Sustainable vehicle allocation decisions under a vertical logistics collaboration setting

Abstract

Enhancing vehicle utilization through a collaborative logistics approach allows businesses to contribute to the three pillars of sustainability by reducing fuel consumption and emissions, enhancing profit margins, and increasing customer satisfaction. This paper aims to introduce an Integer Linear Programming model for solving a vehicle allocation problem within a proposed vertical logistics collaboration setting. In this collaboration setup, production capacity allocation decisions are jointly made by collaborating customers and the logistics service provider, in order to create a more balanced and profitable logistics plan for all involved parties. Through the application of the proposed mathematical model, our numerical analyses illustrate the effects of the vertical logistics collaboration on the performance of transportation operations, including improved vehicle utilization rate and increased satisfied demand amount. Besides, we analyze the outputs of this operation related to the economic (by focusing on profit growth), environmental (by measuring the reduction in emissions), and social (by assessing the discounted transportation costs for customers) aspects of sustainability. To the best of our knowledge, no current study in the literature has established the vehicle allocation problem in the context of vertical logistics collaboration across all three sustainability pillars at the same time. The model can also serve as a tool for evaluating the potential economic, environmental, and social benefits arising from vertical collaboration and joint projects with customers, along with the support offered to logistics decisions.