Auction model for mass customization of logistics

In today´s logistics market, companies strive to optimize the use of their limited resources to meet diverse customer requirements. The effectiveness of their resource allocation directly impacts customer perceived value in terms of available options and costs. Proposed in this paper is an auction model for automatically customizing the logistic services for a potentially large number of customers. The proposed model integrates customers´ customization decision making with the allocation of company´s capacity using a market-based approach. The auction is incentive-compatible in the sense that customers will follow the prescribed auction rule to report their values on various services packages truthfully. We also show that customers are also motivated to participate in the auction.