Incorporating Transportation Mode Decisions into Production-Shipping Planning: Considering Shipping Consolidation

This study develops a global production–shipping planning model that incorporates a decision on transportation mode after considering the cost function of different transportation modes from the shipper’s point of view. We propose tramp shipping, liner shipping, and a mixed mode to select the optimal shipping mode, considering transshipment and consolidation to exploit economies of scale under a given network. We present mathematical formulations of tramp, liner and mixed modes and apply a piecewise approximation technique with mixed-linear integer programming to linearly approximate the concave minimization problem and efficiently solve it using an off-the-shelf solver. In order to verify the effectiveness of the proposed modes, the three modes are compared and discussed in numerical examples. The advantages and disadvantage of the three modes are discussed under different situations. The result is a decision aided system to support production–shipping planning in selecting the optimal transportation mode.