OPS 410 Week 2 Transportation Modes and Carriers Example

Rail Cars, Truckloads and Conveyor Trucks: Comparing Transportation Modes and Carriers for a Roofing Supply Distributor

[Student Name]

University of Phoenix

OPS/410: Logistics Management

Week 2 Assignment

[Instructor Name]

[Date]

Gulf Coast Roofing Supply, its lanes, rates and figures are composites written for a model paper.

Gulf Coast Roofing Supply, the composite roofing materials distributor in Texas and Louisiana from Week 1, depends on two very different kinds of transportation. Inbound, it receives about 92,000 tons a year of shingles and other products from manufacturers' plants, mostly in Texas, Oklahoma and Alabama. Outbound, it makes about 110,000 job-site deliveries a year from nine branches. Week 1 showed that late rooftop loads and stockouts of colors are the main service failures. This paper examines how mode and carrier choices affect both.

The Modes Available

Truck, by full truckload or less than truckload, offers door-to-door service, flexibility and fast transit at a relatively high cost per ton-mile. Rail moves heavy, dense freight cheaply over long distances but needs a rail siding or a transload yard where freight moves to trucks, and its transit times are longer and less predictable. Intermodal combines rail and truck using containers or trailers. Water and pipeline do not suit roofing materials, and air is far too expensive for heavy, low-value goods. Meixell and Norbis (2008), reviewing research on mode choice and carrier selection, found that cost, transit time, reliability and service quality were consistently important, with growing attention to the effect of transport choices on inventory and to strategic relationships with carriers.

Inbound Shingles: Truckload or Rail?

The main inbound lane runs about 280 miles from a manufacturer's plant to the Houston branch, which feeds three others. A truckload of about 22 tons costs about $1,850, or $84 a ton, and arrives the next day. A rail boxcar of about 90 tons to a transload yard near Houston costs about $5,200 plus about $1,400 for unloading and the short truck haul to the branch, about $73 a ton, with transit averaging nine days.

Baumol and Vinod (1970) showed that freight mode choice should account for inventory costs in transit and in safety stock, not just freight rates. Shingles are worth about $1,700 a ton. At a 20 percent annual carrying rate, each extra day in transit costs about $0.93 a ton, so eight extra days by rail add about $7.50 a ton. Rail's variability, which ranges from 6 to 14 days, also requires about four more days of safety stock at the branch, roughly another $3.70 a ton. Rail's total cost comes to about $84 a ton, about the same as truck.

A cheaper freight rate can disappear once the shingles sitting in a boxcar are counted as money.

The Inbound Recommendation

Because the costs are close, the choice rests on service and risk. Rail is suited to steady, forecast-driven replenishment of the most common colors, where the extra days can be planned. Trucks remain the choice for less common colors, urgent top-ups and the weeks after storms, when demand jumps and nine days is too slow. The plan moves about 40 percent of Houston's shingle volume to rail, saving little in cost but freeing truck capacity for storm surges, when truckload rates on the lane typically rise sharply.

Outbound: Private Fleet or For-Hire?

Gulf Coast's private fleet of 74 trucks costs about $14.6 million a year to own and operate, about $133 per delivery. Rooftop loading requires boom and conveyor trucks and drivers trained to place bundles safely on a roof, which for-hire flatbed carriers do not offer. For those deliveries, about 70 percent of the total, the private fleet is the only practical option.

Ground drops to job sites are different. For-hire flatbed carriers quote about $110 a delivery for ground drops within 60 miles, below the private fleet's average cost, though with less control over timing. Mason et al. (2003) found that integrating warehousing and transportation decisions, rather than managing them separately, could reduce total cost and improve service. For Gulf Coast, handing long ground drops to carriers would let boom and conveyor trucks concentrate on early-morning rooftop loads, which Week 1 found to be the main service failure on Mondays.

Routing the Private Fleet

Even within the private fleet, routing affects cost and service. Each branch's dispatcher builds routes the evening before, grouping deliveries by neighborhood and by truck type, and assigns the earliest rooftop windows to the largest contractors. A routing tool that considers truck type, crane reach and promised windows would replace the current whiteboard method; trials at the Beaumont branch cut miles driven by about 9 percent and late rooftop loads by about a third in a month. The savings come from fewer trucks crossing paths and from dispatching boom trucks only where a boom is needed.

Fuel and Driver Costs

Fuel is about a fifth of fleet operating cost, and drivers trained for rooftop work are hard to hire and keep. Moving long ground drops to carriers reduces fuel spent on low-value miles and lets the company concentrate driver training and pay on the specialized work that justifies a private fleet. A retention bonus for certified boom and conveyor operators is part of the plan.

Carrier Selection Criteria

For inbound truckload carriers and outbound flatbed carriers, Gulf Coast will select on rate, on-time pickup and delivery, damage and claims history, safety rating, equipment availability during storm surges and communication, including real-time location tracking. Each carrier will be scored quarterly, and the two lowest-scoring carriers on each lane will be reviewed.

Managing Transportation as a System

Transportation choices affect inventory and warehousing. Rail receipts arrive in 90-ton lots, so the Houston branch needs space to store them; the transload yard can hold up to two boxcars at a time for a small daily fee, which acts as a buffer. Outbound routing must coordinate private and for-hire deliveries so that customers receive consistent windows.

Conclusion

For inbound shingles, rail's lower freight rate is offset by inventory in transit and safety stock, leaving truck and rail roughly equal; a mix uses rail for planned base volume and trucks for urgent and storm needs. For outbound deliveries, the private fleet's specialized trucks are essential for rooftop loading, while for-hire carriers can take long ground drops, freeing the fleet for the early deliveries contractors value most. Selection criteria and quarterly scorecards keep carriers accountable.

References

Baumol, W. J., & Vinod, H. D. (1970). An inventory theoretic model of freight transport demand. Management Science, 16(7), 413-421. https://doi.org/10.1287/mnsc.16.7.413

Mason, S. J., Ribera, P. M., Farris, J. A., & Kirk, R. G. (2003). Integrating the warehousing and transportation functions of the supply chain. Transportation Research Part E: Logistics and Transportation Review, 39(2), 141-159. https://doi.org/10.1016/S1366-5545(02)00043-1

Meixell, M. J., & Norbis, M. (2008). A review of the transportation mode choice and carrier selection literature. International Journal of Logistics Management, 19(2), 183-211. https://doi.org/10.1108/09574090810895951