Unmanned vehicle distribution capacity sharing with demand surge under option contracts

Shuai Liu, Guowei Hua, T. C.E. Cheng, Jingxin Dong

Research output: Journal article publicationJournal articleAcademic researchpeer-review

1 Citation (Scopus)

Abstract

Big promotions of online retailers in different shopping festivals often lead to an overwhelming demand surge in parcel delivery. Besides using its own distribution capacity, online retailers usually adopt capacity sharing to cope with the demand surge. Because of the low cost of unmanned distribution, online retailers can adopt unmanned vehicle distribution (UVD) capability sharing. We examine an online retailer's UVD capacity sharing strategies with a logistics firm under demand surge. We develop sharing models under the unilateral and bidirectional option contracts, from which we derive the optimal ex-ante and ex-post sharing strategies and the corresponding initial, option, and total sharing quantities. We find that if the online retailer wants to secure more UVD capacity in advance, it should use the bidirectional option; otherwise, the unilateral option. Moreover, both the initial sharing and total sharing quantities under the unilateral option are greater than those under the bidirectional option, which however can increase the flexibility of the online retailer. We conduct numerical studies to ascertain the effects of the model parameters on the optimal outcomes. The numerical results show that the degree of demand fluctuation has a greater impact on the initial and total sharing quantities under the unilateral option, and has a greater impact on the option sharing quantity under the bidirectional option. Finally, comparing self-built UVD capacity and UVD capacity sharing, we generate insights to provide guidance for the operations of online retailers.

Original languageEnglish
Article number102320
JournalTransportation Research Part E: Logistics and Transportation Review
Volume149
DOIs
Publication statusPublished - May 2021

Keywords

  • Bidirectional option
  • Capacity sharing
  • Demand surge
  • Unilateral option
  • Unmanned vehicle distribution

ASJC Scopus subject areas

  • Business and International Management
  • Civil and Structural Engineering
  • Transportation

Cite this