Short-term booking of air cargo space

This paper proposes a stochastic dynamic programming model for a short-term capacity planning model for air cargo space. The long-term cargo space is usually acquired by freight forwarders or shippers many months ahead on a contract basis, and usually the forecasted demand is unreliable. A replanning of cargo space is needed when the date draws nearer to the flight departure time. Hence, for a given long-term contract space, the decision for each stage is the quantity of additional cargo space required for the next flight and the decision planning model evaluates the optimal cost policy based on the economic trade-off between the cost of backlogged shipment and the cost of acquiring additional cargo space. Under certain conditions, we show that the return function is convex with respect to the additional space acquired for a given state and the optimal expected cost for the remaining stages is an increasing convex function with respect to the state variables. These two properties allow...

• Type: Journal
• Year: 2006
• Where: EOR
• Authors: Ek Peng Chew, Huei Chuen Huang, Ellis L. Johnson, George L. Nemhauser, Joel S. Sokol, Chun How Leong
• Keywords: Additional Cargo Space, Cargo Space, EOR 2006, Optimal Cost Policy