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

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  • Dullaert, Wout
  • Zamparini, Luca

Abstract

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.

Suggested Citation

  • Dullaert, Wout & Zamparini, Luca, 2013. "The impact of lead time reliability in freight transport: A logistics assessment of transport economics findings," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 190-200.
  • Handle: RePEc:eee:transe:v:49:y:2013:i:1:p:190-200
    DOI: 10.1016/j.tre.2012.08.005
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    References listed on IDEAS

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    1. 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.
    2. Winston, Clifford, 1981. "A Disaggregate Model of the Demand for Intercity Freight Transportation," Econometrica, Econometric Society, vol. 49(4), pages 981-1006, June.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. Jérôme Massiani, 2008. "Can we use hedonic pricing to estimate freight value of time?," EERI Research Paper Series EERI_RP_2008_08, Economics and Econometrics Research Institute (EERI), Brussels.
    8. 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.
    9. 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.
    10. M. Beuthe & Ch. Bouffioux, 2008. "Analysing Qualitative Attributes of Freight Transport from Stated Orders of Preference Experiment," Journal of Transport Economics and Policy, University of Bath, vol. 42(1), pages 105-128, January.
    11. N. Lesca, 2010. "Introduction," Post-Print halshs-00640602, HAL.
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    Citations

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    Cited by:

    1. Holden, R. & Xu, B. & Greening, P. & Piecyk, M. & Dadhich, P., 2016. "Towards a common measure of greenhouse gas related logistics activity using data envelopment analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 91(C), pages 105-119.
    2. Gürler, Ülkü & Alp, Osman & Büyükkaramikli, Nasuh Çağdaş, 2014. "Coordinated inventory replenishment and outsourced transportation operations," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 400-415.
    3. repec:eee:transe:v:109:y:2018:i:c:p:139-150 is not listed on IDEAS
    4. repec:eee:retrec:v:61:y:2017:i:c:p:15-24 is not listed on IDEAS
    5. repec:eee:transa:v:102:y:2017:i:c:p:228-243 is not listed on IDEAS
    6. Tyworth, John E. & Saldanha, John, 2014. "The lead-time reliability paradox and inconsistent value-of-reliability estimates," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 76-85.
    7. Juan Manuel Izar Landeta & Carmen Berenice Ynzunza Cortés & Orlando Guarneros García, 2016. "Lead time demand variability, safety stock and the inventory cost," Contaduría y Administración, Accounting and Management, vol. 61(3), pages 499-513, Julio-Sep.
    8. Jian, Ming & Fang, Xin & Jin, Liu-qian & Rajapov, Azamat, 2015. "The impact of lead time compression on demand forecasting risk and production cost: A newsvendor model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 84(C), pages 61-72.

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