Integrated inventory and transportation mode selection: A service parts logistics system

We present an optimization-based model to gain insights into the integrated inventory and transportation problem for a single-echelon, multi-facility service parts logistics system with time-based service level constraints. As an optimization goal we minimize the relevant inventory and transportation costs while ensuring that service constraints are met. The model builds on stochastic base-stock inventory model and integrates it with transportation options and service responsiveness that can be achieved using alternate modes (namely slow, medium and fast). The results obtained through different networks show that significant benefits can be obtained from transportation mode and inventory integration.