Mitigating Risk in Transportation

In: Business and Management

Submitted By Hodgy
Words 651
Pages 3
Mitigating Risk in Transportation Costs
Troy Beck
MGT325: Introduction to Transportation Management
Instructor: Stephen Griffith
August 25 2013

Mitigating Risk Mitigating costs is important to the success of every company this is especially true in the transportation industry. Economic, accounting , and social costs all need to be evaluated to ensure that a business can remain successful. This paper will explore these three cost concepts and provide recommendations on how to mitigate the risks associated with each. Accounting costs is the first concept. This includes all of the cash outlays of the company. This is the easiest concept to understand. The accounting costs include all of the expenses incurred by the company. This includes fuel, driver wages, wear and tear on the equipment and other costs associated with delivering the freight. When hauling truck load freight this is very straight forward but in the case of LTL freight or package delivery this becomes more difficult. Mitigating these costs can be difficult, but it can pay big dividends for the company. If a company is able to quantify all of its operations they would be able to evaluate which service is the most costly and focus on reducing this costs. Economic cost is the second cost, this is different from the accounting cost. Economic costs are associated with the alternative cost doctrine. Using this doctrine the cost of a resource is its value in its best alternative use. With this being said if a resource has no alternative use, such as a railroad trestle, it has a zero economic cost [ (Coyle, Novack, Gibson, & Bardi, 2011) ]. Accounting costs are related to money that has already been spent, economic costs are future costs. In the transportation industry economic costs are the value of alternative services that could have been provided. Economic costs can be reduced by…...

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