Page 586 - Business Principles and Management

Chapter 21 • Product Development and Distribution

Transportation Decisions facts

Selecting the channel members that will help sell the product to the consumer is &
only one of the distribution decisions a company must make. Another important figures
decision is how to physically transport the products from producer to consumer.
Buyers and sellers face several common problems related to transportation. One
problem deals with the types of products to be shipped. Factors to consider in ship- United Parcel Service is the
ping include the size, shape, and weight of the goods. Also, certain goods are fragile world’s largest package distri-
and may need special care in handling. Transporting 100 tons of steel, for example, bution company. It transports
requires very different treatment from that required to move a carton of glassware. more than 3.75 billion parcels
Another transportation problem is the time needed for delivery. Some buyers and documents annually. The
expect or need shipment within a matter of hours, and others may not need or ex- company uses more than 575
pect delivery for several weeks. Still another shipping problem is cost. In addition aircraft, 92,000 vehicles, and
to the basic transportation charges, there are the costs of packaging products for over 1,700 facilities to provide
shipment, insurance, and often storing products before, during, and after delivery service in more than 200 coun-
to the buyer. Producers that do not perform their own shipping activities must tries and territories.
first decide on their products’ distribution requirements, then select the transporta-
tion method and companies that meet these requirements.
Both consumers and businesses are concerned about the quality of products
at the time of purchase. They also want products available where and when they
need them and at a reasonable cost. Because distribution activities affect all of
these concerns, businesses plan them carefully.

COMMON TRANSPORTATION METHODS

The most commonly used methods of transporting goods are by railroad, truck,
and airplane. A business may use more than one type of transportation, depend-
ing on the requirements for the shipment.
Railway transportation is one of the most common forms of shipping in the
United States. Over a third of the volume of products shipped in the United States
goes by rail car. The principal advantage of rail transportation is the low cost
of moving heavy and bulky items long distances. However, products move slowly
on long train routes as cars are added or dropped off. For bulky products or large
quantities, the cost of shipping by rail is usually lower than by other methods.
Trucks are frequently used for short-distance shipping. Trucks are essential
to smaller communities and rural areas that other transportation methods do
not serve. Industries such as agriculture, mining, and lumber depend on trucks
to move products from the source of production to the processing location. Technology tip
Much long-distance shipping is also done by truck. For products that need to
be moved rapidly, in smaller quantities than can be economically shipped by rail,
or where rail is not accessible, trucks are the typical transportation choice. Some A new technology based on
transportation companies load truck trailers and place them on railroad cars to be tiny radio frequency identi-
shipped close to the final destination. This service is called piggyback service. Many fication (RFID) tags allows
trucking companies now use computer systems to track customer orders and businesses to track products
reroute trucks for rapid pickup and delivery. This flexibility is important for busi- without bar codes. These
nesses that are trying to keep inventories low while maintaining high service levels. small chips can be placed in
Airplanes provide the most rapid form of transportation, but their rates are or on product packaging
much higher than those for other methods. Airplanes can move products quickly and emit a radio code when
over long distances. Items can move across a country in a few hours and around scanned. They are used to
the world in a day, if necessary. The majority of air shipments involve items of track inventory in ware-
relatively small bulk, high value, or quick perishability. Packages and mail are houses and allow for scanless
moved regularly on passenger airlines as well as by air parcel companies. Air- purchasing.
lines are also used for shipping cut flowers, high-fashion clothing, seafood, film,

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