IDEAS home Printed from https://ideas.repec.org/a/inm/ortrsc/v37y2003i1p23-39.html
   My bibliography  Save this article

Outsourcing Logistics: Designing Transportation Contracts Between a Manufacturer and a Transporter

Author

Listed:
  • Osman Alp

    (University of Alberta, School of Business, Finance and Management Science Department, Edmonton, Alberta, Canada T6G 2R6)

  • Nesim K. Erkip

    (Industrial Engineering Department, Middle East Technical University, Inonu Bulvari, 06531 Ankara, Turkey)

  • Refik Güllü

    (Industrial Engineering Department, Middle East Technical University, Inonu Bulvari, 06531 Ankara, Turkey)

Abstract

In our environment, a manufacturer procures material from a supplier and the supplier brings it in bulk to a warehouse. This material is then consigned to the plant area, where it is utilized as an input of the production process. This consignment process is outsourced by the manufacturer and a transportation company is selected via a bidding mechanism. Primarily, we consider the problem of designing parameters of a given contract for the transportation activity. We define three subproblems within the contract design problem that interact with each other to a certain extent. These subproblems are the vehicle dispatching problem, inventory control problem, and contract value problem. We define these problems, exploit their interactions, and propose solution methods. Moreover, we present an approach to design such transportation contracts, which is based on solving these subproblems in an order for an adequate number of contract parameter combinations and selecting the one that minimizes expected total costs for the manufacturer.

Suggested Citation

  • Osman Alp & Nesim K. Erkip & Refik Güllü, 2003. "Outsourcing Logistics: Designing Transportation Contracts Between a Manufacturer and a Transporter," Transportation Science, INFORMS, vol. 37(1), pages 23-39, February.
    • Handle: RePEc:inm:ortrsc:v:37:y:2003:i:1:p:23-39
    DOI: 10.1287/trsc.37.1.23.12818
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/trsc.37.1.23.12818
    Download Restriction: no
    File URL: https://libkey.io/10.1287/trsc.37.1.23.12818?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. Alexandra M. Newman & Candace Arai Yano, 2000. "Scheduling Direct and Indirect Trains and Containers in an Intermodal Setting," Transportation Science, INFORMS, vol. 34(3), pages 256-270, August.
    2. Osman Alp & Nesim K. Erkip & Refik Güllü, 2003. "Optimal Lot-Sizing/Vehicle-Dispatching Policies Under Stochastic Lead Times and Stepwise Fixed Costs," Operations Research, INFORMS, vol. 51(1), pages 160-166, February.
    3. Mordechai Henig & Yigal Gerchak & Ricardo Ernst & David F. Pyke, 1997. "An Inventory Model Embedded in Designing a Supply Contract," Management Science, INFORMS, vol. 43(2), pages 184-189, 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. Hofmann, Erik & Solakivi, Tomi & Töyli, Juuso & Zinn, Martin, 2018. "Oil price shocks and the financial performance patterns of logistics service providers," Energy Economics, Elsevier, vol. 72(C), pages 290-306.
    2. Zhu, Wanshan & Wu, Zhengping, 2014. "The stochastic ordering of mean-preserving transformations and its applications," European Journal of Operational Research, Elsevier, vol. 239(3), pages 802-809.
    3. AgralI, Semra & Tan, BarIs & Karaesmen, Fikri, 2008. "Modeling and analysis of an auction-based logistics market," European Journal of Operational Research, Elsevier, vol. 191(1), pages 272-294, November.
    4. Sarker, Bhaba R., 2014. "Consignment stocking policy models for supply chain systems: A critical review and comparative perspectives," International Journal of Production Economics, Elsevier, vol. 155(C), pages 52-67.
    5. Wei, Bo & Çetinkaya, Sıla & Cline, Daren B.H., 2023. "Inbound replenishment and outbound dispatch decisions under hybrid shipment consolidation policies: An analytical model and comparison," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).
    6. Wu, Qing & Mu, Yinping & Feng, Yi, 2015. "Coordinating contracts for fresh product outsourcing logistics channels with power structures," International Journal of Production Economics, Elsevier, vol. 160(C), pages 94-105.
    7. Fan, Tijun & Sandal, Leif K. & Kong, Jiehong & Li, Dandan, 2009. "A Survey and Analysis of Outsourcing in East China," Discussion Papers 2009/5, Norwegian School of Economics, Department of Business and Management Science.
    8. Marasco, Alessandra, 2008. "Third-party logistics: A literature review," International Journal of Production Economics, Elsevier, vol. 113(1), pages 127-147, May.
    9. Thanh Tran & Kanghyun Yoon & Stefan Genchev, 2017. "Lump‐Sum versus Pay‐As‐You‐Go: The Moderating Effect of Contract Types on the Optimal Logistics Decisions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(4), pages 547-555, June.
    10. Berling, Peter & Eng-Larsson, Fredrik, 2016. "Pricing and timing of consolidated deliveries in the presence of an express alternative: Financial and environmental analysis," European Journal of Operational Research, Elsevier, vol. 250(2), pages 590-601.
    11. Lafkihi, Mariam & Pan, Shenle & Ballot, Eric, 2019. "Freight transportation service procurement: A literature review and future research opportunities in omnichannel E-commerce," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 125(C), pages 348-365.

    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. Tempelmeier, Horst & Bantel, Oliver, 2015. "Integrated optimization of safety stock and transportation capacity," European Journal of Operational Research, Elsevier, vol. 247(1), pages 101-112.
    2. Bart Wiegmans & Behzad Behdani, 2018. "A review and analysis of the investment in, and cost structure of, intermodal rail terminals," Transport Reviews, Taylor & Francis Journals, vol. 38(1), pages 33-51, January.
    3. Berling, Peter & Eng-Larsson, Fredrik, 2017. "Environmental implications of transport contract choice - capacity investment and pricing under volume and capacity contracts," European Journal of Operational Research, Elsevier, vol. 261(1), pages 129-142.
    4. Joren Gijsbrechts & Christina Imdahl & Robert N. Boute & Jan A. Van Mieghem, 2023. "Optimal robust inventory management with volume flexibility: Matching capacity and demand with the lookahead peak‐shaving policy," Production and Operations Management, Production and Operations Management Society, vol. 32(11), pages 3357-3373, November.
    5. Gel, Esma S. & Salman, F. Sibel, 2022. "Dynamic ordering decisions with approximate learning of supply yield uncertainty," International Journal of Production Economics, Elsevier, vol. 243(C).
    6. Gharehgozli, A.H. & Roy, D. & de Koster, M.B.M., 2014. "Sea Container Terminals," ERIM Report Series Research in Management ERS-2014-009-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    7. Thevenin, Simon & Ben-Ammar, Oussama & Brahimi, Nadjib, 2022. "Robust optimization approaches for purchase planning with supplier selection under lead time uncertainty," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1199-1215.
    8. Daniela Favaretto & Alessandro Marin & Marco Tolotti, 2023. "A theoretical validation of the DDMRP reorder policy," Computational Management Science, Springer, vol. 20(1), pages 1-28, December.
    9. Peng Hu & Ye Lu & Miao Song, 2019. "Joint Pricing and Inventory Control with Fixed and Convex/Concave Variable Production Costs," Production and Operations Management, Production and Operations Management Society, vol. 28(4), pages 847-877, April.
    10. Chung-Yee Lee & Sila Çetinkaya & Wikrom Jaruphongsa, 2003. "A Dynamic Model for Inventory Lot Sizing and Outbound Shipment Scheduling at a Third-Party Warehouse," Operations Research, INFORMS, vol. 51(5), pages 735-747, October.
    11. Verma, Manish & Verter, Vedat, 2010. "A lead-time based approach for planning rail-truck intermodal transportation of dangerous goods," European Journal of Operational Research, Elsevier, vol. 202(3), pages 696-706, May.
    12. Serel, Dogan A. & Dada, Maqbool & Moskowitz, Herbert, 2001. "Sourcing decisions with capacity reservation contracts," European Journal of Operational Research, Elsevier, vol. 131(3), pages 635-648, June.
    13. Geunes, Joseph & Zeng, Amy Z., 2001. "Impacts of inventory shortage policies on transportation requirements in two-stage distribution systems," European Journal of Operational Research, Elsevier, vol. 129(2), pages 299-310, March.
    14. Anantaram Balakrishnan & Joseph Geunes & Michael S. Pangburn, 2004. "Coordinating Supply Chains by Controlling Upstream Variability Propagation," Manufacturing & Service Operations Management, INFORMS, vol. 6(2), pages 163-183, July.
    15. Zhu, Stuart X., 2012. "Joint pricing and inventory replenishment decisions with returns and expediting," European Journal of Operational Research, Elsevier, vol. 216(1), pages 105-112.
    16. Inderfurth, Karl & Kelle, Peter & Kleber, Rainer, 2013. "Dual sourcing using capacity reservation and spot market: Optimal procurement policy and heuristic parameter determination," European Journal of Operational Research, Elsevier, vol. 225(2), pages 298-309.
    17. Thomas, Douglas J. & Hackman, Steven T., 2003. "A committed delivery strategy with fixed frequency and quantity," European Journal of Operational Research, Elsevier, vol. 148(2), pages 363-373, July.
    18. Karl Inderfurth & Peter Kelle & Rainer Kleber, 2011. "Dual Sourcing Using Capacity Reservation and Spot Market: Optimal Procurement Policy and Heuristic Parameter Determination," FEMM Working Papers 110014, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    19. Nils Boysen & Malte Fliedner & Florian Jaehn & Erwin Pesch, 2013. "A Survey on Container Processing in Railway Yards," Transportation Science, INFORMS, vol. 47(3), pages 312-329, August.
    20. Kirschstein, Thomas, 2018. "Rail transportation planning in the chemical industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 112(C), pages 142-160.

    More about this item

    Statistics

    Access and download statistics

    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:ortrsc:v:37:y:2003:i:1:p:23-39. 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.