Although splitting shipments across multiple delivery or transportation modes typically increases total shipping costs as a result of diseconomies of scale, it may offer certain benefits that can more than offset these costs. These benefits include a reduction in the probability of stock-out and in the average inventory costs, as well as a concurrent reduction in transportation congestion. We consider a single-stage inventory replenishment model that includes two transportation modes: a cheaper, less reliable mode that is congested, and another, more expensive but perfectly reliable mode. The high-reliability mode is only utilized in replenishment intervals in which the lead time of the less-reliable mode exceeds a certain value. This permits substituting the high-reliability mode for safety stock, to some degree. We characterize optimal replenishment decisions with these two modes, as well as the potential benefits of simultaneously using two delivery modes.


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    Title :

    Impacts of Freight Mode Splitting on Congestion, Risk, and Delivery Reliability


    Contributors:
    J. Guenes (author) / C. Perez (author)

    Publication date :

    2012


    Size :

    37 pages


    Type of media :

    Report


    Type of material :

    No indication


    Language :

    English




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