Issues and
Challenges
about costing
and pricing.
Issues about pricing in transportation
Economies of scale and energy
The larger the quantities transported, the lower the
unit transport cost. Economies of scale or the
possibilities to apply them are particularly suitable for
bulk commodities such as energy (coal, oil),
minerals, and grains if they are transported in large
quantities.
Empty backhauls
Many transport interactions involve empty backhauls
since it is uncommon to have a perfect match
between an inbound and a return trip. Commuting
patterns involve imbalanced flows and empty return
trips. For international trade, imbalances between
imports and exports have an impact on transport
costs.
Type of product
Many products require packaging, special handling, which
are bulky or perishable. Packaging ensures the safety and
security of your goods, but it also increases volume and
weight. For example, road transport and air transport have
different packaging requirements that can make a
considerable difference in the costs of transportation.
For passengers, comfort and amenities must be provided,
especially if long-distance travel is involved. These
amenities have a cost but can also be a source of revenue,
such as for retail and restoration.
Components of the Transport Market:
The price of a transport service includes the direct out-ofthe-pocket money costs to the user. It also includes time
costs and costs related to possible inefficiencies,
discomfort, and risk (e.g. unexpected delays).
Mode of Transport:
The efficiency and capacity of transport modes
and terminals have a direct impact on transport
costs. Different transport costs characterize
different modes since each has their own
capacity limitations and operational conditions.
A core aspect concerns the suitability of modes
according to the distance involved and the
nature of what is being carried.
Fuel Prices:
Fuel prices are volatile and change
constantly. It is the one of the main
reasons why there is always a fare hike in
most public transport.
Fuel costs
The cost of maritime and land transport
is, of course, related to the price of fuel.
As fuel prices fall, container ships and
cargo trucks become cheaper to operate
and the price of transport goes down.
Savings (or losses) are passed on to
consumers – either indirectly or through
a fuel cost component built into a
carrier’s pricing model. And of course, if
fuel prices increase, carriers will pass the
additional expense on to merchants.
Competition
regulation
subsidies
Concerns the complex competitive and
regulatory environment in which
transportation takes place. Transport
services taking place over highly
competitive segments tend to be of lower
cost than on segments with limited
competition (oligopoly or monopoly).
Surcharges, taxes
and tolls
Transport activities are often taxed, such as
vehicle sales taxes and registration fees. Fuel
taxes are the most significant form of taxation
levied by governments with revenues often used
to cover maintenance and infrastructure
investment costs. Tolls are also commonly levied
on the usage of transportation assets,
particularly at bottlenecks such as bridges and
tunnels.
Inflation:
It may cause by higher demand on
a smaller supply. Since the
pandemic started the
transportation has a limited
passenger capacity which has an
impact on the fare.
Government regulation
Regulation may directly impact the freight industry and its bottom line; for example,
governments often set maximum driving hours for commercial operators. Other government
regulation may also impact freight costs.
Vehicle capacity
Some trucking companies operate an older, smaller fleet. While these trucks are entirely
adequate, newer trucks are designed to maximize storage space, allowing a truck to split
space even further.
Distance and time
The impacts of geography mainly involve distance and accessibility. The transport time component is also
an important consideration as it is associated with the service factor of transportation. They include the
transport time, the order time, the timing, the punctuality, and the frequency. It can be expressed in
terms of length, time, economic costs, or the amount of energy used. It varies significantly according to
the type of transportation mode involved and the efficiency of specific transport routes.
Issues and
Challenges about
Costing in
Transportation
Management
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Freight Rates:
Despite current
economic conditions,
the shipping industry is
experiencing a tight
capacity market, which
means there is strong
freight demand, but a
low supply of drivers
and carriers. Powerful
and damaging weather
can also cause freight
rates to spike.
Environmental Issues
Reducing greenhouse gas emissions is one of the major goals for many companies.
Companies that adapt and reduce their carbon footprints succeed better because both
partners and consumers are more aware than ever before. To find more efficient routes
to ship and deliver, or recycling materials from returned goods to put back into
manufacturing, instead of disposing them as waste. The demand for more fuel-efficient
vehicles is creating innovation opportunities, but at a higher capital cost for
transportation providers, uses alternative fuels, including electric, liquefied natural gas
(LNG) and bio diesel vehicles. Lower value bulk commodities such as steel, coal and
chemicals are particularly sensitive to increased fuel and emissions costs, and less output
will cause fewer total ton-miles transported.
Technology Development
The cost of adapting to new technology used in the supply chain is high, but it is a
requirement to survive in the competitive industry. Implementing new technologies is
extremely expensive
Insurance Costs
The risk of damages, loss and theft can never be ruled out no matter how careful the
workers are during loading, unloading and transit. Therefore, it is important to
insure the goods. Depending on the type and value of the goods you are
transporting, insurance costs can make a significant contribution to your
transportation costs.
Inventory Carrying Costs
The goods being transported are the same as goods held in inventory. When
transporting goods over long distances, they may have to be stored in a securelyguarded climate-controlled storage facility overnight along the way. Even after
being unloaded at the destination, they may have to be held in storage for some
time. This can add a significant amount to your cost of transportation.
Issues and
Challenges in
Transportation
Management
Urban Transportation at the
Crossroads
Cities are locations having a high level of accumulation and concentration of
economic activities. They are complex spatial structures supported by
infrastructures, including transport systems. The larger a city, the greater its
complexity and the potential for disruptions, particularly when this complexity is not
effectively managed. Urban productivity is highly dependent on the efficiency of its
transport system to move labor, consumers, and freight between multiple origins
and destinations. Additionally, transport terminals such as ports, airports, and
railyards are located within urban areas, help anchor a city within a regional and
global mobility system. Still, they are also contributing to a specific array of
challenges. Some challenges are ancient, like congestion (which plagued cities
such as Rome), while others are new like urban freight distribution or environmental
impacts.
Traffic congestion and
parking difficulties
Congestion is one of the most prevalent transport
challenges in large urban agglomerations. Although
congestion can occur in all cities, it is particularly
prevalent above a threshold of about 1 million
inhabitants. Congestion is particularly linked with
motorization and the diffusion of the automobile,
which has increased the demand for transport
infrastructures.
However,
the
supply
of
infrastructures has often not been able to keep up
with mobility growth. Since vehicles spend the
majority of the time parked, motorization has
expanded the demand for parking space, which has
created footprint problems, particularly in central
areas where the footprint of parked vehicles is
significant. By the 21st century, drivers are three
times more likely to be affected by congestion than in
the latter part of the 20th century.
Longer commuting
On par with congestion, people are spending an increasing amount of time commuting between their
residence and workplace. An important factor behind this trend is related to residential
affordability as housing located further away from central areas (where most of the employment
remains) is more affordable. Therefore, commuters are exchanging commuting time for housing
affordability. However, long commuting is linked with several social problems, such as isolation
(less time spent with family or friends), as well as poorer health (obesity). Time spent during
commuting is at the expense of other economic and social activities. However, information
technologies have allowed commuters to perform a variety of tasks while traveling.
Public transport inadequacy
Many public transit systems, or parts of them, are either over or underused since
the demand for public transit is subject to periods of peaks and troughs. During
peak hours, crowdedness creates discomfort for users as the system copes with
a temporary surge in demand. This creates the challenge of the provision of an
adequate level of transit infrastructures and service levels. Planning for peak
capacity leaves the system highly under-used during off-peak hours, while
planning for an average capacity will lead to congestion during peak hours.
Low ridership makes many services financially unsustainable, particularly in
suburban areas. Despite significant subsidies and cross-financing (e.g. tolls),
almost every public transit system cannot generate sufficient income to cover its
operating and capital costs. While in the past, deficits were deemed acceptable
because of the essential service public transit was providing for urban mobility,
its financial burden is increasingly controversial.
Difficulties for non-motorized transport
These difficulties are either the outcome of intense traffic, where the
mobility of pedestrians, bicycles, and other non-motorized vehicles is
impaired, but also because of a blatant lack of consideration for
pedestrians and bicycles in the physical design of infrastructures and
facilities. On the opposite side, the setting of bicycle paths takes capacity
away from roadways as well as parking space. A negative outcome would
be to allocate more space for non-motorized transport than the actual
mobility demand, which would exacerbate congestion.
Loss of public space
Most roads are publicly owned and free of access. Increased traffic has
adverse impacts on public activities, which once crowded the streets such
as markets, agoras, parades and processions, games, and community
interactions. These have gradually disappeared to be replaced by
automobiles. In many cases, these activities have shifted to shopping
malls, while in other cases, they have been abandoned altogether. Traffic
flows influence the life and interactions of residents and their usage of
street space. More traffic impedes social interactions and street activities.
People tend to walk and cycle less when traffic is high.
High infrastructure
maintenance costs
Cities facing the aging of their transport
infrastructure have to assume growing maintenance
costs as well as pressures to upgrade to more
modern infrastructure. In addition to the involved
costs, maintenance and repair activities create
circulation disruptions. Delayed maintenance is
rather common since it conveys the benefit of
keeping current costs low, but at the expense of
higher future costs and, on some occasions, the risk
of infrastructure failure. The more extensive the
road and highway network, the higher the
maintenance cost and its financial burden. The same
applies to public transit infrastructure that requires
a system-wide maintenance strategy.
Environmental impacts and energy
consumption
Pollution, including noise generated by circulation,
has become an impediment to the quality of life
and even the health of urban populations. Further,
energy consumption by urban transportation has
dramatically increased, and so the dependency on
petroleum. These considerations are increasingly
linked with peak mobility expectations were high
energy prices incite a shift towards more efficient
and sustainable forms of urban transportation,
namely public transit. There are pressures to
“decarbonize” urban transport systems, particularly
with the diffusion of alternative energy sources
such as electric vehicles.
Accidents
and safety
The growth in the intensity of circulation in
urban areas is linked with a growing
number of accidents and fatalities,
especially in developing economies.
Accidents account for a significant share of
recurring delays from congestion. As traffic
increases, people feel less safe to use the
streets. The diffusion of information
technologies leads to paradoxical
outcomes. While users have access to
reliable location and navigation
information, portable devices create
distractions linked with a rise of accidents
for drivers and pedestrians alike.
Congestion
Congestion occurs when transport demand exceeds transport supply at a specific point in
time and in a specific section of the transport system. Under such circumstances, each
vehicle impairs the mobility of others.
Congestion can be perceived as an
unavoidable consequence of the usage
of scarce transport resources,
particularly if they are not priced. The
last decades have seen the extension of
roads in urban areas, most of them free
of access. Those infrastructures were
designed for speed and high capacity,
but the growth of urban circulation
occurred at a rate higher than often
expected.
Urban congestion mainly concerns two domains of
circulation, often sharing the same infrastructures:
●
●
Passengers. In many world regions, incomes have significantly increased; one automobile per
household or more is becoming common. Access to an automobile conveys flexibility in terms of the
choice of origin, destination, and travel time. The automobile is favored for most trips, including
commuting. For instance, automobiles account for the bulk of commuting trips in the United States.
The majority of automobile-related congestion is the outcome of time preferences in the usage of
vehicles (during commuting hours) as well as a substantial amount of space required to park vehicles.
About 95% of the time, an automobile is idle, and each new automobile requires an additional
footprint.
Freight. Several industries have shifted their transport needs to trucking, thereby increasing the
usage of road infrastructure. Since cities are the leading destinations for freight flows (either for
consumption or transfer to other locations), trucking adds to urban congestion. The “last mile”
problem remains particularly prevalent for freight distribution in urban areas. Congestion is
commonly linked with a drop in the frequency of deliveries tying additional capacity to ensure a
similar level of service. The growth of home deliveries due to e-commerce has placed additional
pressures, particularly in higher density areas, on congestion in part because of more frequent
parking.
Urban mobility also reveals congestion patterns. Daily trips can be
either mandatory (workplace-home) or voluntary (shopping, leisure,
visits). The former is often performed within fixed schedules while the
latter complies with variable and discretionary schedules.
Correspondingly, congestion comes in two major forms:
Recurrent congestion
The consequence of factors that cause
regular demand surges on the transportation
system, such as commuting, shopping, or
weekend trips. However, even recurrent
congestion can have unforeseen impacts in
terms of its duration and severity. Mandatory
trips are mainly responsible for the peaks in
circulation flows, implying that about half the
congestion in urban areas is recurring at
specific times of the day and on specific
segments of the transport system.
Non-recurrent congestion
The other half of congestion is caused by random
events such as accidents and unusual weather
conditions (rain, snowstorms, etc.), which can be
represented as a risk factor that can be expected
to take place. Non-recurrent congestion is linked
to the presence and effectiveness of incident
response strategies. As far as accidents are
concerned, their randomness is influenced by the
level of traffic as the higher the traffic on specific
road segments, the higher the probability of
accidents.
Challenges facing urban transit are:
●
●
●
Decentralization. Public transit systems are not designed to service low density and
scattered urban areas dominating the urban landscape. The greater the decentralization
of urban activities, the more difficult and expensive it becomes to serve urban areas
with public transit. Additionally, decentralization promotes long-distance trips on transit
systems causing higher operating costs and revenue issues for flat fare transit systems.
Fixity. The infrastructures of several public transit systems, notably rail and subway
systems, are fixed, while cities are dynamical entities, even if the pace of change can
take decades. This implies that travel patterns tend to change with a transit system built
for servicing a specific pattern that may eventually face “spatial obsolescence”; the
pattern it was designed to serve no longer exists.
Connectivity. Public transit systems are often independent of other modes and
terminals. It is consequently difficult to transfer passengers from one system to the
other. This leads to a paradox between the preference of riders to have direct
connections and the need to provide a cost-efficient service network that involves
transfers.
●
●
●
●
●
Automobile competition. Given cheap and ubiquitous road transport systems, public transit faced strong
competition and lost ridership in relative terms and, in some cases, in absolute terms. The higher the level
of automobile dependency, the more inappropriate the public transit level of service. The convenience of
the automobile outpaces the public service being offered.
Construction and maintenance costs. Public transit systems, particularly heavy rail, are capital intensive
to build, operate, and maintain.
Fare structures. Historically, most public transit systems have abandoned a distance-based fare structure
for a simpler flat fare system. This had the unintended consequence of discouraging short trips, for which
most transit systems are well suited for, and encouraging longer trips that tend to be costlier per user than
the fares they generate. Information systems offer the possibility for transit systems to move back to a
more equitable distance-based fare structure, particularly with smartcards that enable to charge according
to the point of entry and exit within the public transit system.
Legacy costs. Most public transit systems employ unionized labor that has consistently used strikes (or the
threat of labor disruptions) and the acute disruptions they create as leverage to negotiate favorable
contracts, including health and retirement benefits. Since public transit is subsidized, these costs were not
well reflected in the fare systems.
Self-driving vehicles. Developments in information technologies let anticipate in the coming years the
availability of self-driving vehicles. Such a development would entail point to point services by on-demand
vehicles and a much better
Air Pollution
Data even show that at least 90 percent in the urbanized regions of the population is exposed to
harmful levels of air pollution.
According to a World Health Organization (WHO) study, adverse air quality is responsible for
around 2.2 million of the world's seven million premature deaths.
In the Philippines, air pollution has become one of the biggest health emergencies, recording a
total of 45.3 deaths for every 100,000 people due to air pollution-the third-highest in the world,
based on the 2018 WHO study.
A speech by Department of Transportation Secretary Art Tugade delivered during a recent forum in
Quezon CIty.
"To be honest with you, the fight for clean air is something personal to me. My son has asthma, and
this happened so many years ago, and you can probably imagine how much worse pollution is
right now in the country."
"From there on I said to myself, we should do something for the environment to avoid aggravation
of such illnesses. Indeed, loss of life is enough reason for us to drive for an environmentally
sustainable public transport system here in the Philippines."
Air pollution
has become a serious threat. Our modern day activities are altering our atmosphere at an
unprecedented scale. This has an impact on air quality and is affecting people's health not only
here in Metro Manila, but the entire country, and the world as well.
Push to modernize transportation
For jeepneys, this meant, first, that new franchises shall be issued only to entities that represent
consolidated franchises, either an accredited cooperative or a corporation which operates 15 units
or more. (Thus, a singular jeepney owner cannot apply for his own franchise.) Second, traditional
jeepneys shall be replaced with new vehicles with a body make that abides by LTFRB guidelines
(which, to the naked eye, make the jeeps look more like minibuses). The cost of this new vehicle
varies, but they cost at least ₱1.6 million and above. (In contrast, a jeepney may cost as low as
₱100,000.)
● Another goal of this project is Promoting electro mobility in urban areas.
Which project implementation includes Ten cities, including Pasig in the Philippines, have been
chosen as "living labs" for Urban Pathways, an international sustainable transport initiative. Under
another project, two- and three-wheeled vehicles are being integrated into urban transport
systems.
Jeepneys, in particular, shall serve routes with passenger demand of 1,000 pphpd (passengers per
hour per direction); with routes linking neighborhoods and communities to mass transit lines and
bus routes, but restricted in EDSA and other national highways; shall comply with body make
requirements prescribed by the Land Transportation Franchising and Regulatory Board (LTFRB),
including compliance with EURO IV emission standards.
●
Expensive modern jeepneys
The cost of modern jeepneys is also unaffordable, plain and simple. All modern jeepneys should use
an electric-powered engine or at least be compliant with the Euro-4 emission standards.
Additionally, other equipment like installed cameras/dashboard cameras, Wi-Fi connections,
Speed limiters, GPS trackers, and electronic payment systems/automatic fare collections are
required.
Estimated price is
E-jeep: From ₱800,000 to ₱1.2 million;
Euro IV engine: From ₱1 million to ₱1.5 million;
Solar powered engine: Up to ₱1.6 million
This does not include the add-on features (wifi, CCTV, etc.) required by the Omnibus Guidelines.
Jeepney Phase out
When other public utility vehicles were finally allowed to resume operations in June 2020,
traditional jeepneys were excluded. They were shocked to find that their franchises were
being cancelled or modified for being non-compliant with the Modernization Program,
without prior consultation. Meanwhile, new franchises and routes were being issued to
large corporations which are investing in modern jeepney units and other facilities.
The government’s decision to push through with a modernization deadline could not have
come at a worse time: during a lockdown triggered by a global pandemic. When
traditional jeepneys were disallowed their routes during the pandemic, a 70-year old
jeepney driver as reported here resorted to begging for money on the streets sometime
in July.
Lack of Support
The pandemic is an opportunity to railroad the
Modernization Program because emissions
reduction, cashless transactions, and other
modernization features are now even more
necessary for the health and safety of
commuters. As for the jeepney