A manufacturer leases rail cars to transport raw material from the supplier to the factory. The manufacturer must balance the costs of leasing rail cars versus stockouts (leading to plant closings) and inventory carrying costs. Using a model of circular queues and a simulation, the cost implications of leasing different numbers of rail cars are analyzed. It is concluded that stockout costs exceed the cost of excess inventory and capacity in the logistics system.
Pope, Jennifer A. & Pope, James A. (2006). Plant supply logistics: balancing delivery and stockout costs. Journal of Transportation Management, 17(1), 52-60. doi: 10.22237/jotm/1143849960