Freight Mode Choice with Emission Caps: Revisiting Classical Inventory and Transportation Decisions

Freight mode choice and the resulting inventory implications significantly influence a product’s carbon footprint. This paper investigates mode selection under a voluntary carbon emissions constraint. Slower modes such as inland waterways and ocean freight are less expensive and emit less greenhouse gas (GHG), but they require higher inventory levels due to longer lead times. In contrast, faster modes like less-than-truckload (LTL) shipping reduce inventory needs but incur higher transportation costs and emissions. Mode choice thus involves trade-offs between transport cost, inventory holding, lead time uncertainty, and GHG emissions from transportation and warehousing. This paper develops a comprehensive inventory-transportation model under the stochastic demand and lead time to evaluate these trade-offs and guide sustainable freight decisions. The model is a practical toolbox that enables managers to evaluate how freight mode choice and inventory policy affect costs and emissions under different operational scenarios and carbon constraints.