Nav: Home

Study shows value of dynamic forecasting in intermodal management

June 09, 2016

Intermodal transportation -- which uses a combination of transportation modes, such as trucks, trains and ships, to move everyday goods -- is the backbone of many supply chains, and while the industry is seeing tremendous growth, it also faces a severe container capacity shortage.

Ting Luo, a PhD candidate in operations management in the Naveen Jindal School of Management, recently examined how managers in intermodal marketing companies should use dynamic forecasting to coordinate daily operations, enhance efficiency and improve profitability.

Published online in May in Production and Operations Management, the study determined the optimal container leasing and load acceptance policy under dynamic demand and supply forecasting. It also found that the value of dynamic forecasting depends on scarcity, stochasticity, or randomness, and volatility.

Luo said intermodal revenue management is different from traditional revenue management models, which do not address the supply issue.

With airlines or hotels, no capacity remains when the space is full, Luo said. In intermodal, capacity can be expanded by leasing containers from local railways. There also is a random supply of repositioned and returned containers.

"We have to first decide how many containers to borrow. The trade-off is between on-spot leasing cost and potential profit created by the borrowed container," Luo said. "Then we decide, 'Do I use this container to satisfy the current demand, or do I just keep it for the next day?' Maybe the next day, I have more profitable orders coming in, so I reserve that container. Or, if today I have a lot of very profitable orders, I can backlog that order and fulfill it the next day when I have more containers."

Most companies have no formalized short-term forecast and only a vague idea of available container capacity, Luo said. Few have systematic leasing and acceptance policies.

"The traditional mean-value forecasting may produce misleading recommendations because it ignores the stochasticity within a period and volatility between periods," she said. "Both of these features are captured by dynamic forecasting."

The study characterized the effects of dynamic forecasting on profitability and policy choice. When it comes to profitability, dynamic forecasting reduces the need for carrying large stockpiles for an extended time, thereby saving on holding costs. It also ensures swift stock buildups for imminent shortages. With policy choice, dynamic forecasting guides policy formulation.

Luo and her co-authors also determined that dynamic forecasting should be used when customer heterogeneity is high, inventory costs are low, capacity supply is moderate and forecast accuracy is high.

"The Dallas-Fort Worth area is one of the nation's major transportation hubs and home to many railways and intermodal companies," Luo said. "Our model not only gives these firms practical operational tools but also specifies how and when to use dynamic forecasting."

Dr. Long Gao of the University of California, Riverside and Yalcin Akcay of Koc University in Istanbul are co-authors on the paper.

The trio's future research will focus on coordinating the decentralized intermodal network that consists of multiple locations.
-end-


University of Texas at Dallas

Related Management Articles:

Study changes guidelines for sepsis management
University of Arizona Health Sciences researcher ends debate among physicians regarding sepsis management.
Native approaches to fire management
In collaboration with tribes in Northern California, researchers examined traditional fire management practices and found that these approaches, if expanded, could strengthen cultures and reduce the risk of catastrophic wildfires in Northern California.
Is wildfire management 'for the birds?'
Spotted owl populations are in decline all along the West Coast, and as climate change increases the risk of large and destructive wildfires in the region, these iconic animals face the real threat of losing even more of their forest habitat.
More woodland management needed to help save dormice
Managing woodlands to a greater extent could help stop the decline of Britain's dormice, new research suggests.
The surgical management of Ebstein anomaly
In the current issue of Cardiovascular Innovations and Applications (Volume3, Number 1, 2018, pp. pp.
More Management News and Management Current Events

Best Science Podcasts 2019

We have hand picked the best science podcasts for 2019. Sit back and enjoy new science podcasts updated daily from your favorite science news services and scientists.
Now Playing: TED Radio Hour

Erasing The Stigma
Many of us either cope with mental illness or know someone who does. But we still have a hard time talking about it. This hour, TED speakers explore ways to push past — and even erase — the stigma. Guests include musician and comedian Jordan Raskopoulos, neuroscientist and psychiatrist Thomas Insel, psychiatrist Dixon Chibanda, anxiety and depression researcher Olivia Remes, and entrepreneur Sangu Delle.
Now Playing: Science for the People

#537 Science Journalism, Hold the Hype
Everyone's seen a piece of science getting over-exaggerated in the media. Most people would be quick to blame journalists and big media for getting in wrong. In many cases, you'd be right. But there's other sources of hype in science journalism. and one of them can be found in the humble, and little-known press release. We're talking with Chris Chambers about doing science about science journalism, and where the hype creeps in. Related links: The association between exaggeration in health related science news and academic press releases: retrospective observational study Claims of causality in health news: a randomised trial This...