Floating stocks in FMCG supply chains: using intermodal transport to facilitate advance deployment

Abstract

PurposeThe purpose of this paper is to consider the use of temporary storage offered by intermodal transshipment points to position some stock of fast moving consumer goods in advance of demand; this floating stock concept combines transport and inventory management. Intermodal transport is compared with direct road transport for a supply chain.Design/methodology/approachFirst an analytical comparison is made which shows that the floating stock concept has advantages in inventories over pure road and intermodal transport. Next, a simulation study of a real case is made which quantifies the cost‐differences in detail.FindingsIt is found that both storage costs can be lowered and shorter response times be gotten by sending shipments in advance to intermodal terminals. The advance positioning can offset the disadvantage of a longer transit time in intermodal transport.Research limitations/implicationsDemand needs to be somewhat predictable. The pooling effects depend on geographical layout of the customers. The availability of intermodal transport options is based on the situation in Western Europe.Practical implicationsThe floating stock concept considers both the transport and inventory issues. By positioning some of the stock at transshipment points close to the customer in anticipation of demand, the concept can yield lower inventory costs as well as a lower customer lead time. The benefit for logistics service providers is a more regular supply chain. Using intermodal transport provides an opportunity to green the supply chain as the environmental impact per ton/kilometer is lower than road transport.Originality/valueThis paper draws on the areas of logistics and inventory management to consider the choice of transport mode; most studies look at these issues in isolation. Considering the holding and storage costs in addition to the distribution strategy enables a more thorough comparison of the transport modes.