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Freight Consolidation: BA 308B Dr. Campbell
Freight Consolidation: BA 308B Dr. Campbell
Freight Consolidation: BA 308B Dr. Campbell
Dr. Campbell
FREIGHT CONSOLIDATION
Example: A supplier ships goods from St. Louis to 3 cities. The supplier can ship every day,
every other day or every third day. There is a penalty of $0.20/cwt for each day delayed.
Consolidating shipments allows lower transportation costs from larger loads, but incurs penalty
costs due to the delay.
City
Rolla
Columbia
Kansas City
Weight/day
8,000 lb = 80 cwt
10,000 lb = 100 cwt
7,000 lb = 70 cwt
25,000 lb = 250 cwt
What should be the shipping frequency (or how long should orders be held) to minimize total
cost?
Ship Every Day
R
C
KC
801.20 =
1001.05 =
702.00 =
$96
$105
$140
or
or
or
2501.00 =
2500.80 =
2501.20 =
$250
$200
$300
2501.00 =
2500.80 =
2501.20 =
$250
$200
$300
$192
$210
$280
or
or
or
$288
or
$420
or
2501.00 =
3000.80 =
2501.20 =
$250
$240
$300
BA 308B
Dr. Campbell
Solution: The lowest total cost is $313.33/day for shipping every third day.