Collaborative distribution between two logistics service providers

Mathematical models are described for collaborative distribution between two logistics service providers (LSPs). We find that (a) collaborative distribution is conditionally profitable for LSPs, and the conditions for cooperation are given; (b) LSPs save more costs primarily by shortening the delivery distance and decreasing delivery speed; (c) collaborative distribution makes the delivery time either shorter or longer; (d) if one LSP changes its equilibrium price, the total profit conditionally increases, and this condition is related to demand structure and delivery cost structure; and (e) collaborative distribution can solve the personalization of delivery time and reduce pollution to some extent. For the companies sharing the incremental profit, we characterize a transfer payment contract that includes fixed and variable fees. Our findings suggest that LSPs should adopt collaborative distribution to formulate an optimal distribution plan to save costs and shorten the delivery time, and should select partners with smaller cost parameters and both different and moderate speeds. In addition, warehouse and vehicle sharing are beneficial to the implementation of collaborative distribution.