Optimal operation strategies of an urban crowdshipping platform in asset-light, asset-medium, or asset-heavy business format

Abstract

This paper investigates the operation strategies of an urban crowdshipping platform, which utilizes the latent capacity of the traveling ‘crowd’ in the transportation system to facilitate parcel delivery. We develop an analytical model to characterize the decision-making and operation strategies of a crowdshipping operator in alternative business formats (asset-light/medium/heavy). Asset-light platforms connect customers with potential carriers in the crowd without involving delivery assets, whereas asset-medium and asset-heavy operators integrate crowd carriers with outsourced or owned delivery fleets, respectively. In particular, we firstly formulate the two-sided market equilibrium of crowdshipping system on account of customers’ willingness to use and crowds’ willingness to serve. Based on the market equilibrium, the crowdshipping operator’s optimal strategies in terms of pricing and/or fleet sizing are identified for profit-maximization or social welfare-maximization in alternative business formats. We show that the introduction of crowdshipping can simultaneously improve the benefits of logistics customers, the crowd, and the crowdshipping platform operator, leading to a win-win-win outcome. Furthermore, we establish analytical conditions for one business format being superior to another. We find that if the externality (or marginal social cost) of an unmatched order is smaller in a particular business format, it will result in larger consumer surplus for customers, greater net benefit for crowd carriers, and more profit for crowdshipping operator. Under mild conditions, the crowdshipping operator adopting the asset-light or asset-medium format can earn a positive profit at the social optimum.