Scandinavian Working Papers in Economics
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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2006/15:
Cost allocation in collaborative forest transportation

Mikael Frisk (), Maud Göthe-Lundgren (), Kurt Jörnsten () and Mikael Rönnqvist ()

Abstract: Transportation planning is an important part of the wood flow chain in forestry. There are often several forest companies operating in the same region and co-ordination between two or more companies is rare. However, there is an increasing interest in collaborative planning as the potential savings are large, often in the range 5-15%. A key question is how savings should be distributed among the participants. In this paper we investigate a number of possibilities based on economic models including Shapley value, the nucleolus, separable and non-separable costs, shadow prices and volume weights. We also propose a new allocation method based on finding as equal relative profits as possible among the participants. A case study including eight forest companies is described and analyzed.

Keywords: Transportation; OR in natural resources; Supply chain management; Economics; Group decisions and negotiations; Linear programming; (follow links to similar papers)

JEL-Codes: L91; Q21; Q23; (follow links to similar papers)

27 pages, November 3, 2006

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