Management Science and Engineering ISSN 1913-0341 Vol.3 No.4 2009 Canadian Research & Development Center of Sciences and Cultures 12/20/2009 Http://www.cscanada.org Http://www.cscanada.net 27 Comparison of Typical Shipment Consolidation Programs: Structural Results M. Ali ÜLKÜ 1 Abstract: Shipment consolidation, a strategy commonly used to enable scale economies in freight transportation is the practice of consolidating several small items and then dispatching them on the same vehicle. If applied appropriately, a shipment consolidation program may drive out substantial costs in the logistics supply chain. However, the optimal policy for such a consolidation program in a random setting is not yet fully investigated in the literature. In this paper, we study three alternative systematic shipment consolidation programs: Time Policy, Quantity Policy, and Hybrid Policy. We consider, for one echelon of a logistics supply chain, a freight arrival process that is Poisson and unit-sized. Accordingly, we analyze these policies and obtain structural results for which one policy is superior to the others, on the basis of total cost per order. Key Words: Logistics supply chain; Stochastic modeling; Freight transportation; Quantity- based / time-based dispatching 1 Assistant Professor of Operations Management. School of Management and Leadership, Capital University, 1 College and Main, Columbus, OH, 43209, U.S.A. Email: aulku@capital.edu. Fax: 614-236 6540. * Received 10 September 2009; accepted 1 November 2009. 1. INTRODUCTION Shipment consolidation (SCL) is a logistics strategy that combines two or more orders or shipments so that a larger quantity can be dispatched on the same vehicle. This enables considerable economies of scale, greatly reducing the transportation cost per unit weight. The challenge however is to determine a program/policy for shipping the consolidated load that still gives a good service to the customers whose orders are among the first to be placed. In the literature, several SCL policies have been studied using techniques such as simulation, renewal theory, mathematical programming, and queuing theory. The impact of cost savings and the value added by these policies in the overall logistics supply chain have been increasingly recognized both by practitioners and academicians. There is a variety of extensions in the analysis and practices of consolidation policies. Hall (1987) introduces three types of strategies for consolidation: inventory consolidation, vehicle consolidation, and terminal consolidation. Tyan et al. (2003) examine implications of freight consolidation for a company in the context of global supply chains. Ülkü (2009) introduces the impact of pricing decisions on shipment consolidation and analyzes various policies for consolidating multiple items in the setting of a