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Why does the aggregate demand for freight transportation tend to be price inelastic?
Because the cost of transportation is generally a small % of the products landed cost
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Why does the demand for a particular modes or carriers tends to be price elastic
Because there are usually other substitutes available
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What is Derived Demand
Demand for transport service to move a product to a given location depends upon the existence of demand to consume (use) that product at that location
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What are Transport Costs
- - Influence a producer’s landed cost advantage/disadvantage vs. competitors
- - Determine the market value of the transport service
- (A component of Landed cost)
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What are Landed Costs
- - Include Cost of Production and Transport cost from production point to market
- - Determines extent or range of a producer’s market area and value of transport service
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What are the 3 historical phases of Supply Chain
- - Physical Distribution concept
- - Business/Integrated Logistics concept
- - Supply Chain management concept
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What is the flow of the Supply Chain process
Suppliers => Distributors => Manufacturers => WholeSalers => Retailers/Customers
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What is GDP
- - Gross Domestic Product
- - Annual market value of all goods and services made within border of a nation
- - GDP = Consumption + gross investment + government spending + (exports – imports)
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What are the three decision making groups that shaped the transport System
- – Users: create the demand requirements
- – Providers: supply, operate, and manage transport services to meet demand
- – Government: develop policy, supply infrastructure, and regulate
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What are some affects of Deregulation
– Affected how carriers organized, priced, sold services, and managed operations
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What are some control agencies with Jurisdiction
- -National Highway Traffic Safety Administration
- -National transportation Safety board
- -Federal Railroad administration
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Regulations effects
- -Enebled Government Control
- - Entry and Exit from industry
- - Entry and Exit from markets
- - Rates charged
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Periods of Regulation: Era of Initiation
Focused on Rail Roads
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Periods of Regulation: Era of Positive Regulation
Oriented towards promotion of transportation
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Periods of Regulation: Era of intermodal regulation
Expanded regulation to other modes
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Periods of Regulation: Era of Economic Deregulation
- Strengthend Safety and Security regulation
- Old rationale for regulation was no longer as relevant
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What was significant about "Rates" in the Pre-Deregulation period?
- -Represented the carriers charge
- -Were published in tariffs and available to all shippers
- -To change a rate, regulatory approval was required
- -Rarely influenced by market conditions
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Costs in the Post-Deregulation period
- -Transportation prices were largly determined and driven by market forces
- -Tariffs were no longer subject to regulatory control
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What is Third-degree price discrimination?
- – Seller sets separate prices for separate groups of buyers of essentially same service
- (Very similar to Differential Pricing)
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What are some characteristics that influence a carriers cost?
- -Product Density
- -Stowability
- -Handling
- -Liability
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What are some common mistakes with Pricing?
- - Over-reliance on cost-based pricing
- - Prices not tailored to services and markets
- - Slow reaction to changes in market conditions
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What does TL and LTL stand for?
- TL = Truck Load
- LTL = Less than Truck Load
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What is the fuction of a Break Bulk terminal?
- - To consolidate and re-sort shipments
- -Some disadvantages are that it slows transport time, adds handling, and reduces reliability
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In LTL operations, what can be said about fixed costs?
They are higher due to the terminal system
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What are some reasons why there is a Shortage of Qualified Drivers
- - Federally imposed comercial driver licence (CDL)
- - Rules on drug and alcohol abuse
- - A very demanding but unattractive life style
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What are some reasons the Rail system began to decline?
- - Large government construction programs for Roads and Waterways
- - The development of air transport
- - Construction of Oil pipelines
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What did the Staggers Rail Act do?
- - Helped railroads to become more price competitive
- - Helped railroads develop more customized responses to customers level of service needs
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What are some advantages of Rail roads?
- – Large carrying capacity (few size or weight constraints) enable low average cost operations
- – Capable of handling almost any type of cargo
- – Railroads assume liability for loss and damage
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When would you prefer to use Air transportation opposed to freight?
When the importance of speed outweighs the importance of cost
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What is true about the variable and fixed costs for Air transport?
Has a high Variable cost and a low fixed cost
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