Name: Carlos Vergara Villacis

Budgets and logistics costs

Essay about “Transportation Costs”

The article begins mention some of the costs involved in a transport system (such as
supplies, distribution systems, tariffs, salaries, locations, marketing techniques and cost of
doing business), to point out that the addition of all these costs represents 10% of the
total cost of a product so its important to control them.

The price of a transport service also includes time cost and cost related to possible
inefficiencies discomfort and risk, and all these costs are variable depending on the level
of service. The principal costs and time components are “distance and time”, “type of
product”, “economies of scale and energy”, “empty backhauls”, “infrastructures and
modes” , “ competition, regulation and subsidies”, and “surcharges, taxes and tolls”.
Distance and time are the most basic conditions affecting transport costs, The type of
transportation used and the geography of the land affect directly the costs, for example a
landlocked country will have a higher transportation cost because it does not have direct
access to maritime transportation. The type of product impacts directly to the
transportation cost, not all the products need the same conditions to be transported and
maintain a good condition, and depending on these conditions necessary the cost could
stay low or get higher, Coal is a product that don’t need specific requirements so it is not
expensive to transport, but a product as medicine need to stay cool so the transportation
method has to be climatized and this will affect the cost.

The two components named before affected the costs in a negative way but economies
of scale is a component that could save us money by affecting a little our inventory level.
In economies of scale the more you buy the cheaper the unit of the product gets, its
important to find a balance to not buy more than we can sell or this could get expensier
instead of cheaper.

Empty back hauls cause empty return trips, but for international trade it causes
imbalance between imports and exports, this impacts the transportation cost, this
imbalance makes necessary the reposition of the containers.

Having the correct infrastructures and mode impacts on transport cost, this is because it
makes easier and faster the loads and downloads, letting us have more movements and
therefor more money. The competition, regulation and subsidies, as surcharges, taxes and
tolls are others components very important in some cases