Title: A revenue management model for sea cargo

Authors: L.H. Lee, E.P. Chew, M.S. Sim

Addresses: Department of Industrial and Systems Engineering, National University of Singapore, 10 Kent Ridge Crescent, 119260, Singapore. ' Department of Industrial and Systems Engineering, National University of Singapore, 10 Kent Ridge Crescent, 119260, Singapore. ' DSO National Laboratories, 20 Science Park Drive, 118230, Singapore

Abstract: In this paper, we introduce a revenue management model for an ocean carrier with two classes of orders, namely the ad hoc orders and the contractual orders. When the contractual order is accepted, the carrier can either deliver it immediately or postpone to the next ship on the shipping schedule. This problem is formulated as a stochastic dynamic programming model. We show the existence of the optimal threshold policy. Some important properties of the threshold policy are discussed. Finally, the numerical result shows that the percentage improvement of the threshold policy over an existing policy may be as high as 199%.

Keywords: revenue management; postponement; stochastic dynamic programming; liner industry; sea cargo; ocean carriers; ad hoc orders; contractual orders; shipping schedule; optimal threshold policy.

DOI: 10.1504/IJOR.2009.026535

International Journal of Operational Research, 2009 Vol.6 No.2, pp.195 - 222

Published online: 19 Jun 2009 *

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