An order allocation model in multi-period logistics service supply chain based on cumulative prospect theory and capacity matching constraint

Abstract

By considering a two-echelon supply chain that consists of a logistics service integrator (LSI) and several functional logistics service provider (FLSP), this study builds a comprehensive subjective utility (CSU) function of FLSP in multi-period based on cumulative prospect theory and establishes an order allocation model in multi-period logistics service supply chain. This model considers three goals: to minimise the cost of LSI, to maximise the satisfaction of the FLSP and to maximise the capacity matching degree among different logistics capacities. This study uses an improved technique for order performance by similarity to ideal solution to obtain the optimal solution. A numerical example is given by software MATLAB 7.8. The effects of the behavioural parameters of FLSPs on order allocation are also discussed. When the LSI allocates orders, the FLSP, who has larger ratio of loss to gain range by the sensitivity decreasing rate, should be selected to obtain a large value of CSU. No obvious rule is found for the influence of the loss aversion coefficient of FLSPs on the CSU of FLSPs in a multi-period.

Keywords:

• cumulative prospect theory
• logistics service supply chain
• multi-period
• order allocation
• capacity matching constraint

Funding

This research is supported by the National Natural Science Foundation of China [grant number 71372156], supported by Humanity and Social Science Youth foundation of Ministry of Education of China [grant number 2013YJC630098], sponsored by China State Scholarship Fund and Independent Innovation Foundation of Tianjin University. The suggestions of the reviewers and Miss Yang Liu from Tianjin University are also gratefully acknowledged.