Transportation Fundamentals: Pricing Strategies

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Questions and Answers

What are the two basic pricing strategies used by logistics service providers?

Fixed pricing and variable pricing

Cost-of-service pricing and value-based pricing

Cost-of-service pricing and value-of-service pricing (correct)

Volume-based pricing and distance-based pricing

What happens to the portion of fixed costs allocated to each shipment as shipping volume increases?

It decreases (correct)

It remains the same

It becomes unpredictable

It increases

What type of rates do carriers charge for large-volume shipments?

Less-than-carload rates

Carload or truckload rates (correct)

Less-than-truckload rates

Variable rates

What is a major concern for transportation security?

Airline security Signup and view all the answers

What has been achieved by reducing the number of hours toxic chemicals spend in transit?

A reduction in rail tanker explosions Signup and view all the answers

What is a benefit of cost-of-service pricing?

Lower prices for large-volume shipments Signup and view all the answers

What is the relationship between shipping volume and cost allocation?

As shipping volume increases, cost allocation decreases Signup and view all the answers

What is a challenge faced by logistics service providers?

Balancing shipper and carrier desires Signup and view all the answers

What is the primary objective of transportation in the most general terms?

To satisfy customer requirements while minimizing costs and making a reasonable profit Signup and view all the answers

What is the main goal of logistics managers in terms of transportation?

To ensure the desired services are performed effectively Signup and view all the answers

What is the primary consideration for supply chain managers when deciding on transportation methods?

To decide which forms of transportation, material handling, and storage to use Signup and view all the answers

What is the definition of a common carrier?

A carrier that provides transportation services to all shippers at published rates between designated locations Signup and view all the answers

What is the main purpose of transportation cost optimization?

To satisfy customer requirements while minimizing costs and making a reasonable profit Signup and view all the answers

What is the primary benefit of effective transportation management?

To ensure the desired services are performed effectively Signup and view all the answers

What is the primary goal of logistics managers when deciding on transportation methods?

To satisfy customer requirements while minimizing costs and making a reasonable profit Signup and view all the answers

What is the main consideration for transportation service companies?

To satisfy customer requirements while minimizing costs and making a reasonable profit Signup and view all the answers

What is time utility created when customers receive?

Products delivered at precisely the right time Signup and view all the answers

What is place utility created when customers get?

Products delivered to their desired locations Signup and view all the answers

What is the primary goal of logistics according to the globally recognized council of supply chain management professionals?

To conform to customer requirements Signup and view all the answers

What is included in the process of logistics?

The efficient and effective transportation and storage of goods, including services and related information Signup and view all the answers

What is the primary focus of Section 2: Transportation Fundamentals?

Transportation elements within the logistics function Signup and view all the answers

What is the objective of transportation in logistics?

To conform to customer requirements Signup and view all the answers

What is the scope of logistics in terms of the point of origin and consumption?

From the point of origin to the point of consumption Signup and view all the answers

What is the primary goal of logistics professionals in terms of transportation?

To ensure efficient and effective transportation Signup and view all the answers

Study Notes

Transportation Fundamentals

The objective of transportation is to satisfy customer requirements while minimizing costs and making a reasonable profit.

Legal Forms of Transportation

For-hire transportation service companies are classified legally as:
- Common Carriers
- Contract Carriers
- Exempt Carriers
- Private Carriers
Common carriers offer transportation services to all shippers at published rates between designated locations.

Transportation Pricing

Two basic pricing strategies used by logistics service providers are:
- Cost-of-service pricing
- Value-of-service pricing
Cost-of-service pricing is used when carriers establish prices based on their fixed and variable costs of transportation.
Cost-of-service pricing varies based on volume and distance.
Large-volume shipments allow carriers to charge carload or truckload rates instead of less-than-carload or less-than-truckload rates.

Transportation Security

Transportation security is a very important issue, particularly airline security.
Some companies work with railroads to reduce the number of hours that toxic chemicals can spend in transit, resulting in a reduction of overall risk of rail tanker explosions or spills.

Definition of Logistics

The official definition of logistics from the globally recognized council of supply chain management professionals is:
- The process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods, including services and related information, from the point of origin to the point of consumption, for the purpose of conforming to customer requirements.

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Description

Learn about the two basic pricing strategies used by logistics service providers, including cost-of-service pricing and value-of-service pricing, as well as negotiated pricing for large shipments.