Transport Economies


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•Distance
•Volume
•Density
•Stow ability
•Handling
•Liability
•Market factors

Distance

-Cost curve increases at a decreasing rate as a function of distance and is known as tapering principle.
-Cost curve does not begin at the origin because of the fixed costs associated with shipment pick up and delivery regardless of distance.
-Tapering effect comes into existence, as the longer movements tend to have a higher percentage of inter-city rather than urban kilometers.
-Frequent intermediate stops, typical of urban kilometers, and additional loading and unloading add to the costs.
-Inter-city miles are less expensive since more distance is covered with same fuel as a result of  higher speed.

Volume

-Transport cost per unit of weight decreases as load volume increases.
-Fixed costs of pick up and delivery as well as administrative costs get spread over additional volumes.
-Smaller loads must be consolidated into larger loads.

Density

-Transportation cost per unit declines as product density increases.
-In terms of weight and space, an individual vehicle is constrained more by space than by weight. Once is the vehicle is full, it is not possible to increase the amount carried even if the product is lightweight.
-Higher density products allow fixed costs to be spread across additional weight, as a result the products are assessed at a lower transport cost per unit.
-Attempts are made to increase product density so that more can be loaded in a vehicle to utilize its capacity.

 

Stow ability

-Refers to product dimensions and impact of the same on vehicle utilization.
-Odd sizes and shapes as well as excessive weights and lengths do not stow well and typically waste space.
-Though density and stow ability are similar, products may have same density that stow differently.
-Items with regular shapes are easier to stow than odd shaped items.
-While the steel blocks and rods have the same density, rods are more difficult to stow because of their length and shape.

 

Handling

-Special handling equipments may be required for loading or unloading trucks, trains, or ships and the unitization/ palletization affects the handling cost.

 

Liability

– Product characteristics such as susceptibility to damage, perishability, susceptibility to to theft, susceptibility to explosion affect the risks and hence claims.

 

Market factors

(a)Back-haul i.e. vehicle returning back to the point of origin with load.
(b)Dead head to be avoided because empty returns incur labour, fuel, and maintenance costs.
(c)Thus design of logistics system must add back-haul movement wherever possible.

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