An emergency order allocation model based on multi‐provider in two‐echelon logistics service supply chain
Authors: Wei‐hua Liu , Xue‐cai Xu , Zheng‐xu Ren , Yan Peng 
Published: October 2011

Purpose

On one side, the purpose of this paper is to numerically analyze the emergency order allocation mechanism and help managers to understand the relationship between the emergency coefficient, uncertainty and emergency cost in two‐echelon logistics service supply chain. On the other side, the purpose of this paper is to help managers understand how to deal with the problem of order allocation in the two‐echelon logistics service supply chain better in the case of emergency.

Design/methodology/approach

The paper presents a multi‐objective planning model for emergency order allocation and then uses numerical methods with LINGO 8.0 software to identify the model's properties. The application of the order allocation model is then presented by means of a case study.

Findings

With the augment of uncertainty, the general cost of logistics service integrator (LSI) is increasing, while the total satisfaction of all functional logistics service providers (FLSPs) is decreasing, as well as the capacity reliability; at the same time the emergency cost coefficient is closely correlative with the satisfaction and general penalty intensity of FLSPs; finally, the larger the emergency cost coefficient is, the more satisfaction of FLSPs, but the capacity reliability goes up first and down later.

Research limitations/implications

Management should note that it is not better when emergency cost coefficient is bigger. The general satisfaction degree of FLSP increases with the augment of emergency cost coefficient, but there is an upper limit of the value, i.e. it will not increase indefinitely with the augment of emergency cost coefficient. This paper also has some limitations. The optional emergency cost coefficient only adopted a group of data to analyze while the trend of the reliability of logistics capacity needs to be further discussed. In addition, the algorithm of emergency order allocation model in the case of multi‐objective remains to be solved.

Practical implications

Under emergency conditions, LSIs can adopt this kind of model to manage their FLSPs to obtain the higher logistics performance. But LSIs should be careful selecting emergency cost coefficient. In accordance with different degrees of emergency logistics demand, LSIs can determine reasonable emergency cost coefficient, but not the bigger, the better, on the premise that LSIs acquire maximum capacity guarantee degree and overall satisfaction degree of FLSPs. FLSPs can make contract bargaining of reasonable emergency coefficient with LSIs to make both sides get the best returns and realize the benefit balance.

Originality/value

Many studies have emphasized the capacity allocation of manufactures, order allocation of manufacturing supply chain and scheduling model of emergency resources without monographic study of supply chain order allocation of logistics service. Because the satisfaction degree of FLSPs the cost of integrators needs to be considered in the process of order allocation, and the inventory cost of capacity does not exist, it is different from the issue of capacity allocation planning of manufacture supply chain. Meanwhile, the match of different kinds of logistics service capacity must be considered for the reason of the integrated feature of logistics service. Additionally, cost is not the most important decision objective because of the characteristics of demand uncertainty and weak economy. Accordingly, this paper considers these issues.