Integrated Shipment Routing and Container Booking Model

Abstract

Sea freight forwarders provide transportation services for less-than-container-load shipment customers by simultaneously routing shipments and placing them in containers booked for travel on sea liner networks. A shipment may be (i) sent directly to the destination for better service, (ii) sent via a transfer hub to allow load consideration for cost saving purposes, or (iii) transferred to partners when it is deemed necessary or beneficial from the financial perspective. This research proposes linear mixed integer programming models that integrate shipment routing and container booking decisions. The models take into account the risks of shipment damage during transfer and keep them below a pre-specified threshold. We propose two solution algorithms for solving these large-scale models and find that they are able to solve larger instances of the problem unsolvable by the traditional branch-and-bound algorithm. Our solutions consistently outperform the solutions from sequential planning by a large margin.