Modeling and analysis of an auction-based logistics market |
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Authors: | Semra Ağralı Barış Tan Fikri Karaesmen |
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Affiliation: | 1. Department of Industrial and Systems Engineering, University of Florida, 303 Weil Hall, Gainesville, FL 32611, USA;2. Graduate School of Business, Koç University, Rumeli Feneri Yolu, 34450 Istanbul, Turkey;3. Department of Industrial Engineering, Koç University, Rumeli Feneri Yolu, 34450 Istanbul, Turkey |
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Abstract: | We consider a logistics spot market where the transportation orders from a number of firms are matched with two types of carriers through a reverse auction. In the spot market, local carriers compete with in-transit carriers that have lower costs. In order to analyze the effects of implementing a logistics spot market on these three parties: firms, local carriers, and in-transit carriers and also the effects of various system parameters, we develop a two-stage stochastic model. We first model the auction in a static setting and determine the expected auction price based on the number of carriers engaging in the auction and their cost distributions. We then develop a continuous-time Markov chain model to evaluate the performance of the system in a dynamic setting with random arrivals and possible abandonment of orders and carriers. By combining these two models, we evaluate the performance measures such as the expected auction price, price paid to the carriers, distribution of orders between local and in-transit carriers, and expected number of carriers and orders waiting at the logistics center in the long run. We present analytical and computational results related to the performance of the system and discuss operation of such a logistics spot market in Turkey. |
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Keywords: | Logistics Markov chain models Performance evaluation Reverse auctions |
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