Cost allocation in the establishment of a collaborative transportation agreement—an application in the furniture industry

Abstract

Transportation is an important part of the Canadian furniture industry supply chain. Even though there are often several manufacturers shipping in the same market region, coordination between two or more manufacturers is rare. Recently, important potential cost savings and delivery time reduction have been identified through transportation collaboration. In this paper we propose and test on a case study involving four furniture companies, a logistics scenario that allows transportation collaboration. Moreover, we address the key issue of cost savings sharing, especially when heterogeneous requirements by each collaborating company impact the cost-savings. To do so, we propose a new cost allocation method that is validated through a case study. Sensibility analysis and details about the actual outcome of the case study complete the discussion.

Keywords:

• collaboration
• cost allocation
• furniture industry
• game theory
• horizontal cooperation
• road transport

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Erratum: Cost allocation in the establishment of a collaborative transportation agreement—an application in the furniture industry

Acknowledgements

The authors thank Philippe Marier, FORAC, Charles Doucet, QFMA and the project leaders in the participating companies. The authors also acknowledge the financial support of the NSERC and the private and public partners of FORAC Research Consortium.