Quantity discount with freight consolidation

•We model a purchase incentive program at a manufacturer.•Multi-stop routes and bigger orders reduce truckload transportation cost.•Route elimination rules exclude non-optimal and infeasible routes. We study an integrated quantity discount and vehicle routing problem where truck utilization is incre...

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Bibliographic Details
Published in:	Transportation research. Part E, Logistics and transportation review Logistics and transportation review, 2014-06, Vol.66, p.66-82
Main Authors:	Nguyen, H.N., Rainwater, C.E., Mason, S.J., Pohl, E.A.
Format:	Article
Language:	eng
Subjects:	Consolidation Freight consolidation Freight forwarding Mathematical models Purchasing Quantity discount Route choice Route generation Route optimization Studies Vehicle routing
Online Access:	Get full text
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Summary:	•We model a purchase incentive program at a manufacturer.•Multi-stop routes and bigger orders reduce truckload transportation cost.•Route elimination rules exclude non-optimal and infeasible routes. We study an integrated quantity discount and vehicle routing problem where truck utilization is increased by building multi-stop routes and increasing order sizes through a purchase incentive. We model the problem and prove it to be NP-hard. Our experiments show that commercial solvers do not effectively solve instances with more than ten buyers. We propose the use of non-compromising route elimination rules and other improvement techniques for a route-based formulation. Our experimentation suggests that a cost savings of 18% can be realized by utilizing our model.
ISSN:	1366-5545 1878-5794