Abstract
AbstractThis study uses the winner determination problem (WDP) to integrate auction transportation procurement with decisions related to production scheduling. The basic problem arises when a manufacturer has to clear a combinatorial auction to decide whether to cover transportation needs by using the in‐house fleet or to procure transportation through auction. Thus, the manufacturer should include an additional decision level by integrating the WDP with production scheduling to gain efficiency and achieve savings in the logistics system. To the best of our knowledge, this is the first time production and transportation procurement problems are being solved simultaneously in an integrated manner. The study proposes a mathematical formulation and develops two heuristic approaches for solving the integrated problem. Extensive computational experiments and sensitivity analyses are reported to validate the model, assess the performance of the heuristics, and show the effect of integration on total cost.
Highlights
AND LITERATURE REVIEWProduction and transportation are foundational tasks in designing and operating logistics systems
Researchers and practitioners worldwide are oriented toward integrating several aspects of the logistics system within a common solution framework to increase savings and competitiveness
We suggest two heuristic approaches, one based on the memetic algorithm and the other based on the decomposition technique
Summary
Production and transportation are foundational tasks in designing and operating logistics systems. This study deals with extending the winner determination problem (WDP) to integrate production scheduling with transportation procurement and planning at the operational level (see Figure 1). The first is the use of auctions for transportation procurement, which have great potential for up to 15% savings for shippers [52] This stream consists of solving three main optimization problems, as introduced by Caplice and Sheffi [11] (see Figure 2):. The WDP selects winners and assigns successful bids to carriers using cost minimization criteria While this problem has been extensively investigated in different contexts, it has received limited attention in the transportation sector [19].
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