Empty container logistics optimization : an implementation framework and methods

Abstract

Empty container logistics is a huge cost component in an ocean carrier's operations. Managing this cost is important to ensure profitability of the business. This thesis proposes a 3-stage framework to handle empty container logistics with cost management as the objective. The first stage studies the forecasting of laden shipment demand, which provides the empty container supply requirement. Based on the supply needs, the problem of optimizing the fleet size was then addressed by using an inventory model to establish the optimal safety stock level. Simulations were used to understand the sensitivity of safety stock to desired service level. The final stage involves using mathematical programming to optimize repositioning costs incurred by carriers to ship empty containers to places which need them due to trade imbalance. At the same time, costs that are incurred due to leasing and storage are considered. A comparison between just-in-time and pre-emptive replenishment was performed and impact due to uncertainties is investigated. The framework is then implemented in a Decision Support System for an actual ocean carrier and is used to assist the empty container logistics team to take the best course of action in daily operations. The results from the optimizations show that there are opportunities for the carrier to reduce its fleet size and cut empty container logistics related costs.