A Holistic Optimization Model for Integrated Tactical Level Planning in Liner Shipping

Abstract

Supply chain management plays an important role in ensuring an efficient merchandise trade. Freight transportation is an integral part of supply chain management. A significant part of freight transportation is covered by maritime transportation, as the largest portion of the global merchandise trade, in terms of volume, is carried out by maritime transportation. Liner shipping, which runs on fixed routes and schedules, plays a colossal role for the global seaborne trade. Liner shipping companies deal with three decision levels, namely strategic level, tactical level, and operational level. The strategic-level decisions are taken for more than six months to several years. The tactical-level decisions are effective for three months to six months. Moreover, the operational level decisions are taken for a couple of weeks to less than three months.This dissertation involves the tactical-level decisions in liner shipping, which include: (1) service frequency determination; (2) fleet deployment; (3) sailing speed optimization; and (4) vessel scheduling. The service frequency determination problem deals with determining the time headway between consecutive vessels along a liner shipping route. The fleet deployment problem assigns vessels from the liner shipping company’s fleet (and sometimes, from other liner shipping companies’ fleets) to liner shipping routes. The sailing speed optimization problem deals with selecting sailing speeds along different voyage legs of a given port rotation. The vessel scheduling problem lists the schedules (e.g., arrival time, handling time, departure time) at different ports.A comprehensive review of the liner shipping literature revealed that the existing literature on the tactical-level decisions focused on these problems individually. Solutions from different solution methodologies for the separate problems may have compatibility problems. Moreover, they are not attractive to the liner shipping companies, who look for integrated solutions. Hence, this research aimed to develop a combined mathematical model that comprises the four tactical-level decisions in liner shipping (i.e., service frequency determination, fleet deployment, sailing speed optimization, and vessel scheduling). This mathematical model is named the Holistic Optimization Model for Tactical-Level Planning in Liner Shipping (HOMTLP).The objective of the HOMTLP mathematical model is to maximize of the total profit from transport of cargo. The major route service cost components, found from the literature, are covered by the model, which include: (I) total late arrival cost; (II) total port handling cost; (III) total fuel consumption cost; (IV) total vessel operational cost; (V) total vessel chartering cost; (VI) total container inventory cost in sea; (VII) total container inventory cost at ports of call; (VIII) total emission cost in sea; and (IX) total emission cost at ports of call. Along with the integration of all four tactical-level decisions, the mathematical model has a number of key advantages. First, the model provides flexibility to both the liner shipping company and the marine container terminal operators, as it offers multiple time windows and handling rates at each port of call. Second, the payload carried by the vessels is considered while estimating fuel consumption. Third, the preference of customers is reflected by modification of the container demand at different sailing speeds. Fourth, container inventory is accounted for at ports of call and in sea. Fifth, emissions of different harmful substances are captured in order to preserve the environment.This dissertation carried out a set of numerical experiments to test the performance of the HOMTLP model, where BARON was used as the solution approach. It was revealed that when there was an increase in the unit fuel cost, the unit emission cost, vessel availability, the unit late arrival cost, and the unit freight rate, the sailing speed was reduced. On the other hand, when there was an increase in the unit inventory cost, the unit operational cost, as well as the unit chartering cost, the sailing speed was increased. Moreover, the total required number of vessels was increased, when there as an increase in the unit fuel cost, the unit emission cost, vessel availability, the unit late arrival cost, and the unit freight rate. On the contrary, the total required number of vessels was decreased, when there was an increase in the unit inventory cost, the unit operational cost as well as the unit chartering cost. It was also revealed that the total profit was increased, when more choices were available for time windows and/or container handling rates. The numerical experiments highlighted several other findings. Most importantly, it was found that the HOMTLP model can provide effective tactical-level decisions. Hence, the mathematical model can assist liner shipping companies to take tactical-level decisions, which are effective and profitable.