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• Module overview
• 1. Introduction to logistics
  • 1.1. The logistics concept
    • 1.1.1 A question of definition
    • 1.1.2 Technological context
  • 1.2. Evolution of modern business logistics
    • 1.2.1 Materials management or supply-side logistics
    • 1.2.2 Physical distribution or demand-side logistics
    • 1.2.3 The total logistics concept
  • 1.3 Logistics, the critical interfaces

• 2. Supply side logistics: Procurement and materials management

  • 2.1 Materials management
    • 2.1.1 Purchasing and procurement
    • 2.1.2 Production control
    • 2.1.3 Warehousing and storage
    • 2.1.4 Data and information systems
  • 2.2 Quality in logistics
    • 2.2.1 Total quality management
    • 2.2.2 Benchmarking
  • 2.3 Kanban
  • 2.4 Measurement and evaluation
  • 2.5 MRP 1 and 2

• 3. Demand side logistics: Forecasting and order processing

  • 3.1 Customer order processing
  • 3.2 Environmental scanning
    • 3.2.1 The environments
    • 3.2.2 Approaches to scanning
  • 3.3 Logistics needs forecasting
  • 3.4 Lead time components
  • 3.5 Enhancing forewarning of demand

• 4. Inventory management and control

  • 4.1 Basic concepts and rationale for inventory holding
  • 4.2 Inventory costs
    • 4.2.1 Managing inventory costs
    • 4.2.2 Push and pull control methods
  • 4.3 Types of inventory
  • 4.4 Inventory management
    • 4.4.1 Inventory management systems
    • 4.4.2 Computers and inventory management
  • 4.5 Inventory management and business success

• 5. Storage facilities, materials handling equipment and packaging

  • 5.1 The management of warehouses and distribution centres
    • 5.1.1 Storage alternatives
    • 5.1.2 Warehouse design
    • 5.1.3 Productivity associated with warehousing
    • 5.1.4 Warehouse information systems
  • 5.2 Materials handling
    • 5.2.1 Objectives of material handling
    • 5.2.2 Materials handling systems and equipment
    • 5.2.3 Materials handling productivity ratios
  • 5.3 Packaging
    • 5.3.1 The role of packaging
    • 5.3.2 Packaging materials
    • 5.3.3 Packaging design considerations

• 6. Physical distribution transportation system

  • 6.1 The role of transportation in logistics
  • 6.2 Economic and service characteristics of the modes of transport
    • 6.2.1 Rail
    • 6.2.2 Road
    • 6.2.3 Air
    • 6.2.4 Water
    • 6.2.5 Pipeline
  • 6.3 Intermodal transport services
  • 6.4 Transportation cost structures
  • 6.5 Transportation rate profiles
  • 6.6 Modal and carrier selection
  • 6.7 Management of the transport function

• 7. Change and transformation

  • 7.1 Nature of change
    • 7.1.1 The manager's role and change
    • 7.1.2 Transformation and change continuums
    • 7.1.3 Responding late in the change continuum
    • 7.1.4 Rapid change continuum cycles
    • 7.1.5 Increasing organisational responsiveness and agility
  • 7.2 Scale and pace of change
    • 7.2.1 Leading rapid change
  • 7.3 Stages of change
    • 7.3.1 The stages of change and approaches to management
    • 7.3.2 Change and the organisation's development stage
  • 7.4 Communicating change
    • 7.4.1 Guidelines for communicating change
    • 7.4.2 Communicating change to stakeholders

• 8. Building agility and responsiveness

  • 8.1 Organisational agility and the art of rapid change
  • 8.2 Agility and transformational leadership
    • 8.2.1 Transactional Leadership
    • 8.2.2 Transformational Leadership
  • 8.3 Agility and organisational responsiveness
    • 8.3.1 Principles for Constructive Change
    • 8.3.2 Agility and environmental attunement
  • 8.4 Organisational learning and enhanced agility
    • 8.4.1 Learning and organisational life cycles
    • 8.4.2 Double loop learning and the learning organisation
    • 8.4.3 The learning cycle
    • 8.4.4 Leading learning from being adaptive to generative

• 9. Foster innovation and creativity

  • 9.1 Innovation and agility
  • 9.2 Levels of innovation and their impact
    • 9.2.1 Innovation
    • 9.2.2 Improvement
    • 9.2.3 Re-engineering
    • 9.2.4 Reinventing
    • 9.2.5 Re-engineering
  • 9.3 Re-engineering and business process re-engineering
    • 9.3.1 Reengineering and quality improvement
    • 9.3.2 Identifying when to re-engineer processes
    • 9.3.3 To innovate slowly or reengineer?
  • 9.4 The need for speed
  • 9.5 Organise work to facilitate innovative practices and organisational agility
    • 9.5.1 Innovative and agile organisation
  • 9.6 Enhancing diversity and creativity of thinking in teams and work practices
    • 9.6.1 Convergent and divergent thinking
    • 9.6.2 Left- and right- brain activities
    • 9.6.3 How to generate new ideas?
  • 9.7 Creativity and solutions search in teams
    • 9.7.1 Brainstorming
    • 9.7.2 Synectics
    • 9.7.3 Forcing Techniques
    • 9.7.4 Nominal Technique
  • 9.8 Review the use of innovation in work and team practices.
    • 9.8.1 Assess the ability of the team to achieve goals
    • 9.8.2 Review the success of team leadership

6.5 Transportation rate profiles

The rates or tariffs charged by a carrier will depend on its market and cost structure. The two basic pricing methods used by carriers to determine their rates are: cost-of-service pricing and value-of-service pricing.

Cost-of-service pricing and cross subsidisation. When using cost-of-service pricing method, carriers charge rates which, as a minimum, cover their variable costs or marginal costs of operation. This method is usually applied to low value products, where shippers' profit margins are low, hence they are on the lookout for cheaper transportation. Some carriers use this method of pricing for certain goods, which is offset by the higher rates charged for others. This concept is called cross subsidisation.

Value-of-service pricing. When using a value-of-service pricing method, carriers charge rates which the traffic will bear or which shippers are willing to pay. Hence they maximise their revenue regardless of the costs involved in the transportation of the goods.

The various factors affecting the pricing of transport services is shown in the table below:

Table 6.1 Factors affecting the pricing of transport services

Pricing Variable	Elements of Pricing Variables
Commodity cost factors           Route cost factors       Commodity demand factors       Route demand factors	Loading characteristics Susceptibility to loss and damage Volume of traffic Regularity of traffic Type of equipment required   Distance Operating conditions Traffic density   Value of the commodity Economic conditions in the user industry Rates on competing commodities   Competition with other carriers Production-point competition Traffic density

Source: Bloomberg, D.J., Murray , A. & Hanna, J.B. 1998, The Management of Integrated Logistics, Prentice Hall of Australia Inc., 2 nd edition.

In your text

Please read pages 190-212 (Chapter 6) of your text, which describe the most common rate structure related to volume, distance and demand.

Activity 6.1

Compare the cost characteristics of rail and road modes of transportation, and explain how these influence the pricing decisions of the services they offer.

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