Optimal Slot Allocation in Intra-Asia Service for Liner Shipping Companies
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Optimal Slot Allocation in Intra-Asia Service for Liner Shipping Companies C H E N G - M I N F E N G 1 & C H I A- H U I C H A N G 1 1 I n s t i t u t e o f Tr a f f i c a n d Tr a n s p o r t a t i o n , N a t i o n a l C h i a o Tu n g U n i v e r s i t y, 4 F, N o . 11 4 , S e c . 1 , C h u n g - H s i a o W. R o a d , Ta i p e i 10 0 , Ta i w a n , R . O . C . E - m a i l s : c m f e n g @ m a i l . n c t u . e d u . t w ; [email protected]
Liner shipping companies strive for fully loading cargo on vessels and often neglect revenue management opportunities. Shipping agents in different ports typically compete for additional slots on containerships to improve their own revenue. In booming markets, arguments over slot allocation between shipping agencies occur frequently. Intra-Asian service routes are designed to call at many ports to provide frequent sailings, reduced shipping time and direct delivery. Slot allocation in intra-Asia liner shipping is more complex than that for long-haul liner shipping. This study uses revenue management modelling as a decision-support tool to enhance profit and management performance of liner shipping agencies. The model is explained using a case study of Taiwan liner shipping company. Experimental results show the proposed model to have better applicability and performance than conventional slot allocation models. Maritime Economics & Logistics (2008) 10, 295–309. doi:10.1057/mel.2008.6
Keywords: Liner shipping; slot allocation; revenue management.
INTRODUCTION Facing a market-driven and competitive environment, intra-Asia liner shipping companies must provide frequent sailing, shorter shipping times and direct delivery to customers to enhance their competitiveness. As most service routes are designed to call at many ports, and frequent loading and unloading of cargo is performed at every port, slot allocation becomes increasingly complex for liner shipping companies. Fagerholt and Christiansen (2000) developed a bulk ship scheduling problem that combined a multi-ship pickup and delivery
C-M Feng and C-H Chang Optimal Slot Allocation
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problem with time windows (m-PDPTW) and a multi-allocation problem. Revenue management (also known as yield management) was used to identify optimal inventory allocation and scheduling strategies, as well as price-setting for perishable assets to maximise revenue with a planning horizon (Lai and Ng, 2005). Revenue management is a broad term that describes how a service provider can secure increased revenues from a relatively fixed capacity. Revenue management has been successfully applied to airlines, car rental firms, cruise lines, restaurants and hotels (Berman, 2005), but it has not been popular in liner shipping. Ting and Tzeng (2002, 2004) presented revenue management systems to increase profit using slot allocation in long-haul services for liner shipping. Few studies of slot allocation have sought to maximise profit in short-haul, multiple-port network conditions such as those of intra-Asia liner shipping. Slot allocation in
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