Transportation expenses, which involve the cost of incorporating raw materials into the production process and/or finished goods being shipped out to the customer, account for 12% of the total price of a product in Iran compared with the global average of 6%, says an expert with the Institute for Trade Studies and Research affiliated with Industries Ministry.
Mohammad Reza Sa’adat added that costs associated with storage and materials handling constitute 6.6% of the end price of products in Iran compared with 3.3% in the world.
“The total logistics costs in our country make up 19.4% of the total price of a product whereas the share stands at 9.7-11.3% globally,” he was quoted as saying by the news outlet of Tehran Chamber of Commerce, Industries, Mines and Trade.
Logistics is the process of planning and executing the transportation and storage of goods from the place of origin to the place of consumption. The aim of logistics is to meet customer requirements in a timely, cost-effective manner.
Pointing to the diseconomies of scale, low efficiency of players in the distribution system and high overhead costs as the challenges facing Iran's logistics sector, Sa’adat said, “All these ultimately result in the high costs of distribution services and low transparency in the sector.”
In microeconomics, economies of scale are the cost advantages obtained by enterprises due to their scale of operation, with cost per unit of output decreasing with increasing scale.
When more units of a good or service can be produced on a larger scale, yet with (on average) fewer input costs, economies of scale are said to be achieved. Just like there are economies of scale, diseconomies of scale also exist, which occur when production is less than the proportion of inputs.
Sa’adat noted that small, traditional retailers account for the lion’s share of the supply of groceries i.e. 71%.
“Modern distribution centers like chain stores make up 5% of the supply chain of non-grocery items. All in all, small-scale retailers account for 88.9% of the distribution of grocery and non-grocery products,” he said.
Latest figures show truck drivers transported 230 million tons of goods in more than 15.2 million trips across the country during the first half of the current Iranian year (March 21-Sept. 22, 2019) to register a 13.33% and 0.66% growth in tonnage and number of trips respectively compared with the similar period of the year before.
According to Director General of Road Maintenance and Transportation Organization of Iran's Cargo Transportation Affairs Department, Gholamhossein Daghagheleh, close to 349,000 trucks in Iran handled goods transportation during the period under review.
"Waybill figures show the average weight of shipments carried by each truck over the six-month period increased to 15.1 tons from last year’s 14.5 tons, which shows a rise in road fleet productivity,” the official was quoted as saying by the news portal of the Ministry of Roads and Urban Development.
Road Maintenance and Transportation Organization of Iran is affiliated to the Ministry of Roads and Urban Development.
Transportation of essential goods from Iranian ports via road amounted to nearly 11 million tons in H1, which shows a 30% growth year-on-year.
