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[quote]QUOTE: Originally posted by M.W. Hemphill Macguy: The worth of a commodity is the price a buyer will pay for it delivered to the place where he needs it -- it is not, repeat, not, the cost of the material itself at the place where it is made. That's why I discriminated in the article between delivered price and FOB price (FOB is "Free on Board," the price you pay for something at its origin, loaded into your railcar or truck or barge or what have you). Everything you buy includes a cost of transportation. Some items are so cheap to make (or manufacture) that transportation becomes the greatest contributor to cost. Consider a can of soda you buy at a vending machine in Fairbanks, Alaska, for $1.00.: the water, the corn sweetener, the flavor, and the can cost maybe three cents, the marketing and the refrigeration a few more -- but most of the cost is in the transportation. Coal is not unusual at all in having its worth greatly influenced by its transportation costs. On average, logistics (the total distribution cost including shipping, warehousing, tracking, handling) accounts for about 11 cents of every dollar of a purchased item. That number has been falling consistently for many years -- just a few years ago it was 15 cents of every dollar. Considering that automobiles, electronics, and pharmaceuticals are very expensive to manufacture, are sold in large quanitities, and are a huge proportion of the global economy, one quickly realizes that for MOST goods the cost of transportation exceeds the cost of manufacture. [/quote] I gotcha' Mark, to tell you the honest truth I have never thought about it, but now that you do explain it, wow it sure makes me look at everything in a different way. [8D]
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