Consolidated Transport Service Pricing in Supply Hub in Industrial Park (SHIP) With Heterogeneous Manufacturers

Abstract

There is a growing number of industrial parks implementing supply hubs to provide shared logistics services for member manufacturers. Products from manufacturers could be temporarily stored at the supply hub in industrial park (SHIP), and consolidated into one or more vehicles to be delivered to their retail distribution centers. This article discusses how SHIP and heterogeneous manufacturers interact to optimize their decisions on consolidated transportation service pricing and consolidation schedules. An all-unit multiple-breakpoint quantity discount pricing scheme is adopted. This problem is modeled as a bilevel program where the SHIP is treated as the leader and manufacturers as followers. Optimal properties of the proposed model are analyzed and the global optimal solution is derived. Numerical studies are conducted to examine the effectiveness of this pricing scheme through comparing with the regular transportation price under various circumstances. The results show that the SHIP operator could always increase profit by using this pricing scheme, while manufacturers’ performances are not affected. Among heterogeneous manufacturers with various production capabilities and resources, the SHIP could gain the largest profit increase through adopting quantity discount pricing from medium-sized manufacturers.