Research on strategic liner ship fleet planning with regard to hub-and-spoke network

Abstract

In order to obtain the biggest economic benefits, large shipping firms widely use hub-and-spoke network to operate ships. The reasonable shipping network not only decreases the cost of infrastructure construction to achieve scale economies, but also be efficient to allocate the existing resources of maritime business. Shipping firms usually are in pursuit of the large-scale container ship, leading some firms to blindly upgrade vessels and cause the loss of profit. Since the operating costs and transportation time is the major problem for shipping firms to get more profit, in this study, we research the relationship of route design, fleet planning and container freight to build the objective function in view of the minimization of time and cost. This study proposes the mixed integer linear programming model of hub-and-spoke network and liner ship fleet planning to choose the appropriate ship location and distribution, and applies Lagrange Heuristic Algorithm to solve the model. The simulation results verify the validity of this algorithm, showing that when firms invest the large ship, it usually gets lower freight rate, by contrast, small vessels have cost and scale advantages. But in order to cope with changes in market demand, for the operations of shipping firms, owning large vessels are still necessary. Our two-phase model considers problems comprehensively to complete the network design of liner ship fleet planning. Lagrange Heuristic Algorithm can get high quality solutions in a relatively short time, it provides reference significance for solving related problems in the future.