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Physical distribution from a warehouse: Vehicle coverage and inventory levels

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  • Daganzo, Carlos F.
  • Newell, Gordon F.

Abstract

This paper studies the costs involved in distributing items from a warehouse or depot to randomly scattered customers on a day-to-day basis. Two trade-offs are explored simultaneously. The first one arises because by accumulating large inventories at the depot it is possible to build more efficient distribution tours. This trade-off has already been explored for both distribution of goods (Burns et al., 1983) and passengers (Daganzo et al., 1977; Hendrickson, 1978). Another tradeoff, which involves the length of individual vehicle tours (Clarens and Hurdle, 1975), balances the inventory inside the vehicles against the transportation cost. Banks et al. (1982) have considered both of these tradeoffs simultaneously in the context of passenger transportation, but used a somewhat unrealistic model for vehicle routing. This paper is similar to the latter reference but uses a different routing strategy. It also illustrates how the nature of the objects carried (cheap goods, expensive goods, people, etc.) affects the optimal configuration of the distribution system and the overall distribution costs. Usually there is an optimum partitioning of the service area into districts and an optimum dispatching frequency in each district. The results can vary tremendously, depending on factors such as: the inventory carrying cost per item per unit time, the transportation costs, the demand per unit area and unit time, the average distance from the depot, the average vehicle speed and the time per stop. As an illustration of the ideas, a hypothetical limousine service from an airport is analyzed. The example is used to demonstrate how dramatically the optimal system configuration depends on the nature of the items carried.

Suggested Citation

  • Daganzo, Carlos F. & Newell, Gordon F., 1985. "Physical distribution from a warehouse: Vehicle coverage and inventory levels," Transportation Research Part B: Methodological, Elsevier, vol. 19(5), pages 397-407, October.
  • Handle: RePEc:eee:transb:v:19:y:1985:i:5:p:397-407
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    Cited by:

    1. Luca Bertazzi & Maria Grazia Speranza & Walter Ukovich, 2000. "Exact and Heuristic Solutions for a Shipment Problem with Given Frequencies," Management Science, INFORMS, vol. 46(7), pages 973-988, July.
    2. le Blanc, H.M. & Cruijssen, F. & Fleuren, H.A. & de Koster, M.B.M., 2006. "Factory gate pricing: An analysis of the Dutch retail distribution," European Journal of Operational Research, Elsevier, vol. 174(3), pages 1950-1967, November.
    3. Z.N. Chen & C.K.M. Lee & W.H. Ip & G.T.S. Ho, 2012. "Design and evaluation of an integrated inventory and transportation system," Transportation Planning and Technology, Taylor & Francis Journals, vol. 35(4), pages 491-507, January.
    4. Bertazzi, Luca & Speranza, Maria Grazia & Ukovich, Walter, 1997. "Minimization of logistic costs with given frequencies," Transportation Research Part B: Methodological, Elsevier, vol. 31(4), pages 327-340, August.
    5. Janic, Milan, 2008. "An assessment of the performance of the European long intermodal freight trains (LIFTS)," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(10), pages 1326-1339, December.
    6. Ma, Hong & Miao, Zhaowei & Lim, Andrew & Rodrigues, Brian, 2011. "Crossdocking distribution networks with setup cost and time window constraint," Omega, Elsevier, vol. 39(1), pages 64-72, January.
    7. Anna Franceschetti & Ola Jabali & Gilbert Laporte, 2017. "Continuous approximation models in freight distribution management," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 25(3), pages 413-433, October.
    8. Cruijssen, F., 2006. "Horizontal cooperation in transport and logistics," Other publications TiSEM ab6dbe68-aebc-4b03-8eea-d, Tilburg University, School of Economics and Management.
    9. Baita, Flavio & Ukovich, Walter & Pesenti, Raffaele & Favaretto, Daniela, 1998. "Dynamic routing-and-inventory problems: a review," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(8), pages 585-598, November.
    10. Alım, Muzaffer & Beullens, Patrick, 2020. "Joint inventory and distribution strategy for online sales with a flexible delivery option," International Journal of Production Economics, Elsevier, vol. 222(C).
    11. Turkensteen, Marcel & Klose, Andreas, 2012. "Demand dispersion and logistics costs in one-to-many distribution systems," European Journal of Operational Research, Elsevier, vol. 223(2), pages 499-507.
    12. Langevin, André & Mbaraga, Pontien & Campbell, James F., 1996. "Continuous approximation models in freight distribution: An overview," Transportation Research Part B: Methodological, Elsevier, vol. 30(3), pages 163-188, June.

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