Details on the Supply Chain Model
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is the time usage of truck for a transit trip. The transport time includes the time spent on the various steps for which the vehicle is mobilized plus the fraction of the return journey not paid for. 2. Cartel or syndicate. This is the situation where a cartel or syndicate controls transit freight allocation. The price is adjusted by the cartel for recovering the fixed cost (irrespective of the usage). Then the cost per trip takes into account the average number of round trips (N) per truck per month (or unit of time) on the transit route:
α β + ×D Nλ λ
(A2.4)
which is independent of the transit transport time. This is above the value observed in efficient markets, ceteris paribus (same cost coefficients α, β, and transport time).
Administrative and Overhead Costs of Transit Shipments The two components of the administrative and overhead costs of transit shipments are as follows: O = overheads per unit shipments due to the transit related procedures and activities. O is a fixed cost by container or trailer. A = Administrative costs depending on the size, nature of shipments, and the cost of potential consolidation. (In inventory theory, A is inversely proportional to the number of shipment needed to consolidate in a full load.)
Hedging Costs and Inventory Costs Moving Inventory Costs For simplicity, we retain the following time linear formula based on the operational value of time and the mean lead time in transit: mobile_inventory = m × Tmean × V, where m is cost per day of the mobile inventory. Inventory Costs Induced by the Randomness of Lead Time Optimal inventory management faces constraints from: • Supply chain unpredictability and uncertainty in shipment delivery time; that is, lead time is a random variable. • The level of demand, whether predictable or stochastic. For the same industry, volumes are typically lower in a landlocked country compared to the gateway country. This leads to their higher inventory levels (see Chapter 1).