Transportation Modes and Economics
Transportation modes include:
Historically, railroads have handled the largest number of ton-miles within the continental United States.
Highway transportation has expanded rapidly since the end of World War 11. To a significant degree the rapid growth of the motor carrier industry has resulted from speed and ability to operate door-to-door.
Water is the oldest mode of transport. The original sailing vessels were replaced by steam-powered boats in the early 1800s and by diesel in the 1920s. A distinction is generally made between deepwater and navigable inland water transport. 4) Pipeline
Pipelines are a significant part of the U.S. transportation system. • Fixed costs high (increase almost directly with distance) • Line-haul costs are lowest (even lower than water) • Long haul in bulk
• Liquid fuels in large volumes
• Restricted commodity use; regular flow and demand required
The newest but least utilized mode of transportation is airfreight. The significant advantage of airfreight lies in the speed with which a shipment can be transported
Transportation-Related Service Elements
Speed refers to elapsed movement time. (Time in transit) (ii) Availability
Availability refers to the ability of a mode to service any given pair of locations. (iii) Dependability
Dependability refers to potential variance from expected or published delivery schedules. (iv) Capability
Capability is the ability of a mode to handle any transport requirement, such as load size. (v)Frequency
The final classification is frequency, which relates to the quantity of scheduled movements.
There are two fundamental principles guiding transportation management and operations. They arc economy of scale and economy of distance.
Economy of scale refers to the characteristic that transportation cost per unit of weight decreases when the size of the shipment increases. For example. track load (TL) shipping (i.e.. shipments that utilize the entire vehicles capacity) cost less per pound than less-than-truckload (LTL) shipments (i.e., shipments that utilize a portion Of Vehicle capacity). 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 such as motor or air. [pic]
Transportation economies of scale exist because fixed expenses associated with moving a load can be spread over the load's weight. As such, a heavier load allows costs to be “spread out’’ decreasing costs per unit of weight. The fixed expenses include administrative costs of taking the transportation order, time to position the vehicle for loading or unloading, invoicing, and equipment cost. These costs are considered fixed because they do not vary with shipment volume. In other words, it costs as much to administer a shipment of I pound as it does to administer a 1,000-pound shipment. To illustrate, suppose the cost to administer a shipment is $10. Then the 1-pound shipment has a per unit of weight cost of $10 while the 1,000-pound shipment has a per unit of weight cost of $0.01. Thus, it can be said that an economy of scale exists for the 1.000-pound shipment.
Economy of distance refers to the characteristic that transportation cost per unit of distance decreases as distance increases. For example, 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 as the tapering principle since rates or charges taper with distance.
The rationale for distance economies is similar to that for economies of scale. Specifically, the relatively fixed expense incurred to load and unload the vehicle must be...
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