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Modeling actual transportation costs in supplier selection and order quantity allocation decisions

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Abstract

Given the impact of transportation costs in both supplier selection and inventory management decisions in today’s enterprises, this article addresses both problems simultaneously by developing a mixed integer nonlinear programming model to properly allocate order quantities to the selected set of suppliers while taking into account the purchasing, inventory, and transportation costs under suppliers’ capacity and quality constraints. In particular, we focus on the usage of trucks as a means of transporting goods and the option of the full-truck-load versus less-than-truckload (LTL) is studied. Since actual LTL transportation costs are neither differentiable nor convex, they are modeled with a piecewise linear function using binary variables. It is shown that, considering actual transportation costs in inventory planning, not only affects the order quantities shipped from selected suppliers but also the actual selection of suppliers.

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Acknowledgments

This research has been funded by grants from the PSU/Technion Marcus Funds and the Mexican National Council of Science and Technology (CONACyT), and the Ridg-U-Rak Honors Scholarship from the Material Handling Education Foundation. The authors are grateful to the two anonymous referees for their useful and constructive comments and suggestions.

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Authors and Affiliations

  1. Department of Industrial Engineering, Universidad Panamericana, Guadalajara, Jalisco, 45010, Mexico

    Abraham Mendoza

  2. Harold and Inge Marcus Department of Industrial and Manufacturing Engineering, The Pennsylvania State University, University Park, PA, 16802, USA

    José A. Ventura

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  1. Abraham Mendoza
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  2. José A. Ventura
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Correspondence to José A. Ventura.

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Mendoza, A., Ventura, J.A. Modeling actual transportation costs in supplier selection and order quantity allocation decisions. Oper Res Int J 13, 5–25 (2013). https://doi.org/10.1007/s12351-011-0109-3

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  • DOI: https://doi.org/10.1007/s12351-011-0109-3

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