Solutions for flexible container leasing contracts with options under capacity and order constraints

Cong LIU, Zhibin JIANG, Liming LIU, Na GENG

Research output: Journal PublicationsJournal Article (refereed)

15 Citations (Scopus)

Abstract

The container-shipping market becomes prosperous with the development of the global economy. As shipping networks become more complex and heterogeneous, container capacity planning becomes more difficult. This paper tackles the container planning problem from the carrier's perspective in a two-echelon container shipping service chain (CSSC), which includes one carrier and one upstream rental company. A flexible contract with options is introduced into the one-period container planning mechanism. With the flexible options contract, the rental company requires the carrier to make a commitment or place an order in advance. Options give buyer the right to modify the initial orders to better match the supply with the demand. Based on the carrier's decision tendency, i.e., aggressive or conservative, we analyze the application strategies of the unilateral options and the bidirectional options in different practical scenarios. In particular, for the applicability of the decision models, we further consider the shipping capacity and the minimum order constraints and formulate the carrier's option policies with constrained nonlinear programs. Numerical examples show that the proposed decision strategies with option contract cannot only effectively increase the container trading quantity between the rental company and the carrier, but also significantly reduce the carrier's container capacity risk while increasing its profit.
Original languageEnglish
Pages (from-to)403-413
Number of pages11
JournalInternational Journal of Production Economics
Volume141
Issue number1
Early online date15 Sep 2012
DOIs
Publication statusPublished - Jan 2013

Fingerprint

Containers
Freight transportation
Planning
Industry
Container
Leasing
Profitability
Shipping
Option contract
Container shipping

Bibliographical note

This work was supported by a grant from National Natural Science Foundation of China (No.70872077), and by the National Natural Science Foundation of China and Research Grants Council of Hong Kong joint research project (No.70831160527 and No. N_LU313/08).

Keywords

  • Container leasing
  • Contract with options
  • Decision tendency
  • Kuhn-Tucker conditions

Cite this

@article{8edd1bf2657c433db6bffc709e1ae4bb,
title = "Solutions for flexible container leasing contracts with options under capacity and order constraints",
abstract = "The container-shipping market becomes prosperous with the development of the global economy. As shipping networks become more complex and heterogeneous, container capacity planning becomes more difficult. This paper tackles the container planning problem from the carrier's perspective in a two-echelon container shipping service chain (CSSC), which includes one carrier and one upstream rental company. A flexible contract with options is introduced into the one-period container planning mechanism. With the flexible options contract, the rental company requires the carrier to make a commitment or place an order in advance. Options give buyer the right to modify the initial orders to better match the supply with the demand. Based on the carrier's decision tendency, i.e., aggressive or conservative, we analyze the application strategies of the unilateral options and the bidirectional options in different practical scenarios. In particular, for the applicability of the decision models, we further consider the shipping capacity and the minimum order constraints and formulate the carrier's option policies with constrained nonlinear programs. Numerical examples show that the proposed decision strategies with option contract cannot only effectively increase the container trading quantity between the rental company and the carrier, but also significantly reduce the carrier's container capacity risk while increasing its profit.",
keywords = "Container leasing, Contract with options, Decision tendency, Kuhn-Tucker conditions",
author = "Cong LIU and Zhibin JIANG and Liming LIU and Na GENG",
note = "This work was supported by a grant from National Natural Science Foundation of China (No.70872077), and by the National Natural Science Foundation of China and Research Grants Council of Hong Kong joint research project (No.70831160527 and No. N_LU313/08).",
year = "2013",
month = "1",
doi = "10.1016/j.ijpe.2012.09.005",
language = "English",
volume = "141",
pages = "403--413",
journal = "International Journal of Production Economics",
issn = "0925-5273",
publisher = "Elsevier",
number = "1",

}

Solutions for flexible container leasing contracts with options under capacity and order constraints. / LIU, Cong; JIANG, Zhibin; LIU, Liming; GENG, Na.

In: International Journal of Production Economics, Vol. 141, No. 1, 01.2013, p. 403-413.

Research output: Journal PublicationsJournal Article (refereed)

TY - JOUR

T1 - Solutions for flexible container leasing contracts with options under capacity and order constraints

AU - LIU, Cong

AU - JIANG, Zhibin

AU - LIU, Liming

AU - GENG, Na

N1 - This work was supported by a grant from National Natural Science Foundation of China (No.70872077), and by the National Natural Science Foundation of China and Research Grants Council of Hong Kong joint research project (No.70831160527 and No. N_LU313/08).

PY - 2013/1

Y1 - 2013/1

N2 - The container-shipping market becomes prosperous with the development of the global economy. As shipping networks become more complex and heterogeneous, container capacity planning becomes more difficult. This paper tackles the container planning problem from the carrier's perspective in a two-echelon container shipping service chain (CSSC), which includes one carrier and one upstream rental company. A flexible contract with options is introduced into the one-period container planning mechanism. With the flexible options contract, the rental company requires the carrier to make a commitment or place an order in advance. Options give buyer the right to modify the initial orders to better match the supply with the demand. Based on the carrier's decision tendency, i.e., aggressive or conservative, we analyze the application strategies of the unilateral options and the bidirectional options in different practical scenarios. In particular, for the applicability of the decision models, we further consider the shipping capacity and the minimum order constraints and formulate the carrier's option policies with constrained nonlinear programs. Numerical examples show that the proposed decision strategies with option contract cannot only effectively increase the container trading quantity between the rental company and the carrier, but also significantly reduce the carrier's container capacity risk while increasing its profit.

AB - The container-shipping market becomes prosperous with the development of the global economy. As shipping networks become more complex and heterogeneous, container capacity planning becomes more difficult. This paper tackles the container planning problem from the carrier's perspective in a two-echelon container shipping service chain (CSSC), which includes one carrier and one upstream rental company. A flexible contract with options is introduced into the one-period container planning mechanism. With the flexible options contract, the rental company requires the carrier to make a commitment or place an order in advance. Options give buyer the right to modify the initial orders to better match the supply with the demand. Based on the carrier's decision tendency, i.e., aggressive or conservative, we analyze the application strategies of the unilateral options and the bidirectional options in different practical scenarios. In particular, for the applicability of the decision models, we further consider the shipping capacity and the minimum order constraints and formulate the carrier's option policies with constrained nonlinear programs. Numerical examples show that the proposed decision strategies with option contract cannot only effectively increase the container trading quantity between the rental company and the carrier, but also significantly reduce the carrier's container capacity risk while increasing its profit.

KW - Container leasing

KW - Contract with options

KW - Decision tendency

KW - Kuhn-Tucker conditions

UR - http://commons.ln.edu.hk/sw_master/2397

UR - https://www.scopus.com/inward/record.uri?eid=2-s2.0-84869496443&doi=10.1016%2fj.ijpe.2012.09.005&partnerID=40&md5=21cc3955f871a55de51a2819dd57c425

U2 - 10.1016/j.ijpe.2012.09.005

DO - 10.1016/j.ijpe.2012.09.005

M3 - Journal Article (refereed)

VL - 141

SP - 403

EP - 413

JO - International Journal of Production Economics

JF - International Journal of Production Economics

SN - 0925-5273

IS - 1

ER -