OPTIMIZATION‐BASED PROCUREMENT FOR TRANSPORTATION SERVICES

This paper presents the concept of optimization‐based procurement for transportation services. The approach allows both the shipper and carriers to benefit through the use of a collaborative approach to securing and managing a strategic relationship. Because the shipper's assignment problem involves a combinatorial number of choices and cannot be easily executed manually, the procurement process benefits strongly from the use of optimization. The authors introduce the optimization‐based procurement process, briefly analyze the theoretical issues, and discuss lessons learned from its application in practice over the last several years.