OPTIMIZATION-BASED PROCUREMENT FOR TRANSPORTATION SERVICES

Authors

  • Chris Caplice,

    1. Chainalytics LLC
    Search for more papers by this author
    • Chris Caplice is the Vice President of Transportation Planning at Chainalytics, a niche consulting firm specializing in applying high-end quantitative analysis in the logistics and transportation area. He received his Ph.D. from the Massachusetts Institute of Technology, an MSCE from the University of Texas at Austin, a BSCE from the Virginia Military Institute. In 1997, Dr. Caplice received the Council of Logistics Management's Doctoral Dissertation Award on the topic of optimization-based bidding. Over the last six years, he has applied these concepts in practice.

  • Yossi Sheffi

    1. Massachusetts Institute of Technology
    Search for more papers by this author
    • Yossi Sheffi is a Professor at the Massachusetts Institute of Technology where he leads the School of Engineering's Center for Transportation and Logistics as well as the newly launched Masters in Logistics Engineering program. He received his Ph.D. from MIT and is an expert on logistics and supply chain management, carrier management, and electronic commerce. Dr. Sheffi is the author of a textbook and over 50 technical publications. He also founded several successful software, logistics and electronic commerce companies. In 1997, Dr. Sheffi was awarded the Council of Logistics Management's Distinguished Service Award.


Abstract

This paper presents the concept of optimization-based procurement for transportation services. The approach allows both the shipper and carriers to benefit through the use of a collaborative approach to securing and managing a strategic relationship. Because the shipper's assignment problem involves a combinatorial number of choices and cannot be easily executed manually, the procurement process benefits strongly from the use of optimization. The authors introduce the optimization-based procurement process, briefly analyze the theoretical issues, and discuss lessons learned from its application in practice over the last several years.

Ancillary