An economic inventory/transport model with freight rate discounts

Just-in-time logistics, freight transportation deregulation, and increasing interest in FOB origin buying are making it imperative for destination firms to integrate inbound logistics decisions. Inventory control and transportation are primary logistics functions receiving renewed emphasis. Selection of a transportation mode and carrier has a profound impact on inventory levels, both in-transit and at the destination. This paper develops and demonstrates two optimal inventory/transport decision support algorithms for freight discounts based on the inventory-theoretic model formulation. Freight rates are structured with weight-based discounts for both the all-weight and incremental freight rate discount situations.