Dynamic Speed Optimization in Supply Chains with Stochastic Demand

Peter Berling () and Victor Martínez- de-Albéniz ()
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Peter Berling: Department of Industrial Management and Logistics, Lund University, 221 00 Lund, Sweden
Victor Martínez- de-Albéniz: IESE Business School, University of Navarra, 08034 Barcelona, Spain

Transportation Science, 2016, vol. 50, issue 3, 1114-1127

Abstract: In this paper, we analyze how to continuously adjust the speed in a supply chain with stochastic demand. For each unit (e.g., truckload, shipping container) in the chain, one must decide at which speed it should be moved downstream, given the state of the system, to minimize total supply chain costs. We decompose the problem into a set of one-dimensional subproblems that can be easily solved and characterize the optimal variable speed policy: under some assumptions, we show that it is optimal to set a speed that is first increasing in the distance to the market, and then decreasing. As a result, at optimality a given unit will experience an accelerating speed and then it will be slowed down, unless a demand occurs, in which case, the speed will be adjusted upward. We finally provide a transportation case study where we estimate the benefits of a variable-speed compared to a fixed-speed policy and show them to be significant both financially and from a CO 2 -emissions perspective.

Keywords: variable speed; expediting; environmental impact (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ortrsc:v:50:y:2016:i:3:p:1114-1127

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