optimization model and risk analysis for global supply chain in
TRANSCRIPT
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OPTIMIZATION MODEL AND RISK ANALYSIS FOR GLOBAL SUPPLY CHAIN IN CONTAINER SHIPMENTS: IMPORTS TO
THE UNITED STATES
Lei FanTransportation and LogisticsNorth Dakota State UniversityFargo, NDOct, 2009
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Outline Introduction and Motivation Model Outline Data and Assumptions Results and Discussion Summary
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Introduction and Motivation In recent years, 67-70% of the container trade is for imports, and 75-80% in the major gateways, and peak volume in 2006 are:
West Coast: 10 million TEUs (Twenty-foot Equivalent Units). East Coast ports: 7 million TEUs. Gulf Coast: 0.7 million TEUs. .,
3Source: U.S. Maritime Administration 2008
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Introduction and Motivation The top five U.S. containerized cargo trading partners in
2007 were all from Northeast Asia The trade between Europe and United States is small
and has been growing slow.
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100
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2003 2004 2005 2006 2007
TEU
)100
0)
Year
NEAsia to U.S. West Coast Ports
Europe to U.S. Ports
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Trade volume of container imports between foreign ports and U.S. coast ports ( TEU)
Source:U.S. Maritime Administration 2008Journal of Commerce (2003 – 2006)
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Introduction and Motivation The top 10 U.S. container ports accounted for 90%
percent of U.S.
U.S. Maritime Administration 2008 5
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Motivation Results in pressure on the transportation
network and escalates congestion. One of the most critical transportation issues
facing USA in this first decade of the new century is congestion (Transportation Research Record 2006).
Impacts of volatility on supply chain and transportation, e.g.7.6% lower in 2008 than 2007 (Lloyd's List, 2008).
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Previous study Studies on container shipments have been
active area especially in recent couple of decades.
Few studies quantify and incorporate congestion and stochastic optimization on container activities.
While developments of Prince Rupert and the Panama Canal have been discussed in the popular media, no studies have analyzed the details and quantify inter-port route competitiveness
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Objective Analyze containerized imports flows from NE
Asia and Europe to the United States. Develop an optimization model that
integrates international and North America inland transport networks.
Provide quantitative insights on the behavior of container flows under environment of congestion and uncertainty.
Quantify prospective impacts of the new container ports and expanded routes on container flows and port competition.
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Model outline ---U.S. container markets
Business Economic Areas for containerized imports consumption by origin from Europe.
Business Economic Areas for containerized imports consumption by origin from Northeast Asia
Account for 98% total import volume in year 2006.
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Water Gateways There are 28 container ports, eight seaports in Pacific
Coast, three in Gulf, and 17 in Atlantic Coast, including five Canadian container ports.
U.S. ports account for 97% of total import TEU(U.S. Maritime Administration 2008 )
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Vessel string --- multi ports call.
International trade lane
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Transpacific–West Coast North America.
Transpacific-Panama Canal-Gulf/East Coast
Transatlantic trade lane
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Rail networks for container imports
ArcGIS Network Analyst to generate route of primary railways U.S. railways: BNSF, UP, CSX, and NS Canadian railways: CN and CP
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+ +13
Methodology: Determine the optimal networks flows, based on
criteria of minimized total costs. Choose the ship route(string) and size, import
port, and rail route to the final market. Account for congestion and uncertainty.
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Container ship Port water depth Panama Canal North American seaports and at
border crossing Rail corridors Container demand Shipping time
Subject to constraints below
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General linear programming vs. Network flows formulation
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Network linear programs are efficient and easy to solve.The formulation is specified in terms node and arc, which take the place of the subject to and variable declarations. The joint capacity constraints disrupt pure network structure. The problem is presented as a linear programming formulation in this study.
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Markets size: Business Economic Areas (BEAs) Demand estimation: The Journal of Commerce,
U.S. Maritime Administration, and the Surface Transportation Board Carload Waybill Sample
Ocean shipping cost: Analytical model (ACE) Rail shipping cost: Waybill/econometrics model Port configurations: Ports and terminals guide;
ports website Base GIS map: National Transportation Atlas
Databases NTAD
Data and parameters assumption
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Vessel cost and congestion functions at seaports
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Daily vessel cost = f (ship size, speed, charter rate, and daily bunkerage cost (at sea and in port))
0.0020.0040.0060.0080.00
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Arrival rate in TEUs (1000)
vessel at sea vessel in port, and congestion cost at queue, general distributed G/G/m queuing system
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Rail way shipping rateRailway shipping rate model structure
The annual data set is from years 1996 to 2006.The double log model specifies log (rate) and log (distance).R2 0.804Adjusted R2 0.797Number of Observations 1347
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Port and railroads throughput capacity
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0.0020.0040.0060.0080.00
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Arrival rate in TEUs (1000)
Port general distributed G/G/m queuing system import throughput equals total capacity less non import volume
Railroads uses estimates from Cambridge Systematics, Inc. (2007) for railway capacity as an important input.
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Constraint Assumptions Ten container vessel type (Handy to SuperpostPanamax) 4,400 TEUs ship size for Panama Canal (including Panama
fee) Current observed flows over inland railroad corridors Queue theory for port throughput capacity Relaxing constraint for vessel number via Panama Canal
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Stochastic variables Demand for containerized imports Vessel costs Port and railroad throughput
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Stochastic Demand Time series to forecast demand volume for
future The error term is a measure of risk and
prediction interval provides stochastic range for demand.
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Stochastic Demand
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Random walk series
in the absence of impulse impact or structure change
in presence of impulse impact or structure change
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Stochastic variables of vessel cost
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Daily vessel cost = f (ship size, speed, charter rate, and daily HOV and MDO cost (at sea and in port))
Charter rate
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Uncertainty of throughput at port and over railroads
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0.0020.0040.0060.0080.00
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Arrival rate in TEUs (1000)
Railway capacity for containerized imports within the range of ±10 per cent around volume from a uniform distribution.
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Strategy for optimization with nonlinear
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0.0020.0040.0060.0080.00
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Arrival rate in TEUs (1000)
Piecewise-linear function for congestion cost at container port
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Strategy for optimization with stochastic parameters (variables)
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it may be impossible to meet certain realization of the uncertain parameters, two approaches applied to deal with potential infeasibility
elastic or unanticipated variables, or “soft” constraints in place of ‘hard” constraints additional penalty cost terms in objective function penalty costs are not set infinite.
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Model implementation and calibration (2006)
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Impo
rt T
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U.S. Ports
Actual import volume TEU
Computational results TEU
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U.S. Coasts
Actual volume
Estimate volume
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Computational Results (2006) --- without congestion and stochastic variables
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At ports of LA/LB, Seattle/Tacoma, and Oakland, 50%, 70%, and 30%, outbound moved by rail. Houston, 40% moved out by rail. About 90% consumed locally at New York.
The Port of Long Beach (2009) reported nearly half of all imported containers are transported directly to non-local destinations by train.
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Estimate results with account congestion (2006)
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0500
10001500200025003000350040004500
TEU
s (1
000)
U.S.Container Ports
Actual Import TEUs
estimates TEUs without congestion
Estimate TEUs with Congestion
Ports Traffic changes Expected waiting time (days) LA/LB - 3% 2.5 Houston + 45% 4.0 New York 0 2.3 Vancouver + 21% 0
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Potential Strains over Railroads (2006)
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identified using dual value theory. dual value or shadow price is the amount the optimal objective value is improved negative dual value also implies potential strains or congestion (highlight with light green color).
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Impacts of Prince Rupert and Panama Canal expansion (2007)
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Demands at U.S. markets for container imports are based on projected values for 2007. Prince Rupert, the expansion of Panama Canal (12000TEU vessel and Canal fee), and the Bayport complex of Houston become operational simultaneously
Ports Traffic changes LA/LB - 3% Houston + 22% Prince Rupert 117,705
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Impacts of congestion at U.S. West Coast (2007)
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controls the likelihood that average waiting time will exceed some threshold value at selected U.S. ports. “soft” constraint was replaced by “hard” constraint a Pareto optimal solution in a multi-attribute goal situation under deterministic environment
0.0020.0040.0060.0080.00
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Arrival rate in TEUs (1000)
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Impacts of shipping time (2007)
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Introduce shipping time constraint in the model assume portion of demand to Houston less than 25 days
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Impacts of shipping time (2007)
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shipments to Memphis via Prince Rupert and Houston are 15 and 26 days respectively
Prince Rupert illustrated this by placing a string on the top of a globe, with one end of the string on China and the other end on Memphis. In the middle was Prince Rupert (Port of Prince Rupert, 2009).
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Impacts of stochastic parameters (2007)
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Two scenarios uniform distribution for demand only normal distribution for demand, normal distribution on HOV and MDO (correlation), and charter rate, and uniform distribution for port and railroads throughput capacity assume independent amongst stochastic variables. 5,000 iteration.
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Container traffic at ports
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Stochastic demand (uniform)
Stochastic demand (normal), vessel cost, and port/railroad capacity
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Impacts of stochastic parameters on railway corridors
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The chance of corridor that would be operating at potential congestion situation.
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Estimates network flows (most likely value of distribution)
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0500
10001500200025003000350040004500
TEU
s (1
000)
U.S. Container Ports
Actual Import TEUs
Simulated TEUs
0200400600800
1000120014001600
TEU
s (1
000)
U.S. Inland Railway Corridors
Actual TEUs
Simulated TEUs
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Impacts of congestion at U.S. West Coast (2007)
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a Pareto optimal solution in a multi-attribute goal situation under stochastic environment
0.0020.0040.0060.0080.00
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Impacts of congestion at U.S. West Coast (2007)
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a Pareto optimal solution in a multi-attribute goal situation under stochastic environment
Throughput with waiting time controls at port of LA/LB
Throughput without waiting time controls at port of LA/LB
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Container imports to U.S. Coasts
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Estimates container traffic in year 2008 is based on the scenario in response to economic recession, i.e. assuming 10% decrease in demand for containerized import from Northeast Asia
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Container traffic are highly concentrated and pose pressure on U.S. major logistics channels There are potential congestion at U.S. major gateways and associate corridors. Increased volatility in the underlying economy creates risks for supply chains Develop a model framework that optimizes networks flows and quantifies the traffic pattern by accounting for congestion and uncertainty. Results show inter-ports competition is intense.
Summary
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Though shipments have recently declined, as the economic recovery, constraints will likely re-emerge and shippers will likely be less tolerant of logistical capacity constraints than in the past
Mexican container ports Congestion at Panama Canal
More research interesting
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Congestion at Panama Canal Northwest passage Suez Canal Export
More research interesting
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Thanks and Questions
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