Transport Costs and Goods Characters in Logistics
Transport system is the most important economic activity among the components of business Logistics systems. Around one third to two thirds of the expenses of enterprises’ Logistics costs are spent on transportation.This analysis shows transportation is the highest cost, which occupies 29.4% of Logistics costs, and then in order by inventory, warehousing cost, packing cost, management cost, movement cost and ordering cost. The ratio is almost one-third of the total Logistics costs. The transportation cost here includes the means of transportation, corridors, containers, pallets,
terminals, labours, and time. This figure signifies not only the cost structure of Logistics systems but also the importance order in improvement processing. It occupies an important ratio in Logistics activities. The improvement of the item of higher operation costs can get better effects. Hence, Logistics managers must comprehend transport system operation thoroughly.
Transport system makes goods and products movable and provides timely and regional efficacy to promote value-added under the least cost principle. Transport affects the results of Logistics activities and, of course, it influences production and sale. In the Logistics system, transportation cost could be regarded as a restriction of the objective market. Value of transportation varies with different industries. For those products with small volume, low weight and high value, transportation cost simply occupies a very small part of sale and is less regarded; for those big, heavy and low-valued products, transportation occupies a very big part of sale and affects profits more, and therefore it is more regarded.
The Effects of Transportation on Logistics Activities
Transportation plays a connective role among the several steps that result in the conversion of resources into useful goods in the name of the ultimate consumer. It is the planning of all these functions and sub-functions into a system of goods movement in order to minimize cost
maximize service to the customers that constitutes the concept of business Logistics. The system, once put in place, must be effectively managed. Traditionally these steps involved separate companies for production, storage, transportation, wholesaling, and retail sale, however basically, production/manufacturing plants, warehousing services, merchandising establishments are all about doing transportation. Production or manufacturing plants required the assembly of materials, components, and supplies, with or without storage, processing and material handling within the plant and plant inventory. Warehousing services between plants and marketing outlets involved separate transport. Merchandising establishments completed the chain with delivery to the consumers. The manufacturers limited themselves to the production of goods, leaving marketing and distribution to other firms. Warehousing and storage can be considered in terms of services for the production process and for product distribution. There have been major changes in the number and location of facilities with the closure of many single-user warehouses and an expansion of consolidation facilities and distribution centers. These developments reflect factors such as better transport services and pressures to improve Logistics performance.
The Role of Transportation in Service Quality
The role that transportation plays in Logistics system is more complex than carrying goods for the proprietors. Its complexity can take effect only through highly quality management. By
means of well-handled transport system, goods could be sent to the right place at right time in order to satisfy customers’ demands. It brings efficacy, and also it builds a bridge between producers and consumers. Therefore, transportation is the base of efficiency and economy in business Logistics and expands other functions of Logistics system. In addition, a good transport system performing in Logistics activities brings benefits not only to service quality but also to company competitiveness.