Simulation of Shipping Size Effects for Transportation and Order Quantity in a Supply Chain

Abstract

This paper investigated the interaction effects between inventory and transportation strategies in the logistics network. Demand volumes and shipping sizes were simulated as part of a new conceptual model using a discrete event simulation by minimizing the total logistics cost in the supply chain. The experiments indicate that the full truckload scenario leads to cost efficiency and the larger demand size results in smaller cost per unit based on economies of scale. Considering the interaction effects, demand size has a greater impact on cost reduction than shipping size. The total logistics cost in the system is dependent on replenishment rate and flow rates from the higher to the lower echelon. High inventory cost is the result of a fast replenishment rate and frequent orders, while shipping cost is dependent on the flow rates in a process and total travelling time or total travelling distance. Shipping size also has an impact on the level of service and the total cost along with effective order variability.