Common Contracts

Multi-period distribution networks with purchase commitment contracts

May 18th, 2022

• Filed
  May 18th, 2022

Abstract. Retailers which deliver products directly to their customer locations often rely on Logistics Service Intermediaries (LSI) for order management, warehousing, transportation and distribution services. Usually, the LSI acts as a shipper and subcontracts the transportation to carriers for long- haul and last-mile delivery services. All agents interact and are connected through cross-docking facilities. As the demand from customers may vary significantly over time, the shipper’s requirements for transportation evolve accordingly at the tactical level. This creates opportunities for the LSI to take advantage of medium-term contracts with the carriers at prices lower than those offered by the spot market. In this article, we propose a MILP formulation for the multi-period planning problem with minimum purchase commitment contracts faced by the LSI. The study focuses on designing dynamically, at a tactical level, a suitable network of cross-docking facilities and related transportat