Title

A Carrier Collaboration Problem for Less-Than-Truckload Carriers: Characteristics and Carrier Collaboration Model

Document Type

Article

Abstract

The adoption of e-commerce and information communication technologies by carriers has generated new business and operational paradigms. Consequently, collaboration between carriers has emerged as a deployable alternative for small- to medium-sized less-than-truckload (LTL) carriers to improve fleet usage. This paper addresses a single carrier collaboration problem (SCCP) in which an LTL carrier of interest seeks to collaborate with other carriers by acquiring capacity to service excess demand. The SCCP problem is addressed from a static (planning) perspective to gain insights on the potential of the collaboration concept for carriers, and its ability to alleviate the effects of increased fuel prices. The study also explores the impact of the degree of collaboration represented by the collaborative discount rate on the carrier of interest. The collaborative strategies are compared to the non-collaboration option represented by a short-term leasing strategy, and the relative benefits of collaboration are computed. Single and multiple product SCCP problems are formulated as binary (0-1) multi-commodity minimum cost flow problems and are solved using the branch-and-cut algorithm. Experiments are conducted for two transfer cost policies to illustrate insights on: the computational performance under varying factors, the effects of different degrees of collaboration, and the impacts of energy costs on the potential for collaboration. The results illustrate that a higher degree of collaboration leads to increased benefits for the carrier of interest and reduced dead-heading for the collaborating carriers. Collaboration also can be critical for the survival of the small- to medium-sized LTL carriers as energy prices escalate given the small industry-wide profit margins.