Joint tank container demurrage policy and flow optimisation using a progressive hedging algorithm with expanded time-space network

Xinjie Xing, Dongping Song*, Chengfeng Qiu, Paul R. Drake, Yuanzhu Zhan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

A key feature of the tank container (TC) operating industry is that customers overhold TCs to provide temporary storage equipment for their contents rather than provide their own storage facilities. TC operators charge a very profitable fee (demurrage charge) for this service making it an attractive business proposition, but it can be detrimental to holistic network flows and fleet sizing. This paper addresses the problem of jointly optimising TC demurrage policy and TC flow, in the face of uncertain TC maintenance times, to maximise profits. A progressive hedging algorithm with expanded time-space network (PHA-ETSN) is designed to tackle this tactical level optimisation problem as other established techniques struggle with this optimisation in terms of computational time and memory requirements. Experiments are performed to illustrate how the optimisation tool can be used to investigate how demurrage policy affects different operational costs and TC hire revenue and thereby profit. These experiments demonstrate how the optimisation tool can be used by managers not only to optimise demurrage policy but also to explore and to understand more deeply the costs and profits in their operations.

Original languageEnglish
Pages (from-to)663-679
Number of pages17
JournalEuropean Journal of Operational Research
Volume307
Issue number2
Early online date1 Sept 2022
DOIs
Publication statusPublished - 1 Jun 2023

Bibliographical note

Funding Information:
The authors would like to thank the three anonymous reviewers of this paper for their insightful comments and constructive suggestions, which have helped improve the paper significantly.

Publisher Copyright:
© 2022 Elsevier B.V.

Keywords

  • Detention and demurrage
  • OR in maritime industry
  • Pricing and fleet size optimisation
  • Progressive hedging algorithm
  • Time-space network modelling

ASJC Scopus subject areas

  • General Computer Science
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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