Auction-based city logistics synchronization

This article is the first that proposes an efficient auction mechanism for the City Logistics Synchronization (CLS) problem, which aims to capture both logistics punctuality and simultaneity in a city or region. The main motivation of CLS is if a delay has already occurred or will occur, customers tend to pursue simultaneity. We develop the one-sided Vickrey-Clarke-Groves (O-VCG) auction for the CLS problem. The proposed O-VCG auction realizes incentive compatibility (on the buy side), approximate allocative efficiency, budget balance, and individual rationality. We also prove that if buyers (firms) are substitutes, the utility of the third-party logistics (3PL) company (auctioneer) will be non-negative when it sets real transportation costs in the auction. The vehicle routing problem faced by the 3PL company is formulated as the lane covering problem with CLS requirements. Three effective heuristics are developed: Merge, Exchange, and Mutate. Our computational results show that the three operators are effective but sensitive to the bid duration. A Hybrid operator significantly outperforms each individual operator. We also numerically analyze the impacts of five key factors: the strategic behavior of the 3PL company, flexible due dates, the maximum bid duration, the radius of a city or region, and the number of depots.