CORMSIS seminar by Lotte Verdonck Event

Allocating collaborative costs for the cooperative facility location problem

Transportation companies operating at the same level of the supply chain may cooperate horizontally to increase their efficiency levels. One approach to horizontal carrier collaboration that has not been investigated yet is the sharing of warehouses or distribution centres with partnering organisations. This problem may be classified as a cooperative facility location problem and can be formulated as a mixed integer linear program (MILP). To ensure cooperation sustainability, the collaborative costs need to be allocated fairly to the different participants. In current cooperative location literature the allocation problem is solved exclusively by applying game theory. As basic game theoretic allocation mechanisms often lack sought-after properties in the context of logistics cooperations, this paper applies two additional cost allocation techniques to the facility location problem. The effects of the cost allocation techniques are analysed and compared by means of a U.K. case study. In addition, the influence of fixed distribution centre costs and different cooperation structures on cost allocation results is investigated.