This present paper focuses on the mitigation of uncertainty-driven cost increases specific to the sourcing of transportation services, impacted by spot price volatility, uncertainty of demand and unreliability of carriers. We investigate the value of a specific mitigation strategy, namely the possibility to contract an alternative carrier (AC), which would take care of extra/emergency shipments, at a fixed agreed price, instead of a volatile spot price from freight auctions (FA). We develop a computational model that supports decision makers in assessing the value of this AC strategy compared to FA, in order to see which strategy is more effective and efficient. The model will also guide the decision maker in defining the fair price to be paid to the AC. The computational model is applied to a numerical example, thus showing its value in supporting managers in charge of sourcing the transportation services in the presence of risk and uncertainty.
['Nicola Costantino', 'Roberta Pellegrino', 'D. Tauro']
Mitigating risks in the sourcing of transportation services: A real option-based approach