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The importance of time in transit and reliability of transit time for shippers, receivers, and carriers

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  • Allen, W. Bruce
  • Mahmoud, Mohamed M.
  • McNeil, Douglas

Abstract

Reliability of transit time is reputed to be the most important variable influencing freight transport today, according to shipper surveys. Average transit time also plays a major role. A model is developed that shows how a cost-minimizing shipper will adjust its economic order quantity as reliability and/or time in transit changes. Such changes impact on average inventory costs, ordering costs, expected shortage costs and expected excess costs. The model is developed for both discrete and continuous transit time distributions. Reliability is defined as the variance of transit time. A matrix is prepared for some sample data, which shows the minimum cost attainable with each mean/variance of transit time distribution. Comparing across rows and columns of the matrix enables one to show the value (reduction in total cost) obtainable by improving reliability and/or mean transit time. In addition, value can be obtained by improving reliability while increasing average transit time. It is suggested that the model can be used for shippers in negotiating service improvements with carriers and by carriers in negotiating service improvements with shippers. In the former case, the carrier can determine how much they are willing to pay for the improvement, whereas in the latter case, the carriers can determine how much they are able to charge for the improvement.

Suggested Citation

  • Allen, W. Bruce & Mahmoud, Mohamed M. & McNeil, Douglas, 1985. "The importance of time in transit and reliability of transit time for shippers, receivers, and carriers," Transportation Research Part B: Methodological, Elsevier, vol. 19(5), pages 447-456, October.
    • Handle: RePEc:eee:transb:v:19:y:1985:i:5:p:447-456
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    Citations

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    Cited by:

    1. Wilson, William W. & Priewe, Steven R. & Dahl, Bruce L., 1998. "Forward Shipping Options For Grain By Rail: A Strategic Risk Analysis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(2), pages 1-19, December.
    2. McCann, Philip, 2001. "A proof of the relationship between optimal vehicle size, haulage length and the structure of distance-transport costs," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(8), pages 671-693, September.
    3. William W. Wilson & Bruce L. Dahl, 2000. "Logistical Strategies and Risks in Canadian Grain Marketing," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 48(2), pages 141-160, July.
    4. Heymann, Paul C., 1987. "TL-PIGGY, The Intermodal Decision Assistant," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 28(1).
    5. Carey, Malachy, 1999. "Ex ante heuristic measures of schedule reliability," Transportation Research Part B: Methodological, Elsevier, vol. 33(7), pages 473-494, September.
    6. Wout Dullaert & Bert Vernimmen & El‐houssaine Aghezzaf & Birger Raa, 2006. "Revisiting Service‐level Measurement for an Inventory System with Different Transport Modes," Transport Reviews, Taylor & Francis Journals, vol. 27(3), pages 273-283, July.
    7. Tempelmeier, Horst & Bantel, Oliver, 2015. "Integrated optimization of safety stock and transportation capacity," European Journal of Operational Research, Elsevier, vol. 247(1), pages 101-112.
    8. Zhi-Chun Li & William Lam & S. Wong, 2009. "The Optimal Transit Fare Structure under Different Market Regimes with Uncertainty in the Network," Networks and Spatial Economics, Springer, vol. 9(2), pages 191-216, June.
    9. Rietveld, P. & Bruinsma, F. R. & van Vuuren, D. J., 2001. "Coping with unreliability in public transport chains: A case study for Netherlands," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(6), pages 539-559, July.
    10. Rietveld, P. & Bruinsma, F.R. & Vuuren, D.J. van, 1999. "Coping with unreliability in public transport chains," Serie Research Memoranda 0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    11. Tyworth, John E. & Zeng, Amy Zhaohui, 1998. "Estimating the effects of carrier transit-time performance on logistics cost and service," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(2), pages 89-97, February.
    12. Hallowell, Susan F. & Harker, Patrick T., 1998. "Predicting on-time performance in scheduled railroad operations: methodology and application to train scheduling," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(4), pages 279-295, May.

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