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The impact of lead time reliability in freight transport: A logistics assessment of transport economics findings

  • Dullaert, Wout
  • Zamparini, Luca
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    This paper considers speed and reliability, measured by the average and variance of the lead time, to examine the relevance of the latter variable on inventory costs. By using a flexible simulation framework, it is shown that reducing variability does not necessarily reduce costs and might in fact increase the costs of safety stock, depending on the shape of the demand distribution during lead time and the targeted service level. This offers a novel explanation for the wide variety of value of reliability figures obtained in empirical transport economics research.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1366554512000804
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    Article provided by Elsevier in its journal Transportation Research Part E: Logistics and Transportation Review.

    Volume (Year): 49 (2013)
    Issue (Month): 1 ()
    Pages: 190-200

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    Handle: RePEc:eee:transe:v:49:y:2013:i:1:p:190-200
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    1. Vernimmen, Bert & Dullaert, Wout & Willemé, Peter & Witlox, Frank, 2008. "Using the inventory-theoretic framework to determine cost-minimizing supply strategies in a stochastic setting," International Journal of Production Economics, Elsevier, vol. 115(1), pages 248-259, September.
    2. Cullinane, Kevin & Toy, Neal, 2000. "Identifying influential attributes in freight route/mode choice decisions: a content analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 36(1), pages 41-53, March.
    3. M. Beuthe & Ch. Bouffioux, 2008. "Analysing Qualitative Attributes of Freight Transport from Stated Orders of Preference Experiment," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 42(1), pages 105-128, January.
    4. Simona Bolis & Rico Maggi, 2003. "Logistics Strategy and Transport Service Choices: An Adaptive Stated Preference Experiment," Growth and Change, Wiley Blackwell, vol. 34(4), pages 490-504.
    5. Frank Witlox & Els Vandaele, 2005. "Determining the Monetary Value of Quality Attributes in Freight Transportation Using a Stated Preference Approach," Transportation Planning and Technology, Taylor & Francis Journals, vol. 28(2), pages 77-92, April.
    6. W. J. Baumol & H. D. Vinod, 1970. "An Inventory Theoretic Model of Freight Transport Demand," Management Science, INFORMS, vol. 16(7), pages 413-421, March.
    7. Bert Vernimmen & Frank Witlox, 2003. "The inventory-theoretic approach to modal choice in freight transport: literature review and case study," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 46(2), pages 5-30.
    8. Patterson, Zachary & Ewing, Gordon O. & Haider, Murtaza, 2010. "How different is carrier choice for third party logistics companies?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(5), pages 764-774, September.
    9. Winston, Clifford, 1981. "A Disaggregate Model of the Demand for Intercity Freight Transportation," Econometrica, Econometric Society, vol. 49(4), pages 981-1006, June.
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