TOTAL DISTRIBUTION COST SIMULATION MODEL

Abstract

The choice of mode of transport used by a shipper to move his goods does not depend solely upon relative transportation costs. It should be viewed as one part of the complex process of deciding the method of distributing a product which, apart from transport, involves materials handling and packaging, inventory control and warehousing and order processing procedures. The transport operator providing a premium system of transport such as air freight may well be able to justify its use if appropriate economies can be obtained from other distribution activities. For example, a shipper would be prepared to incur higher transport costs if he were able to reduce the size of the inventory he had to hold to meet demand. Demonstrating in numerical terms the potential benefits from any changes in the distribution system is a difficult task because of the complexity of inter‐relationships involved. A computer‐based analysis is essential. However, because the results of such analysis must be easily understood it is also necessary that the system employed is simple to use, sparing in its input requirements, with a readily assimilated output: in short, it has to be efficient in the marketing sense, as well as an accurate model of the distribution system.

Citation

Garnett, H.C. and Smith, P.S. (1973), "TOTAL DISTRIBUTION COST SIMULATION MODEL", International Journal of Physical Distribution, Vol. 3 No. 5, pp. 355-364. https://doi.org/10.1108/eb014291