Compare and Contrast the Transport Principles of Economy of Scale and Economy of Distance

Topics: Logistics, Rail transport, Transportation Pages: 9 (1418 words) Published: January 2, 2011


Business logistics

Course Code: MKT-406

Program: BBA

Semester: FALL-10

Submitted To:

Mr. Md. Ismail haider

Lecturer of Marketing

Department of Marketing


Submitted By:

Farhan Nowroze Noor

ID: 01 Intake: 14th


Bangladesh University of Business & Technology


Submission Date: 30th December, 2010

1. Compare and contrast the transport principles of economy of scale and economy of distance. Illustrate hoe they combine to create efficient transportation?

Ans: There are two fundamental principle that impact transportation efficiency

Economy of scale in transportation is the cost per unit of weight decreases as the size of a shipment increases. Transportation economy of scale exist because fixed cost associated with transportation a load over the increase weight and cost of loading, unloading, invoicing.

Ex: shipment, larger capacity transportation vehicle (rail, water, airplane) are less cost per unit of weight than smaller capacity transportation vehicle (bus, truck).

Economy of distance: it refers to decreased transportation cost per unit of weight as distance increases. It also referred as tapering principle.

Ex: at a small weight shipment 800 miles will cost less to perform than two shipment each moving 400 miles.

2. Describe the five modes of transportation, identifying the most significant characteristic of each.

Ans: Five modes of transportation are:

o Rail

o Truck

o Air

o Water

o Pipeline

Rail: characteristics of railway transportation:

I. Economically transport capability for large shipment

II. Railroads have largest percentage of intercity freight ton miles

III. Train enjoys relatively low variable operating cost

IV. Train enjoys relatively large tonnage over long distance

V. Railroad operation have fixed cost

VI. Electrification and technology development reduced variable cost per ton

VII. Train is faster and more expensive to operate

VIII. It is nonstop from origin to destination

Truck: characteristics of truck in highway transportation:

I. Trucks have flexibility to transport.

II. Motor carriers have the largest revenue.

III. It is able to operate on a variety of roadways

IV. Ability to operate door to door

V. Trucks have relatively small fixed investment than other modes.

VI. Truck operations are characteristics by low fixed cost and high variable cost.

VII. Truck handle small shipment moving short distances.

VIII. Easy to moving from wholesaler warehouses to retail store.

Water: characteristics of waterway transportation:

I. Water is oldest mode of transportation

II. Capacity to transport extremely large shipment

III. Ability to achieve economy of distance.

IV. Moderate fixed cost

V. Low variable cost to transport large tonnage.

Pipeline: characteristics of pipeline transportation:

I. Pipeline transportation use basically for petroleum ton miles movement.

II. It transported natural types of product

III. Pipeline is unique than others.

IV. Pipelines operate 24 hr and 7 days nonstop.

V. Limited only commodity change over.

VI. Highest fixed cost and variable cost.

Air: characteristics of air transportation:

I. The newest but utilize mode of transportation.

II. Airfreight lies in the speed than others...
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