A New Paradigm for Freight Demand Modeling: The Physical Distribution Channel Choice Approach

The objective of this study is to open up a new paradigm for freight demand analysis. This study proposes to use physical distribution channel choice models which can replace so called freight mode and route models. The basic notion of this approach is that shippers choose the distribution channels which minimize the overall logistics costs including inventory cost, transportation cost, etc., which are not incorporated well in the traditional four-step based approach. As a case study, this research developed physical distribution channel choice models reflecting decision making of the firms and analyzed how choice decision factors influence the selection of distribution channels. The distribution channel survey data in Korea was used to do an empirical study. In creating a choice set, Korean distribution channels were classified into two main choice channels which are direct and indirect channels. It was found that the logit model was suitable for the modeling distribution channel choice and the proposed new paradigm for freight demand analysis could be a viable alternate approach for the traditional four-step method.