Modeling shipper costs in physical distribution analysis

A common objective of analytical modeling of a shipper’s physical distribution system is the minimization of costs. As a result, many cost expressions relating to distribution activities have appeared in the literature. This paper discusses the modeling of shipper costs through an examination of these expressions and their relevance to actual costs. Some conceptual background to the modeling of logistics costs is presented, and general cost classifications relevant to a shipper’s distribution system are outlined. The components of each classification are discussed and summarized by reviewing cost expressions in the literature. A decision table is presented to assist modelers in developing such expressions. Specific and general conclusions are given, and issues regarding these conclusions are discussed.