Vertical and Horizontal Collaboration in Inventory and Transportation

Abstract

In this paper, two forms of collaboration in a decentralised distribution network are studied, namely vertical and horizontal collaboration through volumes and geographical area. Vertical collaboration is introduced through Vendor Managed Inventory to coordinate inventory and distribution better and create higher cost-efficiency. Shippers collaborate horizontally by sharing orders and replenishing retailers through jointly designed routes to increase distribution efficiency. Once the cost savings are calculated, cooperative game theory is used to fairly allocate them to the coalition partners and guarantee sustainability of the collaboration. Given the complexity of the problem, focus is currently on small datasets.