Data-driven optimization: A flexible route pricing method for Non-Truck Operating Common Carriers

Abstract

This paper investigates a data-driven flexible pricing method for Non-Truck Operating Common Carriers (NTOCCs). Different route price intervals are provided based on the data cleaning, mining and clustering of an NTOCC. Furthermore, an innovative data-driven flexible pricing method based on a two-category (category-I and category-II) phased payment strategy is presented to systematically improve the empirical pricing process between NTOCCs and freight carriers. The method includes grabbing order, planning, bargaining, transportation and evaluation stages. First, category-I and category-II (pricing) strategies are proposed for the profit management of NTOCCs. The application of the two strategies is identified by a data-driven route price prediction model. Second, considering the loss risk of NTOCCs, the loss deposit (pre-penalty) is introduced for unpunctual cargo delivery in every category pricing strategy. Moreover, every category strategy includes two phases (phase-I and phase-II). In phase-I (planning stage), the paired pricing references are explored based on the predicted route price, bi-level and interval bi-level programming models; loss deposit intervals are developed for planning bargaining references for NTOCCs. In phase-II (evaluation stage), the references for the loss deposit/phase-II payment are formulated by evaluating the unpunctual cargo delivery. Additionally, in the systematic research, numerical experiments show the necessity of new features’ formulation and the good performance of route price prediction, indicate that the historical data set can be matched with two strategies, and verify that the data-driven flexible pricing method can effectively contribute to the profit management of NTOCCs. Several managerial insights are presented to solve the unbalance development of NTOCCs in different provinces and the implementation difficulties of the innovative pricing method.