Abstract
Logistics service supply chain (LSSC) is a new type of service supply chain. This paper investigates the channel coordination issue in a two-echelon LSSC composed of one logistics service integrator (LSI) and one functional logistics service provider (FLSP) under fairness concerns. The models for a reservation price-only contract under disadvantageous inequality and advantageous inequality are established, respectively, in which the procurement cost, the potential shortage cost, and the operation cost are considered under stochastic market demand. Based on this model, the LSI’s optimal reservation quantity can be determined. Furthermore, we analyze the impact of fairness concerns and the related costs on channel performance and channel coordination. The results are presented in four aspects:(1)channel coordination of the LSSC can be achieved under certain conditions when the LSI experiences advantageous inequality;(2)the spiteful behavior of the LSI leads to the reduction of the channel profit, and channel coordination cannot be achieved when the LSI suffers from disadvantageous inequality;(3)the LSI’s reservation quantity and the channel profit are affected by the LSI’s fairness concerns;(4)motivated by the concerns of fairness, the LSI’s reservation quantity is related not only to his procurement cost and shortage cost but also to the FLSP’s operation cost.
Highlights
Logistics service supply chain (LSSC) refers to a logistics service network structure which is connected from the front-end functional logistics service providers (FLSPs) to the logistics service integrators (LSIs) and to customers [1, 2]
The results are presented in four aspects: (1) channel coordination of the LSSC can be achieved under certain conditions when the LSI experiences advantageous inequality; (2) the spiteful behavior of the LSI leads to the reduction of the channel profit, and channel coordination cannot be achieved when the LSI suffers from disadvantageous inequality; (3) the LSI’s reservation quantity and the channel profit are affected by the LSI’s fairness concerns; (4) motivated by the concerns of fairness, the LSI’s reservation quantity is related to his procurement cost and shortage cost and to the FLSP’s operation cost
Proposition 3 indicates that when the LSI suffers from disadvantageous inequality, his optimal reservation quantity is related to his procurement cost and shortage cost and to the FLSP’s operation cost
Summary
Logistics service supply chain (LSSC) refers to a logistics service network structure which is connected from the front-end functional logistics service providers (FLSPs) to the logistics service integrators (LSIs) and to customers (manufacturers or retailers) [1, 2]. Most of the existing studies about the fairness analysis in supply chain rarely consider the procurement cost, the potential shortage cost, and the salvage value under stochastic market demand, which are major concerns that could affect the channel members’ decisions in reality [31,32,33]. We derive the closed-form expression of the optimal reservation quantity and investigate the impacts of fairness concerns and the related costs (e.g., the LSI’s procurement cost and shortage cost and the FLSP’s operation cost) on channel performance and channel coordination. The major contributions of our study to the research are as follows: we introduce fairness concerns into a two-echelon LSSC and investigate the impacts of fairness concerns on the LSI’s reservation quantity, the channel profit, and the channel coordination.
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