Abstract: In the recent years, trucking companies (carriers) areincreasingly and inevitably facing combinatorial auctions conducted by shippersto seek year-round contracts (or even longer term contracts) for theirtransportation needs. It’s a great challenge and opportunity for transportationagent to deal with the strong shippers and small carriers. In this paper, westudy a double-auction mechanism based on transportation agent. The mechanismis that shippers procure the transportation service through combinatorialauction while transportation agents build up alliance-based relationship withspot market carriers by means of Reverse Auctions. A bid price model isdeveloped to guide pricing strategies of transportation agent under a double-auctionenvironment.

Keywords: Transportation services; Procurement; Double-auction; Bid Price

1.Introduction

According to the statisticalinformation collected by Ministry of Communications of The People's Republic ofChina from 23 provinces in 2004, there’re only 171 state-owned truckingcompanies in possession of 300 or more vehicles. It only accounts for 0.0009%of the total number of trucking companies. It shows that the small and medium sizetrucking companies hold a dominant position in the trucking service. Amongthese small and medium size trucking companies, the lane trucking companiesoccupy the leading position [1].

In a supply chainenvironment, companies focus more on building up a long-term partnership. Butthis comes down to a problem of power equilibrium. Shippers have a strongdemand for transportation service, but they can not find the right service providers.Therefore, shippers have to meet their need through spot market. It’s a greatchallenge for the small and medium size trucking companies (especially for lanecompanies), for they do not have enough capability to run combinatorial lanes. Inthis case, there is a potential gap for agency. Thus transportation agent emergesas the times require. And its responsibilities are to ensure that the informationflow between shippers and carriers is true and reliable, make the deal easy andfleet, manage and supervise carriers’ performances, reduce the risk and improvethe service. Most of the transportation agent companies in South China make their bid price mainly depends on their experienceinstead of using systematic pricing method or price optimization model.