Dependence between Shipment Size and Mode in Freight Transportation

Abstract

This note examines the dependence between freight mode and shipment size when they are chosen simultaneously to minimize transportation and inventory cost. Transportation modes which consolidate freight over many origins and destinations are shown to be least expensive for small supplier production rates (i.e., flows between the supplier and customer); transportation modes which do not consolidate are least expensive for large production rates. Optimal shipment size is a discontinuous function of production rate. Thus, certain shipment sizes are never optimal.