Carrier portfolio management for shipping seasonal products

T. Lu, J.C. Fransoo, Chung-Yee Lee

Research output: Contribution to journalArticleScientificpeer-review


Many seasonal products are transported via ocean carriers from origin to destination markets. The shipments arriving earlier in the market may sell at higher prices, but faster shipping services can be costly. In this paper, we study a newsvendor-type shipper who transports and sells seasonal products to an overseas market, where the selling price declines over time. A set of vessels with different schedules and freight rates are available to choose from. Our analysis demonstrates that a portfolio of vessels has two distinct effects on mitigating uncertainties in both demand and vessels' arrival schedules, while these two portfolio effects have been previously understood as separate issues in the literature. To find the optimal portfolio in our problem,we first show that when vessels arrive in a deterministic sequence, the optimal portfolio can either be derived in closed form (in the single-demand setting) or computed efficiently with a variation of the shortest-path algorithm (in the multi-demand setting). Then, based on these results, we propose an approximation procedure to address the general problem with an uncertain arrival sequence. In each iteration of the procedure, we only need to minimize a cost function approximated by a deterministic arrival schedule and the portfolio generated can converge to the optimal one under mild conditions. Finally, we present a real-world case studyto demonstrate several practical implications of managing a carrier portfolio.
Original languageEnglish
Pages (from-to)1250-1266
JournalOperations Research
Issue number5
Publication statusPublished - 1 Sept 2017
Externally publishedYes


  • Carrier portfolio
  • Diversification
  • Newsvendor problem
  • Ocean transport


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