wholesale price

information sharing

supply chain coordination

Transportation Research Part E Logistics and Transportation Review

• Investigate the logistics service outsourcing choice in a retailer-led supply chain. • The manufacturer prefers retailer providing logistics service, but retailers may not. • The variable cost-sharing contract hurts 3P service provider although it benefits other parties. • Retailer makes a win-win by bearing a part of the fixed cost and variable cost. Motivated by the practice, we investigate logistics service outsourcing choices in a retailer-led supply chain where the retailer offers logistics service by itself or outsources it to a third party logistics service provider. Results show that offering logistics service by the retailer is not always the optimal choice although it alleviates the double marginalization effect. Regarding the value of cost-sharing contracts in such a supply chain, we find that a variable cost sharing contract benefits the retailer but hurts the logistics service provider. When a part of fixed cost is shared by the retailer, a win–win outcome will be achieved.

Logistics service outsourcing choices in a retailer-led supply chain