OPTIMIZING TRANSPORTATION CONTRACTS TO SUPPORT JUST-IN-TIME DELIVERIES - THE CASE OF ONE CONTRACTED TRUCK PER SHIPMENT

We consider the problem of setting up transportation contracts for a just-in-time delivery system between a manufacturer and one of its suppliers. The usage of parts fluctuates over time, and if the needed parts do not fit into the contracted vehicle, arrangements are made for a simultaneous emergency shipment at premium rates. We pose the problem as one of minimizing the total expected cost of contracted and emergency shipments, and where appropriate, inventory holding costs. We derive some properties of the optimal solution and present solution procedures. Computational results and possible research directions are also discussed.