Bulk ship fleet renewal and deployment under uncertainty: A multi-stage stochastic programming approach

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Bulk ship fleet renewal and deployment under uncertainty: A multi-stage stochastic programming approach

Arslan, Ayşe N. / Papageorgiou, Dimitri J.

Highlights•The first application of multi-stage stochastic programming to bulk ship fleet renewal.•The first bulk shipping model to treat time charter durations as a decision variable.•A model that explicitly considers demand and charter cost uncertainty is presented.•The benefits of different scenario trees and look-ahead horizons are investigated.•Better to model uncertainty of near future with more detail than that of distant future.

AbstractFaced with simultaneous demand and charter cost uncertainty, an industrial shipping company must determine a suitable fleet size, mix, and deployment strategy to satisfy demand. It acquires vessels by time chartering and voyage chartering. Time chartered vessels are acquired for different durations, a decision made before stochastic parameters are known. Voyage charters are procured for a single voyage after uncertain parameters are realized. We introduce the first multi-stage stochastic programming model for the bulk ship fleet renewal problem and solve it in a rolling horizon fashion. Computational results indicate that our approach outperforms traditional methods relying on expected value forecasts.