Transportation: costing & pricing

Market Considerations
1. Structure Models
  1. Pure competition
  2. Oligopoly
    1. Competition between a few large sellers of relatively products.
  3. Monopolistic Competition
    1. Many small sellers with some differentiation of products.
2. Contestable Markets
  1. It substitutes potential competition for the active participation of many sellers.
  2. 1. No barriers to entry.
  3. 2. Economies of scale could not be present.
  4. 3. Consumers willing & able to switch quickly among carriers.
Cost-of-service Pricing
1. Marginal Cost
2. Average cost
Value of Serving Pricing
1. Pricing according to the value of the product.
2. Third-degree price discrimination
  1. Seller must separate buyers into groups according to their different elasticities of demand
  2. Seller must prevent the transfer of sales between the submarkets
  3. Seller must possess some degree of monopoly power.
3. Differential Pricing
  1. Done based on several methods of segregating the buyers into distinct groups.
  2. Key Success
    1. Determine the appropriate costs and to stimate demand elasticity in the various markets.
Rate Making in Practice
1. General Rates
  1. Class Rate
    1. Provides a rate for any commodity between any two points
    2. From uniform distance and product systems.
    3. Simplification Steps
      1. 1. Consolidated the 1,000´s of shipping points by dividing the nation into geographic squares
        2. Deals w/the 1,000´s of different items that might be shipped between any two base points.
        3. Groups together products w/similar transportation characteristics so that one rating can be applied to the whole group
    4. Product characteristics that impact the carrier´s costs.
      1. Handling
      2. Liability
      3. Storability
      4. Product density
  2. Exception Rates
    1. Carriers in particular regions can depart from the product scale system for any one of many reasons
      1. Modification to the national classification instituted by an individual carrier.
  3. Commodity Rates
    1. For specific origin-destination shipping patterns of specific commodities.
Special Rates
1. Character of Shipment Rates
  1. LTL. Less than Truckload
  2. Multiple car
  3. Incentive
  4. Unit-train
  5. Per-car, per-truckload
  6. Any-quantity
  7. Density
2. Area, Location, Rute rates
  1. Local
  2. Joint
  3. Proportional
  4. Differential
  5. Per-mile
  6. Terminal to terminal
  7. Blanket or groups
3. Time/Service Rates
  1. Contract rates
  2. Deferred Delivery
4. Others
  1. Corporate volume rates
  2. Discounts
  3. Loading allowances
  4. Aggregate Tender rates
  5. FAK rates
  6. Released Value rates
  7. Empty-haul rates
  8. 2 way-3way rates
  9. Spot market rates
  10. Menu pricing
Pricing in transportation Management
1. Factors
  1. Customers (market)
  2. Government
  3. Other channel members
  4. Competition
2. Decisions
  1. 1. Setting prices on a new service
  2. 2. Modify prices over time.
    1. Market & operating changes.
  3. 3. Decisions will make responding to price changes.
    1. Price leader
3. Pricing Objective
  1. Reflect company objectives & how they will compete.
  2. Survival- based.
    1. Increasing cash flow through the use of low prices.
  3. Unit volume
    1. Utilize a carrier´s existing capacity to the fullest.
  4. Profit Maximization
    1. Measures such as return on investment
      1. Skimming Price
        High price--> attrack market focused on quality, status.
  5. Penetration price
  6. Market share
    1. When revenues are stagnant or declining
  7. Social Responsibility
4. Demand
  1. Price slasticity
  2. Direct attitude survey
  3. Market test
It is detemrined primarily by considering a carrier´s cost.
Implies a value that is detemirned based on prevailing market forces.
1. Dinamic economic enviroment

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Transportation: costing & pricing

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