Freight rate structure and optimal shipment size in freight transportation

Shippers of freight face many choices and trade-offs. Two choices of particular interest are those of mode choice and shipment size. These two choices are interdependent, and they also depend on other commodity and modal attributes. Unlike previous studies on the subject, this paper considers the dependence between unit freight charge and shipment size in deriving a shipper’s economic order quantity (EOQ). It also examines the nature of this dependence, and studies the effect of market and commodity attributes an optimal shipment size. A numerical example is provided in which optimal shipment size is calculated for full truckload (TL) and less-than-truckload (LTL), and the results are compared with those of previous studies.