Supply chain network design considering customer psychological behavior-a 4PL perspective

• Published in: Computers & industrial engineering 2021-09, Vol.159, p.107484, Article 107484
• Main Authors: Huang, Min, Dong, Liwei, Kuang, Hanbin, Jiang, Zhong-Zhong, Lee, Loo Hay, Wang, Xingwei
• Format: Article
• Language: English
• Subjects: Approximation Linearization; Customer Satisfaction; Fourth Party Logistics; Psychological Behavior; Supply Chain Network Design
• ISSN: 0360-8352; 1879-0550
• DOI: 10.1016/j.cie.2021.107484

•A 4PL network design considering customer psychological behavior is proposed.•To describe psychological behavior, a non-liner model based on PT is introduced.•An approximation linearization method is designed to form an equivalent linear model.•Managerial insights on designing the 4PL network are given through behavior analysis. From the perspective of Fourth Party Logistics, a novel supply chain network design problem considering customer psychological behavior is proposed in this paper. First, we calculate the minimum cost of the supply chain network design in Fourth Party Logistics when the demand of customers is fully satisfied. In the shortage of investment in the process of supply chain network design, the demand of customers can be partially satisfied. Then, customer psychological behavior is considered to maximize the value function of customer satisfaction under cost constraint. After introducing the definitions of the psychological reference point and the service level for customers based on the prospect theory, we formulate a non-linear integer programming model for Fourth Party Logistics network design problem. Since the objective function of the proposed model is non-linear, an approximation linearization method is introduced to adjust the proposed model to be an equivalent linear model. Numerical experiments are designed to justify the effectiveness of the proposed method. Through a thorough analysis on customer psychological behavior, it can be seen that customers tend to be more risk-averse for gains than risk-seeking for losses in Fourth Party Logistics supply chain network design. Moreover, valuable investment insights are recapitulated. This proposed method provides an effective tool for a Fourth Party Logistics provider to give reasonable suggestions to an investor in Fourth Party Logistics supply chain network design. Furthermore, we extend the basic model of 4PL supply chain network design considering customer satisfaction with multiple commodities and provid a solution method based on greedy adding heuristic to further reduce the calculation time for large scale cases.