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TRANSPORTATION
A G L O B A L S U P P L Y C H A I N P E R S P E C T I V E

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Australia • Brazil • Mexico • Singapore • United Kingdom • United States

John J. Coyle
The Pennsylvania State University

Robert A. Novack
The Pennsylvania State University

Brian J. Gibson
Auburn University

TRANSPORTATION
Eighth Edition

A G L O B A L S U P P L Y C H A I N P E R S P E C T I V E

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Transportation: A Global Supply
Chain Perspective, Eighth Edition
John J. Coyle, Robert A. Novack, and
Brian J. Gibson

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Kalsi

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A very special note of thanks and appreciation is due to our families. John Coyle would like
to thank his wife Barbara, their children John and Susan, and their grandchildren Lauren,

Matthew, Elizabeth Kate, Emily, Ben, Cathryn, and Zachary. Bob Novack would like
to thank his wife Judith and their children Tom, Elizabeth, and Alex. Brian Gibson

would like to recognize his wife Marcia, son Andy, and his longtime mentor,
Dr. Bob Cook (1947–2014). Special mention should be made in reference
to Dr. Edward J. Bardi to express our deep appreciation of his many

contributions not only to the continuing development of this
text but also to the supply chain management text.

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Brief Contents

Preface xviii

About the Authors xxi

Part I
Chapter 1 Global Supply Chains: The Role and Importance of

Transportation 3
Chapter 2 Transportation and the Economy 34
Chapter 3 Transportation Regulation and Public Policy 59
Chapter 4 Costing and Pricing for Transportation 104

Suggested Readings for Part I 166

Part II
Chapter 5 Motor Carriers 168
Chapter 6 Railroads 200
Chapter 7 Airlines 233
Chapter 8 Water Carriers and Pipelines 260

Suggested Readings for Part II 294

Part III
Chapter 9 Transportation Risk Management 297
Chapter 10 Global Transportation Planning 327
Chapter 11 Global Transportation Execution 358
Chapter 12 Third Party Logistics 393
Chapter 13 Private Transportation and Fleet Management 425
Chapter 14 Issues and Challenges for Global Supply Chains 447

Suggested Readings for Part III 470

Glossary 472

Name Index 483

Subject Index 485

Appendix A Selected Transportation Publications A-1 (available on
book companion website cengagebrain.com)

Appendix B Transportation-Related Associations B-1 (available on
book companion website cengagebrain.com)

vi

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Contents

Preface xviii

About the Authors xxi

Part I
Chapter 1 Global Supply Chains: The Role and Importance of

Transportation 3
TRANSPORTATION PROFILE: Critical Role of Transportation in
Global Economy 4

Introduction 5

Global Supply Chain Flows 5

The Economic Basis and Logic of Improved Global Trade 11
Absolute and Comparative Advantage 11

Contributing Factors for Global Flows and Trade 12
Population Size and Distribution 12

Urbanization 16

Land and Resources 17

Technology and Information 17

Globalization 19

Supply Chain Concept 19
Development of the Concept 20

GLOBAL PROFILE: P&G May Jettison Half of Their Brands 20

ON THE LINE: Transportation’s Impact on the Global Supply Chains 24
Summary 27
Study Questions 28
Notes 29
Case 1-1: Clearfield Cheese Company Case: A Sequel 30
Case 1-2: KEMS LLP 32

Chapter 2 Transportation and the Economy 34

Introduction 35

Up and Down with the Big Muddy 35

Historical Significance 36

Economics of Transportation 37
Demand for Transportation 38
Passenger Demand 38

Transport Measurement Units 39
ON THE LINE: “It’s a Bird, It’s a Plane … No, It’s a Drone” 40

Demand Elasticity 42

vii

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Freight Transportation Demand 43
Service Components of Freight Demand 45

TRANSPORTATION PROFILE: “The Mailman May Ring Twice” 47

Value of Goods 47
Gross Domestic Product (GDP) 50

Environmental Significance 51
The Environment 52
Safety 53

Social Significance 53

Political Significance 53
Summary 55
Study Questions 55
Notes 56
Case 2-1: Highways Galore 57
Case 2-2: The Sustainability Team 58

Chapter 3 Transportation Regulation and Public Policy 59
TRANSPORTATION PROFILE: Congestion Ahead: Merging Disparate
Transportation Bills into a Well-Funded Solution 60

Introduction 61

Regulation of Transportation 61
Nature of Regulation 61
Common Law 62
Role of the Independent Regulatory Commissions 63
Role of the Courts 64
Safety Regulations 65
State Regulations 66

Development of Regulation 66

Current Economic Regulations 68
Current Motor Carrier Safety Regulations 70

Antitrust Laws in Transportation 71

Transportation Policy 72

Why Do We Need a Transportation Policy? 73

Declaration of National Transportation Policy 74
GLOBAL PERSPECTIVES: TTI Releases NAFTA 20 Years After 76

Policy Interpretations 77
Who Establishes Policy? 78

ON THE LINE: Bill That Would Jack Up Insurance Minimum by 400 Percent
Seen as a Long Shot 81

Public Promotion 82
Transportation Planning and the Public Sector 82

An Approach to Public Project Planning Analysis 83
Air 84
Motor and Highway 85

viii CONTENTS

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Rail 86
Domestic Waterway Operations 87
International Water Carriage 87
Pipeline 88
Miscellaneous Forms of Promotion 89

Transportation Promotion in Perspective 89
User Charges 89
Nationalization 90

Transportation Safety 90
TRANSPORTATION TECHNOLOGY: ATA, Shippers Applaud FMCSA Proposal for
ELDs in Trucks 92

Transportation Security 93
Summary 95
Study Questions 95
Notes 95
Case 3-1: Who Pays the Price? 97
Case 3-2: Federal Highway Infrastructure Funding 98

Appendix 3A: Department of Transportation 99
Federal Aviation Administration 100
Federal Highway Administration 100
Federal Railroad Administration 100
National Highway Traffic Safety Administration 101
Federal Transit Administration 101
Maritime Administration 101
St. Lawrence Seaway Development Corporation 101
Research and Innovative Technology Administration 101
Pipeline and Hazardous Materials Safety Administration 102
Federal Motor Carrier Safety Administration 102
Office of the Inspector General 103
Surface Transportation Board 103
Summary 103

Chapter 4 Costing and Pricing for Transportation 104
TRANSPORTATION PROFILE: Some LTL Carriers Shun Annual GRIs in Favor of
“Customer-Centric” Approach 105

Introduction 106

Market Considerations 107
Market Structure Models 107
Theory of Contestable Markets 108
Relevant Market Areas 109

Cost-of-Service Pricing 110

Value-of-Service Pricing 114

Rate Making in Practice 120
General Rates 120
Rate Systems Under Deregulation 127

CONTENTS ix

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Special Rates 128
Character-of-Shipment Rates 128

ON THE LINE: Big Rate Changes Ahead for FedEx Ground 130

Area, Location, or Route Rates 130
Time/Service Rate Structures 131
Other Rate Structures 132

GLOBAL PERSPECTIVES: Ocean Carriers Hike Rates 134

Pricing in Transportation Management 134
Factors Affecting Pricing Decisions 134
Major Pricing Decisions 135
Establishing the Pricing Objective 136
Estimating Demand 137
Estimating Costs 138
Price Levels and Price Adjustments 138
Most Common Mistakes in Pricing 139
Summary 142
Study Questions 142
Notes 142
Case 4-1: Hardee Transportation (A) 144
Case 4-2: Hardee Transportation (B) 145

Appendix 4A: Cost Concepts 147
Accounting Cost 147
Economic Cost 147
Social Cost 148
Analysis of Cost Structures 148
Rail Cost Structure 152
Motor Carrier Cost Structure 153
Other Carriers’ Cost Structures 154
Notes 154
Appendix 4B: LTL and TL Costing Models 156
Operational Activities 156
Cost/Service Elements 156
TL Costing 156
LTL Costing 160
Conclusion 165

Suggested Readings for Part I 166

Part II
Chapter 5 Motor Carriers 168

TRANSPORTATION PROFILE: Tight Capacity Outlook Will Likely Remain Intact for
a While, Say Industry Stakeholders 169

Introduction 170

Industry Overview 170
Significance 170

Types of Carriers 171

x CONTENTS

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ON THE LINE: Dedicated: One Bright Spot in the TL Picture 173

Number of Carriers 174
Market Structure 175
Competition 176

Operating and Service Characteristics 176
General Service Characteristics 176
Equipment 177
Types of Vehicles 178
Terminals 180
Terminal Management Decisions 183

GLOBAL PERSPECTIVES: UPS Adds to Latin America Healthcare Portfolio 186

Cost Structure 186
Fixed Versus Variable Cost Components 186
Economies of Scale 188

Current Issues 191
Safety 191
Technology 192
LTL Rates 192

TRANSPORTATION TECHNOLOGY: Filling the Gaps with TMS 193

Financial Stability 194
Summary 195
Study Questions 196
Notes 197
Case 5-1: Hardee Transportation 198
Case 5-2: Squire Transportation 199

Chapter 6 Railroads 200
TRANSPORTATION PROFILE: Riding High 201

Introduction 202

Industry Overview 203
Number of Carriers 203
Competition 205

GLOBAL PERSPECTIVES: Intermodal Volumes Finish 2013 Strong
Reports IANA 207

Operating and Service Characteristics 208
General Service Characteristics 208
Constraints 210
Strengths 210
Equipment 211
Service Innovations 213

ON THE LINE: XPO’s Grand Entrance into Intermodal 216

Cost Structure 216
Fixed Costs 216
Semivariable Costs 217
Variable Costs 217

CONTENTS xi

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Economies of Scale 219

Financial Plight 220
Legislation Reform 220
Improved Service to Customers 221

Current Issues 222
Alcohol and Drug Abuse 222
Energy 222
Technology 223

TRANSPORTATION TECHNOLOGY: GAO Report Calls on Congress to Extend
Positive Train Control Deadline 224

Future Role of Smaller Railroads 225
Customer Service 226
Drayage for Intermodal Service 226
Summary 227
Study Questions 227
Notes 228
Case 6-1: CBN Railway Company 230
Case 6-2: Railroad Reregulation? 231

Chapter 7 Airlines 233
TRANSPORTATION PROFILE: Slight Improvement Despite Headwinds 234

Introduction 235

Industry Overview and Significance 235

Types of Carriers 235
Private Carriers 235
For-Hire Carriers 235

Market Structure 237
Number of Carriers 237

Competition 238
Intermodal 238
Intramodal 238
Service Competition 238
Cargo Competition 239

Operating and Service Characteristics 239
General 239

GLOBAL PERSPECTIVES: U.S. Airports Ramp Up Competition for Cargo
Dominance 240

Speed of Service 241
Length of Haul and Capacity 241
Accessibility and Dependability 243

Equipment 243
Types of Vehicles 243
Terminals 243

ON THE LINE: International Standards: IATA Launches “Secure Freight” 244

Cost Structure 246

xii CONTENTS

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Fixed- Versus Variable-Cost Components 246
Fuel 247
Labor 247
Equipment 248
Economies of Scale/Economies of Density 248

Rates 250
Pricing 250
Operating Efficiency 251

Current Issues 252
Safety 252
Security 253
Technology 253
Summary 255
Study Questions 256
Notes 256
Case 7-1: Airspace Airlines 258
Case 7-2: Airline Consolidations 259

Chapter 8 Water Carriers and Pipelines 260
TRANSPORTATION PROFILE: Bigger Ships for the Bigger Ditch 261

Introduction 261

Brief History of Water Transportation 262

Water Transport Industry Overview 263
Significance of Water Transport 263
Types of Carriers 266

TRANSPORTATION TECHNOLOGY: Here Come the Mega Ships: Big Changes
Coming 267

Number and Categories of Carriers 268
Competition 268
Operating and Service Characteristics 269
Equipment 271
Cost Structure 276
Current Issues 277

Brief History of Pipelines 277

Pipeline Industry Overview 278
Significance of Pipelines 278
Types of Carriers 279
Ownership 280
Number of Carriers 280
Operating and Service Characteristics 281
Relative Advantages 282
Relative Disadvantages 282
Competition 283
Equipment 283
Commodity Movement 284
Cost Structure 286

CONTENTS xiii

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ON THE LINE: The Politics of Global Pipelines 287
Summary 289
Study Questions 290
Case 8-1: Great Lakes Carriers: A Sequel 291
Case 8-2: CNG Pipeline Company 293

Suggested Readings for Part II 294

Part III
Chapter 9 Transportation Risk Management 297

TRANSPORTATION PROFILE: Battling the Global Piracy Challenge 298

Introduction 298

Risk Concepts 299

Transportation Risk Management Process 300
Step 1—Risk Identification 302
Step 2—Risk Assessment 306
Step 3—Risk Management Strategy Development 307

ON THE LINE: Conducting an International Supply Chain Risk
Assessment 308

TRANSPORTATION TECHNOLOGY: Protecting Product Along the Global Cold
Chain 312

Step 4—Risk Review and Monitoring 313

Supply Chain Security 314
Aviation and Transportation Security Act of 2001 315
Maritime Transportation Security Act of 2002 316
Security and Accountability for Every Port Act 317

GLOBAL PERSPECTIVES: Transportation Security—Global Collaboration
Required 319

Summary 320
Study Questions 320
Notes 321
Case 9-1: Young Again Pharmaceuticals 323
Case 9-2: Techno-Shades 325

Chapter 10 Global Transportation Planning 327
TRANSPORTATION PROFILE: Global Trade Expansion Drives Transportation
Planning Challenges 328

Introduction 329

Overview of Global Transportation 330
Global Trade Agreements Stimulate Transportation
Activity 331

GLOBAL PERSPECTIVES: NAFTA Cross-Border Transportation—an Unfulfilled
Promise 332

Logistics Channel Issues in Global Transportation 333

Export Preparation Activities 335

xiv CONTENTS

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Terms of Trade 335
Cargo Insurance 338
Terms of Payment 340
Freight Documentation 341

Transportation Planning 346
Mode Selection 346

TRANSPORTATION TECHNOLOGY: The Automated Commercial Environment:
Nearing Completion 347

Carrier Selection 349
Route Planning 350

ON THE LINE: Panama Canal Expansion to Double Capacity 351
Summary 352
Study Questions 352
Notes 353
Case 10-1: Music Explosion—Creating a “Sound” Global
Transport Plan 355
Case 10-2: Tablets for the Masses 357

Chapter 11 Global Transportation Execution 358
TRANSPORTATION PROFILE: International Freight Challenges 359

Introduction 359

Overview of Global Freight Flows 360
Intermodal Transportation 361
Preparing Freight for Movement 366
Policy and Regulatory Issues Impacting Global Flows 367

Global Transportation Providers 368
Ocean Shipping 368

ON THE LINE: E × E × E = Mega Capacity 373

International Air 374
Surface Transport 377
Ancillary Services 378

Port Operations and Customs Clearance 379
Seaports 379

TRANSPORTATION TECHNOLOGY: Port Automation Critical to Global Flows 381

Airports 382
Customs Clearance 384
Summary 387
Study Questions 387
Notes 388
Case 11-1: As the Blade Turns 390
Case 11-2: Get Me Those T-Shirts 391

Chapter 12 Third Party Logistics 393
TRANSPORTATION PROFILE: Key Criteria for Evaluating Potential 3PL
Providers 394

CONTENTS xv

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Introduction 394

Industry Overview 395
Types of 3PL Providers 396

ON THE LINE: Amazon.com: More than an Online Retailer? 400

3PL Services and Integration 401
GLOBAL PERSPECTIVES: UPS Expands Incheon Air Hub in Korea 404

3PL User Overview 405
Reasons for Outsourcing 406
Primary Activities Outsourced 407
Results Achieved 408

Establishing and Managing 3PL Relationships 409

Strategic Needs of 3PL Users 413
TRANSPORTATION TECHNOLOGY: The Payoffs of 3PL Investment in IT
Capabilities 415

Summary 418
Study Questions 418
Notes 419
Case 12-1: Jetstream Aerospace 421
Case 12-2: Closet Concepts Ltd 423

Chapter 13 Private Transportation and Fleet Management 425
TRANSPORTATION PROFILE: The Silent Partner: Private Fleets 426

Private Transportation 426

What Is Private Transportation? 427

Private Rail Transportation 427

Private Air Transportation 428

Private Water Transportation 429

Private Oil Pipeline Transportation 429

Private Trucking 430

Private Trucking Cost Analysis 433
ON THE LINE: Taking the Company Private 435

Major Operating Decisions 436
Summary 443
Study Questions 444
Notes 444
Case 13-1: Nittany Products: A Sequel 445
Case 13-2: Naperville Hardware Distribution 446

Chapter 14 Issues and Challenges for Global Supply Chains 447
TRANSPORTATION PROFILE: Dark Clouds on the Horizon 448

Introduction 449

Transportation Infrastructure 450

Highway Traffic and Infrastructure 451

xvi CONTENTS

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Railroad Traffic and Infrastructure 452

Waterway Traffic and Infrastructure 453

Technology and Transportation: A Necessary Marriage 456

Sustainability: Going Green with Transportation 458
TRANSPORTATION TECHNOLOGY: Truck Navigation 461

Fuel Cost and Consumption 462

Motor Carriers 463

Air Carriers 463

Water Carriers 464

Rail Carriers 464

Pipeline Carriers 464

Carriers’ Responses 465
Summary 466
Study Questions 467
Notes 467
Case 14-1: Green and Lean 468
Case 14-2: Bald Eagle Valley Trucking 469

Suggested Readings for Part III 470

Glossary 472

Name Index 483

Subject Index 485

Appendix A Selected Transportation Publications A-1 (available on
book companion website cengagebrain.com)

Appendix B Transportation-Related Associations B-1 (available on
book companion website cengagebrain.com)

CONTENTS xvii

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Preface

In this book Transportation: A Global Supply Chain Perspective while attention was paid
to the global aspect of transportation in previous editions, especially the seventh edition,
the authors realized that the global dimension required even more emphasis to reflect the
increased challenges and requirements of 21st century supply chains. Transportation has
become even more important for efficient and effective supply chains in today’s complex
and competitive global environment. It has become the critical link in successful supply
chains and may be the most important industry for the economic advancement in the
economies of the world. The authors are convinced much more attention and focus
must be given to transportation infrastructure investment to meet the needs of the global
economy.

The text follows the format of the previous edition with three sections and 14 chap-
ters, but substantive additions and changes have been made to enhance the global discus-
sions, improve the content and organization, and streamline and update relevant parts of
text. Part I provides the foundation for the overall text. Chapter 1 explores global thrust
of this edition examining key critical areas such as population trends and related issues
for developing and developed economies. Chapter 2 provides the economic foundation
and rationale for the role of transportation as well as its political and social importance.
Chapter 3 explores the regulatory and public policy issues associated with transportation
while Chapter 4 offers a discussion of transportation costing and pricing in a market-
based economy.

Part II provides an overview of the major transportation alternatives available to
individual and organizational users. Chapters 5 through 8 discuss and examine the key
features and issues of the five basic modes of transportation, namely, motor (5), rail (6),
airline (7), water, and pipeline (8). Each of the basic modes provide some inherent
advantages for shippers of particular commodities or locations that need to be appre-
ciated and …

you can refer to Chapter 12 of attached book.

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