Logistics Model for Indonesia’s National Freight Model System: From a Deterministic to a Stochastic Framework

Abstract

One of the components of a new model, called INTRAMOD, for Indonesia’s domestic freight transport is the logistics model. The logistics model describes shipment size choice and the choice between five different transport chain alternatives involving four main modes: truck, train, vessel, and plane. This paper presents the work to forecast the disaggregate transport chain and shipment size choices for Indonesia’s domestic shipments by applying a deterministic and a stochastic approach. Using a standard economic order quantity model with a consolidation assumption, a deterministic approach is used to determine the transport chain and shipment size, minimizing total logistics cost. As an alternative for this, a stochastic model aims to improve the logistics choice modeling by employing data on the manufacturer’s revealed preferences and stated preferences about only the transport chain choice. The chosen specification for the stochastic approach is utilizing the multinomial logit model. Using the demand elasticities for all alternatives with respect to changes in its transport cost, a comparison will be made between the two approaches. In addition, it is concluded that the deterministic model is susceptible to sticky and flip-flop behaviors. In contrast, this characteristic is absent from the stochastic approach.