Designing liner shipping network in Indonesia with demand uncertainty

Abstract

The problem of maritime logistics in Indonesia lies on the unbalanced trade flow between west and east region of Indonesia. Since the east region does not have many comodity to be transported, to accommodate the demand on the east region liner shipping companies have to face the increasing amount of operational costs which makes the company failed to achieve the optimal profit. According to that situation, liner shipping companies needs a service network design which accomodate demand on each ports and give maximum profit. This research uses stochastic modeling to best portray the real condition of maritime logistics by taking demand uncertainty into consideration. The algorithm used in this research aims to determine the ship routes, ship types, and the cargo allocation that yields higher profits. The result was presented as a comparison between deterministic and stochastic modeling. The result shows that companies can yield higher profit if they use stochastic modeling approach from the initial decision making stage. The proposed solution method was designed to optimize Indonesian liner shipping services.