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As the complexity of a freight network increases, so do the risks

But it’s not as simple as it might seem.

Transporting goods to market was once a relatively straightforward process, but in our modern, globalised world, where extensive networks of intermediaries exist between producers and consumers, transporting freight has become a complex and sometimes risky endeavour.

This is where transport economics comes in – the application of economic theories to analyse the movement of freight over time and space.

“Transport economics is important for key stakeholders in the transport industry for planning and management of transport systems,” said Dr Seu Keow Cheng, a lecturer in Economics and Finance at the Tasmanian School of Business and Economics.

The transportation of freight from point A to point B is not as simple as it seems.

With experience in both freight and passenger transport, Dr Cheng focuses on analysing transport-related issues from a variety of angles, including economic, sociology, management, and marketing.

She is the architect of a landmark study on the subject, and is regularly cited by researchers in the field.

Along with co-author Professor Booi Hon Kam from RMIT, Dr Cheng was able to show that, as the number of middlemen in a freight network increases, so do the risks associated with shipping freight for producers. The framework which combined economic and management perspectives allows for the calculation of risk in freight networks based on their complexity.  

Consider, for example, an Australian producer shipping cherries to consumers in China. As cherries are perishable goods, the producer uses airfreight to get them to market as quickly as possible.

However, a variety of airlines, freight forwarders, and shipping companies in both nations have now become involved, in addition to the bureaucracy of customs processes and paperwork in both nations, likely handled by additional providers.

This added complexity could result in the cherries not arriving while fresh and in perfect condition to the Chinese suppliers.

“When people talk about managing risk, they tend to overlook that component. They look at it as a transaction between a manufacturer and a transport company, but in fact there are often many intermediaries,” said Dr Cheng.

If there are many players in the picture, that will complicate the shipment, and maybe lead to higher risk.

"If that’s the case, and the manufacturer can know that in advance, they may try to avoid forming that kind of network structure in the first place.”

Transport economics is also useful for understanding how people move around in urban environments, perhaps by bicycle or car, or on public transport such as buses and trains. This knowledge is essential for the planning of land use and transport systems.

“An individual’s travel behaviour is complex. Besides economic factors, social factors such as a person’s networks of friends, contacts, and relatives could also influence their demand for different modes of transport,” said Dr Cheng, who is interested in modelling travel behaviour and understanding the differences in demand for various types of transport.

While collecting data on people’s real-world social networks can be difficult using traditional survey methods such as face-to-face or telephone interviews, data from online social networks like Facebook and Twitter may offer researchers a totally new way of studying the interconnectedness between individuals, and how this can shape travel behaviour. 

This may lead to “innovative and more tailored transport systems or solutions for tomorrow," said Dr Cheng.

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