Newsvendor Model in Rail Contract to Transport Gasoline in Thailand

摘要

A long-term contract between a railroad company and a shipper who wants to transport gasoline daily is studied. The contract specifies an upfront payment for reserving bogies and a per-container freight rate. The shipper also uses a trucking company to transport the excess demand, but its per-liter transportation cost is higher. The shipper's problem is to determine the number of bogies to reserve at the beginning of the contract duration, before daily demand is revealed. Since demand is perishable, we formulate the problem as a newsvendor model. The expected cost function is not convex. We show that the expected cost is unimodal and derive an optimal solution under certain conditions, which are not very restrictive. We also provide a sensitivity analysis with respect to the change in the contract parameter.