Final Requirements: Logistics Management BA-519

FINAL REQUIREMENTS
in
LOGISTICS MANAGEMENT
BA-519
Submitted to:
May, 2019
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1. The following are monthly costs by Transport Company. Identify the basic costs
of transportation. Rent of container Rs. 1,200,000, Rent of office Rs. 27,500,
Diesel cost Rs. 80,000, Driver salary Rs. 15,000, Cleaner salary 5,000, Vehicle
repairs Rs. 45,000, Loading and unloading costs Rs. 25,000 20. Indian Oil
Company wish supply LP gas to its customers for cooking purpose at cheaper rate
by minimizing its transport costs? What is best means of transportation?
Answer:
2. What are the market related factors that influence transport costs?
Answer:
 Fuel Costs – cost of seafaring and land transport is, of course, related to the price
of fuel. As fuel prices fall, container ships and cargo trucks become cheaper to
operate and the price of transport goes down. Savings (or losses) are at the
expense of the consumers – either indirectly or through a fuel cost component built
into a carrier’s pricing model. And of course, if fuel prices increases, carriers will
pass the additional expense on to merchants.
 The Labor Markets for commercial Drivers - increasing wages and competition
among carriers for truck dirvers can have an upward impact or transportation costs.
As older drivers retire, carriers may struggle to find operators for their vehicles.
Recruiting new drivers if difficult; the job can be tough and typically requires a
different class of driver license (courses to certify new commercial drivers can take
weeks or even months to complete). Moreover, many logistics companies struggle
to compete with in-house’ truck driving positions that tend to pay better and may
offer less stress.
 Demand for Freight – Pricing depends on the volume of product being shipped by
operators just as much as it depends on the actual, underlying costs. If capacity is limited,
operators may be inclined to sell limited space at a premium. On the other hand, if
business is low, a carrier may ba talked in to offering a more competitive rate, at least in
the short temr.
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 Customer Loyalty – Merchants who can offer a carrier regular, consistent
business are well placed to receive a preferential rate, especially if demand across
the industry is low.
 Vehicle Capacity – some trucking companies operate an older, smaller fleet.
While these trucks are designed adequate, newer trucks are designed to maximize
storage space, allowing a truck to split space even further.
 Government Regulations – regulation may directly impact the freight industry and
its bottom line; for example, governments often set maximum driving hours for
commercial operators. Other government regulation may also impact freight costs;
for example New Zealand’s Emissions Trading Scheme has been estimated to
increase freight costs by several dollars for every thousand kilometres travelled.
 Geopolitical Events – International maritime shipping has become fraught with
the dangers of pirates and rogue governments. The Work Bank estimates that the
estimates that the losses from global piracy amounted to approximately (USD$18)
billion in 2014, pushing up the price of every day freight as carriers where forced
to change shipping and pay higher insurance premiums.
 Your Reputation as a Merchant – the price quoted by a carrier will, at least in
part, reflect the carrier’s expectations as to the packaging of pallets and the time
to load. If you have a reputation for loading quickly, you may be charged a slightly
smaller rate to compensate.
Question #3
Raw teakwood is to be exported from Malaysia to India in bulk. Which mode of

transport would you recommend? What are the advantages and disadvantages of such
a mode?
Answer: The raw wood which is to be transported in bulk may be transported cheaply
through water carriers as it is the cheap means of transport compared to other modes.
Water transport is the oldest mode of transport. Water transport is generally classified
into three types namely inland water ways (rivers, canals, big lakes), domestic coast way
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sand sea ways. Water is more suitable to transport bulk shipments and low value
commodities. It is because, water transport cost per tonne per kilometer is very much
low. Thus, water transport is preferred to reduce the costs when speed of delivery is not
important. Water transport is used to transport bulk wood, iron or coal, chemicals,
petroleum products etc. Fixed costs relating to water transport are relatively less
compared to rail network, but relatively when compared to motor carriers. The
advantages is suitable for mass movement of bulk shipper. Transport cost per tonne per
kilometers is very much low. But there are some disadvantages for water transport, it is
not suitable for quick transport of goods, if the origin and destination of movement are
away from water way, it needs more handling charges and also requires supplementing
with rail or motor transport.
Question No. 4. What are the basic costs in transportation? Explain.
Answer: There are four basic cost elements in transportation. Knowledge of these costs
enables a shipper to get a better price by selecting the right shipping mode. The four
basic costs are as follows:
 Pick up and delivery – costs are similar to line-haul costs except that the costs
depends more on the time spent than on the distance travelled. The carrier will
charge for each pick-up and the weight pick up. If a shipper is making several
shipments, it will be less expensive if they are consolidated and picked up on the
trip.
 Line haul – when goods are shipped, they are sent in a moving container that has
 Line haul
 Terminal handling
 Billing and collecting
Line haul - When goods are shipped, they are sent in a moving container
that has a weight and volume capacity. The carrier, private or for hire, has
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basic costs to move this container, which exist whether the container is
full or not. For a truck, these include such items as the driver’s wages and
depreciation due to usage. These costs vary with the distance travelled,
not the weight carried. The carrier has essentially the same basic costs
whether the truck moves full or empty. If it is half full, the basic costs must
be spread over only those goods in the truck.
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FINAL REQUIREMENTS

Raw teakwood is to be exported from Malaysia to India in bulk. Which mode of

Question No. 4. What are the basic costs in transportation? Explain.

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