Abstract
A well-designed supply chain configuration yields positive net value by creating benefits, reducing costs, and improving firm’s profitability. Nowadays, supply chain also includes third-party logistics service providers (3PLs) which are usually contracted by the supplier or manufacturer to supply integrated logistics services to the buyers or consumers. Efficient utilization of 3PLs is expected to bring benefits such as reducing total costs thereby maximizing profits. The purpose of this research paper is to propose a multi-objective optimization model to derive an integrated net present value-based supply chain configuration for a manufacturing enterprise incorporating the effect of third-party logistics service providers in an uncertain demand scenario. Firstly, the paper presents the conceptual framework considering the third-party logistics service providers for a manufacturing enterprise and thereafter a multi-objective optimization model is proposed to find a compromise solution to NPV maximization and total cost minimization. The model also makes use of Chance Constraint methodology to handle demand uncertainties.
Similar content being viewed by others
Notes
Armstrong and Associates, 2015, Online 3PL guide report screen, http://www.3plogistics.com/product/whos-who-in-logistics-online-guide/.
Gartner (2013) The magic quadrant for global third-party logistics providers, https://www.gartner.com/doc/2371015/magic-quadrant-global-thirdparty-logistics.
References
Agatz, N., A.N. Campbell, and M. Fleischmann. 2013. Revenue management opportunities for internet retailers. Journal of Revenue and Pricing Management 12 (2): 128–138.
Aggarwal, R. 2018. A chance constraint based low carbon footprint supply chain configuration for an FMCG product. Management of Environmental Quality: An International Journal 29 (6): 1002–1025. https://doi.org/10.1108/MEQ-11-2017-0130.
Aggarwal, R., and S. Singh. 2015. Chance constraint-based multi-objective stochastic model for supplier selection. International Journal of Advanced Manufacturing and Technology 79: 1707–1719.
Aggarwal, R., S. Singh, and P.K. Kapur. 2018. Integrated dynamic vendor selection problem considering time varying stochastic data. Benchmarking: An International Journal 25 (3): 777–796.
Aguezzoul, A. 2014. Third-party logistics selection problem: A literature review on criteria and methods. Omega 49: 69–78.
Andersson, D., and A. Norrman. 2002. Procurement of logistics services—a minute’s work or a multi-year project? European Journal of Purchasing and Supply Management 8: 3–14.
Azaron, A., K.N. Brown, S.A. Tarim, and M. Modarres. 2008. A multi-objective stochastic programming approach for supply chain design considering risk. International Journal of Production Economics 116: 129–138.
Brandenburg, M. 2015. Low carbon supply chain configuration for a new product—A goal programming approach. International Journal of Production Research 53 (21): 6588–6610. https://doi.org/10.1080/00207543.2015.1005761.
Brandenburg, M., H. Kuhn, R. Schiling, and S. Seuring. 2014. Performance and value oriented decision support for supply chain configuration. Logistics Research 7 (1): 1–16. https://doi.org/10.1007/s12159-014-0118-8.
Bilsel, R.U., and A. Ravindran. 2011. A multi-objective chance constrained programming model for supplier selection under uncertainty. Transportation Research Part B 45: 1284–1300.
Charnes, A., and W. Cooper. 1959. Chance-constrained programming. Management Science 5: 73–79.
Charnes, A., and W. Cooper. 1963. Deterministic equivalents for optimizing and satisfying under chance constraints. Operations Research 11: 18–39.
Hertz, S., and M. Alfredsson. 2003. Strategic development of third party logistics providers. Industrial Marketing Management 32 (2): 139–149.
Ignizio, J.P. 1976. Goal programming and extensions. Lexington, MA: Lexington Books.
Jharkharia, S., and R. Shankar. 2007. Selection of logistics service provider: An analytical network process (ANP) approach. Omega 35 (3): 274–289.
Lindsey, C., A. Frei, H.S. Mahmassani, and T. Keating. 2014. Predictive analytics to improve pricing and sourcing in third-party logistics operations. Transportation Research Record Journal of the Transportation Research Board 2410: 123–131. https://doi.org/10.3141/2410-14.
Mothilal, S., A. Gunasekaran, S.P. Nachiappan, and J. Jayaram. 2012. ‘Critical success factors of supply chain management: A literature survey and Pareto analysis. A Journal of Business 10 (2): 2407–2422.
Pan, F., and R. Nagi. 2010. Robust supply chain design under uncertain demand in Agile Manufacturing. Computers & Operations Research 3: 668–683.
Selim, H., and I. Ozkarahn. 2008. A supply chain distribution network design model: An interactive fuzzy goal programming-based solution approach. International Journal of Advanced Manufacturing Technology 36: 401–441.
Soinio, J., K. Tanskanen, and M. Finne. 2012. How logistics service providers can develop value-added services for SMEs: A dyadic perspective. International Journal of Logistics Management 23 (1): 31–49. https://doi.org/10.1108/09574091211226911.
Zhang, M., and P. Bell. 2012. Price fencing in the practice of revenue management: An overview and taxonomy. Journal of Revenue and Pricing Management 11: 146–159.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Aggarwal, R., Singh, S.P. An integrated NPV-based supply chain configuration with third-party logistics services. J Revenue Pricing Manag 18, 367–375 (2019). https://doi.org/10.1057/s41272-019-00200-x
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1057/s41272-019-00200-x