Coordinating a supply chain with transport service providers

Abstract

Most business-to-business transactions use external transport service providers (i.e. carriers) to improve supply chain performance and customer satisfaction. Supply chain coordination with transport service providers is seldom explored. The current paper adds a carrier to the supplier-retailer channel and analyzes the effect of double marginalization on pricing policies. The paper assumes that market demand is price-sensitive, which is a general decreasing function of the retailer's selling price. Analysis shows that the joint profit is increased because both the demand is increased and the unit operating cost is reduced as a result of joint coordination. The analytical results are obtained for a specific demand function, and the joint decision policy is coordinated through a nonlinear wholesale and transport pricing scheme. Numerical examples show that the joint coordination including the carrier can significantly improve the performance of the channel compared to the coordination only among the retailer and the supplier.

Pricing and Ordering Decisions in a Retailer Dominant Channel Involving a Third‐Party Logistics Provider

“…Similarly, Woo et al study the ordering decision in a three-echelon supply chain under logistics outsourcing [10]. Li et al examine optimization decisions in a supply chain system with one 3PL, one supplier, and one retailer and analyze the effect of double marginalization on pricing policies [11,12]. The supply chain structure is also used in this paper, but the studies mentioned above do not consider a dominant retailer and the impact of the logistics service level.…”

“…Firstly, by substituting (13) into (11) and simplifying the equation, the manufacturer's optimal wholesale price can be expressed as *…”

Challenges in extending sustainability across a transport supply chain

“…include many actors) for decades, and therefore need to manage agency problems (Meqdadi et al , 2020). However, a clear development can be seen wherein transport supply chains (TSC) become multi-tiered and include several sub-contracting actors (Li et al , 2013), including fourth-party logistics firms (4PL), third-party logistics firms (3PL) and haulers; this makes them particularly relevant to study. The fragmentation of the transport industry, which consists of primarily small and medium-sized companies (Evangelista, 2014), may also entail specific managerial challenges for the shipper (the transport buyer and goods owner) in extending sustainability across the supply chain.…”

“…The managerial challenges experienced in extending sustainability in TSCs might differ from those in product supply chains (Meqdadi et al , 2020; Villena and Gioia, 2018). In line with this, Evangelista et al (2017) called for studies on LSPs’ initiatives to develop collaborative sustainability with subcontractors and Li et al (2013) called for research on the coordination of the relations of multiple LSPs. Therefore, addressing TSCs would mean expanding and contributing to the knowledge on sustainability approaches in supply chains:…”