SUNConferences, Computers and Industrial Engineering 42

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Economic Lot Shipment Under Value Pricing Of Rate
Olufemi Adewumi Babatunde Adetunji, Sarma Venkatta Yadavalli

Last modified: 2012-06-27


We present a model of economic shipment quantity of items when the ordering cost is charged as a percentage of the value of the truck load of item being shipped. This scenario is getting more prevalent today, where an organisation, like a retailer, outsources transport services to companies highly skilled in such. We state what the economic shipment policy should be, given the possibility of constraint in shipment quantity by the capacity of shipment truck. We present a modification of the model under joint replenishment of items supplied by the same supplier using the common cycle time approach. We use an example of a retailer ordering a number of stock keeping units of sugar from a single supplier to illustrate how the model works. We show how a case of possible rate discount from the transporter should be handled. We then present a general rule for minimising the system cost rate given multiple truck sizes with joint replenishment of items.

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