Standardized cargo network revenue management with dual channels

Abstract

One of the most complex problems that cargo managers face is making decisions regarding the acceptance of cargo requests under stochastic and time-dependent demand. In this paper, we consider a practical and realistic model of this problem which accounts for different request types (contracts and spot requests). Although time-dependent demand is realistic and practitioners are aware of the inefficiencies of ignoring time-dependent demand, the advantages of accounting for time-dependency are offset by the added computational complexity. We consider time-dependent and stochastic demand and provide an efficient approach to analyze and optimize such systems. Monte Carlo simulation is applied to create realistic demand patterns. We use dynamic programming to find the optimal solution for small to medium-sized problems and we provide several computationally efficient heuristics as an alternative to the computationally prohibitive dynamic programming approach.