Title: Outsourcing logistics channel coordination with logistics service levels dependent market demand

Authors: Qing Wu, Bin Dan

Addresses: College of Economics and Business Administration, Chongqing University, Chongqing 400044, PR China; School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 610054, PR China. ' College of Economics and Business Administration, Chongqing University, Chongqing 400044, PR China

Abstract: The purpose of this paper is to resolve the coordination problems of an outsourcing logistics channel constituted by a Third Party Logistics Service Provider (TPLSP) and a client. High levels of logistics service that the TPLSP provides have a significant impact on customer demand for the client|s products. When customer demand is not influenced by levels of logistics service, a properly designed revenue-sharing contract can achieve channel coordination and a win-win outcome. When customer demand is influenced by levels of logistics service, a properly designed combination contract with revenue-sharing and service-cost-sharing can achieve channel coordination and a win-win outcome. Under a revenue-sharing contract and a combination contract with revenue-sharing and service-cost-sharing, the TPLSP needs to undertake some inventory risk.

Keywords: outsourcing; logistics services; incentives; channel coordination; revenue sharing; service cost sharing; game theory; third party logistics; 3PL service providers; TPLSP; service levels; market demand.

DOI: 10.1504/IJSTM.2009.022525

International Journal of Services Technology and Management, 2009 Vol.11 No.2, pp.202 - 221

Published online: 14 Jan 2009 *

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