Economy of distance refers to the characteristic that transportation cost per unit of distance decreases as distance increases.
e.g. a shipment of 800 miles will cost less than two shipments (of the same combined weight) of 400 miles. Transportation economy of distance is also referred to a se tapering principle since rates or charges taper with distance. The rationale of distance economies is similar to that for economies of scale.
Longer distances allow the fixed expenses to be spread over more miles, resulting in lower overall per mile charge.
These principles are important considerations when evaluating alternative transportation strategies or operating practices. The objective is to maximize the size of the load and the distance that is shipped while still meeting customer service expectations.
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