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Question: Discuss about the Importance of transportation cost for different manufacturing option. Answer: Transportation operation in a region reflects the efficiency of transporting goods. In the location decision for any manufacturing firms, cost of transportation plays an important role (Knaap Oosterhaven, 2017). For homeowner club, to decide over whether to establish manufacturing plant in Canada or export from China it should consider demand and supply of different mode of transportation and corresponding pricing for each mode. Importance of transportation cost for different manufacturing option If the company decide to build its own plant in Canada then it might enjoy the benefits of economies of scale from operating in the home country. Following establishment of new plant, new employment opportunities are created and this would inspire other related industries to develop in the region. This will in turn reduce transportation cost of other raw materials as well (Hu et al. 2015). For other alternative, that is export from China involves additional transportation cost. The additional transportation cost depend on the availability of different transportation mode in China. Supply and demand of different mode of transportation Supply of different transportation mode The specific transportation mode for importing the required product from China to Canada include air transport and transportation via oceans. Air China has a rapidly growing aviation industry. In 2007, China had nearly 500 airports of various size. Among these 500 airports, 400 had paved runways while 100 had runways of size 3,047 m or shorter. China also has 35 heliports providing additional assistance in air transportation (Ding et al., 2015). The operation of several airline companies such as Air China, Beijing capital Airlines, China Eastern Airlines, China Express Airline and other increases the availability of flight for carrying goods and passengers at different times of the day. Table 1: Air transport statistics in China (Source: hong-kong-economy-research.hktdc.com, 2018). Shipping and Ports There are nearly more than 2000 ports in China. Of which 130 are open foreign ships. Beihai, Fuzhou, Haikou, Nantong, Tianjin, Weihai and Zhanjiang are some of the major ports of China and are open to access for ocean going ships (Hu et al. 2015). The merchant fleet of China has 3497 ship. Table 2: Statistics for different mode of water transportation Year Barge carrier Bulk carrier Cargo ship Carrier Container ship 2004 2 325 840 11 125 2007 3 415 689 3 157 (Source: Ding et al., 2015) Demand of different mode of transportation The firm prefers to use cargo air carriers for importing their goods. The demand for mode of transportation however depend on the demand for companys product. If there is sufficient time, then the required tools of the company can be carried by cargo ships because of a lower cost Cargo flights though cost higher but are more time efficient (cargofromchina.com, 2018). The transportation pricing however often depends on specific period of the year. During peak season, the fair is higher as compared to the average cost. It is therefore beneficial for the company to exchange goods during off-season and maintaining an inventory stock to maintain smooth supply (Knaap Oosterhaven, 2017). In order to construct own plant in Canada, the transportation facilities within the country and corresponding cost needs to be considered. If transportation cost from China outweighs the benefits from operating within the country, then the country should chose to export from China rather than building its own plant References Air Freight Shipping from China: A Compelete Guide. (2018).Cargofromchina.com. Retrieved 3 April 2018, from https://cargofromchina.com/air-freight/ Air Transport and Express Cargo Industry in Hong Kong | HKTDC. (2018).Hong-kong-economy-research.hktdc.com. Retrieved 3 April 2018, from https://hong-kong-economy-research.hktdc.com/business-news/article/Hong-Kong-Industry-Profiles/Air-Transport-and-Express-Cargo-Industry-in-Hong-Kong/hkip/en/1/1X000000/1X0018JT.htm Ding, Z. Y., Jo, G. S., Wang, Y., Yeo, G. T. (2015). The relative efficiency of container terminals in small and medium-sized ports in China.The Asian Journal of Shipping and Logistics,31(2), 231-251. Hu, Y., Xiao, J., Deng, Y., Xiao, Y., Wang, S. (2015). Domestic air passenger traffic and economic growth in China: Evidence from heterogeneous panel models.Journal of Air Transport Management,42, 95-100. Knaap, T., Oosterhaven, J. (2017). Spatial economic impacts of transport infrastructure investments. InTransport Projects, Programmes and Policies(pp. 87-105). Routledge