The Effects of Collaborative Transportation Management on B2B Supply Chain Inventory and Backlog Costs: A Simulation Study

Supply chain management (SCM) is a collaborative effort among various business partners. Many studies in SCM have tended to focus largely on supply chain planning, forecasting, implementation, and warehouse management. Little attention, however, has been paid to the impact of transportation capacity management. This paper proposed a collaborative transportation management (CTM) model to coordinate manufacturers, distributors and carriers in a B2B supply chain. The model can dynamically adjust the available transportation capacity to reduce manufacturers' inventory and backlog levels. It was tested in three different scenarios using the logistics simulation game that was originally developed at Massachusetts Institute of Technology. Results of the simulation demonstrate the potential cost savings in the total supply chain costs, including inventory cost and backlog cost. The overall transportation capacity utilization is also improved. Implications for future research on applying CTM to SCM are discussed.