Hedging against uncertainty in transportation network design through flexible scheduling

Abstract

We consider the planning problem of a consolidation carrier that seeks to plan effective transportation operations in the presence of uncertainty in shipment sizes. We presume the carrier seeks to execute regular operations with respect to the geographical routing of vehicles and shipments. However, the carrier can respond to volatility in shipment sizes by effectively scheduling shipment and vehicle dispatches, as well as acquiring additional vehicle capacity at a premium. We present two mathematical models with uncertainty in shipment sizes. The first mathematical model reflects the aforementioned setting wherein scheduling shipment, scheduling vehicle dispatches, and acquiring additional vehicle capacity act as recourse actions. The second mathematical model serves as a benchmark for estimating the savings potential of schedule flexibility. It reflects a related planning problem wherein vehicle and shipment dispatch scheduling decisions must be made before shipment sizes are known. Based on an extensive computational study, we estimate the savings potential of scheduling flexibility and characterize situations when those savings may be significant. Finally, we identify tactics for designing a transportation network that will position it to benefit from schedule flexibility.