Total Supply Chain Costs and the Impact of Transportation Mode

3 Total Supply Chain Costs and the Impact of Transportation Mode 

Consider a retailer in location B who purchases product from a supplier in location A. Customer demand at location B is satisfied from stock at a warehouse at B. The retailer takes possession of goods at A and arranges transport, manages inventories and order placement, and so on. The retailer can choose any mode of transport to get product from A to B. How should the retailer take account of total supply chain costs in making this decision  

There are three separate categories of costs that are considered  

Transport Costs These costs are a function of transportation mode used. Assume that full truck- or full carload shipments are used and that transport capacity is not shared with any other products. This minimizes transport cost per unit on the route and therefore is the natural choice for transportation managers who seek to minimize transport costs alone. 

Given its larger capacity, rail transportation will be lower per unit shipped than truck, thus a goal to minimize transport costs will result in choice of large loads moved infrequently. If the transport 

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