The 3PL´s optimal transportation pricing problem in dynamic lot sizing models

In this paper we reinvestigate the classical dynamic lot-sizing model, under a new setting of decentralized decision making. Different from the traditional research focus which is on the optimal ordering policy of the manufacturer, we consider the optimal transportation pricing decision for the third-party logistics (3PL) that is in charge of the transportation process in the supply chain. By separating the manufacturer´s transportation cost from other costs, we are able to derive the manufacturer´s optimal ordering policy, and hence the 3PL´s profit, as direct functions of the 3PL´s pricing decision. This leads to a Stackelberg game led by the 3PL. We show how the 3PL can maximize his profit by the pricing decision, and conduct numerical studies to explore the impact of such a game setting on the supply chain system.