IEOR - Designing a More Efficient World

Centralized and Decentralized Warehouse Logistics Collaboration

Publication Date: August 27, 2019

DING AND P. KAMINSKY. 2019.Centralized and Decentralized Warehouse Logistics Collaboration.Manufacturing & Service Operations Management. Extended version available here


Abstract:

Problem definition: We bound the value of collaboration in a decentralized multisupplier multiretailer setting, where several suppliers ship to several retailers through a shared warehouse, and outbound trucks from the warehouse contain the products of multiple suppliers. Academic/practical relevance: In an emerging trend in the grocery industry, multiple suppliers and retailers share a warehouse to facilitate horizontal collaboration, lower transportation costs, and increase delivery frequencies. Thus far, these so-called mixing and consolidation centers are operated in a decentralized manner, with little effort to coordinate shipments from multiple suppliers with shipments to multiple retailers. Facilitating collaboration in this setting would be challenging (both technically and in terms of the level of trust that would be necessary), so it is useful to understand the potential gains of collaboration.