Shapley value cost allocation model for multimodal freight transport carriers

Abstract

The downstream petroleum products distribution is beset with significant challenges due to ageing pipeline infrastructure, pipeline vandalism and other logistical constraints. These challenges have given rise to soaring pump prices of premium motor spirit (PMS), product shortages and unavailability across some locations in Nigeria. Thus, deploying alternative transport modes for PMS distribution is explored to improve product distribution efficiency. The decision to combine inland waterway transport (instead of pipeline network) and road transport modes would activate the intrinsic advantages inherent in the multimodal transport system. However, the efficiency outcome of using multi-modes may be eroded if the multimodal transport operators compete (instead of collaborating) in service provisions. This research investigated cost efficiency in cooperative collaboration among multimodal transport carriers. We proposed collaboration among six multimodal transport operators. The aim of encouraging such a large-scale coalition (S) is the expectation that costs emanating from their joint operation would be reduced. We applied the Shapley value cost allocation method to distribute the costs of operation and profit to the collaborators. After the analysis, we observed that the unit cost for coalition S1 was reduced by N17.16 (5.10 %) million naira. Similarly, we observed respective reductions in unit costs for coalitions S2, …, S10. We observed a reduction in cost by N107.84 million naira, which represents a 6.15 % reduction in total unit cost for the multimodal transportation carriers. Thus, the observed cost efficiency represents savings due to distribution chain efficiency if the multimodal transport carriers collaborate to improve product availability. Working as a coalition would offset PMS pump price variation attributable to distribution chain inefficiency.