Going Bunkers: The Joint Route Selection and Refueling Problem

Manufacturing & Service Operations Management, Vol. 11, No. 4, pp. 694-711, Fall 2009

Columbia Business School Research Paper

18 Pages Posted: 19 Oct 2011

See all articles by Omar Besbes

Omar Besbes

Columbia Business School - Decision Risk and Operations

Sergei Savin

Columbia University - Columbia Business School; University of Pennsylvania - Operations & Information Management Department

Date Written: 2009

Abstract

Managing shipping vessel profitability is a central problem in marine transportation. We consider two commonly used types of vessels - liners (ships whose routes are fixed in advance) and trampers (ships for which future route components are selected based on available shipping jobs) - and formulate a vessel profit maximization problem as a stochastic dynamic program. For liner vessels, the profit maximization reduces to the problem of minimizing refueling costs over a given route subject to random fuel prices and limited vessel fuel capacity. Under mild assumptions about the stochastic dynamics of fuel prices at different ports, we provide a characterization of the structural properties of the optimal liner refueling policies. For trampers, the vessel profit maximization combines refueling decisions and route selection which adds a combinatorial aspect to the problem. We characterize the optimal policy in special cases where: i) prices are constant through time and do not differ across ports, and ii) prices are constant through time and differ across ports. The structure of the optimal policy in such special cases yields insights on the complexity of the problem and also guides the construction of heuristics for the general problem setting.

Suggested Citation

Besbes, Omar and Savin, Sergei, Going Bunkers: The Joint Route Selection and Refueling Problem (2009). Manufacturing & Service Operations Management, Vol. 11, No. 4, pp. 694-711, Fall 2009; Columbia Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=1946397

Omar Besbes (Contact Author)

Columbia Business School - Decision Risk and Operations ( email )

New York, NY
United States

Sergei Savin

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

University of Pennsylvania - Operations & Information Management Department

Philadelphia, PA 19104
United States

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