Analysis of Transportation Cost in Overall Logistics Cost

European Journal of Scientific Research

ISSN 1450-216X Vol.44 No.3 (2010), pp.420-429

© EuroJournals Publishing, Inc. 2010 /ejsr.htm

Analysis of Transportation Cost in Overall Logistics Cost Management of Manufacturing Companies in

Southwestern, Nigeria

Somuyiwa, Adebambo Olayinka

Dept of Transport Management, Ladoke Akintola University of Technology

P.M.B 4000, Ogbomoso, Oyo State, Nigeria

E-mail: miyagi89@

Tel: +2348033570837


This paper evaluates the importance of transportation cost in overall logistics cost management, with a view to establishing the role of transport in the supply chain, while

focusing on inherent costs incurred in transport cost, and how cost reduction can be

established, simultaneously maintaining the correct levels of customer service. Various

Transportation costs components-Labour cost; Owned vehicle cost; Rented vehicle cost

and others were identified and analysed using SPSS and adapted distribution function of

Cobb-Douglas that incorporates Ordinary Least Square and Weighted Least Square

methods. All these components were regressed on the Volume/Quantity of goods

transported. Twenty (20) manufacturing companies formed the sample of the study, based

on multi stage sampling techniques that incorporated cluster, stratified and purposive

sampling methods. Apart from parametric test statistical techniques adopted, data analyses

were done using a software application that incorporated Cobb-Douglas production

function, which was packaged and tailor-made for the paper. It was revealed that there

were significant relationships among components of transportation cost. The paper

recommends that emphasis should be placed on number of owned vehicles, labour cost,

rented vehicle cost and distance over which goods are carried so that cost reduction can be

achieved, simultaneously maintaining customers’ service.

Keywords: Analysis, Costs, Logistics, Transportation, Management,

1. Introduction

The significant roles of transport in physical distribution of materials are well appreciated and need not be over stressed, rather, what is pertinent is how this factor, and other major actors of logistical operational activities will be harnessed towards enhancement of effective supply chain management. Suffice it to acknowledge the fact that, there is a positive and linear relationship between these two concepts (logistics and supply chain) (Somuyiwa, 2010). Transport cost proves to be major area where unnecessary supply chain cost can be incurred. Inefficient load planning, often leads to longer turn around, that will subsequently lead to the cost escalation of the transport operation and may also have an impact on the customer service levels. The effect of lower inventory levels can escalate the cost associated with transport due to smaller and more irregular loads. According to Cooke (2000) ineffective routing and scheduling of orders or the absence thereof can also impact on transport cost.