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...

Full description

Saved in:
Bibliographic Details
Published inTransportation research. Part E, Logistics and transportation review Vol. 66; pp. 66 - 82
Main Authors Nguyen, H.N., Rainwater, C.E., Mason, S.J., Pohl, E.A.
Format Journal Article
LanguageEnglish
Published Exeter Elsevier India Pvt Ltd 01.06.2014
Elsevier Sequoia S.A
Subjects
Consolidation
Freight consolidation
Freight forwarding
Mathematical models
Purchasing
Quantity discount
Route choice
Route generation
Route optimization
Studies
Vehicle routing
Route generation
Quantity discount
Vehicle routing
Freight consolidation
Online AccessGet full text

Cover

More Information
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
DOI:10.1016/j.tre.2014.03.004