Transportation Costs and Pricing: A Comparative Analysis of Cost Structures for Rail Motor Carriers and Air Modes of Transportation

520 Words Jan 30th, 2018 2 Pages
Implicit in this analysis is the rapid adoption of intermodal transportation which is often optimized to specific logistics and supply chain objectives (Jennings, Holcomb, 1996).
Analysis Of Cost Structures
Of the three forms of transportation, rail has the highest fixed costs, motor carriers the greatest variable costs, and air transport, the greatest variable costs of service and logistics optimization. Starting with rail, the cost structure has the highest fixed cost components, driven by infrastructure and terminal costs. Rail is therefore the most difficult to negotiate a lower transportation cost for, as the fixed costs form an inflexible pricing structure for retail service providers. The quality of rail service varies significantly across nations and regions as well, leading to greater variability in costs when a shipment moves across national and regional boundaries. Given the highly fixed cost structure of rail systems, there is significant room for improvement from an efficiency standpoint. The use of containerization is continually adding to greater efficiencies to this mode of transport (Jennings, Holcomb, 1996).
Motor carriers have traditionally had the highest variable costs given their reliance on fuel and the continual maintenance of vehicles. The cost structure of motor…