This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via HighWire Citing Articles via Google Scholar Google Scholar Articles by Sheffi, Y. Search for Related Content

Combinatorial Auctions in the Procurement of Transportation Services

MIT Center for Transportation and Logistics, Massachusetts Institute of Technology, E40-275, 77 Massachusetts Avenue, Cambridge, Massachusetts 02139
sheffi{at}mit.edu

Most shippers use annual auctions to procure transportation services, leading to annual contracts. By using combinatorial auctions they can reduce their operating costs while protecting carriers from winning lanes that do not fit their networks, thereby improving carriers' operations as well. Combinatorial auctions account for carriers' economies of scope, which many consider more important than economies of scale in transportation operations. Any transportation procurement procedure, however, must account for level of service and other nonprice variables, which are as important as price in determining which carrier should serve what lane. These considerations can be incorporated into the combinatorial auction framework easily and holistically. After several years of using this approach, leading shippers have adopted it, and several software providers offer the requisite software.

Key Words: games; group decisions; bidding; auctions; transportation; freight; materials handling

This article has been cited by other articles:

				R. L.-Y. Chen, S. AhmadBeygi, A. Cohn, D. R. Beil, and A. Sinha Solving Truckload Procurement Auctions Over an Exponential Number of Bundles Transportation Science, November 1, 2009; 43(4): 493 - 510. [Abstract] [PDF]

				S. D. Jap and P. A. Naik BidAnalyzer: A Method for Estimation and Selection of Dynamic Bidding Models Marketing Science, November 1, 2008; 27(6): 949 - 960. [Abstract] [PDF]

				R. M. Harstad and A. S. Pekec Relevance to Practice and Auction Theory: A Memorial Essay for Michael Rothkopf Interfaces, September 1, 2008; 38(5): 367 - 380. [Abstract] [PDF]

				A. Lim, B. Rodrigues, and Z. Xu Transportation Procurement with Seasonally Varying Shipper Demand and Volume Guarantees Operations Research, May 1, 2008; 56(3): 758 - 771. [Abstract] [PDF]

				M. A. Figliozzi, H. S. Mahmassani, and P. Jaillet Pricing in Dynamic Vehicle Routing Problems Transportation Science, August 1, 2007; 41(3): 302 - 318. [Abstract] [PDF]