| Abstract: | The management of inventories and determination of transportation policy are normally carried out by different groups of people in an organization. These activities interact, however, when the transportation is used to replace inventory and when the transportation alternatives have different speed, reliability, and cost characteristics. This paper presents exact and heuristic procedures for jointly determining the inventory reorder points, order quantities, and transportation alternatives that provide minimum total transportation and inventory costs. The effectiveness of each procedure is demonstrated for a broad range of problems. The heuristic procedure was also applied to actual company data to determine the potential for cost savings. The results showed that savings were possible both from improving the current procedures and from applying the procedure developed in this study. |
