Descripción de las coberturas

(1) Fixed cost (2) variable cost (3) joint cost (4) common cost

Fixed cost. Certain costs are constant regardless of the firm's activity. Example of this would include the capital invested in railroad, tracks, airplanes, or tractors.

A variable cost changes as output changes. If a tractor is driven more miles, certain costs increase proportionately. Fuel costs, wages, maintenance costs and tire replacement depend on output. As miles increases so do these costs. Fuel usage for airlines varies with the number of flights as week as the distance traveled. To determine if a cost is variable consider what happens if operations shut down. The costs that disappear are variable and these that continue are fixed.

All cost in the long run are variable. For instance, a locomotive is eventually no longer useable and must be replaced. For the twenty-five year life of the locomotive the cost is fixed. When a new locomotive is purchased to replace it, the cost changes, it is no longer fixed. However once the new engine is placed, it too will have a useful life of many years. The cost again becomes fixed. For most decisions do not reach beyond its useful life. The benefits of increased volume accrue more to high fixed cost carriers than to high variable costs carriers seek volume to spread the fixed costs over more units greatly increasing profits.

A joint cost occurs when the production of one product or service requires or offers the production of another product or service. For example, a railroad moves goods from New York to Los Angeles. It now has engines available in Los Angeles to provide back-haul service to New York or additional transportation from Los Angeles. The cost of placing the train in Los Angeles is a joint cost with the New York to LA run and whatever run follows it. Fixed and variable costs can also be joint costs. All modes incur joint costs to some extent.

Common cost cannot be directly associated with a product or activity. Since this creates confusion we normally assign activities percentage of these common costs. For instance a tractor traveling from Dallas to Chicago with three shipments breaks down and requires $5000 in repairs. How much of this repair cost should be allocated to the three different shipments? It is based on space used, weight or both? That’s the

problem with common costs. In transportation common costs are significant and are found in all modes.

Airlines are variable cost mode because they do not own the right of way. Governmental entities own the large airports the federal government operates the airways and airlines pay fees for the privilege of using them. In keeping with the definition of variable costs airlines pay take off and landing fees only when they take off and land. Other large variable costs include fuel, wages and maintenance. Major fixed costs are the airplanes and salaries. Due to their type of operations airlines have many common costs since they normally move freight in a single airplane for multiple customers.

Motor carriers like airlines; do not own the way or path of travel. They are variable cost carriers. Some estimate that 90 percent of the motor carrier industry's cost is variable. They pay user fees (taxes etc.) to offset the road maintenance costs. Other major variable costs are fuel, driver wages, and equipment maintenance. The major fixed costs are the terminals and equipment. LL carriers have many common costs because of the number of shipments in a single trailer. TL carriers have few common costs because the trailer is filled with product from a single shipper.

Pipelines are categorized as heavy fixed cost carriers. They own their right of way and their terminals. In fact because of computerization, this mode is also classified as very capital intensive. This leads to lower wages and maintenance costs. Because pipelines move a variety of liquid products, they have significant common costs.

Railroads are fixed cost carriers because they own their equipment and tracks. Economic of scale arise from increased volume which allow per unit costs to be kept low by spreading fixed costs over more units. A significant portion of railroad cost is common because all traffic share replacement costs.

Water carriers are variable cost carriers because they do not own the waterways. They ways are not free. Channels must be maintained in major rivers and ports. In the United States, the U.S. Army Corps of Engineers dredges the channels. Water carrier’s major variable costs are labor, fuel and maintenance. Like railroads, significant portion of their costs are common because multiple shipments often share a vessel.

Transportation Hidden Costs

The physical distribution component of a major project, including transportation of raw materials, project materials, machinery and equipment and such infrastructure facilities as roads, vehicles etc., usually accounts for 20 to 30% of the total capital cost.

The general scarcity of various goods, unpredictable nature of the economy and economic behavior on the part of the business community and the bureaucracy in India make it all the more necessary for one to plan well ahead. In fact, planning of transportation and infrastructure must be done well ahead of general planning, so that resources spent on other parts of the project do not result in in - fructuous expenditure.

In developed countries, these facilities are already available in abundance or are provided for well in advance. In developing countries, action is generally initiated only after the project has been partially put through or when it becomes totally inescapable to do so.

On the other hand, because of lack of these facilities, such problems are faced even during construction.

Eg. Trucks get stuck in muddy roads, work sites remain unapproachable, and serious vehicular accidents are caused near the project areas.

In developing countries, for the supervision of construction of a building, usually no qualified individual is appointed for the co ordination and planning of transportation infrastructure, which forms a major fraction of the total cost of a project running into crores.

For a major project, the average total cost to the economy of a project costing Rs. 100 crores which is delayed by one year from the date of targeted completion is 39% more than the original budgeted cost on account of the following:

1. The rate of interest on capital may be taken at nearly 12%. 2. The profit on income per year about 12%

3. The cost of depreciation on account of obsolescence or rusting without running of the plant at 5%.

4. The cost of escalation of the project cost at 10%.

The cost of delay in the completion of the project would therefore be roughly about Rs.11 lakhs per day or Rs. 3.25 crores per month. It would be worthwhile to educate senior executives to recognize these facts, for this aspect of the project is usually ignored by project authorities.

Project authorities do not hold themselves responsible for the transportation bottlenecks and resulting delays. These delays are due to non-receipt of equipment, machinery, raw materials etc. and these delays generally run into months. Due to such delays, the project suffers heavy losses, which occur because of congestion in the ports, traffic jams, railway restrictions etc. Therefore, it is financially more practical to obtain critical equipment, machinery and raw materials, critical not from the point of view of availability in the market but critical form the standpoint of transportation bottlenecks- so that the likely delays are avoided.

A proper transportation planning of materials, therefore, may well save a project as well as the economy form the ill effects of wasteful expenditure. At the same time it would help speed up production.

Transportation Cost Elements

Following are the essential elements of transportation to be taken into account:

1. Transport Mode – The most critical decision is the selection of appropriate mode of transport. This fixes two basic elements of distribution function:

a) Transit time or time lapse between production and sale; b) Level of transportation costs.

There is an inverse relationship between transit time and transport cost – the lower the transit time, the higher the transport cost. However, a decision that takes into account only one cost factor cannot be justified. An evaluation of the effect of transit time on other costs must also be considered. Unsold production represents a high cost, and the longer the transit time, the higher the level of unsold production.

2. Inventory Costs – A first class service to clients often requires immediate delivery and, hence a higher level of inventory at the market centre. Economy, on the other hand, calls for minimum inventory. The level of output held in stock is dictated by- a) Transit time : If the time lapse between production and sale is longer, the level of inventory becomes higher.

b) Sales pattern : If the pattern of sales is erratic, higher inventory levels are caused. c) Production pattern : If the production pattern is erratic, higher inventory levels have to be maintained to prevent stock –outs.

Assuming that the sales and production patterns are largely fixed, the important variable, which can influence stock, levels in transit time. As transit time is reduced, the level of static stock can be reduced with accompanying stock reduction.

3. Transit Capital – Capital can be released by changing the proportion of the total output in transit. This can be done by adjusting the transit time. As transit time is reduced, the quantity of goods in transit can be decreased with an associated reduction in transit inventory costs. By realizing the capital cost of transit inventory and goods in transit, capital commitments can be reduced, and more capital can be available for other purposes.

4. Obsolescence - When a slow or erratic mode of transport is employed, a higher level of inventory is necessary to ensure continuous, prompt delivery to the customer. However, when designs change rapidly, obsolescence reduces the market value of the products in store. Rapid advances in technology bring about swifter technical obsolescence. Any goods in the pipeline realize a lower figure when new models are introduced by a company or it’s competitors. Air distribution can overcome this problem, and the effect of such obsolescence can be minimized.

5. Packaging – The nature of packaging of a product is often determined by the mode of it’s transport. E.g. Because of the dry conditions of carriage, short transit times and minimum handling, air cargo generally requires much less packaging than other forms of long distance transport. Goods dispatched by air may require only a dust cover or even no cover at all. In some cases, savings on the packaging of sophisticated products may more than pay for the actual transport charges. Less packaging may lead to other advantages too. These include lower unpacking costs and lower chargeable weight for freight.

6. Insurance – Insurance risks are based on transit time as well as the possibility of damages en route. With faster transit times, skillful handling, substantial reduction in damage and greater security in transit, insurance premiums tend to fall substantially. 7. Breakages – Cost of breakages is an important factor in any cost benefit analysis.

Because breakages may be indemnified by insurance companies, the true cost of damage to cargos can easily be overlooked. In the first place, the vulnerability of various products sent by different modes is reflected in the insurance premium. To high premiums must be added the clerical work involved in establishing claims, making replacements and the loss of customer’s goodwill. The replacements themselves will be subject to the same hazards and premiums will require further documentation.

Therefore, only that mode of transport must be selected which substantially reduces real damage in transit. This calls for a selection of the routes which are more direct and which avoid transshipment. Handling equipment must also be more sophisticated. Containers can be used by shippers for door-to-door transportation, thereby avoiding all handling of goods by the carrier.

8. Pilferage – Many expensive administrative problems associated with breakages also apply to pilferage. This problem is reduced for example, when door-to-door containers are used, a fact which is again reflected in lower insurance rates.

9. Deterioration – In many surface cargos, deterioration may be avoided only by complicated and expensive packing to counteract mechanical shock, exposure to weather or unfavorable temperature etc. Some cannot be stored at all, except at great expense, and others deteriorate slowly.

Deterioration can be costly in terms of packing, stock losses and expensive conditioning in store. It can only shut the door on many distant markets. A high speed of transport and the frequency of services can overcome many of these problems.

10. Transport Costs – Transport can be divided into 3 phases: (i) Delivery to docks, airport or railway station.

(ii) Transport from one terminal to another.

(iii) Delivery from the terminal to the consignee’s place.

In the cost-benefit analysis of the turnaround time of a company’s delivery and collection vehicles, their man hour costs can be significant. Some customers may find this item to be more costly than the cost of the major journey.