Choice-driven Service Network Design and Pricing in Intermodal Transport

Abstract

In intermodal transport, Service Network Design (SND) problems cover most tactical decisions of a carrier. Nevertheless, among the literature on SND, very few works include pricing decisions and the preferences of the shippers. In this study, we contribute to the existing body of knowledge by proposing a choice-driven and cycle-based formulation of the Service Network Design and Pricing (SNDP) problem which considers different aspects of the mode choice decisions of shippers. This formulation aims at finding the itineraries, frequencies and prices of the services that will maximize the profit of an intermodal carrier. Moreover, the mode choice preferences of shippers are modeled as a utility maximization accounting not only for the logistics costs, but also the frequency of the offered services and the accessibility of the transport mode. This bi-level formulation can be reformulated into a single level linear problem. The proposed model is compared to two other models (one cycled-based and one path-based) where shippers are assumed to be purely cost minimizers. While the latter generate higher profits, they also result in unrealistic mode shares, with road transport being negligible. On the other hand, the proposed formulation leads to mode shares that are considerably closer to reality. In addition, higher revenues can be generated with a cycle-based formulation compared to a path-based as it allows for more consolidation opportunities for the carrier.