A revenue management model for sea cargo

Byline: L.H. Lee, E.P. Chew, M.S. Sim In this paper, we introduce a revenue management model for an ocean carrier with two classes of orders, namely the ad hoc orders and the contractual orders. When the contractual order is accepted, the carrier can either deliver it immediately or postpone to the next ship on the shipping schedule. This problem is formulated as a stochastic dynamic programming model. We show the existence of the optimal threshold policy. Some important properties of the threshold policy are discussed. Finally, the numerical result shows that the percentage improvement of the threshold policy over an existing policy may be as high as 199%.