Factors Influencing Transportation Cost and Pricing

FACTORS INFLUENCING TRANSPORTATION COST AND PRICING

Factors influencing transportation cost or pricing can be grouped into 2 major categories namely

• Product related factors
• Market related factors

PRODUCT RELATED FACTORS

1)   DENSITY

It refers to a products weight to volume ratio. Items such as steel canned foods, building products and bulk paper have high weight to volume ratios. They are relatively high weight to volume ratios. They are relatively heavy given their size. On the other hand products such as luggage and toys have low weight to volume ratios and thus are relatively lightweight given their size. In general low density products those with low weight to volume ratios tend to cost more to transport on a kilo basis than high density products

2)   STOW ABILITY

It is the degree to which a product can fill the available space in a transport vehicle.  For example petroleum products in bulk have excellent  stow ability because they can completely fill the container in which they are transported. Other items such as automobiles, machinery, livestock and people do not have good stow ability. A products stow ability depends on its size, shape, and other physical characteristics.

3)   EASE OR DIFFICULTY OF HANDLING

Difficult to handle products are more costly to transport. Products that are uniform in their physical characteristics require less handling expenses and are therefore less costly to transport.

4)   LIABILITY

It is an important concern. Products that have high value to weight ratios are easily damaged and are subject to higher rates of theft, cost more to transport. Where the transportation carrier assumes greater liability higher price will be changed to transport the product.

MARKET RELATED FACTORS

1)    Degree of intra- mode and inter mode competition

2)    Locations of markets, which determine the distance goods, must be transported.

3)    Nature and extent of government regulations of transportation carriers.

4)    Balance of imbalance of freight traffic into and out of market.

5)    Seasonality of product movement

6)    Whether the product domestically or internationally.