Transportation with Common Carrier and Private Fleets: System Assignment and Shipment Frequency Optimization

In this chapter, a shipment can either be served by a private carrier or a common carrier. The cost of using the private carrier declines as the space between stops decreases. Therefore, if more stops are assigned to private carriage, the cost of adding another stop will decline. The methodology presented in this chapter for assigning stops to private and common carriage accounts for this cost interaction through use of a square-root route length approximation. Techniques are presented for systems with (1) fixed shipping cycle for all stops with a variable fleet size, (2) fixed shipping cycle for all stops with a fixed fleet size, and (3) variable shipping cycles with a variable fleet size. In the last case, the optimal time between shipments accounts for both transportation and inventory costs.