Solving the winner determination problem with discounted bids in transportation auctions

Continuing advances in modern technologies have transformed the procedure of transportation procurement through auctions in supply chain management (SCM). This study examines the online combinatorial auction (CA), which serves customers placed at the nodes of a transportation network, with particular consideration given to carbon emissions. The CA mechanism allows early shipments of the carriers to improve their load consolidation and reduce their repositioning trips. Sustainability and carbon emissions are considered by prioritizing the carrier’s carbon reduction performances. Two models are examined under the carbon emission regulations (Carbon tax and Cap-and-offset) to choose the winners in the CA. Our aim is to minimize the cost of transportation procurement and reduce carbon emissions by incorporating the green reputation-based winner determination problem within the procurement model. Computational experiments reveal the positive impact of prioritization and discounted offers in reducing both transportation costs and the number of empty trips. Indeed, our results show the introduction of the discounted bids allows a reduction of about 2% in the transportation cost for the shipper and 24% of empty movements, on average, for the carriers.