SCM 373 Lecture Notes - Lecture 5: Liability Insurance, Profit Margin, Comparative Advantage

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Economic importance of transportation: allows for geographic specialization. Different regions can specialize in producing products for which they have a comparative advantage vis- -vis other regions: enables large-scale production. Allows product to be produced in one region and transported to another: increased competition. Other producers in different regions can now compete for the market: increased value of land. Areas previously of little value now have substantial value because they can serve distant markets. Transportation economics & pricing: an effective logistics strategy must understand four interrelated topics, economic drivers that influence rates, costing methods to allocate costs, carrier pricing strategy used to set rates, rates and rate making mechanics used by carriers. 7 economic drivers influence rates: distance, weight, density, stowability, handling, liability, market. Determines how product dimensions fit into transportation equipment: odd package shapes and sizes can waste cubic capacity, nesting refers to ability of product to be placed in itself or collapsed.

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