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• Module overview
• 1. Introduction to logistics
  • 1.1. The logistics concept
    • 1.1.1 A question of definition
    • 1.1.2 Technological context
  • 1.2. Evolution of modern business logistics
    • 1.2.1 Materials management or supply-side logistics
    • 1.2.2 Physical distribution or demand-side logistics
    • 1.2.3 The total logistics concept
  • 1.3 Logistics, the critical interfaces

• 2. Supply side logistics: Procurement and materials management

  • 2.1 Materials management
    • 2.1.1 Purchasing and procurement
    • 2.1.2 Production control
    • 2.1.3 Warehousing and storage
    • 2.1.4 Data and information systems
  • 2.2 Quality in logistics
    • 2.2.1 Total quality management
    • 2.2.2 Benchmarking
  • 2.3 Kanban
  • 2.4 Measurement and evaluation
  • 2.5 MRP 1 and 2

• 3. Demand side logistics: Forecasting and order processing

  • 3.1 Customer order processing
  • 3.2 Environmental scanning
    • 3.2.1 The environments
    • 3.2.2 Approaches to scanning
  • 3.3 Logistics needs forecasting
  • 3.4 Lead time components
  • 3.5 Enhancing forewarning of demand

• 4. Inventory management and control

  • 4.1 Basic concepts and rationale for inventory holding
  • 4.2 Inventory costs
    • 4.2.1 Managing inventory costs
    • 4.2.2 Push and pull control methods
  • 4.3 Types of inventory
  • 4.4 Inventory management
    • 4.4.1 Inventory management systems
    • 4.4.2 Computers and inventory management
  • 4.5 Inventory management and business success

• 5. Storage facilities, materials handling equipment and packaging

  • 5.1 The management of warehouses and distribution centres
    • 5.1.1 Storage alternatives
    • 5.1.2 Warehouse design
    • 5.1.3 Productivity associated with warehousing
    • 5.1.4 Warehouse information systems
  • 5.2 Materials handling
    • 5.2.1 Objectives of material handling
    • 5.2.2 Materials handling systems and equipment
    • 5.2.3 Materials handling productivity ratios
  • 5.3 Packaging
    • 5.3.1 The role of packaging
    • 5.3.2 Packaging materials
    • 5.3.3 Packaging design considerations

• 6. Physical distribution transportation system

  • 6.1 The role of transportation in logistics
  • 6.2 Economic and service characteristics of the modes of transport
    • 6.2.1 Rail
    • 6.2.2 Road
    • 6.2.3 Air
    • 6.2.4 Water
    • 6.2.5 Pipeline
  • 6.3 Intermodal transport services
  • 6.4 Transportation cost structures
  • 6.5 Transportation rate profiles
  • 6.6 Modal and carrier selection
  • 6.7 Management of the transport function

• 7. Change and transformation

  • 7.1 Nature of change
    • 7.1.1 The manager's role and change
    • 7.1.2 Transformation and change continuums
    • 7.1.3 Responding late in the change continuum
    • 7.1.4 Rapid change continuum cycles
    • 7.1.5 Increasing organisational responsiveness and agility
  • 7.2 Scale and pace of change
    • 7.2.1 Leading rapid change
  • 7.3 Stages of change
    • 7.3.1 The stages of change and approaches to management
    • 7.3.2 Change and the organisation's development stage
  • 7.4 Communicating change
    • 7.4.1 Guidelines for communicating change
    • 7.4.2 Communicating change to stakeholders

• 8. Building agility and responsiveness

  • 8.1 Organisational agility and the art of rapid change
  • 8.2 Agility and transformational leadership
    • 8.2.1 Transactional Leadership
    • 8.2.2 Transformational Leadership
  • 8.3 Agility and organisational responsiveness
    • 8.3.1 Principles for Constructive Change
    • 8.3.2 Agility and environmental attunement
  • 8.4 Organisational learning and enhanced agility
    • 8.4.1 Learning and organisational life cycles
    • 8.4.2 Double loop learning and the learning organisation
    • 8.4.3 The learning cycle
    • 8.4.4 Leading learning from being adaptive to generative

• 9. Foster innovation and creativity

  • 9.1 Innovation and agility
  • 9.2 Levels of innovation and their impact
    • 9.2.1 Innovation
    • 9.2.2 Improvement
    • 9.2.3 Re-engineering
    • 9.2.4 Reinventing
    • 9.2.5 Re-engineering
  • 9.3 Re-engineering and business process re-engineering
    • 9.3.1 Reengineering and quality improvement
    • 9.3.2 Identifying when to re-engineer processes
    • 9.3.3 To innovate slowly or reengineer?
  • 9.4 The need for speed
  • 9.5 Organise work to facilitate innovative practices and organisational agility
    • 9.5.1 Innovative and agile organisation
  • 9.6 Enhancing diversity and creativity of thinking in teams and work practices
    • 9.6.1 Convergent and divergent thinking
    • 9.6.2 Left- and right- brain activities
    • 9.6.3 How to generate new ideas?
  • 9.7 Creativity and solutions search in teams
    • 9.7.1 Brainstorming
    • 9.7.2 Synectics
    • 9.7.3 Forcing Techniques
    • 9.7.4 Nominal Technique
  • 9.8 Review the use of innovation in work and team practices.
    • 9.8.1 Assess the ability of the team to achieve goals
    • 9.8.2 Review the success of team leadership

6.4 Transportation cost structures

There are basically three types of costs associated with transportation. These are fixed costs, variable costs and common or joint costs. Let us briefly discuss each of these types of costs.

Fixed costs. Fixed costs are those that do not vary with change in output; in other words, they are constant regardless of the firm's activities. Examples of fixed costs would include capital outlay for roadways, terminals, transport vehicles and equipment and carrier administration.

Variable costs. Variable costs change as the output varies. They include costs such as fuel and labour, equipment maintenance, handling, pickup and delivery. The easiest way to determine whether a certain element of cost is fixed or variable is to assume that the business has shut down, in which case if the cost is still incurred it would be a fixed one. However, in the long run even fixed costs are said to vary. As there are significant cost differences between transportation modes, there is no precise allocation between fixed and variable costs for some of a firm's activities. Some costs are partly fixed and partly variable and allocation of cost elements into one class or the other is a matter of individual perspective. Examples are costs related to maintenance and handling.

Besides the fixed and variable costs discussed above, there are other costs incurred which have no simple formula for cost allocation and production costs on a per shipment basis remain a matter of judgement. For example, the costs incurred by carriers on their return or backhaul service need to be taken into account in the total costing. These costs are categorised under common or joint costs. It is assumed that the forward haul is the heavy traffic direction and the backhaul is the light traffic direction. However, this may not always be true, especially if carriers offer shippers heavy discounts on the backhaul service.

In your text

Please read pages 187-189 (Chapter 6) of your text, which describe the cost characteristics of the five modes of transportation.

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