PRINCIPLES OF TRANSPORTATION
There are 2 principles of transportation
1) ECONOMY OF SCALE
This refers to the characteristics that transportation cost per unit of weight decreases when the size of shipment increases. It is also generally true that larger capacity transportation vehicles such as rail or water are less expensive per unit of weight than smaller capacity vehicles like truck and tempo. Transportation economies of scale exist because fixed expenses associated with moving and loading can be spread over the loads weight. The more the load, the less will be the cost per unit weight. The fixed expenses include administrative cost of taking the transportation order, time to position the vehicle for loading and unloading.
2) ECONOMY OF DISTANCE
Refers to the characteristic that transportation cost per unit of distance decreases as distance increases. These principles are important considerations when evaluating alternative transportation strategies. 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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