Abstract

Freight transportation has long been recognized as an important foundation of economic strength. Previous studies use traditional methods to examine a set of scenarios. However, due to the complexity of transportation projects which can have substitution effects in a network the number of resulting scenarios may be more than can be examined on a case by case basis.

In this paper, a sequential shipper-carrier freight flow prediction model is examined. Additionally, an explicit capacity constraint is used to divert the traffic volume from congested links. A branch and bound method is applied to obtain a solution to our model. We discuss the benefits and limitations of our method, examine its computational efficiency and provide a numerical example. The results show that project selection by the traditional case by case analysis method cannot capture the complexity of freight transportation network improvements and yields the sub-optimal solution.

Abstract

B2B e-Commerce facilitates the reduction of supply chain intermediaries and reduces transaction costs. This revolution has spawned a number of online marketplaces for freight transportation service procurement. The paper looks into the operational models of existing electronic freight marketplaces and the strategic behavior of shipper and carriers conducting their business in these market places. A literature survey of market clearing mechanisms models for online freight transportation market places is provided. Models for shipper-carrier strategic interaction are presented for freight transportation procurement. Some of the key research questions for developing methodologies to aid both the shippers and carriers are discussed.

Abstract

Uncertainties in transportation capacity and costs pose a significant challenge for both shippers and carriers in the trucking industry. One way to hedge these uncertainties is to use concepts from the theory of Real Options to craft derivative contracts, which we call truckload options in this paper. In its simplest form, a truckload call (put) option gives its holder the right to buy (sell) truckload services on a specific route, at a predetermined price on a predetermined date. The holder decides if a truckload option should be exercised depending on information available when the option expires. Truckload options are not yet available, however, so the purpose of this paper is to develop a truckload options pricing model and to show the usefulness of truckload options to both shippers and carriers. Since the price of a truckload option depends on the spot price of a truckload, we first model the dynamics of spot rates using a common stochastic process. Unlike financial markets where high frequency data are available, spot prices for trucking services are not public and we can only observe some monthly statistics. This complicates slightly the estimation of necessary parameters, which we obtain via two independent methods (variogram analysis and maximum likelihood), before developing a truckload options pricing formula. A numerical example based on real data shows that truckload options would be quite valuable to the trucking industry.