Transportation, Supply Chain

Describe the concept of “Economies of Scale” as it relates to the transportation industry. What advantages has economies of scale brought to transportation? Can you think of any disadvantages?

Sample Solution

Economies of scale are cost advantages companies experience when production becomes efficient, as costs can be spread over a large amount of goods. In the transportation industry, the aspect of economies of scale comes in when bulk transportation is done. Transporting products in bulk will cost the company or organization less money than transporting the same products in small portions. Through distance degression the law of economies of scale widens the sales market, while the transport object degression of unit costs intensifies both the tendency towards the concentration of transport production and the activity of transport users. Economies of scale lowers a carrier’s average costs and potentially lower the freight rates charged to their shipper customers.

are other contingency theories that provide a more continuum based approach such as Redding’s theory of leadership and management, however Fielder’s description of how situational factors affect the leadership style required for the situation is extremely useful in understanding the fundamentals of leadership (Pettinger, 2007). Chelladurai in his Multi Dimensional Model of Leadership, expands on much of Fiedler’s theory but in a continuum based approach, in which the leader can adapt their leadership style to fit the situation (Chelladurai and Madella, 2006). Chelladurai’s theory is taken from sports psychology but can be applied to an organisational scenario. It provides a much more empirical categorisation of task structure, clearly differentiating a plethora of situations that require certain leadership styles for success. Chealldurai found three characteristics that affect the leadership style required for a situation, called antecedents, they mainly expand upon Fiedler’s situational factors and leader – member relations and ultimately affect how a leader should behave towards a situation. The first are situational characteristics, the environment in which the leader must perform, the second are leader characteristics, the experience, personal qualities and skills of the leader, and the third are member characteristics, the motivation, skill and experience levels of group members (Chelladurai and Madella, 2006). The situational characteristics and member characteristics have a required behaviour to ensure maximum group performance, they also have a preferred behaviour to ensure the satisfaction of group members, if the leaders actual behaviour matches both the required behaviour and preferred behaviour of the situation the consequence is maximum group performance and satisfaction. However, if the group are not performing and achieving goals or are not satisfied or both, then the leader is able to amend their actual behaviour to improve this. Leaders able to monitor performance and satisfaction, and understand what is required to amend the situation will achieve optimum group performance in Chelladurai’s model.

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