Facing market disruptions: values of elastic logistics in service supply chains

Tsan Ming Choi

Research output: Journal article publicationJournal articleAcademic researchpeer-review

10 Citations (Scopus)

Abstract

Market disruptions are commonly seen nowadays which directly affect demand. However, in logistics service supply chains, service capacity suppliers and service providers usually have to prepare logistics-service-capacity before demand is known. In this paper, we explore a logistics service supply chain with which the logistics-service provider (LP) has to decide the quantity of capacity to reserve to satisfy future demand in the upcoming season, which depends on whether market disruption occurs or not. The optimal capacity planning policy is determined and the impacts brought by the chance of market disruption are uncovered. Then, we consider the scenario with ‘elastic logistics’ in which capacity can be adjusted after the market state is known. We analytically establish the corresponding optimal dynamic policy and prove that it helps to stop the ripple effect from appearing. We explore the value of elastic logistics and propose conditions and measures to achieve Pareto improvement in the supply chain upon the adoption of elastic logistics. We extend the analysis to the case with the risk-averse LP and uncover that our qualitative findings remain robust, irrespective of the LP’s risk attitude.

Original languageEnglish
JournalInternational Journal of Production Research
DOIs
Publication statusAccepted/In press - 1 Feb 2020

Keywords

  • elastic logistics
  • market disruptions
  • ripple effect
  • risk aversion
  • service capacity
  • service supply chain systems
  • supply chain management

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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