BUS
Session 7- Transportation AndTransportation Decision Strategies-Annotated

Session 7- Transportation AndTransportation Decision Strategies-Annotated

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Transportation And Transportation Decision Strategies
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Transportation and the Economy Transportation: a tool of civilized societies Essential element of daily life Conceptual views of transportation Enabler of utility creation As a bundle of services at a certain cost Factor of production Market access Spatial and temporal relationships 2
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Demand (price) Elasticity Aggregate demand for freight transportation tends to be price inelastic. Cost for transport generally small % of product’s landed cost Demand for particular mode or carrier tends to be price elastic. Often, substitutes are available Service elasticity 3
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Freight Transportation Demand Characteristics Derived demand Def: 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 Remember, demand is a relationship between price and quantity demanded Aggregate demand for freight transport cannot be easily affected by carrier actions 4
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Value of (Transport) Service, cont’d Transport cost is a component of a product’s landed cost Transport costs influence a producer’s landed cost advantage/disadvantage in distant markets, thus determining the value of the transport service to the producer Similar to place utility concept Landed cost also determines extent or range of a producer’s market area (Lardner’s Law) and thus value of transport service. 5
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Value of (Transport) Service, cont’d Service components of freight demand Transit time Volume and cost of holding inventory Potential stockout costs
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  • Spring '14
  • Utility, producer, transit time, Commodities Hauled

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