Transport Management & Theory Practices (2)

Management of Transportation

Seventh Edition Coyle, Novack, Gibson & Bardi

© 2011 Cengage Learning

Chapter 2Transportation’s Role

in the Economy

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1

Introduction• Chapter focus: Holistic view on significance

and impact of improved transport– Transport is pervasive, an essential element of

daily life. Its vital to economic development and growth and has significant social, environmental, and political consequences

• Chapter organization– Historic significance– Economic significance– Environmental, social, and political significance

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly

accessible website, in whole or in part.2

Historical Significance of Transport• Contribution to growth of early civilizations– Nile River facilitated trade, communication, defense,

political and cultural growth in ancient Egypt • Creation of social structures– Fosters unification of political and cultural ideals

• Facilitation of trade and economic growth– Canals, rail and road systems spur U.S. expansion

and growth through 19th and 20th centuries• Role in national defense

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or

duplicated, or posted to a publicly accessible website, in whole or in part.

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© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied

or duplicated, or posted to a publicly accessible website, in whole or in part.

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Transportation and the EconomyOverview

• Conceptual views on the role of transportation in an economy– Enabler of utility creation– Provider of services at a varying costs– Factor of production– Influence on market access and extent of

market – Spatial and temporal relationships• Transport as a bridge for the producer-consumer or

supply-demand gap© 2011 Cengage Learning. All Rights

Reserved. May not be scanned, copied or duplicated, or posted to a publicly

accessible website, in whole or in part.

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Economic SignificanceValue of Goods

• Conceptual foundations– Influence of transport improvement on

landed cost and size of market area• Place utility: creation of economic value through

transport cost reduction• Law of Squares in Transport and Trade (Lardner’s

Law) • Reduction of producer-consumer gap

– Time utility– Quantity utility



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Economic SignificanceUtility of Goods

• Additional concepts: Contribution of transport to:– Geographic specialization and principle of

comparative advantage– Enabling of large-scale production economies– Increased competition through market area

expansion– Changing land values



Economic SignificanceTransport Patterns

• Principal global trade flows – East-west flows • Reflect trade between industrialized nations largely

in Northern Hemisphere

– North-south flows • Reflect trade between industrialized nations and

developing economies in Southern Hemisphere

• Trade flows within countries– Principally link major metropolitan areas and

ports© 2011 Cengage Learning. All Rights

Reserved. May not be scanned, copied or duplicated, or posted to a publicly

accessible website, in whole or in part.

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Economic SignificanceGross Domestic Product (GDP)

• GDP: measures size of an economy– Definition: annual market value of all goods and

services made within border of a nation• GDP = Consumption + gross investment + government

spending + (exports – imports)

– Transport: 10.5% of 2007 U.S. GDP• Trails housing, health care, and food, exceeds education• Downward trend due to improving transport productivity

• Transport: 18% of household expenditures– Exceeds all expenditure categories except housing





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Environmental Significance• Social costs of transport– Various forms of pollution– Consumption of natural resources

• Policy challenge is to develop clear understanding of relationships between– Transport investment and operations– Economic benefits of transport– Social costs of transport



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Environmental SignificanceThe Environment

• More emphasis today placed on achieving balance between:– Sound and efficient transport system– Clean and safe environment

• Green supply chain concept• Business leaders and environmental quality – Increasingly believe business has important role– Environmental quality does not have to be a

zero-sum game © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly


Air Quality and Acid Rain• Acid rain: more acidic rain than normal– Adversely affects water systems, crops, forests,

human health, and air visibility– Sulfur dioxide, nitrogen oxides, and volatile

organic compounds produce acid rain– Internal combustion engine emissions are a

source of these pollutants– Existing regulations limit emissions• More reductions may be needed. This may involve

difficult policy-balancing choices © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly


Air Quality and Acid Rain• Greenhouse effect– Definition: heat radiating from earth is blocked or

absorbed by gases in atmosphere• Source of gases – human activity, such as transportation

– Contributes to climate change

• Ozone reduction in stratosphere– Ozone reduces amount or ultraviolet radiation

reaching surface of the earth– Concern that chlorofluorocarbons used in home and

vehicle air conditioners contribute to ozone depletion© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly


Maritime and Water Quality• Many potential transport-related sources of

adverse impacts on maritime environment– Oil tanker spills– Ship generated garbage dumping– Hazardous material spills– Motor oils in water runoff

• Adversely affects birds, marine mammals, and quality of water used for drinking and recreation



Noise• Noise from transport – Potential annoyance as well as health concern

• Principal transport sources of noise– Airplanes and motor vehicles

• U.S. DOT and Federal Aviation Administration – Sponsors research on noise abatement strategies– Provides funding for noise abatement projects

• Noise emissions governed by Noise Control Act of 1972



Safety• Transport-related injuries and loss of life– Passenger transport• 2006: 44,912 transport-related deaths• 95% of fatalities occurred in highway vehicles• Number of deaths has remained stable. Death rate

is declining due to: – Increased licensing requirements– More reliable vehicle designs

– Freight transport• Safety trends not as favorable as on passenger side• Rising number of accidents, spills and explosions



Social and Political Significance• Social significance– Enhancement of health and welfare• Famine and other disaster relief efforts

• Political significance – Wide range of governmental responsibilities• Regulatory role examples

– Common carrier concept– Power of eminent domain

• Promotional role – Facilitation of commerce

• Preservation of national defense© 2011 Cengage Learning. All Rights Reserved. May not be

scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Overview of Modern Transportation• Prior material: addresses broad impacts

– Economic (micro and macro) – Environmental, social, political

• Transport system shaped by three decision-making groups:– Users: create the demand requirements – Providers: supply, operate, and manage transport

services to meet demand– Government: develop policy, supply infrastructure,

and regulate• Each group’s decisions influenced by impacts



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Overview of Transportation Trends

• Deregulations of late 1970s and 1980s stimulated major changes in transport– Affected how carriers organized, priced, sold services,

and managed operations• Numerous key trends continue to shape transport – Key trends in demand for transport services– Key trends in supply, operation, and management of

transport services– Key trends in government policy and regulation



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Transport Management & Theory Practices (2)

Business

Transcript of Transport Management & Theory Practices (2)