The Role of Transportation

An industrialized society without an efficient transportation system seems a contradiction in terms. As consumers, we often take for granted that products will move from where they are produced to where they are consumed with a minimum of difficulty in terms of both time and cost. The transportation sector of most industrialized economies is so pervasive that we often fail to comprehend the magnitude of its impact on our way of life. Transportation expenditures constitute approximately 8 percent of U. S. ex­penditures for goods and services (GNP). D. F. Pegrum analyzed the integral role transportation plays in the economy:

The unique position which transportation occupies in economic activity arises from the reduction by it of the resistance of time and space to the production of economic goods and services. The significance of this in terms of the allocation of economic resources is indicated by the fact that probably at least one third of our national wealth is directly devoted to transportation. So important is it that without it organized hu­man activity would be impossible; complete stoppage of a community's transport services is the quickest way to assure complete paralysis of cooperative effort: economic, political and social.

Logistics involves the movement of products (raw materials, parts, suppliers, finished goods) from point-of-origin to point-of-consumption. A product produced at one point has very little value to the prospective customer unless it is moved to the point where it will be consumed. Transportation achieves this movement.

Movement across space or distance creates value or place utility. Time utility is mostly created or added by the warehousing and storage of product until it is needed. But transportation is also a factor in time utility; it determines how fast a product moves from one point to another. This is known as time-in-transit. If a product is not available at the precise time it is needed, there may be expensive repercus­sions, such as lost sales, customer dissatisfaction, and production downtime. So transportation creates utility.

Transportation System

There are five transportation modes motor, rail, air, water, or pipeline, hi addition; certain modal combinations are available, including rail-motor ("piggyback"), motor-water, motor-air, and rail water. Such inter-modal combinations offer specialized or lower cost services not generally available than a single transport mode. Finally, other transporters (sometimes called indirect or special earners or non-operating third parties) offer a variety of services to shippers. These transporters include freight for­warders, shipper cooperatives, parcel post, United Parcel Service (UPS), and other parcel services such as Federal Express and Roadway Express. Special carriers usually act as transportation middlemen and use one or more of the basic modes for moving their customer's products.