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The National Motor Freight Classification (NMFC), as
determined by the Surface Transportation Board (STB), is the tariff system that
has classification and description of commodities based on four main
characteristics. These are density of the commodity, liability, handling and
storability of the commodity. Carrier companies negotiate the rate and terms of
transporting the commodities on the basis of these four characteristics. It is
important to mention that product density is the dominant factor that
determines use of carrier’s vehicle and cost per hundredweight. Higher product
density results in lower cost per hundredweight but higher capability of
hauling product weight. A lower density of commodity results in high cost per
hundredweight and lower capability of weight haulage.

 

The type of inter-modal and intra-modal opposition in the
motor carrier industry has transformed over a certain period over the last five
decades. The motor carrier industry is composed of truckload (TL) and less than
truckload (LTL) motor carriers. There has been an increment in the
concentration among LTL carriers (ton miles as concentration measure) but
decrease in number of firms. This means intra-modal competition in LTL motor
carrier segment has increased. The 1980 Motor Carrier Act enhanced the
competition in the LTL industry. The deregulation of the motor carrier industry
increased as the rate competition between intra-modal motor carriers.
Intra-modal competition in both TL and LTL industry segments has resulted in
few large firms hauling bulk of the tonnage. The intra-modal competition has been
required for intermodal transport carriers to make specific partnerships to
help gain industry-wide advantage over the rival firms in the area operating
with same business plan. With the Inter-modal in place, it has certain partnership
agreements with other railroads that have been signed to help provide better
services and cost advantages compared to the other intra-modal competitors in the
motor carrier industry. During 1980, the TL motor carriers fared quite well. These
companies include J.B. Hunt, MS Carriers and Werner. There was 30% to 40%
annual increment in their revenues during 1980s. For instance, J.B Hunt’s
revenues at the start of 1980 was around $25 million but increased to $732
million starting 1991. MS Carriers increased from $35 million in 1980 to $152
million in 1991. During 1980s, TL segment of the motor-carrier industry rapidly
outgrew other segments such as LTL, rail boxcars, and long-haul private fleets.

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The major reason of railroads abandoning significant number
of miles of track (over 260,000) has been the rapid inter-model transportation
competition. Since the gradual deregulation of railroad industry, the two major
industry segments in motor carrier transportation have been truck load (TL) and
less-than truck load (LTL) industries. TL and LTL industry segments have
rapidly developed after the US government reregulated the transportation
industry. There has been an increasing competition of rail boxcars with
trucking industry. The improvement of water ways carried out by the engineering
corps of the U.S army has also led to increased competition between inter-modal
transportation carriers. The trend is likely to continue as TL and LTL industry
segments continue to expand their operations thus making the transportation
industry more competitive for railroad providers. The developing of highways
and freeways has led to decrease in price structures of TL and LTL industry
segments.

 

Air carriers use all three factors i.e. value of goods,
density, and weight of the shipment in order to price their services. The air
carriers take into consideration both the volume and the weight of the shipment
as measure to determine the relative price of service. Air carriers use
dimensional weight, a technique that takes into consideration the length,
height and breadth of shipment. This is the general practice because low
density (shipment having lower weight compared to their other dimension such as
height and length) cargo becomes unprofitable for air-carriers. Air carriers
also determine transportation price through determination of value of goods.
High value goods such as diamonds, consumer electronics, and perishable
commodities have higher rate of transportation because special care for
transportation and timely delivery is required.

 

The water carriers did play an important role during 18th
and 19th century because there was strict regulation enforced by the
government. There was no inter-modal competition and there were no alternatives
available for transporting commodities and materials. During the 20th century,
the relative position of water carriers has decreased due to the emergence of
air cargo and trucking industry that can effectively transport with more
efficiency compared to the water carriers. The importance of water carriers is
still vital in the developed and developing economies. Large-scale bulk
transportation and long-haul carriage requires the services of bulk carriers
such as very large crude oil carriers (VLCCs) and ultra large crude oil
carriers (ULCCs). Dry bulk carriers are used to transport large volumes of
grain and other commodities. The importance of water carriers in transportation
sector will remain primary, as the importance of crude oil and commodities is
primary for the development of economies.

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