Managing third-party logistics under uncertainty: A decision scheme and managerial implications

Lawrence C. Leung, Wai Hung Wong, Yer Van Hui, Yulai Wan

Research output: Journal article publicationJournal articleAcademic researchpeer-review

10 Citations (Scopus)

Abstract

Airfreight forwarders design shipment plans to ensure that client shipments are delivered on time and at a low cost. Reliability of a shipment - the probability of delivering a shipment on time - is a critical consideration in shipment planning. We propose a three-phase decision scheme for forwarders to develop, evaluate, and revise their shipment plans, such that plans can meet reliability targets at a reasonably low cost. In phase one, a tentative shipment plan is determined using a Tabu algorithm. In phase two, the plan's reliability is examined by a simulation model. In phase three, we design specific actions to revise an unsatisfactory plan. To explore managerial implications of uncertainty in third-party logistics, we solved many cases of shipment plan using real-life air cargo routes and data. It is observed that consolidation - while saves cost - can have undesirable impact on shipment reliability as it allows uncertain elements of one shipment to affect another. Integration, although not as cost-efficient, enhances shipment reliability. Compared to results obtained from simulating industry practice, the proposed scheme is able to perform consistently better. Many issues of practical concern are discussed.
Original languageEnglish
Pages (from-to)630-644
Number of pages15
JournalInternational Journal of Production Economics
Volume145
Issue number2
DOIs
Publication statusPublished - 1 Oct 2013
Externally publishedYes

Keywords

  • Airfreight forwarder
  • Consolidation
  • Integration
  • Logistics
  • Shipment planning
  • Simulation

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering
  • Business, Management and Accounting(all)
  • Management Science and Operations Research
  • Economics and Econometrics

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