Abstract— Nowadays, enterprises survive in a competitive environment. Logistics islooked as "the third profit source” which has big potential in reducingthe cost of operations. Especially inventory and transportation occupy aconsiderable proportion in logistics cost. So reduce the cost becomes the keyto reduce it. However, China'senterprises consider how to reduce transport cost or inventory cost only,ignoring the relation between the two parts, making the logistics systemicoperating cost high. The paper takes full consideration of antinomies of transportation and inventory cost and use systemic thinkingto low the operating cost in order to provide a solution to the two costs.

Keywords-Inventorycontrol, Transportation management, Integrated optimization, EOQ model

1. Introduction

In growing competitive market, survival and development of enterpriseshave become a more complicated problem. In order to cope with more intensemarket competition, meet customer requirements and continue shorteningproduction getting time, these serious unpredictable problems in productionprocess, enterprises have to adopt a series of new manufacturing strategy. Andlogistics, seen as the third profits source gets more and more attention ofenterprises.

In the process of operation of logistics system, transportation cost andinventory management cost are two key factors which trade-off to make logisticscost high. If consider it from the whole system, it is possible to find a pointwhich can makeinventory and transport cost balance.But two costs are still calculated separately, which makes operation cost high.

This paper regards inventorymanagement and transportation management as a whole, and establishes digitalmodel to seek optimal operation index.  

2. Background description of modeling

Study integrated optimization problem of inventory and transportationmanagement by a logistics operation system combined with suppliers anddemanders to find a balanced point of logistics total cost.

This paper mainly studies a secondary supply chain system consisted ofone supplier and one retailer and uses common model to analysis as well ascalculate the optimal point. Specific analysis procedures are in follows: 

Firstly, solve optimal quantity based on the economic order quantitymodel without considering the premise of transportation cost.