Incorporating logistic costs into a single vendor–buyer JELS model

Abstract

Inventory replenishment decisions in supply chains usually benefit from economies of scale to minimize logistics costs; however, this approach may create a conflict between truckload utilization and economic ordering decisions. This paper proposes two Joint Economic Lot Size models that incorporate logistic costs (a function of shipping weight and distance) with two transportation modes: truckload (TL) and less-than-truckload (LTL) shipments. Additionally, a heuristic model is proposed to provide the solution when the mode of transportation is limited to TL and LTL shipments. The procedures for solving each model are developed based on two challenges in transportation: incapacitated shipments and capacitated shipments. Moreover, numerical examples are given to illustrate the proposed models based on four aspects: total costs, order quantity, the number of deliveries, and production batch quantity. The three proposed models are subsequently compared to reveal results for managers to consider for improving the performance of their supply chain.