Comprehensive Report on Factors Affecting Transportation Cost

This report delves into the multifaceted factors that influence transportation costs, a critical aspect of business operations. It examines the impact of various elements, including fuel costs, human resource expenses, the demand for freight, customer loyalty, vehicle capacity, government regulations, and geopolitical events. The report explores how fuel prices directly affect land and maritime transportation costs, and how human resource costs, such as driver wages, also play a significant role. It highlights how demand and customer loyalty can influence pricing strategies. Furthermore, it analyzes the effects of government regulations, such as emission trading schemes, and geopolitical events, like piracy, on transportation expenses. The report concludes that transportation costs are subject to fluctuations based on these interconnected factors, providing insights into how these factors impact the overall cost structure of moving goods and services for businesses. The report also includes real-world examples to demonstrate the applicability of the factors discussed.

Running head: FACTORS AFFECTING TRANSPORTATION COST
FACTORS AFFECTING TRANSPORTATION COST
Name of Student
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Author Note

1FACTORS AFFECTING TRANSPORTATION COST
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Fuel cost.................................................................................................................................2
Human resource cost..............................................................................................................3
Demand for freight.................................................................................................................3
Customer’s loyalty.................................................................................................................3
Vehicle capacity.....................................................................................................................4
Government regulation...........................................................................................................4
Geopolitical events.................................................................................................................4
Your reputation as a merchant...............................................................................................4
Conclusion..................................................................................................................................5
References..................................................................................................................................5
Conclusion..................................................................................................................................5
References..................................................................................................................................5

2FACTORS AFFECTING TRANSPORTATION COST
Introduction
Transportation cost refers to cost of moving the products and services from one place
to another majorly for the purpose of sale to the consumers. For instance businesses incur
transportation cost for transferring their goods to the retailers for sale to consumers.
Transportation costs are usually uncertain because the merchant transferring the goods
through shipment may not know the actual cost until they receive the invoice from the carrier
of the goods. There are a number of factors that have an affect over the transportation cost.
Some of these factors includes- the fuel cost, the human resource cost, demand for freight,
customers loyalty, vehicle capacity and others (Brazil et al., 2019). The main aim of the paper
is to discuss about all the factors affecting the transportation cost and discussing about
various concepts related to the same and showing the applicability of the factors to the real-
world situations.
Discussion
Fuel cost
The land transportation and cost and the maritime cost are related to the fuel prices
and is therefore affected by the same. This is so because if the fuel costs fall, the cargo trucks
and container ships also become cheaper for operators and therefore the transportation cost as
a whole also goes down. Moreover the losses or savings made in the transportation cost due
to the fuel cost is ultimately passed on to the consumers wither directly with the help of
component of fuel cost that will further be built on the pricing model of the carrier. On the
other hand, in case of any rise in the fuel prices the same will have to be borne by the
merchant (Kabongo Booto et al., 2020). For instance: Qantas airlines fuels cost affects its
transportation cost. As it is prominent that the company was forced to increased their fares for

3FACTORS AFFECTING TRANSPORTATION COST
the rise in crude oil prices of 99.48 US dollar per barrel. As a result, the budget of the
company is observed to be at threat and in order to tackle the same the company not other
option but to raise its transportation cost.
Human resource cost
The human resource cost refers may be impacted upwardly through the increasing
competition and wages among carriers. This is so because once the old expert drivers retire, it
becomes difficult to find drivers (Last_Name et al., 2019). Moreover recruitment of the new
drivers is also difficult because a different type of driver’s license is required by the drivers
and the job can be stressful as well. And the logistics companies compete for the driving
positions of in-house drivers who are paid better and the stress is also less. If the labours costs
that are being employed in the transportation activities increases then the transportation cost
will also increase. Company in supply chain management example
Demand for freight
The price of transportation is dependent upon the product volume that is shipped by
the operators and also underlying actual costs. This is so because if there is limited space
availability, then the operators will be able to sell the same at premium pricing. On the other
hand, in case of slow business the carriers may offer the space at competitive prices for at
least a short period of time.
Customer’s loyalty
The customers loyalty has got a major impact on the cost of transportation. This is so
because merchants offering regular and consistent carrier services to its customers will have a
higher chance of getting preferential rates specially when the demand is lower in the industry.
Therefore there is a direct relationship between the customers loyalty and the transportation

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cost. Therefore if the company has higher customers loyalty then they can also charge higher
transportation cots as the customers will readily accept the same (Mercado & Quiros, 2018).
Vehicle capacity
Some transportation companies that are engaged in providing truck facilities in
smaller and older fleets and are also entirely adequate on the other hand, the new trucks are
designed in a way to increase the storage space and also allow the truck to further split the
space. Therefore the vehicle capacity also affects the transportation cost and this can better be
understood with the help of example of large shipping carriers. The transportation cost varies
depending upon the size of it. And in many of the cases, the aviation vehicles also follows the
same process where the number of travellers is an important factors for the com[any in
formulating their costing.
Government regulation
The freight industry as a whole is impacted by the government regulations directly.
This is so because the government may set some maximum driving hours for the commercial
operators. Moreover there are various other government regulations that can impact the
freight cost. This can be better understood with an example: the Emission Trading Scheme of
New Zealand is estimated to increase the cost of freight for travelling thousands of kilometres
(Sibdari, Mohammadian & Pyke, 2018). Many of the cases it has been seen that the
government authorities have the tendency of imposing higher tariff rates for certain countries
with which they are having trade wars. For example United states and China are observed to
impose higher tariff rates on both marine and aviation shipments.
Geopolitical events
The geopolitical events include- the impact of various dangers of rouge government
and pirates on the international maritime shipping (Neves-Moreira, Amorim-Lopes &

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Amorim, 2020). According to a report published by the world bank, the losses due to global
piracy in maritime shipping amounts to approximately USD $18 billion that had a major
impact over the transportation prices as the shipping routes had to be changed and moreover
insurance premium were required to be taken that further added to the cost.
Your reputation as a merchant
The prices charged by the carriers reflect the expectation of the carriers related to
packaging of pallets and also the loading time (Turan & Şahin, 2017). Therefore if the
merchant is well known for loading the products quickly then the same may be charged from
the end consumers for compensation of the same.
Conclusion
Therefore from the above discussion, it can be concluded that the transportation cost
is very uncertain as kit keeps fluctuating with a number of factors. Some of these factors as
can be understood from the paper include, the geological events, the merchant’s reputation,
the governments regulation, the capacity of the vehicle to hold goods, the customers loyalty
towards a company, the fuel costs and also the labour cost. Moreover, from the paper, the
ways in which each of the factors affects the transportation cost has been understood from the
paper. For instance, the customers loyalty towards the transportation company helps the
company in deciding its costs because if the customers are loyal towards the company then
they will be ready to pay a premium price for the same.

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References
Brazil, W., Kallbekken, S., Sælen, H., & Carroll, J. (2019). The role of fuel cost information
in new car sales. Transportation Research Part D: Transport and Environment, 74, 93-
103.
Kabongo Booto, G., Run Vignisdottir, H., Marinelli, G., Brattebø, H., & Bohne, R. A. (2020).
Optimizing Road Gradients Regarding Earthwork Cost, Fuel Cost, and Tank-to-
Wheel Emissions. Journal of Transportation Engineering, Part A: Systems, 146(3),
04019079.
Last_Name, R., Hussain, I., Maqsood, S., & Ahmad, I. (2019). Factors Affecting the Total
Cost and Design of the Supply Chain Network. Journal of Industrial Engineering and
Management Science, 2019(1), 241-262.
Mercado, J. G., & Quiros, E. (2018). Operational Cost Comparison of Alternative Fuel
Vehicles for Public Transportation. Philippine Engineering Journal, 39(1).
Neves-Moreira, F., Amorim-Lopes, M., & Amorim, P. (2020). The multi-period vehicle
routing problem with refueling decisions: Traveling further to decrease fuel
cost?. Transportation Research Part E: Logistics and Transportation Review, 133,
101817.
Sibdari, S., Mohammadian, I., & Pyke, D. F. (2018). On the impact of jet fuel cost on
airlines’ capacity choice: Evidence from the US domestic markets. Transportation
Research Part E: Logistics and Transportation Review, 111, 1-17.

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Turan, E., & Şahin, B. (2017). An Investigation for the Fuel Price Escalations on Optimum
Speed in Maritime Transportation. Journal of Earth Sciences and Geotechnical
Engineering, 7(1), 305-318.