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Transportation costs

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Moving a product from one place to another costs money, and different modes of transportation have different costs. These modes have different speeds, which can be just as important as transportation cost. A faster and more expensive transportation mode might actually save you money by decreasing the amount of inventory that you have in transit, for example. It’s also common to use more than one mode of transportation to move a single product through a supply chain. Changing from one mode to another by using multimodal transportation can optimize transportation costs. Another common way to reduce transportation costs is to pack more products into each load, thereby improving capacity utilization. The important thing to remember is that choosing a transportation mode that is slower and less reliable may reduce transportation costs, but it will increase your inventory and consume working capital.

Generally, when you rank transportation methods from least expensive to most expensive, the order is this: pipeline, sea container, full truckload, less-than-truckload, and parcel.

Supply Chain Management For Dummies

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