- Air freight: , 3-5 days
- Truck: $$$, 3-5 days
- Rail: $$, 5-15 days
- Maritime (Ocean): $, 30-45+ days
Maximum Weight for a Truck
- 80,000 lbs.
Motor Carrier Equipment Vehicles
- Line Haul: Long-distance hauls between cities, typically tractor-trailer combinations with 3+ axles.
- City (Straight): Used within a city for nimble pickup and delivery, smaller single-unit vehicles.
Transportation Pricing Drivers
- Service characteristics (speed being a major driver).
- Capacity & Shipping Volume:
- Capability (supply): Number of drivers, tractors, trailers/containers, cargo ships, cargo aircraft.
- Shipping Volume (demand): Driven by shipping demand.
Top Carrier Costs
- Driver wages and fuel.
Operating Ratio
- A measure of operating efficiency and financial viability.
- Calculated: (Operating expenses / operating revenue) x 100.
- LTL normal levels: 93-96.
- TL normal levels: High 80s to low 90s.
Differential Pricing
- Charging different prices to different customers based on:
- Time (seasonal)
- Individual person
- Place
- Commodity
Market Intelligence for Shippers
- Shippers can use market intelligence to combat carrier use of differential pricing.
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Description
This quiz covers key concepts in the parcel shipping industry, including contract rates, backhaul rates, and transit services. Test your knowledge on top carriers like FedEx and UPS, as well as the factors influencing parcel shipment pricing and growth rates.
