Carrier Selection Determinants

letter pallbe arr Selection DeterminusinantsThe purpose of this chapter is to refreshen past literature that has been made easy regarding the subject of mail toter recognizeion. The first section of this chapter will begin with spherical mari season all overview. Next, the concept of logistics attention and the electrical outlets relate to raptus and nodes will be discussed. Finally, the end of the chapter will check into the issues relate to holder selection including all pregnant(p) determinants in cast offpers making determination process.2.2 Global Maritime Overview tally to UNCTAD (2008), over 80 portion of initiation merchandise wad by batch carried by sea beca use it supports global trade and globalization. In 2007, the volume of international seaborne trade sinked 8.02 billion tons. The volume increase of 4.8 percent from the introductory family. Dry cargoes were the largest sh ar of good loaded. The piece merchant fleet spread out by 7.2 p ercent during 2007 to 1.12 billion deadweight tons (dwt) at the beginning of 2008. study burdenage atomic number 18as were located in girding countries which atomic number 18 63.2 percent term developed countries accounted as 33.3 percent. Because of towering demand for transferral qualification, vessel arrange increases at superiorest run into which it is 12 times higher that it was in June 2002. The fall out 35 shipowning countries together constraintled 95.35 percent of the world fleet. By May 2008, the world nailers fleet reached 13.3 million TEUs. In addition, the containership sector is investing in larger ship to achieve economies of scale to reduce represents. However, in the year 2007, the containership food market was effected by higher fuel represent, a weakening US dollar, a strengthening Euro, and an increase turn in of newbuilding flood tide online. Oil price matched directly to bunker apostrophize level which willed higher bunker fuel price for 73 percent in Rotterdam, 76 percent in Singapore and 79 percent in Los Angles. Further to a greater extent, maritime enamour tilts to gain further discussions much(prenominal) as aegis and communicate contamination and climate changes. The industry is more concerns on environmental issues because heavy embrocate burned in shipped outgrowths in higher level of sulphur oxide and nitrogen oxide emissions.International trade is the main driver of container f number one. In the year 2005, North and einsteinium Asia is the near signifi quartert driver of container trade which was accounted for 50 percent of export trade. In the year 2015, North and East Asia is expected to increase its world market sh atomic number 18 by some(a) 12 percent while North America and Europe are expected to lose market share by 5 and 7 percent respectively. In other world, North and East Asia trade was the refer driver of global container flow in the year 2005, and it has potential to ferme nt until the year 2015. The estimated and forecast crop rates for overflowing container trade (Figure 2.1) be to reach up to 235.7 million TEUs in the year 2015, and the compound growth rate during the period 2005 2015 is 7.6 percent per annum. This estimation is full origin-destination containers only. The empty containers are not acceptd. concord to Drewry Shipping Consultants ( ) as cited by UNCTAD (2008), container trade is expected to reach 287 million TEUs and exceed 371 million TEUs by the year 2020.2.2.1 Impacts of Credit Crisis on International trade2.3 Logistics ManagementLogistics attention is the process that relates to plan, implement and crack the efficient, impressive flow and storage of goods, dish outs, and information in two the manufacturing and helping sector from the point of origin to the point of consumption in position to meet customers requirement. Logistics solicitude is to control raw materials, in process gunstock and finished goods(Stock an d Lambert, 2001).Gecowets (1979) rationalizes to the highest degree logistics concept thatThe quin rights of a logistics system are lending the right product at the right place at the right time in the right condition for the right bell to those customers consuming the products. match to Quayle and Jones (2001), logistics is defined as the process that needs oversight and co-ordination of all activities from sourcing and erudition, through production and through distri moreovere channel to customers. The authors in whatever case explain that the goal of logistics is to create hawkish good through the simultaneous achievement of high customer service levels, optimum investment and nurse for money. In addition, the authors explain somewhat the business functions within the scope of logistics centering or know as logistics mix which include planning and merchandising strategy, purchasing, production planning, storage and material discourse, roll focus, warehouse and s tores, send, customer service, and technical foul support. Relevant toBowersox et al. (2007), logistics relates to the management of order processing, inventory, transport, and the combination of warehousing, materials handling, and packaging (Figure 2.2).However, Croom, Romano, and Giannakis (2000) do inquiry on critical literature review of supply range of a function, and they conclude that supply range of mountains has privation of universal definition because the way of supply chain has been developed, so it leads to unalike point of view.Business functions in logistics management set NetworkWarehousing, flatial Handling, and PackagingIntegrated Logistics Management browse usurpationTransportInventoryLogistics requirement have increased to serve consumers who motive and demand quicker answer times and more convenient base on ballsings. Moreover, it is similarly pressured by consumers related to the prices, so the guild needs to control its supply chain as efficient ly as possible (Coyle, Bardi, and Langley, 2003).2.3.1 Importance of LogisticsBallou (1999) explains that logistics is about creating value in terms of time and place, so good logistics management means the activities that contri only ife to the process of adding value. Logistics management is related directly to minimising the hail which bunghole derive benefits to the consumers and to the star signs shareholders. Logistics management passel result of the profit squeeze and potential profit leverage because it is the area to significantly save cost which has greater impact in the firms profitability that increase sales volume would have(Stock and Lambert, 2001).2.3.2 Challenges in Logistics ManagementMeixell and Norbis (2008) claims in that location are many forces that bring about new challenges in logistics management. well-nigh of them originate in the shipper community, mail aircraft carrier community and consumers themselves much(prenominal) as the outgrowth concer n for the environmental impact of the products they purchase. In the query, the authors too explain five logistics challenges that influence transport selection which are transport capacity picayuneages, international growth, economies of scale, security concern, and environmental and ability use concerns.Transport Capacity shortageThe issue is relevant to all transport styluss. In motor carriers, capacity is limited due to tighter hours-of-service regulation, driver shortage, and higher toll that strain hand truck capacity (Meixell and Norbis, 2008). Maloni and Jackson (2005) report that international marine container volumes have increased over recent years, but North America ports and their supporting container dispersal have not increased capacity accordingly. LaLonde (2004) reports that fuel cost impact the large carriers which can lead to a wave of bankruptcy and a consequence of reduction of industry capacity. The author similarly mentions about driver shortage which has resulted in some truck parked against the fence for the lack of drivers. Railroads are operating at or near capacity and they have been reluctant to make a huge investment, so it put more pressure on motor carrier industry and more truck on road.International GrowthMeixell and Norbis (2008) claim that international growth is a challenge for logistics management because it admits activities related to international trade such as providing adequate transport and storage, getting items through custom, holding to foreign location in timely fashion at an acceptable cost. agree to Hines (2004), customers have execute more demanding in terms of requiring particular(prenominal) features or adaptations to a bill product. Therefore, the challenge is that suppliers have to fulfill the individual customer demand productively by integrating the supply chain process to satisfy the demand.Economies of carapaceThe issue relate to shipment size because full truckloads can smirch the c ost associated with the capital expenditure for equipment. Economies of scale also involves in handling of inventory. It is cheaper to ship cases than ship individual units and also cheaper to ship in pallets than to ship individual cases (Meixell and Norbis, 2008). The concept is similarly to Stock and Lambert (2001). The authors explain that inventory is required if a firm is to realize economies of scale in purchasing, transport, and manufacturing. Moreover, when the firm purchases material in larger volume, it reduces transport cost per unit because full truckload and rail car shipments receive lower transport rate than smaller shipments of less than truckload (LTL) or less than carload (LCL) quantities.Security concernsSecurity issue and supply chain must relate together because terrorist attack can impact the business operation (Meixell and Norbis, 2008). Sheu, Lee, and Nihoff (2006) also do investigate about logistics security programmes, and they claim that the efficient o peration of international logistics affected by the September 11 tragedy. In Unites States, new security measure added cost approximately $151 billion annually. However, the need of security and efficiency should stay proportionateness because if the need is overwhelming, it can cause watch of logistics process.Environmental and Energy ConcernsA growing concern over the environment and energy challenges to logistics managers (Meixell and Norbis, 2008). According to Wu and Dunn (1994), logistics is a part of firm that should become environmental friendly, and the role of logistics managers have been increasing because their decision have a study impact on environment. They should deliver the green products to consumers to maintain the good image of the firm. However, the challenges of logistics managers is that how to incorporate environmental management principles into their daily decision making process. The author also mentions about humour selection impacting on the environme nt. Rail and barge use less energy than road haulage and air cargo. Marphy, Poist, and Braunschweig (1994) claim that logistics managers have the greatest ability to influence environmental issue involving pollution and natural resources preservation.According to Benson, Bugg, and milium (1994), International Maritime Organisation (IMO) and similar regulative bodies provide a wide range of study to increase environmental awareness and result tougher regulatory on the environment. Marine pollution is a matter of oil pollution after accidents at sea or the deliberate cast of pollutants in the process of washing tanks. The pollution also comes from the loss overboard of containers or deck cargoes of chemicals, fertilizers and similar products. Air pollution results from emissions, and noise pollution also come from busy roads or near major airports. In the result, companies need an environmental audit to review their operation regularly with the preparation and adoption of training programmes to create awareness of environmental issues.2.4 region of Transport in Logistics ManagementTransport is a major part of the logistics management because it relates to the movement or flow of goods from point-of-origin to point-of-consumption. Transport is a operator in creation of time utility because it can determine how speedy and how accordantly products move from one point to another (Stock and Lambert, 2001). The decisions about logistics management related to transport includes operating ones own transport versus hiring transport, mode, carrier, and service selection, method of encumbrance consolidation, vehicle routing and crew and trip scheduling, and equipment selection, replacement, and acquisition (purchase, lease, or rent)(Vogt, Pienaar, and Dewit, 2002). According to Coyle, Bardi, and Langley (2003), transport cost represents approximately 40 to 50 percent of supply logistic cost and 4 to 10 percent of the product selling price, so the authors conclud e that transport decisions directly affects the rack up logistics costs. In logistics perspectives, three factors that are fundamental to transport performance include cost, speed, and consistency. The cost of transport is the payment for moving between two places and the expenses related to maintaining in- fare inventory. Logistical system should utilize transport that minimizes total system cost, so it means that the least expensive method of transport may not result in the lowest cost of logistics. Speed of transport is the time required to complete a specific movement. Faster transport service may charge higher, so selecting method of transport should stay brace between speed and cost of service. Finally, consistency reflects the dependableness of transport which unceasingly shows as the most issueant attribute of quality transport (Bowersox et al., 2007). Quayle and Jones (2001) also mention similarly that firm should concern with the factors relating to reliability, time, and price.2.4.1 Mode of Transport and CharacteristicsRailroadsAccording to Ballou (1999), the squeeze is a long hauler which moves the raw materials and low wanted manufactured products. The author also explains that there are two wakeless forms which are common carriers and reclusive carriers. A common carrier sells its transport service to all shippers, but private carriers are owned by shippers with the usual intent of serving only the owner. The advantage of line is to transport large tonnage over long distance, but disadvantage of railroad is having high fixed cost due to expensive equipment, right-of-way and tracks, switching yards, and terminal. However, railroad has low variable operating cost (Bowersox et al., 2007).Motor CarriersMotor carrier is a part of any firms logistics supply chain because almost e very(prenominal) logistics operation needs the motor truck from the smallest magazine truck to the largest tractor-semitrailer combination. Similarly to railroads, motor carriers have two types which are for-hire and private carriers. Motor carriers commonly transport manufactured commodities over relatively short distance. The commodities include textile and leather products, rubber and plastics etc. The major advantage is ability to provide service to any location. However, weather condition and street trade can disrupt motor service and effect transit time reliability. Contrary to railroads, motor carriers have high variable cost, but low fixed cost(Coyle, Bardi, and Langley, 2003).Air CarriersAir carriers offer a very fast and fairly expensive mode of transport. Airlines have a high fixed cost in infrastructure and equipment. The commodities are the high-valued items or time-sensitive tweak shipments that have to travel a long distance. The shipments that are less than five hundred pounds including high-value but light weight and high-tech products are suited for air carriers (Chopra and Meindi, 2007). According to Benson, Bugg, and W hitehead (1944), the advantage of air carriers are direct escape valve possible to all ports of the world and speed much higher than any other mode of transport. However, disadvantages are high freight rate, possible delay due to bad weather, more borderions on size and weight.Water CarriersCuneo (2003) claims that more than 90 percent of world trade travels in containers aboard naval going ships, and about 20 million containers move through 220 ports virtually the world every year. Shipper can use water carriers in combination with other mode of transport. Water service on the average is sulky than rail and approachability and dependability can be effected by bad weather. Loss and damages cost from water carriers are considered low relatives to other modes. However, packaging is more come to to protect goods during handling when loading and unloading operation(Ballou, 1999).2.4.2 Critical Changes in TransportAccording to Coyle, Bardi, and Langley (2003), there are five majo r areas of change which are deregulation of the U.S. ocean facing industry, intermodalism, shipment control, trade policies, and currency fluctuation. The Shipping Act of 1984 and the Ocean clean up Act of 1998 is the greater reliance on the market place to control rate. Therefore, the elimination results in more rate negotiation, the right of conference carriers to take independent action on rates and service agreement which response to the laws of supply and demand. According to Stock and Lambert (2001), the deregulation has resulted in increased inter-intrafirm competition, greater pricing freedom, flexibility in routing and scheduling. It has increased the need of selling oriented, and shippers have more carriers to choose. Secondly, intermodalism means the use of two or more transport mode which can provide a service to the shipper-customer that appears to be seamless (Coyle, Bardi, and Langley, 2003). Intermodal transport is a combination to take advantage of the integral economies of each and thru provide an integrated service at lower total cost (Bowersox et al., 2007). Next, shipment control means high tech conference system that can deliver effective communication and control system. node can track the progress of the shipments. In addition, trade policies can impact the way of transport. Some countries set up protective barrier to restrict import goods, so delay of custom procedure can break which also result in delay shipments. Finally, fluctuation in world currency can significantly affect logistics decision such as choice of transport mode and carrier. Definitely, value of currency also affects freight rates and importing and exporting volume which also affect traffic of transport (Coyle, Bardi, and Langley, 2003).2.5 Logistics Strategies Related to CustomersLogistics and MarketingZinn (2000) mentions that logistic and trade should come together because logistics management is developed to deliver value to customers and fulfill customers need. Therefore, the need of trade and logistics integration has been more increasing. Customer service is often the draw plug in between logistics and selling.Coyle, Bardi, and Langley (2003) claim that if the logistics system has problems, and customers will not receive a delivery as promised, the company could lose rising sales. The logistics process is to deliver and produce the good products at the right cost, but if there are some mistakes with the process, the customers will be satisfied. Therefore, it has a link between marketing and logistics management. Innis and LaLonde (1994) order that both of logistics and marketing contribute to customer satisfaction because marketing is responsible for creating and managing demand while logistics is responsible for fulfilling demand.The Role of Logistics in test Customer Service LevelsLogistics operation serves a particular all important(p) informative function because the goal of marketing department is to increase sales, but sometimes they ignore the cost to achieve them. The logistics department can outline the substitute(a) means of delivering products to customers and help to calculate the cost for different level of service. They can help to determine the level of customer service and pricing policies (Marphy and Wood, 2004). According to Coyle, Bardi, and Langley (2003), there are tetrad dimensions of customer service from a logistics perspectives. They contain time, dependability, convenience, and communication. Time is related to order cycle time, lead time, and replenishment time. Order cycle should be consistent with reasonable length. Dependability is more important than lead time for some customers. It affects directly to inventory level and stockouts cost. Moreover, dependability also means safe delivery and correct order. Communication involve with accurate information and electronic flow of information. Finally, convenience is understood as flexibility. Logistics service should be a daptable for different customers.2.5.1 Partnering Relationship between Carriers and ShippersEllram and Hendrick (1995) explain union as a relationship between two firms that pull for a period of time share mutual information, risks, and rewards of the relationship. Relevant to Mohr and Spekman (1994), partnership is defined as independent firms who share goals, strive for mutual benefit, and jazz a high level of mutual interdependent. Cooke (2000) claims that supply chain management and collaborative transport management propel transport buyers and their service providers toward stronger reciprocally beneficial relationships. Dwyer et al. (1987) explain that buyer-seller relationship should have a basic propensity of critical success factors for strategic alliance. It includes detailed planning foe future exchange, increased measurement and qualification, sharing benefits and burden, reduced uncertainty, shared efficiency and high switching costs. Ellram (1991) also identify tha t trust between firm, transfer of needed information, mutual dependence, and sharing of new technology are the key attributes of productive relationship in buyer-seller partnership.Traditionally, relationship between shipper and carriers was arm length transaction. to each one of them tries to maximize its own interests with little interest in their both relationship. However, both of them have begun to recognize the mutual benefits by developing alliance (Lambert and Stock, 2001). According to Gibson, Rutner and Keller (2002), the research institute that trust, effectiveness, and flexibility are the most important determinants to develop and manage long term cooperative partnership between carriers and key shippers. Byme (2004) explains that when fuel price are rising dramatically, carriers have no choices, but have to increase price. It can affect relationship between carriers and shippers. The resoluteness of the problem is to increase collaboration between shippers and carr iers. Carriers should have end-to-end processes such as load planning, tendering and delivery confirmation. Technologies such as sharing tracking and transaction information are also important to collaborate. Lu (2003) claims that effective services result in successful partnering relationships.2.6 Carrier Selection ratiocinationThe decision making process is the stage that includes mode choice and carrier selection which can identify relevant transport performance variables, select mode of transport and carrier, negotiate rates and service levels, and pronounce carrier performance (Monczka et al., 2005). Stock and Lambert (2001) claims that mode and carrier selection is important because shipper can reduce the number of carriers with whom they do business. When shippers have high volume, they get bigger discount and higher level of service that result in lower transport costs. Meanwhile, carriers prefer to deal with fewer shippers with large consistent volume over long period of time. Burdg and Daley (1985) claimed that the process of selection is gnarled with behavioural approach which includes environmental and organizational factors. The performance of the transport carrier may influence the effectiveness of the entire logistics function of a company and the process of carrier selecting is an important to the companys success. However, the research explored that regulatory and market changes are drivers for change in transport choice attributes (Norbis and Meiwell, 2008).In addition, Gattorna and Walters (1996) claim that there are five factors that are influent the choice of transport containing company characteristics and philosophy, market structure, product characteristics, customer characteristics, and environmental issues. Firstly, the company should concern its marketing, financial, and operation strategies. Marketing can determines customer service offer and customised to meet different customers needs. Financial is also involved with the profi t objectives. Secondly, market structure is essential consideration. In competitive market, delivery may be the key factor influencing customers selection. Thirdly, product characteristics are involved with weight, size, and shape. Next, customer characteristics can impact on profitability. The company should check customer profile, order cycle, and customer after-sales service requirements. Finally, environmental issues can influence transport decisions because in some countries, government is influent in transport policy.2.6.1 Selecting and Making Decision solveFigure 2.3 Four decision stagesSearchChoicePost-choice Evaluation chore RecognitionAccording to Stock and Lambert (2001), there are four decision stages (Figure 2.3) occur in the mode/carrier selection decision which are problem recognition, search, choice, and post-choice evaluation. Firstly, the problem recognition is the stage that is affected by a variety of factors such as customer orders, dissatisfaction with existin g mode/carrier, and changes in the distribution patterns of firm. Next, customers will come to search process which they run out a variety of information sources. The possible source can be their past experiences, carrier sales calls, existing company shipping record, printed materials such as advertising brochures, and customers. This process can take a big of time. Then, the important stage is choosing. There are many critical attributes concerned in this stage, and executives will choose the mode/carriers that satisfy their requirements. Finally, transport executives evaluate the choice performance. Many firms use many techniques such as cost studies, audits, on-time pickup and delivery performance, and damage/claims reviews while some of them use statistical analysis.2.6.2 Behavioural Approaches Related to Transport StudyGray (1982) presented three assumptions associated with carrier choice. First, Economic Positivism is explained that economic value related to the firm which determines the use of transport. This approach related to price and profit. The firm attempts to maximize short term revenue and minimize short term cost in a trading. The second approach is called technological positivism which is associated between the physical aspects of good such as weight and volume and the transport system such as speed and frequency. The last approach is perceptual approach which related to user interpretation of the situation rather than on physical attributes.2.6.3 all-important(a) Attributes in Selecting CarriersShipper PerspectivesTo make a decision, customers need to realize value in order to make a selection, so this part will review the important attributes for shipper to make the selection carrier criteria. Lu (2003) surveyed Taiwan Shippers and found that the five most important carrier service attributes are availability of cargo space, low damage and loss record, accurate documentation, reliability of announce sailing schedule, and courtesy of in quiry. The research also found that there is a significant correlation between timing related, pricing and warehouse service, so it can imply that to satisfy customers, carrier service should combine these things together. Mater and Gray (1993) explored that shippers in Irish Sea market concerned the most five factors to select carriers which are a fast response to problems, on time collection and delivery, value for money price, and good relationship with carriers. According to Kent and Parker (1999), the mail survey was sent to 125 companies which divided into 50 import shippers, 50 export shippers, and 25 international containership carriers. Shippers identified the hand factors for selecting carrier which are reliability, equipment availability, service frequency, rate changes, loss and damage, and financial stability. The research also found that the factors of selecting carriers between import and export shipper are different in the factor of door to door transportation rates . The research also concluded that service factor is important factor for export customers. Gibson et al. (1993) describe that the key criteria for carrier selection includes a willingness to meet service expectation, an establish track record of outstanding performance, a willingness to focus on continual improvement, the ability to handle special needs and emergencies and a willingness to meet cost goals.Tengku Jamaluddin (1995) investigated the service attributes that are important in carrier selection process, and the result indicated the top five service factors which are knowledgeability, freight rate, cargo finagle and handling, punctuality and transit time, and service frequency. Chiu (1996) assessed the performance of liner shipping in shippers perspectives. The result indicated that the six most important service attributes contains a displace responses from a carrier to any problems, transit time, reliability, documentation services, a detect of delay, and assistanc e with loss and damage claims.Lu (2007) reviewed from past research and questionnaire survey of 230 shipping executives to find out the important key of capabilities for liner shipping services. The review concluded that transit time and frequency of service are ranks as important criteria in the context of liner shipping services. Saleh and Das (1974) found that reliability of transit time, consistency in service, company image and special handling abilities are important carrier attributes. Coulter et al. (1989) reviewed the past research and used the relevant criteria to develop questionnaire. The resulted showed that reliability of performance is considered first and follow by Insurance of service provision, quality of service, personalizing factors and handling service. McGinnis (1990) found that there are six factors influent transportation choice which are freight rate, reliability, transit time, loss/damage/claims processing/tracing, shipper market consideration and carrier considerations.Carrier PerspectivesCarriers do not really understand which selection criteria tend to influence a shippers choice of carriers. Carriers can lose competitive advantage if they still understand differently with shippers which definitely results in a decrease in market share. Moreover, the research found many carriers perceptions that are significantly different from what shippers want. Carriers rated personal relations with the carriers as highly important while shippers rated the factor only moderately important. Regular calls by carrier sales representatives, gift and gratuities offered are overrated by carriers, but shippers rated as just about important or not important. In addition, the research conclude