Transportation Costs and Service Quality: An Examination of Competing Hypotheses

Abstract

The tradeoff concept in transportation and logistics is a well-accepted and conventional paradigm for describing the relationships between business and economic variables in logistics systems. For example, the use of premium transportation to enhance customer service is well known. As such, the increased transportation costs may be more than offset by customer time-related or service attribute benefits, by the stimulation of demand, or by channel of distribution coordinative benefits. Thus, it has been generally believed that higher levels of transportation service quality require greater transportation expenditures in a tradeoff-type relationship. This paradigm has been extended recently to the strategic level of management decision making.