CHEMICAL ENGINEERING TRANSACTIONS  
 

VOL. 62, 2017 

A publication of 

 
The Italian Association 

of Chemical Engineering 
Online at www.aidic.it/cet 

Guest Editors: Fei Song, Haibo Wang, Fang He 
Copyright © 2017, AIDIC Servizi S.r.l. 
ISBN 978-88-95608- 60-0; ISSN 2283-9216 

Research on Cost Control of Hazardous Chemicals 
Enterprises - Based on the Perspective of Transport Service 

Chain Cost 
Jiankun Chua,b*, Xuefei Zhenga, Luhui Wanga, Hyunrae Chob 
a Xingtai Polytechnic College, Xingtai 054035, China 
b DaeJeon University Daejeon 300-716, Republic of Korea 
hlf761225@163.com 

The cost control of hazardous chemicals enterprises is of great practical significance. Many experts and 
scholars have conducted studies in this issue before, however, existing researches tend to be based on the 
assumption of minimizing cost, ignoring the particularity of hazardous chemicals enterprises, that is, there is 
an inverse relationship between the cost control and the risks, the more the cost input, the lower the risks; the 
less the cost input, the higher the risks. In this context, based on the perspective of transport service chain of 
hazardous chemicals, this paper discusses the cost control of enterprises based on risk factors, and points out 
Hazardous chemicals companies should focus on three aspects, including storage operations cost 
management, transportation cost management and risk control cost management. 

1. Introduction 
Hazardous chemicals are important industrial raw materials. In recent years, the social demand for hazardous 
chemicals has been gradually increasing, and the number of enterprises engaging in the production, storage 
and transportation of hazardous chemicals also increases. Hazardous chemicals companies are facing many 
problems in their operations. The first is the high cost, the second is the poor corporate risk control 
(Sivakumar, 1993). It can be said that the prevention and control of risks are the responsibility and obligation 
of hazardous chemicals companies. However, due to the limitation of cost, enterprises have limited investment 
in risk control. Therefore, it is very important to study the cost control of hazardous chemicals enterprises so 
that more funds can be invest into risk control. 
Many studies have pointed out that the major costs for hazardous chemicals companies are storage costs and 
transportation costs (Plüss & Ferrell, 1991; Bennett, 1996; Larsson, 2007), both of which can be included in 
the costs of the transport service chain studied in this paper. The purpose of this paper is to analyze the 
relationship between the cost of transportation service chain and the risks by analyzing the cost of 
transportation service chain of hazardous chemicals companies, then this paper puts forward some 
suggestions and methods for controlling and optimizing the cost of transportation, and provides references for 
cost control for the hazardous chemicals companies. 

2. Hazardous chemicals transport service chain 
For now, there is no standard definition for the service chain of transport of hazardous chemicals yet, but the 
definition of service chain is basically mature. The service chain is a consumer network based on Internet of 
Things technology (IOT), logistics technology and so on, with demand as orientation and various well-
organized services (Brockhoff, 1992; Vanderstraeten, 1996). 
According to above definition, this paper defines the transport service chain of hazardous chemicals as a 
consumer network based on modern science and technology with demand as its orientation and organically 
combines the services during the storage and transportation of hazardous chemicals. The participants in the 
hazardous chemicals transport service chain can be single agents or multi-agents (such as manufacturing 
enterprises, warehousing enterprises and transport enterprises). When the agents are diversified, different 

                                

 
 

 

 
   

                                                  
DOI: 10.3303/CET1762260 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Please cite this article as: Jiankun Chu,  Xuefei Zheng,  Luhui Wang,  Hyunrae Cho, 2017, Research on cost control of hazardous chemicals 
enterprises - based on the perspective of transport service chain cost, Chemical Engineering Transactions, 62, 1555-1560  
DOI:10.3303/CET1762260   

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agents have different responsibilities: manufacturing enterprises are responsible for producing goods; 
warehousing enterprises provide warehousing and handling services; and transportation enterprises provide 
transportation services (Guo, 2010; Reniers & Pavlova, 2012; Li, 2013). 

 

Figure 1: Dangerous Goods Transportation Service Chain 

3. Hazardous chemicals transport service chain cost analysis 
3.1 Definition of Cost of Hazardous Chemicals Transport Service Chain 

The enterprise logistics cost refers to the monetary performance of materialized labor and live labor consumed 
in logistics activities (Erkut, 1995; San et al., 2003; Faghih-Roohi, 2016; Toumazis, 2013), it is the sum of all 
consumed manpower, materials and financial resources during the process of cargo transportation, storage, 
handling and processing.  
With reference of this definition, and above-mentioned definition of the transport chain of hazardous 
chemicals, this paper defines the cost of hazardous chemicals transport service chain as follows: the cost of 
hazardous chemicals transport service chain is the sum of all consumed manpower, financial resources and 
materials during the process of storage and transportation, the cost can be divided into three categories: 
storage cost, transportation cost and risk control cost. 

3.2 The cost composition of the transport service chain of hazardous chemicals 

It has been pointed out above that the cost of transportation service chain can be divided into three 
categories, namely storage cost, transportation cost and risk control cost. Storage cost refers to the sum of all 
the costs of hazardous chemicals in the storage process, including warehousing, handling, moving, waste 
disposal, etc. (Leonelli, 2000). Transportation cost refers to the full costs incurred in the operation of 
transportation vehicles (mainly trucks, trains and ships) (Fang 2004; David 2013), including depreciation, 
maintenance, repairs, fuel costs, lubricant costs, etc. Risk control cost refers to the sum of all costs that are 
used for mitigating the risks (Karkazis & Boffey, 1995; Bonvicini, 1998), including the purchase and 
maintenance of monitoring equipment, the management costs associated with risk control, and so on. 

 

Figure 2: Cost Structure Diagram 

According to the statistics of relevant associations, in the industry average, storage costs of hazardous 
chemicals companies account for about 20% of total costs, transportation costs account for 60% -70% of total 
costs and risk control costs account for 10%- 20% of total costs.  
According to the relationship between cost and volume, the cost of hazardous chemical companies can also 
be divided into fixed cost and variable cost. According to the academic definition, fixed cost refers to the total 
cost of a certain period of time and within a certain volume of business, not subject to changes in business 
volume; variable costs refers to the total cost of production subject to changes in business volume. The cost 

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items of the change are mainly the value of raw materials, fuel, power and other factors of production. When 
the output increases for a certain period of time, the consumption of raw materials, fuels and power will 
increase correspondingly in proportion and the costs incurred will increase proportionally. Among the 
transportation service chain, the cost of transportation tools and the cost of testing tools are all fixed costs, 
while personnel costs, fuel costs and management costs are typical variable costs. In the process of cost 
control, fixed costs are hard to reduce in a short time, while variable costs are not. Therefore, when we talk 
about cost control and optimization, we mainly refer to the control and optimization of variable costs. 

 

Figure 3: The Relationship between Cost and Transportation Volume 

4. Hazardous chemicals transport service chain cost control methods 
Many scholars have used models to explore the cost control of hazardous chemicals companies. However, all 
these models aimed at minimizing the cost and neglected the particularity of hazardous chemicals companies, 
that is, the special requirements of risk control. In this context, this paper explores the cost control of the 
transport service chain of hazardous chemicals based on the relationship between risk and cost. 

4.1 The relationship between transportation costs and risks of hazardous chemicals 

Among different costs of the transport service chain of hazardous chemicals, the storage cost and 
transportation cost dominate (Li, 2013; Torretta et al., 2017) and typically account for around 80% of all costs. 
For hazardous chemicals companies, the risk is not only about the risk control cost, it’s also about the storage 
cost and transportation cost. Typical examples include the cost of repairing transportation vehicles, training 
cost for related personnel, cost of technical inspection, and so on. Generally speaking, the relationship 
between the above-mentioned cost inputs and enterprise risks can be summarized as follows: the higher the 
cost input is, the less the risk is likely to occur, the lower the cost input is, the greater the risk is likely to occur, 
and the marginal utility of cost input increases first and then decreases (Onishi, 1985; Jin & Karwan, 1996). 
The above relationship can also be understood as the level of risk control of enterprises rises with the 
increase of the cost. Therefore, the relationship between the cost input and risk of the hazardous chemicals 
transportation service chain is shown in the following figure. 

 

Figure 4: The Relationship between Cost Input and Risk Control Level 

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4.2 Cost structure optimization within acceptable risk range 

Above analysis shows that the risk decreases with the increase of the input, meanwhile, the corporate profits 
will reduce accordingly; lower cost input may result increase in profit, but the possibility of risk also rises. 
Therefore, how to find the balance between cost, risk and enterprise profit is an urgent problem to be solved 
by the hazardous chemicals enterprises. In this section we will answer this question by modeling. 
This paper establishes the formulas for each cost in the process of transport service chain of a hazardous 
chemical company. 
(1) Storage Cost (CS) can be expressed in the following formula: 

1 1 2 2

n n n n n

S Z iZ J iJ J iJ H iH iF
i m i m i m i m i m

C P q P q P q P q C
= = = = =

= + + + +      (1) 

Where, CS is the total cost of storage operations in the i-th month; PZ is the handling cost (yuan / ton); qiZ is 
the handling volume (tons); PJ1 and PJ2 are two kinds of construction costs for warehousing and storage area 
respectively (Yuan / square meter), qiJ1 and qiJ2 are storage volume (square meters); PH is port charges (yuan 
/ ton), qiH is handling service volume (tons); CiF is fixed cost (yuan). 
(2) Transport Costs (CT) can be expressed in the following formula: 

T e w o l fC C C C C C= + + + +
n n n n n

ie i iw i io i il i if
i m i m i m i m i m

x C x C x C x C C
= = = = =

= + + + +      (2) 

Where, Ce, Cw, Co, Cl, Cf  respectively represent the spare parts, manpower, fuel, lubricant costs and fixed 
inputs in the transportation service, all units are Yuan. Ci represents the total cost of transportation service 
chain in the i-th month, and xi is the ratio of each costs to total costs. 
(3) Risk Control Costs (CR) can be expressed in the following formula: 

n n

R ir i im i
i m i m

C x C x C
= =

= +   (3) 

Where, xir represents the proportion of risk control cost in the i-th month to the total cost, and xim is the 
proportion of the risk cost of transportation equipment to the total cost. 
(4) According to above formulas, the total cost of transport service chain can be expressed as: 

S T RC C C C= + +  (4) 

In order to make the cost formula to achieve the minimum, we set the following constraints: 

1 S T Rie iw io il
C C C

x x x x
C

+ +
+ + + = −  (5) 

( 1)
n

ie i e
i m

x C n m NM
=

≥ − +  (6) 

( 1)
n

il i l
i m

x C n m M
=

> − +  (7) 

Where, N is the number of the means of transportation, M is the average monthly cost of spare parts per unit 
of the means of transportation. 
In the process of solving the model, first we need to assume a sustainable risk value, and then adjust the 
proportion of other costs in the total cost. In the solution process, the above model actually controls the risk 
related costs (such as risk control cost, equipment maintenance and testing cost, etc.), by reducing other 
costs (including staff cost, fuel cost, lubricant cost, storage cost, etc.) to achieve the purpose of reducing costs 
without raising the risk. 

4.3 Hazardous chemicals transport service chain cost control methods 

According to the meaning of the model above, hazardous chemicals companies should mainly control variable 
costs, such as personnel cost, fuel cost and lubricant cost, and should not reduce various expenditures 
directly related to risks, such as equipment maintenance, testing expenditures, etc. Management believes 
there are some ways to reduce costs that apply to all businesses, especially for labour costs. For labour cost, 

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one method is to eliminate the redundant members. In addition, companies need to train their stuffs, which is 
not a small expenditure. Companies should focus on improving the quality of training, shortening the training 
cycle, reducing staff mobility, and improving the training effectiveness while reducing training cost. 
In this article, we believe that hazardous chemicals are very special in some ways. In this context, the article 
will describe some specific cost control measures in detail. 
(1) Storage Operations Cost Management 
Firstly, hazardous chemicals companies should control labour costs. They should hire the people they need, 
not as many people as they can. Secondly, hazardous chemicals companies should make storage plans and 
do their best to avoid warehouse idleness. Operators should understand that the demand for different types of 
chemicals is seasonal, so they should adjust inventory according to demand. Last but not least, a large part of 
the expenditure of storage cost comes from the expenses of renting or purchasing land. Hazardous chemicals 
companies should ask for more preferential policies. 
(2) Transportation Cost Management 
As mentioned before, oil costs account for a large proportion of transportation costs. Hazardous chemicals 
companies should do as much as they can to lower this part of the cost. For oil cost and lubricant cost, 
companies should set fuel consumption quota standards and implement rewards and punishments. Attention 
should also be paid to the changes in oil prices, when the oil prices are relatively cheap, storage of oil should 
be noticed. In addition, enterprises should reasonably plan their transport routes, reduce detour and no-load 
situation. Addition to the oil costs, companies should also control labour costs. Only the ones that are needed 
should be hired. Companies should implement the incentive system to encourage employees to improve their 
work efficiency. Companies should pay attention that do not blindly cut the costs for maintenance and 
inspection. On the one hand, these costs do not bring much pressure on companies, on the other hand, these 
costs directly related to the risk. 
(3) Risk Control Cost Management 
As mentioned before, the risk level will increases with the decrease in input. But it does not mean companies 
should control the costs related to risk management. Firstly, companies should know the key point of risk 
control very well and do not spend too much on unimportant things. Secondly, companies should purchase 
risk control equipment at reasonable price, using unified purchase. Thirdly, companies should check the 
equipment regularly and repair it in time. Regularly arrange the staff to check the equipment operation, timely 
maintenance, avoid the waste of maintenance. Last but not least, companies should allocation of 
transportation equipment management personnel, lower management costs. 

5. Conclusion 
The cost control of hazardous chemicals companies is very important in practice. Many experts and scholars 
have conducted in-depth studies on this issue. However, these studies often fail to emphasize the relationship 
between risk and cost inputs, neglecting that cost reduction may lead to increased risks. In this context, based 
on the perspective of transport chain of hazardous chemicals, the paper discusses the methods of enterprise 
cost control considering the risk factors. The conclusions are as follows: 
(1) Hazardous chemicals company's cost input and the risks show an inverse relationship, the more the cost 
input, the lower the risks; the less the cost input, the higher the risks. This fact tells us companies should not 
blindly reduce the costs associated with risk control. 
(2) Hazardous chemicals companies should focus on three aspects, including storage operations cost 
management, transportation cost management and risk control cost management. 
(3) For storage operations cost management, hazardous chemicals companies should control labour costs, 
make storage plans and ask for more preferential policies. For transportation cost management, hazardous 
chemicals companies should do as much as they can to lower this part of the cost, such as set fuel 
consumption quota standards, plan their transport routes and so on. For risk control cost management, 
hazardous chemicals companies should know the key point of risk control, purchase risk control equipment at 
reasonable price and check the equipment regularly and repair it in time. 

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