Auction-based coopetition in the landside air cargo supply chain

Abstract

Increased competitiveness with other transport systems and declining operation margins have motivated freight forwarders in the air cargo transport industry to look into horizontal collaboration. This paper focuses on developing a fully integrated five-phase auction-based coopetition model, a form of horizontal collaboration where competition is preserved. A combinatorial auction is used to exchange transportation requests without having to reveal critical company information. Freight forwarders submit requests into an auction pool, where they are grouped into attractive bundles by a central planner and offered for auction. The request selection and bundling procedures are based on the time windows of the request deliveries. A freight forwarder’s bid on each bundle is equal to the marginal profit of that bundle, which is obtained by solving two NP-hard routing problems with a simulated annealing and large neighborhood search meta-heuristic. A unique aspect of the auction is that the dock capacity of the ground handlers is taken into account, which helps to alleviate truck congestion at the ground handlers. The potential of the auction-based coopetition model is shown for an air cargo supply chain scenario. There is a clear increase in profitability for the collaborating freight forwarders because the auction model decreases the transportation costs for the entire coalition. This cost reduction is achieved by an increase in transport efficiency, while the collaboration disadvantages, as seen in the literature, are limited.