Internalization of Transportation External Costs: Impact Analysis of Logistics Company Mode and Route Choices

Abstract This study focuses on the mode and route choices of a logistics company in a situation involving intercity transportation with networks of surface roads, highways and a railway. A method of transportation network analysis is applied to construct a logistics company mode and route choice models with the objective of minimizing total distribution and external costs. This study also assumes that the fleet number and vehicle capacities are given. Freight distributed from a distribution center to given retailers or consumers via surface road/highway links or via intermodal transportation involving surface road/highway links and a railway. In terms of model construction, this study first explores the routing and sequence of the retailers and consumers served by each vehicle. Second, the study internalizes the external cost of air pollution into the total distribution cost, to analyze the influences of external cost burdens on a logistics company mode and route choices from a user charge perspective. Finally, the study designs a heuristic algorithm for solving the above models, and illuminates the modeling process using a numerical example.

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