1The Logistic Institute – Asia Pacific Cargo Selecting Problem Abstract  The work describes a mathematical programming model for a cargo selection problem, obtained from a Singapore shipping company (APL).  Our model helps in evaluating whether a forecast demand should be selected or not.  Given the forecasting and a finite set of candidate routes, the model calculates the number of containers transported between port pairs, according to specific customer, equipment type and size and service requirement.  This model also concerns the empty container reposition.

2The Logistic Institute – Asia Pacific Cargo Selecting Problem Background Introduction

3The Logistic Institute – Asia Pacific Cargo Selecting Problem Demand Forecasting  A joint work of demand planner, sales manager and trade manager.  Demand forecasting is carried out at three different levels: Background Introduction – Long term forecasting – Median term forecasting – Short term forecasting  Long term forecasting  Median & short term forecasting For the strategic decisions, such as the design of fleets, the design of sea transport systems and long term revenue management Mainly focus on the tactical and operational planning respectively. The selection of origin-destination pairs, selection of costumers, fleet deployment and so on are dependent on the data.

4The Logistic Institute – Asia Pacific Cargo Selecting Problem A High Degree of Uncertainty  It is possible that not all the forecast demands can be shipped in a period because of the bad weather.  From time to time, there are also many extra profit opportunities offered by the variable markets. Background Introduction Two Examples: It is critical for shipping company to manage revenue based on the cargo selection.

5The Logistic Institute – Asia Pacific Cargo Selecting Problem Empty Container Reposition  A major component of a shipping company's total operating cost  Due to the imbalance of the international trading Background Introduction In light of the above, it is necessary to have an efficient policy to manage the movement of forecast demand (including laden containers and empty containers) in order to maximize the total profit in a specific planning horizon, and at the same time, to make best use of the existing facilities.

6The Logistic Institute – Asia Pacific Cargo Selecting Problem Problem Description

7The Logistic Institute – Asia Pacific Cargo Selecting Problem Forecast Demand Record  loading port, i.e., origin  discharging port, i.e., destination  customer  equipment type and size, ETS  service requirement Problem Description Each forecast demand record is characterized by:

8The Logistic Institute – Asia Pacific Cargo Selecting Problem Equipment Type and Size  Equipment type and size or ETS is the value denoting the type and size of containers which is used for moving cargoes. For example, `D40H' means dry container with the size of 40 feet high cube. The different equipment type and size are shown in the following table: Problem Description Equipment TypesAvailable Size Dry Containers20’, 40’, 40’ High Cube, 45’, 48’ Refrigerated Containers20’, 40’, 40’ High Cube Specialty Equipment20’, 40’, Flat Rack, Open Top Chassis20’, 40’, Extendable 40’ – 48’ Note: This table is copied from APL website

9The Logistic Institute – Asia Pacific Cargo Selecting Problem Service Requirement  The liner shipping company provides regular service among major ports on a determined schedule basis.  A service depends upon a number of factors, such as seasonal fluctuations, market requirements, company policy etc.  Customer may have specific service requirement. Problem Description

10The Logistic Institute – Asia Pacific Cargo Selecting Problem Route Definition  In practice, most of shipping companies use concept route, which differs from the service, for operation convenience.  There is a fact that only services are visible for customers or shippers.  Service leg. Problem Description

11The Logistic Institute – Asia Pacific Cargo Selecting Problem Forecast Demand Conclusion  (i,j,k,m,n) represents the value for forecast demand dimension, i.e., origin-destination pairs, customer, ETS and service requirement.  We label this forecast demand dimension (i,j,k,m,n) as f and simply call d f a laden cargo demand flow from port i to port j.  Empty container reposition demand e can be characterized by origin- destination pairs and ETS, notated as e:(i,j,m).  Another flow from port i to port j. Problem Description We assume that shipping company has all the required demand forecasts for any markets they plan to serve. Laden Cargo DemandEmpty Container Reposition Demand We want to assign each cargo demand forecast f and e to some mix of routes r among a finite set of candidate routes considered by the shipping company, to optimize our objective.

12The Logistic Institute – Asia Pacific Cargo Selecting Problem Valid Route Not all the routes in candidate set will be appropriated to each demand:  Cargo between i and j can only be transported if the ship sails from i to j, directly or indirectly.  Service requirement should be satisfied. Problem Description Definition:

13The Logistic Institute – Asia Pacific Cargo Selecting Problem Problem Description  The decision making problem is to assign cargo demands to each route in the `best possible' way.  The objective is to maximize the revenue of optional cargoes minus the variable cost, under a set of different constraints such as demand constraint, network balance constraint, vessel capacity constraint etc.  There are two decisions should be made: Problem Description – To decide which cargo demand should be moved; – To decide to move the cargo demand on which route.

14The Logistic Institute – Asia Pacific Cargo Selecting Problem Assumptions  All the ships available during the planning horizon are known and fixed.  The forecast demand of cargo, i.e., number of containers from port i to port j over the planning horizon is deterministic, known and occurs uniformly during the horizon.  There are sufficient empty container relocation demand, i.e., d e is a big number. It seems more practical to give this assumption since the shipping company only makes the empty container reposition planning.  The managers of the shipping company can suggest a finite set of candidate routes for their liner fleet, derived from common sense, their past experience or their view of future main cargo flows. Problem Description

15The Logistic Institute – Asia Pacific Cargo Selecting Problem Related Problem  Ship routing and scheduling problem: to find optimal route for each ship and the cargo it carries for any port pair whereas the frequency of service are also calculated.  In our model, the concept of route is expanded and one route can be fulfilled by one or more ships to satisfy the cargo demand, and so most of the approaches for ship routing problem are not applicable in our problem. Problem Description

16The Logistic Institute – Asia Pacific Cargo Selecting Problem Today’s Topic Q & A