The Transportation System
Transportation accounts for between one-third and two-thirds of total logistics costs; for most firms, it is the most important single element of logistics costs. Firms and their products’ markets are often separated geographically. Transportation increases the time and place utility of products by delivering them at the right time and to the right place where they are needed. By doing so, the customers’ level of satisfaction increases, which is a key factor for successful marketing.
A comprehensive discussion of transportation is beyond the scope of this text, so we focus here on essential issues of transportation systems, which are more related to the physical flows of materials.
Transport Modes and Their …show more content…
Total transit time (from pickup at the vendor to delivery to the customer) is important to shippers and the customers. From this point of view, well-managed surface carriers can compete favorably with air carriers, especially on short and medium hauls. Even though air carriers provide rapid time in transit from terminal to terminal, they may spend too much time on the ground (e.g., for pickup, delivery, delays and congestions, and waiting for scheduled aircraft departures).
Loss and damage ratios resulting from transportation by air are considered lower than the other modes. The classic study by Lewis et al. shows that the ratio of claim costs to freight revenue was only about 60% of those for road and rail.
Airline companies generally own neither airways nor airports. Air spaces and air terminals are usually developed and maintained with public funds, so fixed airfreight costs (including aircraft purchases, specialized handling systems, and cargo containers) are lower than rail, water, and pipeline. Air-transport variable expenses are extremely high because of fuel, maintenance, and the labor intensity of both in-flight and ground crew. Variable costs are reduced by the length of journey because