Shipper-carrier cooperation in outsourcing logistics via contract and execution

The thesis studies the shipping contract and the process of execution aiming at enhancing shipper-carrier cooperation and communication in the shipping process. Free cancellation of shipment booking causes conflict in interests of carrier and shipper and prevents optimization techniques from being used. Therefore, a new contract form with a discount term is proposed to benefit both shipper and carrier. The discounted freight rate is offered only for early confirmed booking which requires zero cancellation. The discount allows the shipper to reduce shipping cost and get a higher service level, while the use of confirmed booking helps carrier to stabilize demand and enables better revenue management and operation planning. Two stochastic models are developed to study shipper’s behavior with single carrier. The first model minimizes shippers shipping cost with the optimal confirmed booking volume being calculated from the distribution of show-up volume. An algorithm is developed to find the distribution, followed by the proof of strongly consistence. The second model adds the consideration of service level. We prove that the booking decision and shipment assignment are independent and thus solvable like Model 1. Numerical results demonstrate the impacts of demand characteristics on shipper’s booking behavior, showing that the optimal volume of confirmed booking reveals shipment show-up probability. For the carrier, a small discount can be enough to encourage the shipper to use confirmed booking. In the multiple-carrier problem, a new booking and assignment policy is designed for the shipper to make decisions when some carriers offer discounts for confirmed booking and other carriers do not. The proposed policy is proved to be feasible and satisfying the MQC requirement, while enabling the shipper to make the best use of the discount. The new policy shifts the no-show risk of demand from participating carriers to non-participating carriers. This forms a strategic game for the carriers and pushes them to participate in the new contract, so that in the unique Nash Equilibrium, the shipper as the creator of the game can minimize its total cost as all carriers participate