WHICH MODE
SHOULD WE USE?

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) a thorough cost-benefit analysis may reveal that the best choice is not the obvious choice.

For example, in the domestic arena there are some areas where modes tend to overlap, and in these areas 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 will generate significant cost savings and service improvement.

When it comes to mode choice for international transportation, the most commonly employed options are air and water, but your Origin-Destination pair could involve road and/or rail. Take our NAFTA situation (Canada-USA-Mexico). The majority of shipments here are by road and rail, and air is most often employed for high priority or 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), and the key to freight expense is the service level choice to meet specific delivery requirements. (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 involved with 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 comprise 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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• Terms Conversion Is Not Special to Walmart
• Basic Logic of Freight Terms: Understanding the Emotion Behind Resistance to Change
• Continuous Moves: Another Two-Bag Tactic
• Don't Be Confused!
• As Rates Go Up, What Are Shippers Doing?
• The Seven Factors Behind Rising Truck Freight Rates
• Tactic: Mode Change and Consolidation Network
• Reliability Breeds Inventory Reduction: BIG Tactic Delivers BIG Strategy
• Size Does and Doesn't Matter: More Freight Does Not Translate to Lower Rates
• The Best Performers Focus on Inventory Reduction to Improve Cash Creation
• Thinking About Trackable Pallets
• Fleet Efficiency Is a "Double Bagger" Tactic, Lower Cost AND Sustainability
• The CFO Needs to Understand Transportation Operations Volatility and Anticipate Impact on Financial Performance
• Can Transportation Contribute to Operating Cash Flow Generation?
• Where Does It Start?
• Focus on Transportation Operations: Defining What We Are Doing Well
• OPERATIONS – How Much Can We Improve?
• WHAT SHOULD IT LOOK LIKE?
• HOW SHOULD IT WORK?
• Ever Consider an Assessment?
• OUTSOURCE? A Strategic Decision!
• Designing the Plan (You Do Have a Plan, Don't You, Sweetcheeks?)
• Tune Up? Alignment? Or, Both?
• Cutting Transportation Cost – Today’s Greatest Challenge?
• Freight Invoice Audit and Payment – Old-School or New-School?
• Freight Invoice Audit and Payment – What Are the Alternatives?
• CENTRALIZE FOR CONTROL – DECENTRALIZE FOR EXECUTION
• WHAT FREIGHT TERMS? AND WHY?
• WHICH MODE SHOULD WE USE?
• For-Hire Carrier or Private Fleet?
• TRANSPORTATION SPEND MANAGEMENT – STRATEGY or TACTIC?
• Transportation Software Systems - Can You Afford Not To?
• CARRIER SELECTION - Who You Gonna Call?
• MODE
• Re-Bidding Truckload Contracts for Service and Savings
• Freight Cost Reduction? Consider Standardization of Assessorials
• Transportation Strategy and Tactics - The Value of Aligning With an EX: Shipper
• Focusing on Industry Trends for Freight Expense Reduction Opportunities
• Freight Expense as a Percentage of Cost of Goods Sold
• Domestic vs. International?
• A Simple Tactic for Controlling Budgeted Freight Expense
• Freight Cost Reduction – Regional Cross-Dock Consolidation
• NEARSHORING TREND
• Thoughts on Selecting 3PL Transportation Spend Management Service Providers
• Transportation Spend Management – It’s MORE than LOW HANGING FRUIT!
• INBOUND TRANSPORTATION – HIDDEN CASH
• TRANSPORTATION STRATEGY and TACTICS: Wholesale Distributor Supply Chain Assessments