A revenue management model for sea cargo

Abstract

We introduce a revenue management model for the ocean carrier. The two classes of order, namely the ad hoc orders and the contractual orders, may arrive at each time instance and each class of order consists of a random amount of containers. If a container from the contractual order is accepted, the carrier can either deliver it by the first ship leaving the port or postpone the delivery to the next ship on the shipping schedule. Under this situation, we formulate the problem as a stochastic dynamic programming model and prove that a non-increasing threshold policy exists which gives an optimal solution to the problem. We next propose various heuristics to determine the stationary threshold policy.