Breaking truck dominance in supply chains: Proactive freight consolidation and modal split transport

Abstract

Environmental concerns and a shortage of truck drivers motivate a paradigm shift in truck-dominated supply chains. To alleviate the pressure on truck transport, one can consolidate freight with other companies. Freight consolidation can be facilitated by third-party logistics service providers, who combine shipments that require delivery to the same destination on the same day. More gains can be realized through “proactive freight consolidation”, by proactively synchronizing the timing of shipments prior to placing orders. This is facilitated by a joint replenishment policy. The truck intensity of supply chains can be further reduced by shifting freight from road towards alternative transport modes, such as train. Modal split transport combines two complementary transport modes by using both modes in parallel. We analyze how proactive freight consolidation can be combined with modal split transport. We propose a heuristic that combines a can-order joint replenishment policy to consolidate freight orders proactively via truck, with a tailored base-surge policy to coordinate shipments via train. We develop a lower bound on the optimal cost to validate our heuristic. By comparing the truck usage and cost performance of our policy against alternative replenishment strategies, we show how the combination of proactive freight consolidation and modal split transport can shift freight towards alternative transport modes, without negatively impacting costs or service.