Wider markets can result in lower production costs. With the greater volume provided by these markets, more utilization can be made of production facilities and specialization of labor usually follows. In addition, inexpensive transportation also permits decoupling of markets and production sites. This provides a degree of freedom in selecting production sites such that production can be located where there is a geographic advantage.
Reduced prices
Inexpensive transportation also contributes to reduced product prices. This occurs not only because of the increased competition in the marketplace but also because transportation is a component cost along with production, selling, and other distribution costs that make up the aggregate product cost. As transportation becomes more efficient, as well as offering improved performance, society benefits through a higher standard of living.
Service choices and their characteristics
The use of transportation has a wide range of services at his or her disposal, all revolving around the five basic modes (water, rail, truck, air, and pipeline). A transport service is a set of performance characteristics purchased at a given price. The variety of transport services is almost limitless: the five modes may be used in combination; transportation agencies, shippers' associations, and brokers may be used to facilitate these services; small shipment carriers may be used for their efficiency in handling small packages; or a single transportation mode may be used exclusively. From among these service choices, the user selects a service or combination of services that provides the vast balance between the quality of service offered and the cost of that service. The task of service- choice selection is not as forbidding as it first appears because the circumstances surrounding a particular shipping situation often reduce the choice to only a few reasonable possibilities.
To aid in solving the problem of transportation service choice. Transportation service may be viewed in terms of characteristics that are basic to all services; price, average transit time, transit time variability, and loss and damage.
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