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Q1) Different types of costs associated with transportationin logistics.

Ans)There are four basic costs associated with transportation


A) Fixed cost B) Variable cost C) Joint cost D) Common costs
A) Fixed Cost - It does not vary with a change in output, atleast for a given pe
riod ex:- capitol invested in trucks,tracktors,carriers etc
B) Variable cost - The costs which change as output levels are changed. The clas
sification of costs as variable or fixed is a function of both the length of the
time horizon and the extent of indivisibility over the range of output consider
ed.It varies with change in output. If goods are taken for long distance,it incr
eases and vice-versa
Ex:- fuel costs,maintainance costs, tyre replacement costs etc.
C)Joint Cost - A cost which is incurred simultaneously during the production for
two or more products, where it is not possible to separate the contributions be
tween beneficaries. These may be fixed or variable. (e.g. cow hides and cow stea
ks) It is the cost incurred when the production of any product ir service requir
es the production of anoher product or service. Ex:- when a truck goes from poin
t A to B, there is an unavoidable joint cost from B to A.
D) Common Cost - A cost which is incurred simultaneously for a whole organizatio
n, where it cannot be allocated directly to any particular product. These may be
fixed or variable.These costs cannot be directly associated with any one shipme
nt, if the carrier is carrying more than one shipment. Ex:- If a carrier carryin
g three shipments breaks down and Rs 500 is incurred to repair it.How much of th
e cost is allocated to each shipment.
Five Basic Transportation Modes
Pipeline
Water
Rail
Air
Highway

Cost Structure For Each Transportation Mode


Rail
* high fixed costs (land, tracks)
* low variable costs (operating costs, e.g., labor, fuel)
* slow, but inexpensive way to transport heavy freight that doesn t require sp
ecial handling, long distances
Highway
* low fixed costs (government builds, maintains highways)
* medium-high variable costs (operating costs, e.g., labor, fuel)
* most accessible mode (more highways than railroads, waterways, pipelines);
best for transporting medium to high value products short to moderat
e distances
Water
* moderate fixed costs (ships and freight handling equipment)
* low variable costs (operating costs, e.g., labor, fuel)
* very slow, but inexpensive way to transport large, heavy freight over long
distances (e.g., oceans, rivers, inland waterways, lakes)
Air
* low fixed costs (aircraft and freight handling equipment)
* highest variable costs (e.g., labor, fuel, maintenance)
* very fast; used for transporting high value and/or high perishability prod
uct over short to medium distances.
Pipeline
* highest fixed costs (right of way & construction costs of equipment)
* lowest variable costs (no significant labor or fuel costs)
* slow, but dependable (e.g., no weather, traffic disruptions); no flexibili
ty with regard to types of products that can be transported must be liquid
(e.g., petroleum)

Q2) What is Intermodal Transportation?


Ans) According to Merriam-Webster, "Intermodal means being or involving transpor
tation by more than one form of carrier during a single journey.Intermodal trans
portation is using more than one mode of transportation to move goods from origi
n to destination.
The following is a example of utilizing more than one mode of transportation to
ship freight from origin to destination:A truck moves an empty piece of equipmen
t to a shipper to pick up a load.The equipment is loaded with freight and then t
aken by truck to a railroad yard.Loaded equipment is put onto a train and railed
to its destination.The load is taken off the train and delivered by truck to th
e customer.Equipment is unloaded and now empty, ready for another load.
Growth in intermodal movements can be attributed to several circumstances includ
ing industry deregultaion, global business expansion and new techniques to impro
ve intermodal process.
This transportation helps the consignor to take advantage of each mode of transp
ortation and to reduce his costs.
Intermodal transportation is also used when water transport and road transport c
ombines or rail and road combile etc. to deliver the goods to the customer at le
ss expensive rates.