The primary objective is to better understand the factors that influence the shippers' decisions to ship goods by sea or by road and how they interact to produce a certain outcome.
The primary aim is to be achieved by constructing a generic model of the single shipper's choice situation, and to embed it in an equilibrium model with many shippers and with network externalities, in the sense that aggregate volumes by each mode determine the offered freight rate and the freight rates influence the decision of each single shipper.
The model will take full account of uncertainty in demand for the goods and in lead times. One of its features is a very detailed representation of transport costs. Another is the upper and lower bounds on vehicle size for the distribution stages and line haul stages. For each of the transport modes, the shippers choose vehicle size, shipment size (shipments may be smaller than the minimal vehicle size) and reorder point. A choice model produces the choice probabilities. Aggregating over shippers, the expected total transport volumes for each mode that determine the freight rates are produced. The procedure is repeated for the new freight rate until convergence.
The necessary data for the model are provided by utilising the data sources and data bases that are established in TØI's work with the National Freight Transport Model, by a review of literature and by the new commodity flow survey which is due in spring, 2016.
Tests with the model will be done and are expected to provide new insight in how the mode split could be influenced, and the social efficiency of doing so. It is also thought that this model may point forward to a new generation of freight models where uncertainty and safety stocks play a larger part, and where the transport supply is not exogenously given.
In the framework of the project there has been developed a conceptual framework for logistics cost minimization, where:
- Decisions are made on an annual basis
- Shipment size and number of trips are endogenous
- Not all transport costs are proportional to number of tonnes
- Unlike conventional inventory theory models, transport costs will affect the choice variables
- Uncertain demand and uncertain lead time
- Firms choose a reorder point depending on demand during lead time
- Solution depends on a set of generic cost parameters
- Most of these parameters are already available for Norwegian conditions
- Framework can be used to assess “value of reliability”
- Which can be problematic in a SP setting
- Cost minimization can (almost) be solved analytically
- Short computation time