Page 194 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 8: Transportation

 Distance: Distance is a major influence on transportation cost since it directly contributes Notes
to variable cost, such as labour, fuel, and maintenance. This is reflected by the cost-distance
curve. The cost curve does not begin at the origin because there are fixed costs associated
with shipment pickup and delivery regardless of distance. It increases at a decreasing rate
as a function of distance. This is shown in Figure 8.4.

Figure 8.4: Relationship between Distance and Transportation Cost

Price

Distance

Source: Upendra Kachru, (2010), “Exploring the Supply Chain,” Excel Books
 Volume: The load volume relationship reflects economies of scale in transportation
activities. This is illustrated in Figure 8.5. The curve indicates that transport cost per unit
of weight decreases as load volume increases. The relationship is limited to the maximum
size of the vehicle. Economic transportation requires the consolidation of small loads into
larger loads to take advantage of scale economies.

Figure 8.5: Relationship between Weight and Transportation Cost

Price

Weight of load

Source: Upendra Kachru, (2010), “Exploring the Supply Chain,” Excel Books
 Density: The product weight is a function of the product density and volume. Figure 8.5
reflects weight considerations. If the product is light, it is not possible to increase the
amount carried if the space consideration has been met. Since vehicles are limited by both
space and weight considerations, once the vehicle is full, actual labour and fuel expenses
are not dramatically influenced. Generally, higher density products are assessed at lower
transport costs per unit of weight as the capacity is better utilized.

 Stowability: Stowability refers to vehicle space utilization as is reflected by product
dimensions. Odd sizes and shapes, as well as excessive weight or length, do not stow well
and typically waste space.

LOVELY PROFESSIONAL UNIVERSITY 189