Could shipment consolidation jointly improve the economic and environmental sustainability of a maritime service supply chain?

Shipment consolidation is an effective way to reduce carbon emissions, because it can better utilise the ship-borne space and lower the shipment frequency. However, there also exists the dark side of shipment consolidation, i.e. the increasing pricing power of the common shipping company, and the ‘green dilemma’ because of green demand resluted by the shipping company’s emission reduction efforts. This paper studies the shipment consolidation decision of a retailer giant who resells two substitutable products, where either a common shipment company or two exclusive shipping companies can be contracted. The main findings include: (1) shipment consolidation induces the common shipping company to invest more in emission reduction, but strengthens the green dilemma, worsening environmental performance. (2) Pareto improvement of economic and environmental sustainability can be achieved with shipment consolidation. (3) Shipment consolidation can be even beneficial for upstream suppliers, so an ‘all-win’ situation is possibly observed.