Two-Phase Optimization Models for Liner Shipping Network Based on Hub Ports Cooperation: From the Perspective of Supply-Side Reform in China

Abstract

From the perspective of supply-side reform in China, it is hard for COSCO Shipping, a merged company with a strong shipping capacity, to abandon the container shipping market. Meanwhile, the new company could cooperate with new strategic ports along the Maritime Silk Road in liner service. Against this backdrop, this paper aims to optimize the liner shipping network (LSN) from strategic, tactical, and operational levels and help the merged shipping company adjust its operational measures according to market changes. The optimization towards different levels of decision-making process is a new research of highly practical values. Specifically, this paper created two-phase optimization models for LSN based on the selection of hub ports. In Network Assessment (NA) phase, the LSNs of two types of hub ports selected are designed and assessed on strategic and tactical levels, and the primary and secondary routes are identified; in Network Operation (NO) phase, the “path-based flow” formulations are proposed from the operational level, considering operational measures including demand rejection and flow integration. The models in both phases are mixed-integer linear programming (MILP), but are solved by different tools: CPLEX for the NA phase models and the Genetic Algorithm (GA) for the NO phase models due to the computational complexity of the latter problem. Then, a computational experiment is performed on the LSN of COSCO Shipping on the Persian Gulf trade lane. The results have proved the effectiveness of the methodology and inspired important countermeasures for the merged shipping company.