A Determination Method of Optimal Customization Degree of Logistics Service Supply Chain with Mass Customization Service

Abstract

Customization degree is a very important field of mass customization. Its improvement could enhance customer satisfaction and further increase customer demand while correspondingly it will increase service price and decrease customer satisfaction and demand. Therefore this paper discusses how to deal with such issues in logistics service supply chain (LSSC) with a logistics service integrator (LSI) and a customer. With the establishment of customer demand function for logistics services and profit functions of the LSI and the customer, three different decision modes are proposed (i.e., customization degree dominated by LSI, customization degree dominated by customer, and customization degree decided by concentrated supply chain); many interesting findings are achieved. Firstly, to achieve customization cooperation between LSI and customer, measures should be taken to make the unit increase cost of the customized logistics services lower than a certain value. Secondly, there are differences between the optimal customization degree dominated by LSI and that dominated by customer. And in both cases, the dominator could realize more profit than the follower. Thirdly, with the profit secondary distribution strategy, the modified decentralized decision mode could accomplish the maximum profit achieved in centralized decision mode and meanwhile get the optimal customization degree. Hindawi Publishing Corporation

Revenue-Sharing Contract Models for Logistics Service Supply Chains with Mass Customization Service

“…Liu researched the method of determining an optimal customized level in a logistics service supply chain. They proposed three different decision-making modes for a customized level (the LSI decides the customized level; the customer decides the customized level, customized level decision of centralized supply chain), and these models discussed the reaction of profits of the LSI, customers, and the whole supply chain under different decision-making modes with the change of customized level, respectively [7]. Overall, most of MC research on customized levels is focused on product supply chain currently, but there is little research on service supply chains.…”

“…In order to explore the effect of different customer's customized level on a revenue-sharing contract, as in Liu et al 's study [7], assuming that customized level is a variable ( > 0), follows a kind of distribution which is not sure, and its distribution function is ( ) and probability density function is ( ). Since the customized level is a random variable, and it will change with different customers, so, referring to Liu et al [7], we assume that is subject to a certain distribution. Assumption 2.…”

“…Assumption 2. It is supposed that there is a correlation between customer demand and customized level [7,24], which is assumed as ( ) = 0 + − (1/2)ℎ 2 . We assume the average value of ( ) is and variance is 2 .…”

“…In practice, higher customized level may not lead to the increase of the customer demand, because too high customized level will increase the service price and finally will reduce the customer satisfaction. Referring to [7,24], the demand function is set as ( ) =…”

“…Because of the capacity of providing scale service for multiple customers and providing customized service for individuals, mass customized service has dual characteristics of a scale effect and a customized effect. It has been applied in many industries such as insurance services [6], logistics services [7], and air services [8]. Under the environment of MCLS, in order to meet the customized demand of clients, downstream LSIs and upstream FLSPs have to address the coordination and profit distribution issue.…”