Estimation of an Inventory Theoretical Model of Mode Choice in Freight Transport

A model of freight mode choice was developed on the basis of the economic order quantity model, an inventory theoretical model of optimal shipment size. Shipment size is not explicit in the mode choice model; however, the specifications of the utilities associated with each transport mode account for shipment size and transport mode, which are two related decisions that depend on transport costs and on the logistics costs of shippers. The explanatory variables of the mode choice model are the total commodity flow between the shipper and the receiver, the distance between the origin and the destination, the value density of the commodity, and a few additional variables. No transport supply data are used. Four versions of the model were estimated with the use of the French shipper survey ECHO. As a result of these estimations, the terms of the utility functions inspired from inventory theory substantially improved the statistical goodness of fit of the models. This finding tends to confirm the potential of inventory theory to improve freight mode choice modeling. The finding also shows that the commodity flow between the shipper and the receiver is an important explanatory variable of mode choice and indicates that this variable should be observed in shipper surveys.