IoT-enabled delivery time guarantee in logistics outsourcing and efficiency improvement

Industrial Internet of Things (IoT) technologies have been widely implemented in today's logistics operations to reduce the handling time and improve service efficiency. This enables a firm to promise a delivery time (PDT) when selling products, which improves customer satisfaction and enhances the firm's brand image. However, the costly PDT logistics service should be seriously evaluated when the market competition is intensified to aggravate the firm's cost concern. In a competitive decentralized framework, this paper investigates the value of IoT-enabled PDT quotation in a brand's logistics outsourcing decisions. We develop three-stage optimization models and show that the brand's production quantity and equilibrium profit exhibit non-monotonic relationships to the competition intensity degree. Given a moderate competition intensity degree, the brand developing IoT and quoting PDT suffers from imbalanced payoffs between PDT cost-saving and sales volume expansion. This distorts the PDT cost and hence, investing in the IoT-enabled logistics system might not be beneficial. This paper contributes to the existing literature by examining the impact of heterogeneous logistics service incorporating the PDT quotation on traditional quantity competition within a dual-channel supply chain.