DISPATCHING SfflPMENTS AT MINIMAL COST WITH MULTIPLE MODE ALTERNATIVES

287 Numerous organizations are involved in distributing goods and materials. When shipping alternatives exist, the selection of the appropriate shipping alternative (mode) for each shipment may result in significant cost savings. This paper describes a highly flexible dispatching system that selects the shipping mode to be used for each shipment while minimizing the overall shipping costs. Multiple shipping modes must be considered when one faces economies of scale in shipping. On the one hand, combining shipments on a truck route usually results in reduced cost per shipment, but on the other hand, a common carrier alternative almost always exists. Therefore, nearly every major shipper faces shipping mode alternatives. Generally, shipping by private (or dedicated) fleet is cheaper than other alternative modes, provided that the fleet is fully utilized. However, in order to assure full utilization, the variability in daily demand for transportation services compels operators to size their fleet below their long-term average transportation needs, and to supplement thei~ fleet by outside (contract and/or common) carriers, as needed. The variability in demand for transportation services may stem from both internal and external sources, such as natural variability in customers' demand, which is manifested in different shipment (order) sizes, different sets of delivery/pick-up locations visited in a shift, promotions, and salesperson incentive structures. Even when an organization uses only private (or dedicated) fleet, but the fleet's truck physical characteristics and/or costs are not homogeneous, it faces