Optimal transport pricing of inland freight for cement haulage at GHACEM Limited

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Cement is a key element of modern construction and its production at Ghacem limited takes place only at Tema and Tarkoradi whiles consumption occurs across the breadth and length of Ghana. Transportation therefore plays a major role in the distribution of the product and contributes to a portion of the landed price of cement to the consumer at distant locations. This study attempts to develop a model for optimal transport pricing of inland freight for cement haulage at Ghacem limited for cement distribution in Ghana. In order to achieve the research objectives, literature on product transport pricing between firms and the consumer and the mathematical theory of linear programming for solving transportation problems were reviewed. Results of the transportation model which was undertaken with the aid of Microsoft Excel Solver 2003 application, used data of cement supply and consumption activity recorded by Ghacem in year 2010. The model revealed and optimal transport pricing solution and also indicated a pattern of routes from different sources (supply) to different destinations (demand) if transportation costs were to be minimized. Owing to its current pricing scheme known as the “mill price model”; where firms choose their locations, price their products and consumers incur the transportation cost to their demand destinations, Ghacem does not completely control the physical distribution of the product and therefore has no comprehensive transport cost model for comparison with the derived optimal transport price in this work. However, one purpose of the theory of optimal pricing using the transportation model is to predict what the optimal price should consist of in terms of cost, making the theory fit for empirical development and practical application as had been carried out in this case with the goal of helping to reduce the net cost of cement to consumers at distant locations.
A Thesis Submitted to the Department of Mathematics, Kwame Nkrumah University of Science and Technology, Kumasi, in Partial Fulfillment of the Requirement for the Degree of Master of Science in Industrial Mathematics, Institute of Distance Learning.