Mode Choice in the context of Production Runs

Many studies of distribution cost have suggested the importance of inventory in the make‐up of total distribution cost. Substantial cost savings can be realised by freeing capital tied up in inventory; these are often the largest category of cost saving realised as a result of switching to premium transportation. This being the case, a shipper must normally be in a position to reduce inventory if he is to be induced to utilise premium transportation. But in some circumstances, unrelated to distribution factors, it may not be possible to cut inventory. The length of production runs constitute one such circumstance and as such pose a serious difficulty for air carriers and others who attempt to sell premium transportation service.