Transportation pricing of a truckload carrier

• Published in: European journal of operational research 2011-11, Vol.214 (3), p.559-567
• Main Authors: Toptal, Ayşegül, Bingöl, Safa Onur
• Format: Article
• Language: English
• Subjects: Applied sciences; Carriers; Cost control; Costs; Decision making models; Decision theory. Utility theory; Exact sciences and technology; Integrated inventory/transportation; Inventory control, production control. Distribution; Less than truckload carrier; Logistics; Mathematical models; Motor carriers; Operational research; Operational research and scientific management; Operational research. Management science; Order quantity; Pricing; Pricing policies; Replenishment; Schedules; Studies; Supply chain management; Transportation; Transportation pricing; Transportation pricing Supply chain management Truckload carrier Less than truckload carrier Integrated inventory; Transportation problem (Operations research); Transportation services; Truckload carrier
• ISSN: 0377-2217; 1872-6860
• DOI: 10.1016/j.ejor.2011.05.005

► A setting with a retailer, a truckload carrier and a less than truckload carrier, is considered. ► Retailer’s replenishment problem is solved under bimodal transportation costs. ► Truckload carrier’s pricing problem is solved to maximize his/her revenue. ► Truckload carrier may increase his/her revenue significantly by better pricing. Freight transportation is a major component of logistical operations. Due to the increase in global trade, fierce competition among shippers and raising concerns about energy, companies are putting more emphasis on effective management and usage of transportation services. This paper studies the transportation pricing problem of a truckload carrier in a setting that consists of a retailer, a truckload carrier and a less than truckload carrier. In this setting, the truckload carrier makes his/her pricing decision based on previous knowledge on the less than truckload carrier’s price schedule and the retailer’s ordering behavior. The retailer then makes a determination of his/her order quantity through an integrated model that explicitly considers the transportation alternatives, and the related costs (i.e., bimodal transportation costs) and capacities. In the paper, the retailer’s replenishment problem and the truckload carrier’s pricing problem are modeled and solved based on a detailed analysis. Numerical evidence shows that the truckload carrier may increase his/her gainings significantly through better pricing and there is further opportunity of savings if the truckload carrier and the retailer coordinate their decisions.