Su Xiu Xu

Truthful, Budget-Balanced Bundle Double Auctions for Carrier Collaboration

This paper aims to propose effective auction mechanisms for the carrier collaboration problem with bilateral exchange, which is generally the problem of how to realize the potential of carrier collaboration over a bilateral exchange transportation network (e.g., a B2B e-commerce logistics environment). Carriers offer the lanes with the highest marginal costs for subcontracting, while they are allowed to bid on bundles of the lanes. We construct a bundle double auction (BDA) for the one-unit demand case in which the lane offered by each buyer (transportation service purchaser) is only required to be covered with one truckload once. The BDA mechanism realizes incentive compatibility, individual rationality, budget balance, and asymptotical efficiency. We then propose two mechanisms, called BDA-1 and BDA-2, for the multiunit demand case in which each buyer asks for one or multiple truckloads of transportation service. Both mechanisms are effective but differ in incentive compatibility and realized social wel...

Auction-based transportation procurement in make-to-order systems

This article presents an auction-based model for Transportation Service Procurement (TSP) in make-to-order systems. It is one of the first to integrate auction-based TSP and inventory. The underlying model is applicable in the general context of coordinating TSP and inventory decisions. Using the well-known Revenue Equivalence Principle, we formulate a dynamic programming problem. When no fixed auction costs occur, we establish the optimality of the state-dependent deliver-down-to allocation policy, which is essentially a state-dependent base-stock-type (S(x)-like policy). We characterize the property of the optimal state-dependent deliver-down-to level. When fixed auction costs apply, we establish the optimality of the state-dependent (s(x), S(x))-like policy. We show that the optimal allocation can be achieved by running a Vickrey–Clarke–Groves auction or a first-price auction with closed-form reserve prices. A symmetric equilibrium bidding strategy for each carrier can be easily computed. Our model is also extended to the case where each carrier has multi-unit supply. By mild technical modifications, all of the results derived in the infinite-horizon case can be extended to the finite-horizon case. Some key features of the finite-horizon case are discussed.

Headquarter-centered Common Order Management: a simulation approach

This paper considers the customer order management in a group corporation which consists of one headquarter (HQ) and several geographically dispersed and operationally semi-autonomous production subsidiaries. Two order management models are formulated. One is the Headquarter-centered Common Order Management (HQ-COM) where customer orders are processed by the HQ and then allocated to its subsidiaries. The other is Subsidiary-Autonomous Order Management (SD-AOM) where subsidiaries take and process customer orders relatively independent of each other. The two models are applied to study two situations, respectively. One situation is that the total quantity of customer orders exceeds the production capacity of each individual subsidiary so that the order has to be split before allocating amongst multiple subsidiaries. The other situation is that the quantity of selected customer orders is within the production capacity of a single subsidiary so that orders should be merged into one batch before allocating to one subsidiary. Different heuristics are proposed and a series of simulation experiments are conducted. The results show that HQ-COM outperforms SD-AOM in terms of both its performance and its robustness against the demand variability. This achievement is largely due to the effects of pooling of different customer orders and sharing of production capacity amongst subsidiaries.

Optimal auctions for transportation service procurement in an infinite horizon inventory system

This paper presents an auction-based model for transportation service procurement (TSP) in infinite horizon cases where orders are produced in the just-in-time pull mode. The underlying model is applicable in the general context of coordinating TSP and inventory decisions. Using the well-known Revenue Equivalence Principle, we formulate a dynamic programming problem. When no fixed auction costs occur, we establish the optimality of state-dependent deliver-down-to allocation policy, which is essentially of state-dependent base-stock type (S(x)-like policy). We also characterize the property of the optimal state-dependent deliver-down-to level. We show that the optimal allocation can be achieved by running a Vickrey-Clarke-Groves (VCG) auction or a first-price auction with closed-form reserve prices. A symmetric equilibrium bidding strategy for each carrier can be easily computed. Finally, we prove that the expected total discounted cost in a first-price auction is less than that in a VCG auction, when carriers are risk-averse.