Simultaneous optimization of schedule coordination and cargo allocation for liner container shipping networks

A liner container shipping carrier usually collects immediately-delivered goods that are produced by manufacturers in world factories, and transports the products to worldwide market destination by offering weekly shipping service. In practice, the carrier has to consider extra demurrage cost of containerized cargos incurred from waiting for weekly shipping service at ports. In this paper, we develop a mathematic programming model to maximize the carrier’s profitability by simultaneously optimizing the ship route scheduling and interrelated cargo allocation scheme. The nonlinear optimization model is transformed into an equivalent mixed-integer linear program, and its applicability is demonstrated by a case study.     

Analyzing air cargo flows of international routes: an empirical study of Taiwan Taoyuan International Airport

Air cargo demand is an important aspect of the operation and planning of private and public agencies responsible for airports. While most existing studies in this field include only geo-economic characteristics of airports and their hinterlands as explanatory variables, this study develops a gravity model of air cargo flows by trying to incorporate more factors that might influence international air cargo flows of an airport. The model is developed based on the panel data of air cargo services on scheduled routes at Taiwan Taoyuan International Airport during the years 2004-2007. The results indicate that population, air freight rate and three dummy variables, including the regional economic bloc of the “Chinese Circle”(an informal partnership between Hong Kong, Macao, Taiwan and mainland China), the Open Sky Agreements and long established colonial links, are key determinants of international air cargo flows from/to Taiwan. These results suggest a wider array of factors needs to be considered in policy.     

Mapping causalities of airline dynamics in long-haul air transport markets

The introduction of low-cost air transport services to short-haul routes has significantly shaped the structure of this market segment. Recent research investigates and discusses the transferability of the low-cost carrier business model to long-haul routes and identifies respective challenges such as lower cost advantages over the competing full-service network business model. Our paper complements the existing research with a review of airline dynamics in long-haul air transport markets and the subsequent development of a causal loop diagram of the transatlantic air transport market using systems thinking. The objective of this paper is to provide an overview of specific characteristics regarding airline operations in the transatlantic air transport market to investigate the market potential of long-haul low-cost carriers competing with full-service network carriers in this market. We implement these characteristics in a causal loop diagram which comprises the most important elements of and causalities within the long-haul air transport market that affect the development of these elements. These include the generation of transatlantic air transport demand, passenger choice, and airline ticket price and fleet development. The causal loop diagram serves as a framework for qualitative investigation of the market potential of long-haul low-cost services. The paper proves systems thinking to be a feasible approach to map causalities based on knowledge from scientific literature.     

Defining a conceptual model for high-speed vessels

High-speed vessels offer the opportunity for faster and more frequent delivery of smaller quantities of goods over shorter sea crossings. This paper reviews the role of high-speed vessels in the context of the total supply chain based on Fisher's product categorisation model. A mode choice process is presented here within the context of supply chain transport strategies. The model relates mode choice to volume supply, product cost, shipping distance, frequency of service, transit time and product type. The paper concludes that where the flexibility is the market winner high-speed vessels are required whereas where cost is the market winner conventional ships will suffice.     

Segmenting industrial competitive markets: An example from air freight

This paper applies a disaggregated approach to segment industrial markets under competitive structures taking the air-freight market for the high-technology product industry in Taiwan as a case study. Data from firms is used to examine the structure of the air freight industry and we find that carriers are clustered into two strategic groups, express and forwarder. Pricing is a leading strategy recognized by customers for forwarders, whereas service punctuality and freight security are the winning strategies for express. The high-tech freight market is classifiable by shipment destination and size.     

Constructing a mixed-logit model with market positioning to analyze the effects of new mode introduction

This study aims to investigate how the introduction of high-speed rail (HSR) influences traveler choice behavior and the market structure in the western corridor of Taiwan. A new mixed-logit model with factor decomposition is constructed to analyze the market positioning of the existing modes and HSR; the data is collected using the stated preference method. The empirical results show that travel cost is the major factor in market positioning. After the introduction of HSR, travelers’ mode preference did not change, whereas locations across modes on the market-positioning map as well as some coefficients of the explanatory variables changed.     

Price planning for time-definite less-than-truckload freight services

Price planning simultaneous determines the service demand (with associated prices) and an operational plan to maximize a carrier’s profit. We modeled this integral-constrained concave program in the link formulation and proposed an implicit enumeration embedded with Lagrangian Relaxation upper bounds to determine the optimal prices. Computations on Taiwan’s time-definite less-than-truckload freight market showed that the carrier needs to simultaneously re-evaluate its network capacity while determining prices. The common practice of distance-based pricing that sets price by a base rate over direct shipment distance underestimates operating cost, specifically operating losses for short distance shipments.     

A model of air cargo liberalization: passenger vs. all-cargo carriers

This paper employs a multi-market oligopoly model to examine the effect of cargo liberalization on competition between all-cargo carriers and mixed passenger/cargo carriers. We find that if home carriers engage in the joint production of cargo and passenger services, whereas foreign carriers produce the two outputs separately, then unilateral cargo liberalization by the home country will reduce home firm profits and increase foreign profits, and raise air fares for passenger travel when foreign competition in the passenger sector is limited. Our analysis suggests that the separation of air cargo and passenger rights might be fraught with difficulty in Asia due to the characteristics of its air cargo market, in which most passenger carriers have substantial cargo businesses and operate “combi” fleets.     

Optimal cargo container loading plans under stochastic demands for air express carriers

In this research, we develop a stochastic-demand cargo container loading plan model with the objective of minimizing the total operating cost, subject to the related operating constraints. The model is formulated as a nonlinear mixed integer program that is characterized as NP-hard. We employ a problem linearization technique, coupled with a mathematical programming solver, to develop a solution method. To preliminarily evaluate the model and the solution method, we perform a case study using data from an international air express carrier. The results show that the model and the solution method could be useful for air express carriers.     

Cooperation through capacity sharing between competing forwarders

In this paper, we consider a shipping system consisting of one carrier and two shipping forwarders who compete on price for businesses from potential shippers. The carrier may quote different prices or a single price to the two shipping forwarders who will then order shipping capacity from the carrier and set the selling prices to the shippers before market uncertainties are revealed. Inspired by cooperation between competing parties in many industries including the maritime shipping industry, we propose a new model under which the shipping forwarders are allowed an opportunity to purchase shipping capacity from each other after they order capacity from the carrier but before they set the selling prices and satisfy demand, referred to as the capacity reservation model. We show analytically that capacity reservation between competing forwarders benefits both the carrier and the forwarders, leading to a win–win situation under various market conditions. Furthermore, capacity reservation can offset the negative effect of a carrier’s pricing power which enables the carrier to charge discriminatory shipping prices to squeeze more profits out of the forwarders.     

Economies of traffic density and scale in the integrated air cargo industry: The cost structures of FedEx Express and UPS Airlines

This paper examines the cost structures of the leading integrated air cargo carriers, FedEx Express and UPS Airlines. A total cost model is estimated for the two carriers using quarterly data on domestic operations and costs over a nine-year period (2003–2011). The estimated model indicates that the integrated industry exhibits increasing returns to traffic density and constant returns to scale. Accounting for carrier-specific differences in cost structure and network size, FedEx Express is found to be more cost-efficient than UPS Airlines. Looking at the carriers individually, UPS Airlines exhibits substantial economies of traffic density and constant returns to scale while FedEx Express' cost structure is characterized by weak economies of density and constant returns to scale. The combined effect of returns to density and returns to scale on the cost structures of integrated carriers is captured by economies of size. Both FedEx Express and UPS Airlines exhibit economies of size, indicating that carriers in the integrated industry can be more cost efficient by making appropriate adjustments to their network size as their output grows. Moreover, the relative cost-efficiencies of the carriers are reversed when their network-size differences are not controlled.     

Classification and competition analysis of air cargo logistics providers: The case of Taiwan’s high-technology industry

This paper classifies air cargo logistics providers allowing analysis of high-technology manufacturers’ choices of providers. Data are collected from high-technology manufacturers in Taiwan’s science parks. Forwarder providers are put into three categories and nested logit model are applied to explore what service performance factors influence high-technology manufacturers when selecting third party logistics providers. Delivery is found to be the most important factor. It is found, for example, that two express providers with high levels of customer satisfaction and market share could compete more effectively by exercising differential strategies.     

Issues on liberalization of air cargo services in international aviation

This paper provides a general discussion of various issues related to the liberalization of air cargo services in international aviation. It shows that all-cargo carriers may have different routing needs than passenger carriers and thus require different sets of air traffic rights from those needed by passenger carriers. On the other hand, separation of air cargo and passenger rights will be fraught with difficulty in Asia because of distinctive characteristics of its air cargo market, where most passenger carriers have substantial cargo business and operate “combi” fleets. Customs and inter-modal transportation are also discussed in the context of cargo liberalization.     

An airline's management strategies in a competitive air transport market

Over the last decade, the demand for domestic and international flights in Korea has increased substantially. To meet the strong flight demands, several low cost carriers have begun to offer flight services. In addition, full service carriers have been motivated to establish their own subsidiary low cost carriers to maintain their market share against rival low cost carriers. This paper studies the management strategies of three kinds of airlines - full service carrier, its subsidiary low cost carrier and rival low cost carrier - based on game theory in the competitive air transport market. Each airline is assumed to act as a player and chooses strategies regarding airfare, flight frequency, and the number of operating aircrafts for specific routes while maximizing its own profits. Demand leakages between the airlines are considered in the flight demand function according to the selected strategies of all airlines. Through various game situations reflecting realistic features, this study provides managerial insights that can be applied in the competitive air transport market.     

Assessing the air cargo business models of combination airlines

Notwithstanding the fact that the air cargo business is generally a secondary one to the passenger business for combination airlines, it can have an important role to play in their profitability. However, growing challenges are threatening the market positions of the combination airlines. Improving their market positioning depends, amongst other factors, on appropriate business models. Yet, the literature on the air cargo business models of combination airlines is scarce. This paper aims to contribute to closing this gap.The research presented herein aimed to identify the representative business models of the combination airlines' cargo strategies. Three strategies have been considered. The research method included a series of structured interviews with key informants from combination airlines, namely: TAP Cargo, Brussels Airlines Cargo, SATA Cargo, Turkish Cargo, SWISS WorldCargo, Finnair Cargo, AF-KLM Cargo, Emirates SkyCargo, Lufthansa Cargo and IAG Cargo.The ten air cargo business models and the representative business models of each strategy are described. The results suggest an overlap between the business models of different strategies. In addition, the results show that an evolution in strategy does not necessarily require a redesign of the business model, but tailored changes in specific components.     

Liner shipping cargo allocation with service levels and speed optimization

The cargo allocation problem is a key strategic problem that determines the profitability of a liner shipping network. We present a novel mixed-integer programming model for this problem that introduces service levels for transit time requirements and optimizes the vessel speed on each leg of a service. These extensions to the cargo allocation problem greatly increase its realism and value for carriers. We evaluate our model on realistic data from the LINER-LIB and perform a sensitivity analysis of transit times versus bunker costs. Furthermore, we show how carriers can use our model to make data driven decisions in their operations.     

The potential of horizontal collaboration in airport ground freight services

Since the global economic crisis of 2007–2011, the increasingly dynamic and challenging air cargo market in Europe has forced freight forwarders to improve their performance. In addition to improving their internal transport efficiency, they have also started to look at previously unexplored opportunities for horizontal collaboration in landside airport transport. The aim of this study is to reveal the potential of air cargo transport collaboration on a horizontal level, i.e. between multiple freight forwarders within a single airport. Reviewing existing literature on horizontal collaboration, with a focus on the air cargo industry, we propose a conceptual framework for transport collaboration in the air cargo industry. Based on a comprehensive study on air cargo transport movements within Schiphol, using a simulation model based on company data of 10,747 shipments (6977 tons of cargo) for a period of 30 days, we find several interesting results. Our main finding is that horizontal collaboration can improve the transport performance, by maintaining a high frequency of transport movements and maintaining an acceptable throughput time for air cargo shipments, and at the same time reduce transport costs by up to 40%. For smaller freight forwarders, the frequency of transport deliveries can even increase, while still allowing them to improve the average load factor of transport movements.     

Air cargo expansion and economic growth: Finding the empirical link

This paper applies Granger causality tests to examine the causal relationship between air cargo expansion and economic growth in Taiwan for the period 1974–2006. The results of cointegration tests show a long-run equilibrium and bi-directional relationship between air cargo expansion and economic growth in the case of Taiwan.     

Exploring passenger preferences in airline service attributes: A note

This paper examines passengers' valuations on airline service attributes using stated preference analysis in the direct flight air market between Taiwan and China. An experiment design reflecting the characteristics of low cost airlines is used to collect stated preference data from Taiwanese air passengers. Empirical results reveal not only the implicit values of service attributes but also the preference differences in attributes between business and non-business travelers.     

Air cargo as an economic development engine: A note on opportunities and constraints

This note examines the role that air cargo plays in economic development and factors that condition its impact. After presenting basic empirical relationships between air cargo and both trade and gross domestic product per capita, we discuss three factors that can enhance air cargo's positive impact: air service liberalization, improving customs quality, and reducing corruption. We then model and assess the effects of these three factors on per capita net inward foreign investment and gross domestic product per capita in 63 countries around the world.