A Study On Liner Shipping Slot Allocation Strategy Based On Information Sharing Trust Mechanism

In the context of sluggish demand and fierce market competition, moreand more liner companies are adopting revenue management theory tooptimize their operation. One fundamental element for revenue managementis demand forecast. However, when market demand information passes fromdownstream shippers to upstream carriers along the supply chain, due to adeficiency of information sharing, the demand information twists andfluctuates larger and larger. The Bullwhip effect of oscillating demand leadsto an overcapacity problem, from which liner companies are now suffering.Therefore, it is myopic for a liner company who only focus on optimizing hisown resources. Individuals in a shipping service chain acts independently andself-centrically when participating market activities. As a result of inherentcharacteristics of a decentralized supply chain, like double marginalization,asymmetric information and fragile partnership, the revenue performance ofthe entire shipping supply chain is not satisfactory.The goal of this study is to investigate the role of trust in optimizingcontainer slot allocation process and improving revenue. In this study, we takethe two most important market players in shipping supply chain: shipper andcarrier as our research objectives, build up an vertical cooperation alliancebetween a shipper and a carrier, and use trust updating function to facilitatedemand information sharing between them. Through interviews withindustrial professionals, we incorporate the social characteristics of the carrierand the forwarder during the information sharing process, and optimize themulti-period decision optimization problem through Dynamic Programming.At last, to test the effectiveness of our model, we use Backward Induction Algorithm to significantly lower the complexity of computing and dosimulation. We explore the impact of forecast accuracy, carrier’s character,and forwarder’s character on trust level and profit of both. Based on thetheoretical analysis and empirical study, we conclude that not only does ourtrust scheme improve the profitability of the carrier and the forwarder, but it isalso proved to be robust when the incoming market player has a differentcharacter.The contribution of this work is twofold. On theoretical level, it bringstrust study between supply chain partners to liner shipping market, builds up atrust scheme with container shipping characteristics and proposes a noveldemand-driven slot allocation strategy. In the meantime, this research focuseson the bullwhip effect and over capacity issue, which are currently theheadache for liner companies. Through research, it offers many valuablemanagerial insights and applicable strategies about liner shipping revenuemanagement.