The role of Physical Internet in building trackable and sustainable logistics service supply chains: A game analysis

Abstract

The emergence of Physical Internet (PI) has profoundly changed the logistics supply chain paradigm. Logistics service providers (LSPs) could benefit from the improved logistics efficiency and environment sustainability if they finish the door-to-door services by themselves. However, in practice, door-to-door services are usually provided by both short-distance LSPs and long-distance LSPs, rather than a single LSP. And the short-distance LSP usually has private demand information, which has to be shared if the PI-enabled operational model is adopted. Therefore, how to coordinate LSPs' incentives regarding profit allocation and demand information sharing becomes the bottleneck of PI adoption. We thus build a logistics service supply chain model where differentiated logistics services are jointly provided by a short-distance LSP and a long-distance LSP. We find that, the long-distance LSP always benefits from PI because it can determine a more accurate service price with the short-distance LSP's shared demand information. However, the short-distance LSP's preference of PI depends on the degree of logistics efficiency improvement and the service competition intensity. When the logistics efficiency improvement is in a moderate range, the short-distance LSP prefers PI when the service competition intensity is either low or high. We further identify a “dilemma” where the environment sustainability is deteriorated under PI-enabled operational model.