IDEAS home Printed from https://ideas.repec.org/a/inm/oropre/v61y2013i1p112-125.html
   My bibliography  Save this article

Allocating Cost of Service to Customers in Inventory Routing

Author

Listed:
  • Okan Örsan Özener

    (Department of Industrial Engineering, Ozyegin University, Istanbul 34794, Turkey)

  • Özlem Ergun

    (H. Milton Stewart School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332)

  • Martin Savelsbergh

    (School of Mathematical and Physical Sciences, University of Newcastle, Callaghan NSW 2308, Australia)

Abstract

Vendor-managed inventory (VMI) replenishment is a collaboration between a supplier and its customers, where the supplier is responsible for managing the customers' inventory levels. In the VMI setting we consider, the supplier exploits synergies between customers, e.g., their locations, usage rates, and storage capacities, to reduce distribution costs. Due to the intricate interactions between customers, calculating a fair cost-to-serve for each customer is a daunting task. However, cost-to-serve information is useful when marketing to new customers or when revisiting routing and delivery quantity decisions. We design mechanisms for this cost allocation problem and determine their characteristics both analytically and computationally.

Suggested Citation

  • Okan Örsan Özener & Özlem Ergun & Martin Savelsbergh, 2013. "Allocating Cost of Service to Customers in Inventory Routing," Operations Research, INFORMS, vol. 61(1), pages 112-125, February.
    • Handle: RePEc:inm:oropre:v:61:y:2013:i:1:p:112-125
    DOI: 10.1287/opre.1120.1130
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/opre.1120.1130
    Download Restriction: no
    File URL: https://libkey.io/10.1287/opre.1120.1130?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Peter Borm & Herbert Hamers & Ruud Hendrickx, 2001. "Operations research games: A survey," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 9(2), pages 139-199, December.
    2. Stefan Engevall & Maud Göthe-Lundgren & Peter Värbrand, 1998. "The traveling salesman game: An application ofcost allocation in a gas and oil company," Annals of Operations Research, Springer, vol. 82(0), pages 203-218, August.
    3. Jin-Hwa Song & Martin Savelsbergh, 2007. "Performance Measurement for Inventory Routing," Transportation Science, INFORMS, vol. 41(1), pages 44-54, February.
    4. Potters, J.A.M. & Curiel, I. & Tijs, S.H., 1992. "Traveling salesman games," Other publications TiSEM 0dd4cf3d-25fa-4179-80f6-6, Tilburg University, School of Economics and Management.
    5. Stefan Engevall & Maud Göthe-Lundgren & Peter Värbrand, 2004. "The Heterogeneous Vehicle-Routing Game," Transportation Science, INFORMS, vol. 38(1), pages 71-85, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ichiro Nishizaki & Tomohiro Hayashida & Shinya Sekizaki & Kenta Tanaka, 2023. "Averaged dual solution for linear production games and its characterization," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 31(2), pages 523-555, June.
    2. Mehmet Onur Olgun & Erdal Aydemir, 2021. "A new cooperative depot sharing approach for inventory routing problem," Annals of Operations Research, Springer, vol. 307(1), pages 417-441, December.
    3. Yves Crama & Mahmood Rezaei & Martin Savelsbergh & Tom Van Woensel, 2018. "Stochastic Inventory Routing for Perishable Products," Transportation Science, INFORMS, vol. 52(3), pages 526-546, June.
    4. Ichiro Nishizaki & Tomohiro Hayashida & Shinya Sekizaki & Kojiro Furumi, 2023. "A two-stage linear production planning model with partial cooperation under stochastic demands," Annals of Operations Research, Springer, vol. 320(1), pages 293-324, January.
    5. Cheng, Lihong & Guo, Xiaolong & Li, Xiaoxiao & Yu, Yugang, 2022. "Data-driven ordering and transshipment decisions for online retailers and logistics service providers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 161(C).
    6. Jessica Rodríguez‐Pereira & Burcu Balcik & Marie‐Ève Rancourt & Gilbert Laporte, 2021. "A Cost‐Sharing Mechanism for Multi‐Country Partnerships in Disaster Preparedness," Production and Operations Management, Production and Operations Management Society, vol. 30(12), pages 4541-4565, December.
    7. Miroslav Prokić, 2023. "The applicability of Cooperative Game Theory in Rail Freight Corridors Framework," Shaping Post-COVID World – Challenges for Economic Theory and Policy, in: Aleksandra Praščević & Miomir Jakšić & Mihail Arandarenko & Dejan Trifunović & Milutin Ješić (ed.),Shaping Post-COVID World – Challenges for Economic Theory and Policy, chapter 14, pages 305-320, Faculty of Economics and Business, University of Belgrade.
    8. Chen, Yan & Huang, Zhenhua & Ai, Hongshan & Guo, Xingkun & Luo, Fan, 2021. "The Impact of GIS/GPS Network Information Systems on the Logistics Distribution Cost of Tobacco Enterprises," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    9. Martin Savelsbergh & Tom Van Woensel, 2016. "50th Anniversary Invited Article—City Logistics: Challenges and Opportunities," Transportation Science, INFORMS, vol. 50(2), pages 579-590, May.
    10. Ali Ekici & Okan Örsan Özener & Gültekin Kuyzu, 2015. "Cyclic Delivery Schedules for an Inventory Routing Problem," Transportation Science, INFORMS, vol. 49(4), pages 817-829, November.
    11. Yanjun Shi & Na Lin & Qiaomei Han & Tongliang Zhang & Weiming Shen, 2020. "A Method for Transportation Planning and Profit Sharing in Collaborative Multi-Carrier Vehicle Routing," Mathematics, MDPI, vol. 8(10), pages 1-23, October.
    12. Dan C. Popescu & Philip Kilby, 2020. "Approximation of the Shapley value for the Euclidean travelling salesman game," Annals of Operations Research, Springer, vol. 289(2), pages 341-362, June.
    13. Gansterer, Margaretha & Hartl, Richard F., 2018. "Collaborative vehicle routing: A survey," European Journal of Operational Research, Elsevier, vol. 268(1), pages 1-12.
    14. repec:beo:swcetp:23-14 is not listed on IDEAS
    15. Arroyo, Federico, 2024. "Cost Allocation in Vehicle Routing Problems with Time Windows," Junior Management Science (JUMS), Junior Management Science e. V., vol. 9(1), pages 1241-1268.
    16. Lai, Minghui & Cai, Xiaoqiang & Li, Xiang, 2017. "Mechanism design for collaborative production-distribution planning with shipment consolidation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 106(C), pages 137-159.
    17. Aleksandra Praščević & Miomir Jakšić & Mihail Arandarenko & Dejan Trifunović & Milutin Ješić (ed.), 2023. "Shaping Post-COVID World – Challenges for Economic Theory and Policy," Shaping Post-COVID World – Challenges for Economic Theory and Policy, Faculty of Economics and Business, University of Belgrade, number 23, October –.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kellner, Florian & Schneiderbauer, Miriam, 2019. "Further insights into the allocation of greenhouse gas emissions to shipments in road freight transportation: The pollution routing game," European Journal of Operational Research, Elsevier, vol. 278(1), pages 296-313.
    2. Yang, Fei & Dai, Ying & Ma, Zu-Jun, 2020. "A cooperative rich vehicle routing problem in the last-mile logistics industry in rural areas," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    3. Florian Kellner, 2022. "Generating greenhouse gas cutting incentives when allocating carbon dioxide emissions to shipments in road freight transportation," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 44(3), pages 833-874, September.
    4. A. Kimms & I. Kozeletskyi, 2016. "Shapley value-based cost allocation in the cooperative traveling salesman problem under rolling horizon planning," EURO Journal on Transportation and Logistics, Springer;EURO - The Association of European Operational Research Societies, vol. 5(4), pages 371-392, December.
    5. Arroyo, Federico, 2024. "Cost Allocation in Vehicle Routing Problems with Time Windows," Junior Management Science (JUMS), Junior Management Science e. V., vol. 9(1), pages 1241-1268.
    6. Hamers, H.J.M. & Miquel, S. & Norde, H.W., 2011. "Monotonic Stable Solutions for Minimum Coloring Games," Other publications TiSEM efae8d09-83e6-4fe4-9623-e, Tilburg University, School of Economics and Management.
    7. Trine Platz & Herbert Hamers, 2015. "On games arising from multi-depot Chinese postman problems," Annals of Operations Research, Springer, vol. 235(1), pages 675-692, December.
    8. Çiftçi, BarIs & Borm, Peter & Hamers, Herbert, 2010. "Highway games on weakly cyclic graphs," European Journal of Operational Research, Elsevier, vol. 204(1), pages 117-124, July.
    9. Margaretha Gansterer & Richard F. Hartl & Sarah Wieser, 2021. "Assignment constraints in shared transportation services," Annals of Operations Research, Springer, vol. 305(1), pages 513-539, October.
    10. repec:wsi:jeapmx:v:20:y:2018:i:04:n:s021919891850007x is not listed on IDEAS
    11. Okan Örsan Özener & Özlem Ergun, 2008. "Allocating Costs in a Collaborative Transportation Procurement Network," Transportation Science, INFORMS, vol. 42(2), pages 146-165, May.
    12. Mathijs van Zon & Remy Spliet & Wilco van den Heuvel, 2021. "The Joint Network Vehicle Routing Game," Transportation Science, INFORMS, vol. 55(1), pages 179-195, 1-2.
    13. Sanchez-Soriano, Joaquin, 2006. "Pairwise solutions and the core of transportation situations," European Journal of Operational Research, Elsevier, vol. 175(1), pages 101-110, November.
    14. Cruijssen, Frans & Cools, Martine & Dullaert, W., 2007. "Horizontal cooperation in logistics: opportunities and impediments," Other publications TiSEM ab29fad8-1faf-422b-826e-0, Tilburg University, School of Economics and Management.
    15. Hamers, H.J.M. & Miquel, S. & Norde, H.W., 2011. "Monotonic Stable Solutions for Minimum Coloring Games," Discussion Paper 2011-016, Tilburg University, Center for Economic Research.
    16. Lindong Liu & Xiangtong Qi & Zhou Xu, 2016. "Computing Near-Optimal Stable Cost Allocations for Cooperative Games by Lagrangian Relaxation," INFORMS Journal on Computing, INFORMS, vol. 28(4), pages 687-702, November.
    17. Stefan Engevall & Maud Göthe-Lundgren & Peter Värbrand, 2004. "The Heterogeneous Vehicle-Routing Game," Transportation Science, INFORMS, vol. 38(1), pages 71-85, February.
    18. Estévez-Fernández, Arantza, 2012. "A game theoretical approach to sharing penalties and rewards in projects," European Journal of Operational Research, Elsevier, vol. 216(3), pages 647-657.
    19. Moon, Ilkyeong & Feng, Xuehao, 2017. "Supply chain coordination with a single supplier and multiple retailers considering customer arrival times and route selection," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 106(C), pages 78-97.
    20. van Beek, Andries & Malmberg, Benjamin & Borm, Peter & Quant, Marieke & Schouten, Jop, 2021. "Cooperation and Competition in Linear Production and Sequencing Processes," Discussion Paper 2021-011, Tilburg University, Center for Economic Research.
    21. Alparslan-Gok, S.Z. & Miquel, S. & Tijs, S.H., 2008. "Cooperation under Interval Uncertainty," Other publications TiSEM 9a01bd57-964d-4e71-8508-7, Tilburg University, School of Economics and Management.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:oropre:v:61:y:2013:i:1:p:112-125. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.