Purchasing transportation services from ocean carriers

Reducing transportation costs is priority number one for global shippers who need to move their cargo containers all over the world. To achieve such cost reduction, a shipper can use what is called a reverse auction mechanism to purchase transportation services, by inviting carriers, i.e. liner shipping companies, to bid competitively to sell their services. As part of the process, carriers often seek commitments from the shipper, and internal business units of the shipper often express their own preferences when it comes choosing the carriers, which naturally complicates the shipper’s decisions. In this chapter, we first review existing studies on the transportation service procurement problem. Based on a new general optimization model, we then discuss extensions to the existing known results, as well as present several results new to the literature.