Cost Structure

Cost Structure

Steven Oldham

ECO/561

September 5, 2013

William Akamine 

Cost Structure

The indirect cost of the logistic companies has progressively grown. In this paper the student discusses the differences between two companies Landstar and JB Hunt's cost structure. It describes the flexibility in meeting the changing market and the implications that creates these logistic companies Landstar and JB Hunt's cost structure to differ even though they provide like service and how they implement very different strategic approaches to their cost structure.

Landstar System Inc. (LSTR)

Landstar is one of the top non-asset based logistic supply services, running the largest fleet of independent owner operator contractors in the United States. They focus on service sensitive customers with special requirements, and tough to find capability. Landstar produced $2.6 billion in revenue in its transportation services. It consists of truck services, intermodal rail and, air transport (Baird Equity Research, 2012).

Landstar operates in a high competition and split business environment with a variety of logistic companies that consist of a large number of small companies. However, LSTR is one of the highest ranked logistic companies in the United States. Landstar has implemented a strategic approach with operating revenue which exceeds $2.6 billion. However, it is not asset based; they use third party sources and independent sales agents. Landstar's management operates with the understanding that their company has the largest number of both commissioned sales agents, and independent contractors in the logistics industry. Landstar gradually sold their company-owned trucks and phased out their company employed operators. They distribute cargo through a network of approximately 9,000 owner-operators, and 3rd party providers along with railroad, and air carriers which causes their operating costs to vary directly with revenue. Doing this creates a large fleet of revenue equipment while Cost Structure reducing capital investments and fixed costs; this enhances return on investments. Different from its competitor JB Hunt, Landstar intentionally operates with a low fixed cost and high variable cost structure (Hawkins, 2013).

J.B.