An integrated approach of hedging and network planning for liner shipping’s bunker management

• Main Author: Wang, Xiaoyu
• Other Authors: Teo Chee Chong
• Format: Theses and Dissertations
• Language: English
• Published: 2014
• Subjects: DRNTU::Engineering::Civil engineering::Transportation; DRNTU::Business::Operations management::Risk management
• Online Access: http://hdl.handle.net/10356/55445
• Institution: Nanyang Technological University

The high volatility of the bunker fuel market in recent years presents serious challenges for container shipping lines. In this research, an integrated planning approach is proposed with the objective to help shipping lines minimize operating cost and to better manage bunker price risks. In this approach, the liner network planning and bunker hedging decisions are considered simultaneously. The benefits of the integrated planning approach over the widely practiced sequential planning approach are first demonstrated. Subsequently, an optimization model is developed to support the proposed integrated planning. The model minimizes the expected total cost and is subject to an operating budget constraint that incorporates the underlying price volatility. By solving the problem over a rolling horizon, the model is able to capture the dynamic characteristics of the market and the user’s tolerance for risk exposure. Numerical studies are performed to validate the model’s performance and to gain managerial insights. The model and the insights obtained will allow shipping lines to analyze the trade-offs among the key performance indicators of risk, cost and service level.