Capacity investments in logistics outsourcing

Abstract

Recently, various e-commerce businesses are investing in their in-house logistics fleet to implement a partial outsourcing strategy. Under this strategy, the business source their excess requirements through a delivery-as-a service model using third party logistics (3PL) providers. Further, these 3PL also invest in the fleet capacity to cater to various sources of demand. Our aim in this paper is to study capacity investment decision of the 3PL providers as well as of the buyers who implements the partial outsourcing strategy. We investigate the impact of demand parameters and pricing parameters on the above decisions.