A stochastic programming winner determination model for truckload procurement under shipment uncertainty

We propose a two-stage stochastic integer programming model for the winner determination problem (WDP) in combinatorial auctions to hedge the shipper’s risk under shipment uncertainty. The shipper allows bids on combinations of lanes and solves the WDP to determine which carriers are to be awarded lanes. In addition, many other important comprehensive business side constraints are included in the model. We demonstrate the value of the stochastic solution over one obtained by a deterministic model based on using average shipment volumes. Computational results are given that indicate that moderately sized realistic instances can be solved by commercial branch and bound solvers in reasonable time.     

Demand clustering in freight logistics networks

Demand clustering in freight logistics networks is an important strategic decision for carriers. It is used to incorporate new business to their networks, detecting potential economies, optimizing their operation, and developing revenue management strategies. A specific example of demand clustering is truckload combinatorial auctions where carriers bundle lanes of demand and price them taking advantage of economies of scope. This research presents a novel approach to cluster lanes of demand. Community detection is used to cluster the emergent network finding profitable collections of demand. Numerical results show the advantages of this method.     

Modeling net rates for expedited freight services

We demonstrate the development, testing and application of statistical models to study actual billings (net of discounts) for expedited freight services. The models reveal the structure of net tariffs. They enable carriers to identify customers whose revenues are deficient considering services rendered, and terminals where revenues are deficient considering their mix of business. The models thus point to situations where business activities, pricing structures or negotiated discounts need review. The models also verify that the overwhelming determinants of monthly charges to shippers are the fundamental cost drivers for the industry, namely number of shipments, weight of shipments, and distance shipped.     

Stopover and hub-and-spoke shipment strategies in less-than-truckload carriers

This paper presents a methodology to identify when freight consolidation strategies are cost-efficient in the less-than-truckload carriers operations. Shipments are assigned based on proximity and cost criteria to build an initial long-haul shipment solution. This initial solution is later improved by the implementation of Tabu Search algorithm. The proximity criterion takes into account the spatial distribution of shipments loads among centers. The results show that the proposed methodology may reduce the transportation cost by 20% compared to the solution of those heuristics only considering cost criterion.     

Choosing a port: An analysis of containerized imports into the US

Using a unique data set of individual shipments, port characteristics, and actual freight charges, we examined potential factors within management controls that affect the attractiveness of a port for containerized shipments. We hypothesized that the importance placed on each factor varies by the size of the shipper. We find support for our hypotheses that large shippers emphasize the factors affecting speed of delivery more than the freight charges compared to small shippers. These findings have managerial implications because investments in port development would pay off depending on the fit between the type of investment and the customers’ needs.     

A carrier’s optimal bid generation problem in combinatorial auctions for transportation procurement

We consider the carrier’s optimal bid generation problem in combinatorial auctions for transportation procurement. Bidders (carriers) employ vehicle routing models to identify sets of lanes (origin-destination pairs) based on the actual routes that a fleet of trucks will follow in order to maximize profit. Routes are constructed by optimally trading off repositioning costs of vehicles and the rewards associated with servicing lanes. The carrier optimization represents simultaneous generation and selection of routes and can incorporate any existing commitment. We employ both column generation and Lagrangian based techniques for solving the carrier optimization model and present numerical results.     

Attributes driving the selection of trucking services and the quantification of the shipper’s willingness to pay

This paper investigates the selection of trucking services by shippers that require the movement of truck shipments. A set of pragmatic attributes are postulated to describe trucking services. They are used in a stated choice experiment that collects data and preferences from shippers. A mixed logit model is estimated in order to test the attributes and quantifying the shipper willingness to pay for them. The results are used to provide meaningful negotiation guidance for truck-related shippers and carriers, a significant contribution to literature in transportation, logistics, and supply chain management. A numerical example illustrates the use of the model.     

The multistage stochastic integer load planning problem

Time-definite freight delivery common carriers, who pickup, consolidate and deliver small shipments are a key third-party logistics service provider in the supply chains. Under uncertain demands, carrier’s multistage stochastic integer load planning in the pure hub-and-spoke line-haul operations network is to determine multistage freight paths and distribute trailers over time while meeting operational restrictions, service requirements, and balancing trailer inventory at the termination of planning horizon. We developed a heuristic approach, scenario aggregation with embedded branching on the binary variables. The numerical experiments showed a proactive operations strategy with a lower operating cost than the conventionally deterministic approach.     

New SP-values of time and reliability for freight transport in the Netherlands

This paper discusses the methods used in a study on the values of time and reliability in freight transport in the Netherlands. SP surveys were carried out among more than 800 shippers and carriers. A novel feature is that both for the value of time and reliability two additive components are distinguished: a transport cost and a cargo component. Specific instructions were given to make sure that the carriers provide the former and shippers that contract out the latter component. The resulting values that will be used in CBA in The Netherlands are presented and compared against the international literature.     

A bilevel storage pricing model for outbound containers in a dry port system

Serving as a potential solution for seaport congestion and capacity limitation, dry port development is increasingly popular in the freight transport industry. This paper pioneers the research on dry port operations by modelling the storage pricing problem for outbound containers. The interaction between a dry port and multiple shippers is modelled as a bilevel program. The optimal properties of the proposed model under certain conditions are derived analytically, from which a closed-form solution is obtained. Contrary to intuition, the increase of container delivery frequency from shippers may lead to the reduction of dry port’s profit according to model outcomes.     

A selected review on the negative externalities of the freight transportation: Modeling and pricing

The planning of freight transportation activities creates benefits as well as costs. Among those costs, some of them, namely externalities, fall on other people/society that have no direct relevance to the operations of transportation. Such externalities are accrued expenses which should be addressed by actual pricing policies to enable an efficient and sustainable freight transportation system. This paper reviews externalities in quantitative terms, and then provides pricing studies of these costs per unit of freight transported along with the most recent estimations. The associated negative externalities are structured by transportation mode (road, rail, maritime, and air).     

Estimating and benchmarking Less-than-Truckload market rates

In this paper, we present a regression-based methodology that can estimate the Less-than-Truckload (LTL) market rates with high reliability using an extensive database of historical shipments from continental United States. Our model successfully combines the quantitative data with qualitative market knowledge to produce better LTL market rate estimates which can be used in benchmarking studies allowing carriers and shippers to identify cost saving opportunities. We identify the main drivers of LTL pricing and reveal the effects of certain industry practices on the final market rates.     

Allocating collaborative costs in multimodal barge networks for freight bundling

In order to improve the competitive position and efficiency level of multimodal transport, consolidation of freight flows is often suggested. Bundling networks require cooperation between multiple partners in the multimodal transport chain. In this context, the question rises how benefits may be allocated fairly among the spatially distributed participants in the cooperation. A great deal of scientific literature reports on the behavior of allocation methods in collaborations between shippers or carriers making use of unimodal road transport. However, research on cost or savings allocation methods in multimodal transport is scarce. The main contribution of this paper is thus to provide a first insight in the complexity of sharing cost savings fairly among shippers who bundle freight flows in order to reach economies of scale in multimodal barge transport. By applying four different allocation methods to two realistic case studies, a comparison is made between simple and straightforward allocation mechanisms and more advanced techniques based on cooperative game theory. Special attention is paid to the savings division among coalition partners and collaborative stability. Results demonstrate the influence of cooperation characteristics on allocation outcomes and underline the value of carefully selecting appropriate allocation mechanisms when long-term stability of the multimodal barge collaboration is aspired.     

Freight train scheduling with elastic demand

A train slot selection model based on multicommodity network flow concepts is developed for determining freight train timetables for scheduling rail services along multiple interconnected routes. The model seeks to minimize operating costs incurred by carriers and delays incurred by shippers while ensuring that the schedules and demand levels are mutually consistent. A column generation-based methodology is proposed for train slot selection to meet frequency requirements. This methodology is embedded in a simulation-based iterative framework, where demand for rail services is re-computed in accordance with the train schedule obtained by solving the freight train scheduling problem.     

Multi-criteria decision-making for complex bundling configurations in surface transportation of air freight

Airlines typically carry out freight transportation in a hub and spoke structure, where the movements between the outstations and the hub are served by trucks. To transport freight efficiently, air carriers must consider bundling options for shipments that are delivered at outstations and have to be moved to the hub. There are three options when it comes to bundling freight: on ‘through unit load devices’ (T-ULD) (all freight for the same flight at the hub), on ‘mixed unit load devices’ (M-ULD) (freight for different flights at the hub) and loose freight in trucks. The optimal freight bundling configuration for carriers, taking into account their main KPIs (key performance indicators), is unknown. This research formulates the problem as a multi-criteria decision-making (MCDM) problem, allowing carriers to decide which configuration is optimal for a given outstation. The selected KPIs (cost, (un)loading time, and quality) are formulated as mathematical functions. A new MCDM, called best worst method (BWM), is then used to identify the best configuration with respect to the three KPIs. The proposed methodology is applied to KLM Cargo to identify the best configuration for the selected outstations that supply freight to the KLM hub at Schiphol Airport. This case study shows that there are different optimal freight bundling configurations for different outstations and that trucking costs and freight handling tariffs are among the key factors in deciding which configuration is optimal.     

Container freight rates and the role of surcharges

This paper demonstrates that the structure of ocean container freight rates has become more complex. A growing number of surcharges are being imposed by the carriers on their customers, surcharges that are not only adding significant extra costs but are highly variable over time. These elements are examined based on a data set of export rates from ports on the Northern European Range that have been compiled from a major global carrier. The paper compares the surcharges to the base rates and discusses some of the implications for shippers who face increasing uncertainty in planning supply chains. Some of the issues for academic research on freight rates is also examined and points to the need to clearly identify what is included in the freight rate data employed. In addition, questions are raised concerning the suitability of many of the variables traditionally used to explain or predict freight rates.     

Freight distribution in megacities: Perspectives of shippers,logistics service providers and carriers

We analyse the opinions of shippers, logistic service providers (LSPs) and carriers related to regulations and issues faced by these companies regarding freight distribution in megacities, and the logistical performance measures likely affected by those regulations and issues. We present a review of the freight distribution literature focusing on a large number of freight distribution aspects, such as regulatory, collaborative, environmental, logistical and risk. We also investigate some logistical performance indicators adopted by the companies. Subsequently, we conduct a survey with 147 companies working in the São Paulo Metropolitan Region (SPMR). We use multivariate analysis of variance to assess the logistical performance indicators and non-linear canonical correlation analysis to identify the most relevant freight distribution attributes. The results that the majority of carriers are located inside the SPMR and efficiently handle these issues better than others actors. The lack of collaboration, cargo theft, traffic congestion and some regulations affect the LSP’s logistical performance. Moreover, the actors perceive regulatory aspects, mainly traffic congestion, and a lack of security for deliveries in unsafe areas as the significant issues for deliveries in megacities.     

The application of inventory transshipment modeling to air cargo revenue management

This paper applies an inventory transshipment modeling approach to investigate the air cargo revenue management problem for an airline operating in a two-segment network. Building upon an extension of the classic two-location inventory transshipment model, we develop a framework to optimize an airline’s cargo overbooking decisions in a two-segment network setting. We find consistent evidence indicating that network-based global optimization always leads to greater expected profits than does local (i.e., market by market) optimization. Further, the magnitude of profit improvement is found to be most significant when local shipments have a relatively higher freight yield compared to flow-through shipments. Finally, our results indicate that global optimization contributes to greater profit improvement as offloading penalty costs become higher.     

Measuring connectivity in the air freight industry

In this paper, we present an air transport connectivity model for air freight. For the purposes of this paper, connectivity is defined as all possible direct and indirect connections to or from an airport operated by wide-body aircraft, weighted for the quality of the connection in terms of transhipment and in-flight times. Using this model, we analyse the networks of seven European airports. Europe’s largest hub airports carry most air freight thanks to their extensive intercontinental passenger networks, while smaller airports with a strong focus on air freight carry large amounts of cargo on dedicated freighter aircraft. For air freight operations, the catchment area of an airport is much larger than it is for passenger services, as shipments are being trucked to their departure airport throughout all of mainland Europe. Since there are many airports sharing the same catchment area, potential competition for air freight is fierce. We found that well located regions between the four large European airports have access to large air freight networks, whilst regional air freight connectivity in northern and southern parts of Europe is substantially lower.     

Long haul freight network design using shipper–carrier freight flow prediction: A California network improvement case study

Transportation network design is a method for analyzing the interactive benefits of transportation projects applied to a network. In this paper, a network design model is developed for long haul freight movements which are represented by relationships between shippers and carriers. Additionally, an explicit capacity constraint is used to divert traffic volume from congested links. A case study based on the California transportation network is implemented to examine the effectiveness of this model when applied to a large network. A geographic information system is used to facilitate data management and analysis of the results.