SC&L SEMINAR SERIES :: Cost Allocation Mechanisms for a Shipper Collaboration Network
We study a logistics network where shippers collaborate to minimize system-wide asset repositioning costs. The companies join the collaboration and bundle their shipment requests with others in order to negotiate better rates from a common carrier. In this setting, shippers are able to identify collaborative routes with decreased overall empty truck movements. After the optimal routes that minimize total cost of covering all the shippers' demand are determined, this cost is allocated among the shippers. Our goal is to devise cost allocation mechanisms that will ensure the sustainability of the collaboration. A cost allocation method can have many properties, though there can be none that embraces all. We first develop cost allocation mechanisms with well known properties from the cooperative game theory literature, such as efficiency, fairness and cross monotonicity. Next, we define a set of new properties specifically desirable in our setting and propose several cost allocation schemes which could lead to implementable solutions.
Students and faculty are invited to remain after the seminar for a coffee and snacks reception sponsored by The Logistics Institute.