Optimizing a partnership structure for horizontal collaboration in logistics

Journal article, 2025

This study addresses the design of a horizontal collaborative logistics network comprising multiple players at the same echelon of the supply chain to reduce logistics costs by leveraging joint replenishment, distribution center sharing, and risk-pooling. A designated player within each coalition functions as a joint distribution center, facilitating consolidated shipment and distributing it to other players within the coalition. The study reveals the problem’s non-superadditive nature, advocating for the use of a coalition structure for horizontal collaboration design. Formulating the problem as a cooperative game, we develop a mixed-integer nonlinear programming model along with an exact algorithm to optimize each coalition. Then, we propose a dynamic programming algorithm to find the optimal stable coalitions. Results indicate that coordination costs emerge as a crucial factor influencing the cost-effectiveness and structure of horizontal collaboration. Furthermore, horizontal collaboration proves especially advantageous for a few small and medium-sized companies, high levels of uncertainty, significant facility opening costs, close geographical proximity, and low coordination costs.