The 3PLP's Effort Level and Incentive Mechanism from Manufacturer's Perspective

Abstract

The author investigates the relationship between the degrees of effort of third part Logistics Provider (3PLP) and the manufacturerpsilas incentive mechanism, which was analyzed using two-period model and from the perspective of manufacturer. Several circumstances were considered and discussed integrated, which were single and double type of 3PLP, long term or short term cooperation relationship scheme, and even manufacturer prefers long term profit or short term profit. The result shows that the manufacturer which emphasizes long term profit will provide the 3PLP with a higher incentive than a short term profit preferred manufacturer in the first period. A long (short)-term cooperation is more suitable if the value of the farsighted manufacturer under a long-term relationship is greater (less) than the switching option value under a short-term relationship view. And some circumstance and condition in which long term or short term contract is better was given.