Analysis of collaborative savings and cost allocation techniques for the cooperative carrier facility location problem

Transport companies may cooperate to increase their efficiency levels by, for example, the exchange of orders or vehicle capacity. In this paper a new approach to horizontal carrier collaboration is presented: the sharing of distribution centres (DCs) with partnering organisations. This problem can...

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Bibliographic Details
Published in:The Journal of the Operational Research Society 2016-06, Vol.67 (6), p.853-871
Main Authors: Verdonck, Lotte, Beullens, Patrick, Caris, An, Ramaekers, Katrien, Janssens, Gerrit K
Format: Article
Language:English
Subjects:
Alliances
Business and Management
Case studies
Collaboration
Cooperation
cooperative game theory
cost allocation
Cost control
Customer services
Distribution centers
Efficiency
Experiments
facility location
General Paper
General Papers
horizontal cooperation
Linear programming
Location of industry
Logistics
Management
Market positioning
Operations research
Operations Research/Decision Theory
Studies
Transportation services
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Summary:Transport companies may cooperate to increase their efficiency levels by, for example, the exchange of orders or vehicle capacity. In this paper a new approach to horizontal carrier collaboration is presented: the sharing of distribution centres (DCs) with partnering organisations. This problem can be classified as a cooperative facility location problem and formulated as an innovative mixed integer linear programme. To ensure cooperation sustainability, collaborative costs need to be allocated fairly to the different participants. To analyse the benefits of cooperative facility location and the effects of different cost allocation techniques, numerical experiments based on experimental design are carried out on a UK case study. Sharing DCs may lead to significant cost savings up to 21.6%. In contrast to the case of sharing orders or vehicles, there are diseconomies of scale in terms of the number of partners and more collaborative benefit can be expected when partners are unequal in size. Moreover, results indicate that horizontal collaboration at the level of DCs works well with a limited number of partners and can be based on intuitively appealing cost sharing techniques, which may reduce alliance complexity and enforce the strength of mutual partner relationships.
ISSN:0160-5682
1476-9360
DOI:10.1057/jors.2015.106