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Joint optimal decision of the shared distribution system through revenue-sharing and cooperative investment contracts

Qiang Wei (School of Statistics, Southwestern University of Finance and Economics, Chengdu, China)
Sheng Li (School of Statistics, Southwestern University of Finance and Economics, Chengdu, China) (School of Management, Chengdu University of Traditional Chinese Medicine, Chengdu, China)
Xinyu Gou (School of Business Administration, Southwestern University of Finance and Economics, Chengdu, China)
Baofeng Huo (College of Management and Economics, Tianjin University, Tianjin, China)

Industrial Management & Data Systems

ISSN: 0263-5577

Article publication date: 23 November 2018

Issue publication date: 29 March 2019

513

Abstract

Purpose

The rapid development of e-commerce has caused not only explosive growth of the express delivery industry, but also ever-greater operational pressures. Models from the sharing economy may provide new ideas for operational improvement. The purpose of this paper is to consider an optimization method that reduces costs and increases efficiency. The proposed method enables a shared distribution system based on revenue-sharing and cooperative investment contracts.

Design/methodology/approach

The authors design a two-echelon supply chain (SC) of the shared distribution system with one shared distribution company and N express companies. In this SC, the express companies provide only inter-city transportation, and they outsource internal-city transportation to a shared distribution company. This distribution system differs from that of the traditional express delivery industry. The traditional system of delivery requires large numbers of empty trips (with no load to deliver), because the operating mode of urban distribution has been the franchise. To offer greater efficiency and performance, the authors introduce the sharing economy mode of express delivery. The authors examine the potential of a joint optimal decision-making strategy that involves revenue-sharing and cooperative investment contracts based on an order flow proportion (OFP) and a revenue-sharing factor (RSF). In this shared distribution system, the most important innovation is that all of the express companies jointly invest in and establish a shared distribution company based on OFP or RSF principles.

Findings

The profitability of an SC with revenue-sharing contracts based on an OFP system is much higher than that of a decentralized SC, and it is very close to the profitability of a centralized SC. In SCs with revenue-sharing contracts that are based on RSFs, there are many possible combinations of RSFs that can increase the overall profitability. The analyses indicate that the OFP system offers the best solution in designing revenue-sharing contracts based on RSFs.

Practical implications

This study indicates that revenue-sharing contracts based on both OFP and RSF principles can increase overall SC returns by 0.21 to 0.44 percent. In sum total, this improvement could mean a 0.84 to 1.76bn Yuan increase in revenues for the 400+ bn-Yuan express delivery industry.

Originality/value

The authors find that a combination of equity investment and SC coordination contracts makes the cooperation between SC members much more stable. Through this kind of shared distribution system, the scale of economy can further reduce the costs and increase the efficiency of the express delivery industry.

Keywords

Acknowledgements

This research was supported by Fundamental Research Funds for the Central Universities (JBK1507105) and National Natural Science Foundation of China (#71525005).

Citation

Wei, Q., Li, S., Gou, X. and Huo, B. (2019), "Joint optimal decision of the shared distribution system through revenue-sharing and cooperative investment contracts", Industrial Management & Data Systems, Vol. 119 No. 3, pp. 578-612. https://doi.org/10.1108/IMDS-07-2018-0285

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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