An empirical study on coalition formation and cost/savings allocation

Interest has been raised by the recent identification of potential savings through collaborative planning in logistics operations. Even though substantial savings can be realized, two key questions exist: (i) how should potential savings be divided among a group of collaborating companies and (ii) among potential collaborating companies, how should collaborating group(s) be formed? These two questions are studied in a specific context: among potential collaborating companies; a subset, denoted the leading companies, performs collaborative planning on behalf of the others and together, they initiate formation of a collaborating group. We use the concept of a business model to detail such context. Based on the literature on network formation where potential savings are modelled by a cooperative game, four business models are explored in four different subsets of leading companies. We propose a network model as a method to determine the stable collaborating group in each computation. A case study including eight forest companies is described and analyzed. Results show that very different solution characteristics can be achieved depending on the business model selected.