Multimodal Transportation Solutions for Resilient Shipping Alliance under Disruption Risk

Abstract

Recently, the shipping industry has frequently confronted inland transportation disruption, because of regional shocks such as EU strikes. Therefore, many ocean shipping (OS) carriers have implemented multimodal transportation strategies to provide resilient and stable delivery services. Doing so alters the competition dynamics among OS carriers within shipping alliances  (e.g., 2M Alliance, Ocean Alliance, THE Alliance) and may undermine OS carriers’ incentives to cooperate. We hereby develop an incentive-based model comprising two asymmetric OS carriers to study the interactions among OS carriers’ multimodal transportation strategies, inland transportation risks, shipping service competition, and shipping alliance breakup risk. We find that an inferior OS carrier’s multimodal transportation strategy may benefit (or surprisingly harm) itself when the shipping alliance’s dominant carrier cannot (can) effectively enhance the alliance service level to expand the market. Even though the inferior OS carrier’s multimodal transportation strategy may increase its own profitability, we reveal that the dominant carrier’s profitability can be impaired. This may eventually hold the carriers back from horizontal alliance when the operational cost saving from the alliance is insufficient. Our work elucidates the sophisticated value of multimodal transportation solutions for risk mitigation under dynamic commercial contexts.

Keywords: Risk management, Resilient delivery, Service supply chain, Shipping alliance, Game theory