Coordination Is Hard: Electronic Auction Mechanisms for Increased Efficiency in Transportation Logistics

The lack of coordination among carriers leads to substantial inefficiencies in logistics. Such coordination problems constitute fundamental problems in supply chain management for their computational and strategic complexity. We consider the problem of slot booking by independent carriers at several warehouses and investigate recent developments in the design of electronic market mechanisms promising to address both types of complexity. Relax-and-round mechanisms describe a class of approximation mechanisms that is truthful in expectation and runs in polynomial time. Whereas the solution quality of these mechanisms is low, we introduce a variant able to solve real-world problem sizes with high solution quality while still being incentive compatible. We compare these mechanisms to core-selecting auctions, which are not incentive compatible but provide stable outcomes with respect to the bids. In addition to a theoretical analysis we report results from extensive numerical experiments based on field data. The experimental results yield a dear ranking of the mechanisms in terms of waiting time reductions and computation times.