Sea cargo revenue management: a scenario-based approach for order acceptance decision

Abstract

In this paper, we consider a single-leg, single-departure period sea cargo revenue management problem. Since demand is uncertain, the carrier practices overbooking to better utilise capacity in which the overlooking quantity is fixed based on past experience and historical data. Booking requests arrive in a given time window before ship departure. The problem is to determine whether to accept a booking request upon its arrival so as to maximise the total expected profit subject to the limited capacity. To this end, a two-phase scenario-based heuristic is developed for real-time application. This heuristic is intuitive, fast, and easy to understand and implement. The major advantage of the proposed heuristic is that the development is simple enough such that a college graduate with basic knowledge on management science can understand, implement, and maintain. By computational experiment, we find that the heuristic is robust and delivers solutions with consistently high effectiveness.