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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
Why does the demand for a particular modes or carriers tends to be price elastic
Because there are usually other substitutes available
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
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)
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
What are the 3 historical phases of Supply Chain
- - Physical Distribution concept
- - Business/Integrated Logistics concept
- - Supply Chain management concept
What is the flow of the Supply Chain process
Suppliers => Distributors => Manufacturers => WholeSalers => Retailers/Customers
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)
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
What are some affects of Deregulation
– Affected how carriers organized, priced, sold services, and managed operations
What are some control agencies with Jurisdiction
- -National Highway Traffic Safety Administration
- -National transportation Safety board
- -Federal Railroad administration
- -Enebled Government Control
- - Entry and Exit from industry
- - Entry and Exit from markets
- - Rates charged
Periods of Regulation: Era of Initiation
Focused on Rail Roads
Periods of Regulation: Era of Positive Regulation
Oriented towards promotion of transportation
Periods of Regulation: Era of intermodal regulation
Expanded regulation to other modes
Periods of Regulation: Era of Economic Deregulation
- Strengthend Safety and Security regulation
- Old rationale for regulation was no longer as relevant
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
Costs in the Post-Deregulation period
- -Transportation prices were largly determined and driven by market forces
- -Tariffs were no longer subject to regulatory control
What is Third-degree price discrimination?
- – Seller sets separate prices for separate groups of buyers of essentially same service
- (Very similar to Differential Pricing)
What are some characteristics that influence a carriers cost?
- -Product Density
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
What does TL and LTL stand for?
- TL = Truck Load
- LTL = Less than Truck Load
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
In LTL operations, what can be said about fixed costs?
They are higher due to the terminal system
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
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
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
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
When would you prefer to use Air transportation opposed to freight?
When the importance of speed outweighs the importance of cost
What is true about the variable and fixed costs for Air transport?
Has a high Variable cost and a low fixed cost