THE ECONOMIC TRANSPORTATION QUANTITY

This paper develops a model which simultaneously determines the optimal transportation alternative and lot size or shipping quantity. The model represents an extension of current formulations in the literature in three ways. First, in the spirit of integrated logistics management, the impact of the economic transportation quantity (ETQ) on point of origin inventory level is considered. All previous models consider inventory only in transist and at the destination point. Second, the model recognizes that transportation alternatives may differ in terms of per shipment loading costs, not included in point-to-point freight rates. For instance, many goods have mode-dependent packaging requirements or self-insurance implications. Third, the model is applied to demonstrate the impact of logistics system constraints (e.g., destination point production schedules or usage rates) on shipping quantity and costs.