Cooperation and Competition in Last Mile and Freight Consolidation

The rapid growth of e-commerce has transformed the nature of delivery logistics. Orders have become smaller, more frequent, and are sent to a greater number of dispersed destinations, often with tight delivery windows and high time sensitivity. This fragmented and dynamic delivery environment makes consolidation, i.e., grouping shipments, routes, or operations to reduce inefficiencies, increasingly difficult for delivery companies. As a result, trucks often run underutilized, routes overlap, and congestion in urban areas worsens. Emerging strategies, such as (shared) collection points networks and joint delivery models, show promise in this context but also raise new challenges, particularly around competition and collaboration between delivery companies. Our manuscript explores these challenges in both last-mile and freight delivery by investigating strategic interactions between companies using game theory. The first emerging strategy we study in this context relates to the deployment of collection points in city centers, locations where customers can collect their packages at a time that suits them best. While these collection points can significantly boost consolidation and delivery efficiency, their strategic placement by competing delivery companies may lead to overlap or clustering in the same areas. This, in turn, reduces their overall effectiveness from a societal perspective. In the first study of this thesis, we use a game-theoretic framework to analyze these competitive placement decisions and the role of public authorities (e.g., a municipality of a city) in influencing them. More precisely, we propose a competitive location model where collection points are placed within a network of districts and a multinomial logit framework is used to model customer choices. In this competitive setting, we analyze the Nash equilibria and measure potential inefficiencies using the price of stability. The analysis includes a theoretical two-district setting, where we find a significant mismatch between competitive and optimal public placement, leading to potential efficiency losses of up to 33%. In contrast, a case study based on a Dutch city shows a narrower difference between public and strategic placements. At the same time, the case study illustrates that it is not easy for authorities to close the gap between public and strategic placements, for example, by promoting the attractiveness of all collection points or those of particular interest to a public authority.In the second study, we remain inspired by the positioning of collection points, but shift our focus to the perspective of delivery companies collaboratively opening and subsequently operating a shared collection point network, another emerging strategy applied in practice. For such a strategy to be sustainable, the costs of opening collection points and the revenues generated from the shared network must be allocated in a reasonable way among the participants. To identify such reasonable allocations, we first introduce a stylized model in which a group of carriers can decide to position parcel lockers collectively. In this model, opening a locker comes at a cost, while serving a customer via close-by lockers generates a customer-specific profit. We then introduce and study the associated cooperative game to investigate whether carriers can allocate the joint profit in a stable (i.e., reasonable) way. We prove that a stable allocation always exists for particular configurations of locker locations and customers, but also provide a counterexample, demonstrating that stable allocations do not exist in the general sense. Generating a large set of instances, we introduce three possible allocation rules, and conduct several numerical experiments, showing that stable profit allocations exist in most situations. In the final study of the thesis, we turn our attention to the emerging strategy of freight consolidation, allowing delivery companies to group shipments on overlapping shipping routes. Typically, such collaborative initiatives require substantial investments in data-sharing infrastructure to facilitate effective cooperation. Similar to the second study, we use cooperative game theory to analyse how to allocate the costs related to investments and transport in a stable way. More precisely, we propose a game where a group of delivery companies may lower transportation costs through freight consolidation and shared vehicle capacity, while also considering the costs originated by transfer and transport processes, including investments in technology and infrastructure. Although stable cost allocations do not exist in general, we provide three conditions, related to capacity and fixed costs, under which stable allocations exist. Numerical experiments indicate, moreover, that existence of stable allocations is also likely outside of these conditions. As a whole, this thesis thus contributes to both the study of novel consolidation practices in last-mile delivery and freight logistics, as well as the development of tailored game theoretical models that allow us to gain both theoretical and practical insights in this area.