Abstract:  With irregular customer demands in Logistics Service Supply Chain (LSSC), the major problem faced by an integrated logistics service provider (ILSP) is how to effectively coordinate the logistics capability of logistics providers. In this paper, such a supply chain is considered where an ILSP allocates orders to each logistics service provider by taking the logistics capability difference for each distribution site into account. An optimization model is developed for the problem discussed in considering the suppliers' orders on hand, logistics capacity availability, distribution efficiency, defective rate, and cost. With this model, the solution procedure for logistics supplier selection and order allocation is proposed. Then, a numerical example is given. Results show that, with the proposed method, appropriate suppliers can be selected and the order allocation is optimized such that cost is reduced while desired service level is ensured. Thus, by using the proposed method, the suppliers are able to increase their competitiveness.

Key words: supplier selection, order allocation, logistics service supply chain, portfolio optimization