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1、Chapter 08 - TransportationChapter 8: TransportationStudy Questions1. Compare and contrast the transport principles of economy-of-scale and economy-of-distance. Illustrate how they combine to create efficient transportation.Economy of scale and economy of distance are two fundamental principles that
2、 impact transportation efficiency. These scaling principles are very important when various transportation alternatives are evaluated. Economy of scale means that the cost per unit of weight decreases as the size of the shipment increases. Therefore, truckload (TL) shipments that utilize the total v
3、ehicle capacity have a lower cost per pound than less than truckload (LTL) shipments. The economies-of-scale exists because the fixed costs associated with moving the load is distributed over the increase weight. Economy of distance refers to a decrease in the transportation cost per unit of weight
4、as the distance increases. Therefore, a shipment for 800 miles will cost less to move than two shipments of the same weight each moving 400 miles. This principle is also called as the tapering principle. Longer distances allow fixed costs to be spread over more miles resulting in lower per mile char
5、ges.2. What is the economic justification for the rapid growth of premium package services?In todays business world, competition is shifting towards time-based competition. Given this fact, though service is expensive, premium package services can justify their costs wit the incredible speed they of
6、fer. That value of speed may exceed the business or personal shippers costs, especially in emergency situations. Most times, business shippers parlay those costs to customers that value time and are willing to pay the premium package cost. 3. Railroads have the largest percentage of intercity freigh
7、t ton-miles, but motor carriers have the largest revenue. How do you explain this relationship?The characteristic of railroad transport is that very large shipments can be carried at low costs. Thus, the rates they charge are relatively low. On the other hand, motor carriage can handle small, but va
8、luable shipments. Motor carriers can charge higher rates because of higher speed and flexibility, the fact that they are more readily available also lets them charge more, thus increasing their revenue per ton relative to railroads4. The five basic modes of transportation have been available for wel
9、l over fifty years. Is this the way it will always be or can you identify a sixth mode that may become economically feasible at some time in the foreseeable future?Intermodal transportation could be another mode of transportation in the future. It takes advantage of the inherent economies of each mo
10、de and provides an integrated service at lower total cost. The most widely used intermodal system is the trailer (TOFC) or container (COFC) on a flatcar. 5. Seven economic drivers that influence transportation cost were presented. Select a specific product and discuss how each factor will impact det
11、ermination of a freight rate.The following are the factors that affect the transportation cost of a product: Distance: Generally, transportation costs increase the distance, though at a decreasing rate. Since there are fixed costs involved regardless of distance, real costs are never zero even if pr
12、oduct is not moved. Generally speaking, if the product is moving in the city, transportation cost/distance would be much higher than that of intercity transportation.Volume: Generally, transportation costs per pound tend to decrease as the total weight is distributed across a number of transportatio
13、n facilities and equipment, each having its own fixed costs to cover. The more a unit of equipment is utilized (filled), the lower the variable cost per product unit. The relationship is repetitive for each truck load.Density: In terms of weight and space, the individual vehicle is more constrained
14、by space, unless the product is extremely dense - creating limitations based on weight. The transportation rates are quoted per weight, while the actual fuel and labor expenses are not dramatically influenced by weight. Therefore, higher density products usually have lower transportation costs per u
15、nit of weight. The cost/density relationship is similar to the cost/volume relationship.Stowability: Items with standard rectangular shapes that do not have odd lengths, sizes and weights are easy to stow. This factor is directly related to the shipment shape.Handling: The way products are packaged,
16、 the need for special handling equipment, and the physical grouping of products serve as handling cost elements.Liability: Carriers should either have insurance to protect against damage claims or accept responsibility for damage. Improved packaging and reduced susceptibility to loss and damage can be a solution to reduce risks.Market Conditions: The imbalance of movement between the destination and the origin causes vehicles to sometimes return
