Cost allocation in the establishment of a collaborative transportation agreement—an application in the furniture industry

Abstract

Transportation is an important part of the Canadian furniture industry supply chain. Even though there are often several manufacturers shipping in the same market region, coordination between two or more manufacturers is rare. Recently, important potential cost savings and delivery time reduction have been identified through transportation collaboration. In this paper we propose and test on a case study involving four furniture companies, a logistics scenario that allows transportation collaboration. Moreover, we address the key issue of cost savings sharing, especially when heterogeneous requirements by each collaborating company impact the cost-savings. To do so, we propose a new cost allocation method that is validated through a case study. Sensibility analysis and details about the actual outcome of the case study complete the discussion.

A competitive solution for cooperative truckload delivery

“…Multiple extensions of this solution have been proposed ever since. Audy et al (2010) extend the EPM by including additional constraints that ensure a minimum allocation of savings for all logistics providers. Liu et al (2010) directly incorporate the marginal contributions of players as weights into the EPM formulation.…”

An Educational Game in Collaborative Logistics

“…We also provide extra reading. For example, the papers by Audy et al (2010) and Lehoux et al (2009) are good complements to the game because they report on collaborative logistics cases. It is clear that this game does not cover all the important issues, but we believe that it contributes to students developing key competencies for establishing higher quality collaboration in logistics.…”

Issues in Collaborative Logistics

“…About 6% arises from better transportation planning within each company and another 8% comes from the actual cooperation. Audy et al (2008) analyses a potential collaboration between four furniture manufacturers. The aim is to optimize collectively the outbound transportation of their products to the US.…”

“…In logistics, this evaluation is mainly conducted using operational research planning and transportation models, which are sequentially used to solve the entity problem and the different coalitions' problems. Examples can be found in recent papers by Frisk et al (2006), Audy et al (2008), .…”