Modeling the Pre Auction Stage The Truckload Case

Abstract

In transportation service procurement, shipper and carriers cost functions for serving a pair of origin-destination points, usually called lanes, are highly dependent on the opportunity to serve neighboring lanes. Traditional single-item auctions do not allow to capture this type of preferences. On the contrary, they are perfectly modeled in combinatorial auctions where bids on bundles of items are allowed. In transportation service procurement the management of a combinatorial auction can be seen as a three-stage process. Each stage involves several complex decision making problems. All such problems have relevant practical implications but only some of them have received attention in the literature. In the present paper we focus on the pre-auction stage for transportation procurement. In particular, we analyze the problem of a shipper who has to decide between undertaking and/or outsourcing (through an auction) his transportation requests. The problem has never been analyzed before.We propose two different models for the problem in the truckload case and provide their computational comparison on randomly generated instances.