MODE

by Mike Starling

A key part of any transportation strategy is deciding what Transportation MODE to utilize in any given Origin-Destination shipping lane. MODE choices are finite—road, rail, air, water, (and pipeline if you need it). MODE selection will take into account the product to be shipped, delivery timing requirements, freight expense, assessorial services required, and business or customer delivery specifics. While each MODE has an inherent advantage (i.e., the type of shipment it is best suited for), the best cost-benefit result may reveal that the BEST CHOICE may not be the OBVIOUS CHOICE.

For example, in the domestic arena, there are some areas where MODES tend to overlap, where MODE selection requires close scrutiny. For example, small package CWT program vs. LTL? Or LTL vs. Multi-Stop Truckload? Or Long-Haul Truckload vs. Inter-Modal? These are all areas where leaning on some experienced help can result in significant cost savings and service improvement.

When it comes to MODE choice for International Transportation, the typical alternatives are air and water, although your origin-destination pair could involve road and/or rail. Take our NAFTA situation (Canada-USA-Mexico). The majority of shipments here are road and rail, and air is most often employed for high priority/expedited shipments.

Similarly, there can be MODAL challenges in international as well, but they tend to be much more subtle. Take air freight for example. While pricing is somewhat analogous to the weight break pricing of LTL, pricing is weight and measure-based (whichever is greater). The key to freight expense is the service level choice to meet specific delivery requirements (i.e., next flight out? Expedited? Standard?) Pick the wrong one and it will cost you a fortune. Also consider the value of the merchandise being shipped vs. the freight expense if you actually expect to generate a profit on the sale.

Is there a MODAL challenge of international ocean? Yep. But it doesn't necessarily involve the ocean shipping portion of the move. The MODE choice to get your shipment to or from the port can be a critical part of either landed cost or required transit time. This can constitute up to 50 percent of the ocean freight charge. Cost-benefit comparison of the various MODES vs. your requirements is a MUST.

So, first comes transportation strategy and alignment with corporate strategic goals. Second is identification of origin-destination nodes for baseline mapping of your transportation network. Then comes MODE choice evaluation, comparison, and selection. Do it right to ensure that you deliver the best service performance while achieving optimal operational cost control.

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