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Service capability procurement decision in logistics service supply chain: a research under demand updating and quality guarantee

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  • Weihua Liu
  • Dong Xie
  • Yang Liu
  • Xiaoyan Liu

Abstract

Though existing researches have already studied on service quality guarantee and demand updating in a supply chain respectively, there is little attention paid to integrated research on service quality guarantee problem with demand updating. This paper aims to investigate the impacts of demand uncertainty revelation and quality guarantee change cost (GCC) on the optimal decisions of logistics service integrator (LSI) and functional logistics service provider (FLSP) in a logistics service supply chain. At the beginning of the first period, the FLSP first guarantees an initial quality level and the LSI procures service capacity from the FLSP based on the demand prediction. Then the demand information is updated after the first-period demand being satisfied, and the LSI and the FLSP make their optimal decisions based on the renewed demand in the next period. Before the second period, uncertainty complete revelation/uncertainty incomplete revelation (UCR/UIR) and GCC/no guarantee change cost (NGCC) may take place, which will affect the decisions the LSI and the FLSP make. Consequently, four situations are considered: (1) UCR and GCC; (2) UIR and GCC; (3) UCR and NGCC; and (4) UIR and NGCC. In each situation, we derive the optimal decisions of the FLSP and the LSI, and a comparison between the first- and second-period decisions in each situation is conducted. Several managerial insights are concluded, and the most important one is that the LSI is supposed to reduce the procurement quantity and the FLSP is supposed to promise a higher quality defect rate in the case of UIR and NGCC. Furthermore, in case of UIR and GCC, we specify a critical condition in which the LSI and the FLSP insist on the initial decisions of the first period. At last, we conducted numerical analysis and gave a practical example of China Yuantong Express Company to support our conclusions.

Suggested Citation

  • Weihua Liu & Dong Xie & Yang Liu & Xiaoyan Liu, 2015. "Service capability procurement decision in logistics service supply chain: a research under demand updating and quality guarantee," International Journal of Production Research, Taylor & Francis Journals, vol. 53(2), pages 488-510, January.
    • Handle: RePEc:taf:tprsxx:v:53:y:2015:i:2:p:488-510
    DOI: 10.1080/00207543.2014.955219
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    Citations

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    Cited by:

    1. Liu, Weihua & Liu, Xiaoyan & Li, Xiang, 2015. "The two-stage batch ordering strategy of logistics service capacity with demand update," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 83(C), pages 65-89.
    2. Ni Du & Qinglan Han, 2018. "Pricing and Service Quality Guarantee Decisions in Logistics Service Supply Chain with Fairness Concern," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(05), pages 1-41, October.
    3. Cui-Hua Zhang & Peng Xing & Jin Li, 2018. "Optimal Strategy of Social Responsibility and Quality Effort in Service Supply Chain with Quality Preference," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(03), pages 1-43, June.
    4. Li, Yadong & Guan, Zhenzhong & Ren, Jianbiao, 2023. "Channel coordination under retailer's (sub)conscious preferences of loss aversion and fairness," Journal of Retailing and Consumer Services, Elsevier, vol. 74(C).
    5. Wang, Yulan & Wallace, Stein W. & Shen, Bin & Choi, Tsan-Ming, 2015. "Service supply chain management: A review of operational models," European Journal of Operational Research, Elsevier, vol. 247(3), pages 685-698.
    6. Weihua Liu & Enze Bai & Liwei Liu & Wanying Wei, 2017. "A Framework of Sustainable Service Supply Chain Management: A Literature Review and Research Agenda," Sustainability, MDPI, vol. 9(3), pages 1-25, March.
    7. Shafiq, Muhammad & Savino, Matteo M., 2019. "Supply chain coordination to optimize manufacturer's capacity procurement decisions through a new commitment-based model with penalty and revenue-sharing," International Journal of Production Economics, Elsevier, vol. 208(C), pages 512-528.
    8. Jun Zhao, 2022. "Will the community O2O service supply channel benefit the elderly healthcare service supply chain?," Electronic Commerce Research, Springer, vol. 22(4), pages 1617-1650, December.
    9. Huang, Min & Tu, Jun & Chao, Xiuli & Jin, Delong, 2019. "Quality risk in logistics outsourcing: A fourth party logistics perspective," European Journal of Operational Research, Elsevier, vol. 276(3), pages 855-879.
    10. Wang, Jianxin & Lim, Ming K. & Zhan, Yuanzhu & Wang, XiaoFeng, 2020. "An intelligent logistics service system for enhancing dispatching operations in an IoT environment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 135(C).
    11. Weihua Liu & Donglei Zhu & Yijia Wang, 2017. "Capacity Procurement in Logistics Service Supply Chain with Demand Updating and Rational Expectation Behavior," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(06), pages 1-48, December.
    12. Weihua Liu & Xinran Shen & Di Wang, 2020. "The impacts of dual overconfidence behavior and demand updating on the decisions of port service supply chain: a real case study from China," Annals of Operations Research, Springer, vol. 291(1), pages 565-604, August.

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