Transportation Economics is a special branch of economics that deals with the allocation of resources from one point to another. It particularly assists in allocating resources with consideration to time and money factors. Transportation of people and goods from one destination to another in consideration to time, money and other related cost is all the transportation serves to solve. Westminster is a company that deals with distribution of products from one point to another. It operates on the principles of supply and demand wherein its demand can be measured in terms of distanced travelled or the frequency made by the courier. Westminster is composed of three distribution network of sales company. In this case each company comprises of a given number of both owned and operated manufacturing plants and distribution facilities.
Just as has been outlined in this case study wherein transportation economics consists of finding an acceptable way of handling and or transporting non similar product, carriage in this case is dependent on demand and inventory.
ISSUES INVOLVED IN TRANSPORTATION ECONOMICS
Production
In order to ensure there is continuity in transportation sector, there must be goods and or people to be transported. This therefore can elicit choice to produce or create a market. For the case of Westminster, it has three distribution network, these are equipped with manufacturing facilities which are used for production. Once goods have been produced, they are distributed from one point to another depending on the demand as created by the nationals.
Network
Within any transportation problem, there must be issues related to distribution network, Westminster for example has mainly three distribution network, all these networks needs to be cooperate to have a synchronized order as far as distribution network is concerned. The Westminster route their products through a distribution center before the delivery to the final consumer and or retailers or wholesalers.
Location
In order to effectively handle the issues of transportation several issues need to be considered as far as distance to the market. This therefore calls for establishment of a suitable location to handle such issues as may be attributed to costs. As for Westminster Company, they have considered their strategy and have no intention to relocate their manufacturing plans. It has actually taken into consideration issues associated to costs. For instance the supply task force being aware of the capital outlay involved in acquisition and purchase of manufacturing plants, have bowed not to relocate the facility
Demand
In order to ensure continuity of flow of goods from the company to the end producer, there is the need to establish demand of the products to be distributed. Such is only possible if there exists a mechanism to create and or establish the demand. This is achieved in Westminster distribution network through establishment of demand responsive plans. This involves assessing demand and coming up with strategic design that enhances and or attain extreme sensitivity to customer’s need and or requirement. It is normally recommended to develop relationship with the customer that is customer collaboration to help identify better ways to improve transportation costs associated with late deliver and or returned goods. In a situation where the management assumes what the customer requires it may lead to more of returned goods since then, they do not march customer requirements and or demand. When organization establishes relationship with the customer issues like joint planning are encouraged further more there is integrated operation all these issues can lead to enhancement of strategic and or tactical information. The demand for the consumable product is in line with the major population and is uniform throughout the three companies under Westminster.
Transportation and warehousing costs
Within the transportation economics, issues relating to cost of transportation are looked at in conjunction to warehousing charges, for example Westminster Company in table 5 shows the transportation and warehousing charges and or cost for the three companies. Freight rate is classification is non uniform for the three companies; that is for company A the freight charge is 60, as for Company B it is higher than B by 10 making it to 70, for company C it is even more expensive to the tune of 150. The variation in freight rates is due to expenses related to density and volume of goods handled. In this case there cost are generally categorized into two that is transfer freight cost which are basically derived from truckloads as charged from the manufacturing plants to the final distribution centers. Other than transfer rates there is customer rate which is basically incurred from the distribution centers to retailers. Westminster Company in order to reduce distribution cost is located near a plant. This strategy enhance transport cost reduction
Time
Transportation also involve delivery within a given time period. It is usually taken into consideration especially from the point an order has been dispatched from the center of distribution until such order reaches.
Buyer/supplier relationship
For Westminster, it is important for them to develop and maintain relationship with the supplier and or buyers. This is most important during the development of new products. The inputs of buyers, suppliers and customers area necessary to come up with a better product that everyone is familiar with and is admissible for all the parties. This type of relationship is also important to formulating a better and useful strategies relating to manufacturing and facilitation within any supply chain management. Good relationship enhance better Life cycle support for a given product because such issues like repairs of a product and even maintenance, issues like warranty emerges to win the buyers confidence.
Distribution strategy
Generally the distribution takes different form depending on where a given demand is located. Westminster distribution centers ship produce all over though the customers on a great deal are served by the closer center provided it is within the Westminster boundary. More of transfer of shipment among the distribution centers is encouraged. Truck loads are generally used however on few occasions the airfreight is used especially during emergency.
References
Small, Kenneth A.; José A. Gomez-Ibañez (1998), Road Pricing for Congestion Management: The Transition from Theory to Policy. The University of California Transportation Center, University of California at Berkeley
Walters, A. A. (1968). The Economics of Road User Charges, World Bank Staff Occasional Papers Number Five, Chapter VII, Washington, D.C.
Smeed,, R.J. (1964). Road pricing: the economic and technical possibilities. HMSO.
Small, Kenneth A.; Verhoef, Erik T. (2007), The Economics of Urban Transportation. Routledge, England.
