One-to-Many Distribution with Transshipments: An Analytic Model

Abstract

This paper presents and optimizes two cases of an approximate analytic model of distribution from a single origin to many destinations via transshipment terminals. Linehaul vehicles carry items from the origin to terminals and local vehicles make deliveries on peddling routes from the terminals. It has been shown that transshipments are not desirable when local vehicles can be as large as linehaul vehicles. This paper limits the size of local vehicles and explores conditions under which transshipments are desirable. This paper focuses on situations in which local vehicles operate on multi-stop tours. The tradeoffs between the transportation, inventory and terminal cost components determine optimal values for the number of terminals, the number of stops per vehicle route and the distribution cost. The optimal type of distribution system is shown to depend on the ratio of the linehaul to local vehicle load size. Examples are presented that show how distribution via terminals can reduce the total cost.