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

Compare and Contrast the Transport Principles of Economy of Scale and Economy of Distance Paper On Business logistics Course Code: MKT-406 Program: BBA Semester: FALL-10 Submitted To: Mr. Md. Ismail haider Lecturer of Marketing Department of Marketing BUBT Submitted By: Farhan Nowroze Noor ID: 01 Intake: 14th [pic] Bangladesh University of Business Technology (BUBT) 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. 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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 III. Very much costly. IV. Use sensitive product transportation. V. High fixed cost and variable cost. 3. What is the motor carrier freight transportation the most used method of product shipment? Ans: Highway transportation has expended rapidly since the end of World War II. Today motor transportation is the most used method of product shiftiest because: 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. 4. What is the economic justification for the rapid growth of premium package services? Ans: Economic justification for the rapid growth of premium package services: Package services represent an important part of logistics, and the influence of carriers in this segment is increasing because of their size and intermodal capabilities. The advent of e-commerce and need for summer-direct fulfillment have significantly increased demand for package delivery. While package services are expanding, the services required do not fall neatly into the traditional model classification scheme. Packages are regularly transported by using the line-haul services of rail, motor, and air. Package service provides both regular and premium services. 5. Why is it Important for a logistics manager to have a degree of understanding of transportation regulatory history? Ans: Transportation is a key activity in logistics because it moves product through the various stages of production and ultimately to consumers. Transportation infrastructure introduced major principles of transportation economics and provided a brief historical summary of government regulation. That’s why it is important that logistics managers have appreciation and understanding of regulation history to fully appreciate the logic underlying today’s transport system. 6. Why have railroad miles declined during a period of national growth? Ans: Historically railroads have declined the largest number of ton miles in the world. Before World War II it ranked first among all the mode of transportation. As a early development of a comprehensive rail network connecting almost all cities, towns intercity. But after World War II with the technology development serious motor carrier competition began to develop and railway share revenues and began to decline. The extensive development of road and highway will soon change the ranking of railway. 7. Railroads have the largest percentage of intercity freight ton-miles, but motor carriers have the largest revenue. How do you explain this relationship? Ans: Railway and motor both are the mode of transportation so they have the relationship but rail taken largest percentage of intercity freight ton-miles because: 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 But motor carries the largest revenue because: 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. 8. Discuss the fundamental difference between TOFC and COFC. Why double stacking was considered a major innovation in multimodal transportation? Ans: Fundamental difference between TOFC and COFC: TOFC means trailer on a flatcar. Which is 8 feet wide, 8 feet high or 53 feet long and have highway wheels. COFC means container on a flatcar. This is 8 feet wide, 8 feet high or 20 or 40 feet long and do not have highway wheels. Double stacking considered a major innovation in multimodal transportation because while the TOFC concept facilitates direct transfer between rail and motor carriage. It also has several technical limitations. The placement of a trailer with highway wheels attached. Transferred to a railcar, can lead to wind resistance, damage, and weight problems. The use of constraints reduces these potential problems, as they can be double stacked and easily transferred to water carriers. However, they require special equipment for over-the-road delivery or pickup. 9. Explain the value proposition offered by freight forwarding. Provide an example that illustrates why shippers would be attached to using the services of a freight forwarder as contrasted to arranging their own transportation. Ans: Value proposition offered by freight forwarding: a) Lower rate per hundred weight obtained from large shipment b) Faster transport of small shipments than would be experienced if the individual customer dealt directly with the common carrier. Cause for shippers for which they would be attracted to using the services of a freight forwarder as contrasted to arranging their own transportation: i. Lowering transportation cost ii. More profit iii. Higher security iv. Faster transport v. Sharing responsibility 10. The five basic modes of transportation have been available for well over 50 years. Is this the way it will always be, or can you identify a sixth mode that may become economically feasible in the foreseeable future. Ans: Yes this is the way it will always be. Because we can’t identify another mode of transportation excluding all these five.