Content uploaded by Bart Wiegmans

Author content

All content in this area was uploaded by Bart Wiegmans on Oct 15, 2018

Content may be subject to copyright.

Minimizing cost of empty container

repositioning in port hinterlands, while

taking repair operations into account

T. Hjortnaesa, B. Wiegmansa*, R.R. Negenborna, R.A.

Zuidwijkb, R. Klijnhoutc

!"#$%&'%

Abstract

Shipping companies are striving to optimize their empty container repositioning strategies which

also contributes to reduced congestion and environmental improvements. In this paper we

propose a multi-commodity model that makes an explicit distinction between flows of non-

damaged containers, on the one hand, and flows of damaged containers, on the other. The model

is tailored for the repositioning of these containers in the representative setting of a network of

off-dock empty depots, ocean terminals, and inland terminals. In our case study, cost savings of

up to 17% are found, depending on the composition of the network, container type, and

particular evacuation and repositioning strategy. In particular, directly transporting containers

from inland terminals to other inland terminals (direct repositioning) results in cost savings of up

to 15% for dry containers and up to 17% for reefer containers. Furthermore, the total costs might

be optimized by actually preventing the container failure from occurring possibly leading to

considerable additional cost reductions. Finally, exporting damaged containers might seem to be

the optimal solution from a regional cost perspective, but, this does not necessarily lead to total

cost optimization from the global perspective.

1

Keywords: damaged containers, repositioning, hinterland, optimization

2

1 Introduction

Shipping companies mainly focus on providing transport between major ports in a global

network. Chang et al., (2015) analyzed the minimum transportation cost for the repositioning of

empty containers for an entire shipping network. However, also a trend of incorporating the port

hinterland into a carrier’s supply chain can also be observed (Gadhia et al., 2011). In general, the

carriers’ customers are not located directly near the terminal, and it is therefore necessary for

shipping companies to transport containers between the ocean terminals and provide empty

containers at the customer’s front door in the hinterland. This is complicated due to the existence

of large trade imbalances between the continents (e.g. from Asia to Europe). These imbalances

contribute to policy requests to reduce these additional empty transport flows causing congestion

and environmental problems on a local and regional level. In an ever-growing volatile container

transport market, cost reductions and efficiency improvements are required. For container

carriers it is therefore crucial to (re)position empty containers optimally (i.e. at the lowest

possible cost). Indirectly this also contributes to reduced congestion and environmental pollution.

1.1 Empty container repositioning in a regional network

Empty container repositioning is performed at various network levels, viz. global, regional, and

local scales. The local level covers the repositioning of empty containers between inland

terminals or depots and surrounding customers. The regional level focuses on hinterland

transport between inland terminals, off-dock empty depots, and ocean terminals. In a research,

Mittal et al., (2013) determined optimal inland-empty container depot locations under stochastic

demand for the New York/New Jersey port region. The global level focuses on balancing

international trade flows between ocean terminals. Inland terminals hereby serve as nodes which

connect the regional and local-scale network, while ocean terminals serve as gateways to

interconnect the global scale with the regional-scale network. Trade imbalances can be observed

leading to regions being either surplus (i.e. import dominated) or deficit (i.e. export dominated)

regions, resulting in empty container transport. At a regional level, this results in repositioning

flows between the deficit and surplus areas on a regional scale. At a global scale, this results in

what are called ‘evacuation flows’ between continents (e.g. from Europe to Asia). In general,

approximately 20% of the exports are empties, but a wide range from 0-90% can be observed.

Overall this means that empty flows can be considerable.

3

There are various types of empty-container flows between: ocean terminals at a port

(1)

, off-

dock empty depots at the port

(2)

, inland terminals in the port hinterland regional network

(3)

, and customers

(4)

. Off-dock empty depots serve as container storage locations, from

where containers are picked up, and to where they are returned to serve export demand. As

illustrated in Figure 1 below, flow interactions exist between these different locations: repair

flows for transporting damaged empty containers to workshops located at depots

(5)

,

customer flows (6) to meet local demand, repositioning flows

(7)

to meet regional demand

and evacuation flows

(8)

towards a global network to serve overseas deficit areas

(9)

.

Meeting customers’ demand globally through the repositioning of empty containers follows a

hierarchical order from local via regional to global scale, until the costs exceed the price of

producing new containers (Theofanis & Boile, 2009). At each location what is called a ‘safety

stock’ in the form of a Target Stock Level (TSL) is maintained to meet demand. The TSL is

based on historic data and the carrier’s expert knowledge. Hardly any information regarding the

actual distribution and availability of empty containers throughout the network is available.

4

Figure 1 An overview of the regional network surrounding the ocean terminal in relation to the transport super-network

(based on Rodrigue et al., 2013)

1.2 Non-damaged versus damaged empty containers

Containers are a commodity that is not handled gently. They are built to last, however during the

transport process, containers can get damaged, which is often inflicted by careless handling on a

terminal or during transport, failure of cooling equipment, regular maintenance, etc.. This can

have a significant influence on the available supply of empty containers. Currently, as soon as a

container is damaged, it is taken out of service until it has been repaired. A repair activity is a

direct reduction of the available supply of empty containers for meeting export demand. Given

the high failure rates (20-25%), understanding the cost impact of extra container movement for

meeting demand is quite relevant. Current methods for repositioning do not take this reduction of

supplies into account, resulting in higher costs due to inefficient transport, handling, storage, and

repair operations. A more comprehensive approach that explicitly takes into account the presence

of both damaged and non-damaged empty containers is therefore desired. This article aims to fill

this research gap and investigates how the total costs of repositioning damaged and non-damaged

empty containers can be optimized, while keeping operations in the hinterland and ocean

terminals in mind. Section 2 provides an overview of the scientific literature for modeling empty

container repositioning. Section 3 gives a detailed explanation of the developed mathematical

model. In Section 4 the mathematical model is implemented for a case study in the Port of

Rotterdam. Section 5 gives the conclusions and further research opportunities.

2 Scientific state of the art in empty container repositioning modeling

To understand the behavior of cost induced by the interaction between damaged and non-

damaged containers while keeping different strategies of repositioning empty containers in mind

an optimization model needs to be developed. Several mathematical models have been proposed

in the literature for general network optimization problems in container liner shipping (see the

overview by Tran & Haasis (2013)), as well as more specifically for empty container

repositioning (see Braekers et al. (2011), Song & Dong (2015) for extensive overviews).

However, little research has been done that takes damaged containers into account. The goal of

this research study is to identify how to model multi-commodity container repositioning

problems and how to solve them. We use Braekers et al. (2011) as starting reference for our

literature review. Crainic et al. (1993) propose a single commodity model, which has been used

by many authors. In this article, we also use this single commodity model as a basis, as its

5

assumptions and model dynamics closely match our case. Choong et al. (2002) present a model

to investigate the impact of the length of the planning horizon. Their paper provides a better

understanding of how to implement a container allocation problem to a fixed network, yet no

damaged containers are taken into account. Olivo et al. (2005) provide a single commodity

model which takes container leasing into account. Their paper mentions the importance of the

repair of damaged containers, although it is not included in their model. The implementation of

customers and inland terminals as aggregated nodes, henceforth known as ‘macro-nodes’, will

also be used for our model. This approach is useful for a tactical model, where the focus is to

understand the impact of repositioning strategies between terminal nodes on total cost through

network optimization. The approach leaves out the interaction with and decisions by customers

in order to make optimization less computationally intensive. Jula et al. (2006) present a single

commodity model, which implements the solutions depot direct and street-turn, but leaves out

the effect of damaged containers. The methods presented are used to investigate the impact of the

solutions on total cost. Wang & Wang (2007) present a model that minimizes the cost of empty

container repositioning with a focus on inventory at locations. Empty container stock is managed

through a TSL, which is implemented as an equality constraint in their model. Furió et al. (2013)

present a Decision Support System tool that reviews street-turn in a model implemented for a

case at the Port of Valencia. No evacuation demand to locations outside the scope of their paper

is taken into account. Moon et al. (2013) present a model that investigates the influence of

foldable containers on total costs. The proposed model has inspired the formulation of our

model, yet the implementation of foldable containers is left out of the scope of our paper, since

they currently represent only a small portion of existing containers. Olivo et al. (2013) present a

deterministic multi-commodity model that takes future requirements into account.

Error: Reference source not found provides the review of the model types and solution methods

found in the scientific literature. Deciding on the model type depends on a number of choices

between alternatives, i.e. nonlinear or linear relationships; explicit or implicit system equations;

discrete or continuous states; deterministic or stochastic variables; and static or dynamic models.

The existing literature presents models that allow the addition of multiple container states and

solutions to the empty container repositioning problem. However, no papers have been found

that take into account damaged containers and the constant evacuation of empty containers. We

therefore propose a new Linear Deterministic Discrete Dynamic Mathematical Optimization

6

model for finding an optimal cost solution for the repositioning of empty containers through off-

dock depots, while taking both damaged and non-damaged containers into account. The

proposed model is then used to investigate the impact on different network topologies, and the

results of applying the following solutions to the network: street-turn; moving containers directly

between importers and exporters (Furió et al., 2013) or depot-direct; empty containers are stored

and maintained at off-dock depots next to deep-sea terminals (Jula et al., 2006). These solutions,

when applied correctly, can help to eliminate a full transport leg, as the purpose of the model is

to support decision making on empty container repositioning.

# (

)

Linear

Explicit

Continuous

Deterministic

Dynamic

Multi-commodity

Substitution

Street turn

Leasing

Depot direct

Foldable containers

Container repair

"

*"%

+,,-. / / / / / / / / "

*"%

0110. / / / / / / "

*2%

0113. / / / / / / )

4

*5%

0116. / / / / / / / / #

*%

01+-. / / / / / / "

*787

0119. / / / / / / :;

*<=%

01+-. / / / / / / /

"

4

*2%

01+-. / / / / / / /

:>

;

*(.

/ / / / / / / / /

7

Table 1 Existing literature on relevant empty container repositioning models and their relationship to our proposed model

This article contributes to the literature in three ways: (1) it provides an optimization model for

the repositioning of empty containers in the hinterland while incorporating flows of

damaged containers; (2) it applies the model to realistic instances based on real data from

Maersk Line; and (3) it provides managerial insights that support empty container

repositioning while taking into account failure of containers and repair.

3 Model incorporating ‘damaged’ and ‘non-damaged’ empty containers

The mathematical model proposed optimizes the cost of transporting damaged and non-damaged

empty containers in a network. The problem is known as a ‘minimum-cost network flow

problem’, which optimizes the objective function restricted by flow conservation constraints.

3.1 Model assumptions

A number of assumptions have been made to be able to model empty container repositioning:

A time-step of 1 week with a horizon of 52 weeks is assumed. The available dataset (provided

by Maersk Line) contains weekly data points for 52 weeks, which allows the incorporation of

seasonal effects. Also, as container repair takes roughly 1 week, the repair prices can be taken

into account by assuming a single period repair.

All transport in the model is performed by barge without capacity constraints. The model

proposed is made from the carrier’s point of view, and in this case the barge modality is the

most economic option.

Depots which offer repair facilities are limited by a repair capacity representing the number

of repairable containers per time-step. A repair facility is limited by the number of staff and

available equipment.

No capacity constraints exist at the other nodes in the network. Each inland terminal has

sufficient storage space, and is often capable of expanding its capacity.

No backlogging is permitted, and no delivery window is included. Containers are delivered

within a single time period to the location with demand. This is in alignment with the

carrier’s operational policy.

Move costs are a combination of transport costs and two handling costs for the start and end

node per arc. Each arc in the network represents the movement of a container between two

nodes, which is subject to a combination of costs.

8

Each node represents a location in a container transport network plus its surrounding

customers. Customers generate demand and supply in a container supply chain with respect

to empty containers. The physical transport to and from customers is outside the scope of our

model, which means that the various inland terminals, ocean terminals, and empty depots

represent the origin and destinations in the supply chains.

Containers can only be repaired once inside the network. A repaired container is delivered to

the customer in the following time-step and as such they leave the model. The total lifecycle

of a container is left out of scope.

Containers can also be repaired outside of the network. The container volume to be repaired

inside of the considered network (Port of Rotterdam) is assumed to be 25%. The remaining

75% of repairs is carried out outside of the considered network. Evacuation flows represent

these external repairs.

All move costs are unit costs independent of distance and time travelled. Carriers make price

agreements with inland shippers depending on the distance, travel time, and container

frequency between the legs in their network.

3.2 Network representation

9

Figure 2 Graphical representation of the scoped network of nodes and arcs, allowing for both damaged and non-damaged

container flow.

We define the network

G(N , A)

with nodes

N

and arcs

A

. We consider flows of both

damaged containers (on arcs

AD

) and non-damaged containers (on arcs

AND

), with

disjoint union

A=AD⨃AND

. As a consequence, the network consists of two separate subgraphs

GD=G(N , A D)

and

GND=G(N , AND )

. The node set

N

consists of ocean terminal

M

, off-dock empty depots

K

, workshops

K '

(located at a depot location), surplus

inland terminals

I

, deficit inland terminals

J

, virtual nodes

V1

and

V2

for damaged

flows, virtual node

V3

for non-damaged flow and node specific customers

C

. Figure 2

illustrates the structure of the network by indicating the flows between the node sets.

The network as proposed is balanced with incoming and outgoing flows. Subgraph

GD

(dashed arrows) focuses only on the damaged containers, and provides repair at a workshop

either within the region or outside the scope of the network. The

GND

subgraph (solid arrows)

focuses on the flow of non-damaged containers for the purpose of meeting shipping demand at

customers.

The flow volumes between nodes

N

are decision variables. For example, the flow volume of

damaged containers between inland terminal

i∈I

and workshops

k ' ∈K '

is given by the

non-negative real number

Xik '

D

.

The flow volumes between customers

C

and nodes

N

are input variables, where FI

represents flow ‘From Import customers’ and TE represents flow ‘To Export customers’. The

damaged container flow leaves the network through the set of virtual nodes

V2=

{

v2

}

, and the

non-damaged container flow leaves the network through the set of virtual nodes

V3=

{

v3

}

.

In network

GD

, a depot has two tasks and is represented by two separate nodes: first, serving

as a transshipment and source node

k∈K

and second, as a workshop

k ' ∈K '

. Containers

become available for repositioning or evacuation purposes after being repaired at a workshop.

Node

V1=

{

v1

}

represents a sink node with inflow equal to the sum of locally repaired

damaged containers. Node

V2=

{

v2

}

represents a sink node with inflow equal to the sum of the

evacuated damaged containers. Inland terminal nodes

I∪J

serve as a source node for repair

flows. Ocean terminal nodes

M

have two functions, being combined transshipment and

source nodes. The arcs between

K

and

K ’

represent the number of repair activities

10

Xk k'

D

of damaged containers.

Ifail ,k '

D

(

t

)

is the amount of containers originating from

workshop

k ' ∈K '

, that have failed in time-step

t

, and will re-enter the system at time-step

(t+1)

as flow of repaired containers

Ifail ,k

ND

(

t+1

)

to an off-dock empty depot

k∈K

.

Xik

D, X jk

D, Xmk

D, X km

D, Xm v2

D

(dashed arrows) represent the flows between nodes in the network of

damaged containers. Flows between the nodes

I , J , K , M

represent the transport of empty

containers to repair facilities. Flows between an ocean terminal

M

and overseas repair

facility

V2

represent the transport of empty containers to repair facilities overseas. Flows

from a repair facility

k ’∈K '

via virtual node

V1

and off-dock empty depot

k∈K

represent the repair of empty containers.

The

GND

graph is similarly constructed as the

GD

graph with some differences, but only

operates non-damaged empty containers for repositioning and evacuation purposes. The main

differences are as follows. The off-dock empty depots

K

are either sink-and-transshipment or

source-and-transshipment nodes. Inland terminal nodes are either sink nodes

I

or source

nodes

J

. An ocean terminal

m∈M

serves as a sink-and-transshipment or source-and-

transshipment node. Node

V3

has been added to serve as the location representing the

overseas location, from where containers enter or leave the network depending on the overall

state of the network at time-step t.

Xmk

ND , Xik

ND , Xkj

ND , Xmj

ND , X ℑ

ND , Xij

ND , Xm v3

ND , X v3m

ND

(solid arrows) represent the flows between nodes

in the network of non-damaged containers. Flows of non-damaged containers between the nodes

I , J , K , M

represent the transport of empty containers to fulfill demand. Flows between

ocean terminals

M

and an overseas ocean terminal

V3=

{

v3

}

represent the transport of

empty containers to and from overseas locations. Flows between the virtual nodes

V1

and the

empty depots

K

represent repaired containers becoming available for empty container

demand. For a detailed description of the optimization model, see Annex 1.

4 Case study: Maersk Line

In this section, we apply the model, as sketched in the previous section and described in Annex 1,

to the Maersk Line case study. Simulations are carried out using an implementation of the model

in Matlab 2014a, in combination with the linear optimization toolbox (Kay, 2014) for

investigating the impact of various scenarios.

11

The Maersk Line dataset provides gate in (i.e. containers returning from import customers) and

gate out (i.e. empty containers sent to export customers) frequencies at inland terminals per

week. The implemented model is subject to various scenarios which show the potential of the

model and the contribution of container repair in the total repositioning cost. A set of 3 ocean

terminals, 4 off-dock empty depots, and 14 inland terminals are considered, corresponding to the

main hinterland of the Port of Rotterdam. The investigated locations are in a surplus area,

meaning that sufficient supply exists and therefore delivery time constraints are left out of the

scope of the model. The case study had the following characteristics;

Number of periods (weeks): 52

Amount of 20’dry containers (20DC): 37500

Amount of 40’ dry containers (40DC): 26500

Amount of 40’ highcube containers (40HC): 42400

Amount of 40’ highcube reefer containers (40HR): 25900

In order to explore cost-saving opportunities, a number of scenarios have been studied. Based on

Maersk Line data, empty containers feature a failure rate of 20 – 25%.

4.1 Experimental setup

The model is now used to investigate several operational scenarios. In particular the influence of

opening or closing off-dock empty depots and ocean terminals was of interest for this case study.

Moreover, some of the existing solutions found in literature that have a direct relationship to

managing empty container flow need to be considered, because they change the physical network

that drives the model. Each scenario is a combination of four scenario variables, which alter the

shape of the matrix that describes the network investigated, specifically:

1. Ocean terminal topology: see Table 2. The scenario variables change when an ocean terminal

in the network is opened or closed. Opening or closing an ocean terminal has a direct

influence on the network and on total cost, as certain network arcs can(not) be selected for

transport.

2. Off-dock empty depot topology: see Table 3. The scenario variables represent which off-dock

empty depots are open in the network.

3. Forced repositioning: see Table 4. The scenario variables allow the forced repositioning of

empty containers through depots.

12

4. Move type scenarios: see Table 5. The scenario variables allow direct transport between

inland terminals (reposition moves) or between inland terminals and ocean terminals

(evacuation moves) in the network of arcs and nodes. Indirect refers to if transport went

through an off-dock empty depot to get to its final destination and direct refers to transport

that neglects the presence of off-dock empty depots.

Table 2 Overview of the ocean terminal topology scenario variables (based on Maersk Line operations)

Ocean terminals

Scenario name: +(1)

0(1)

-(1)

‘Base’ 2# " 2#

‘Transition 1’ 2# 2# 2#

‘Transition 2’ " 2# 2#

‘Future’ " 2# "

Note: 1. For confidentiality reasons the actual terminal and depot names are left out.

Table 3 Overview of empty depot topology scenario variables (based on Maersk Line operations)

Dep

ot

Owner Size Container types

A#*+. 01?@1?8@1?

*0.

B#*+. ( 01?@1?8@1?

C#*+.

@1?

D A# 01?@1?@1?*0.

8@1?

Note: 1. For confidentiality reasons the actual terminal and depot names are left out.

2. Highcube dry containers are 1 foot taller than dry containers

Table 4 Overview of forced repositioning scenario variables (based on Maersk Line operations)

Equal depot

ow

distribution

Unequal

depot ow

distribution 1

Unequal depot

ow distribution

2

2 depots open 31B31 @1B61 C1B01

3 depots open --%-B--%-B--%- 01B01B61 01B@1B@1

4 depots open 03B03B03B03 01B01B01B@1

Table 5 Overview of move type scenario variables (based on Maersk Line operations)

Repositioning Evacuation

Move type 1 : :

Move type 2

13

Move type 3 :

Move type 4 :

The initial and current network composition per container type is referred to as the ‘base’ result.

For each scenario, the focus lies on the relative cost savings compared to the ‘base’ result. The

deterministic optimization model is applied to an instance where for each time step, failure rates

are drawn uniformly from the interval from 20% to 25%. Each scenario is run five times to

reduce variation in these randomly drawn instances. The established scenario variables result in

over 36,000 combinations to be determined by the model. To reduce the computational

complexity, a heuristic has been established that works as follows: (1) Determine the optimal

solution while varying empty depot and ocean terminal topology scenarios; (2) Use the best

solution to further investigate the influence from forced repositioning through depots; and (3)

Use the best solution to investigate the influence of direct repositioning and direct evacuation

scenarios. The main focus of the case study is to discover the cost impact of opening or closing

empty depots in various scenarios with open or closed ocean terminals in the focus area. The

application of step 2 and 3 further illustrate other means of reducing cost for the company. This

heuristic helps reduce the size of the investigation to 9,200 variants. The heuristic is applied

separately to the 4 container types investigated in the case: namely, 20 ft. dry containers (20DC),

40 ft. dry containers (40DC), and 40 ft. highcube dry containers (40HC), 40 ft. highcube reefers

(40HR). Finally, a sensitivity analysis identifies the model’s cost drivers and provides input to

the recommendations.

4.2 Results

Prior to understanding the results presented by the model, it is important to know the dispersion

of the containers through the network. Depending on the location of companies with transport

demand in the investigated network, the following statement applies; all dry container types

seem to be required more at and around inland terminals in comparison to reefer containers,

which are required more in the port area. In the Rotterdam port area a large quantity of customers

shipping perishables exists in comparison with further inland. Dry containers in comparison to

reefers thus require a different approach with respect to optimal repositioning. All numerical

values are deformed to preserve confidentiality of the data.

14

4.2.1 Step 1. Determine the optimal solution while varying the empty depot and ocean terminal

topology scenarios

Running the model with respect to Step 1 of the heuristic provides the results found in Figure 3

and Figure 4. A number of insights are obtained when investigating the results further:

1. The relative weight between transport and handling costs seems to fluctuate depending on

container type. This is caused by differences in locations where there is container

availability and locations where containers are required. Furthermore, the distance

travelled by empty containers influences the size of transport costs. When combined,

these aspects result in roughly 75% of the total cost.

2. Storage costs are constant per container type, because the pre-set TSL is constant over

time for the different locations. In the current setup, storage costs have minimal influence

on total cost, because the costs are only charged at off-dock empty depots and because

the unit costs are low.

3. The transport costs of the 40HR container scenario are significantly lower than the

transport costs in the other scenarios, as can be explained by the fact that 40HR

containers are more required in the Rotterdam port area.

15

4. The 40HR container cost composition is different compared to the cost composition of

the other containers, resulting in transport and handling cost aspects accounting for 50%

and repair cost accounting for 45%. The repair of reefers has a larger impact on the total

cost.

Some conclusions can be drawn from the impact of damaged containers on empty container

management. Empty container supply is reduced by the repair rate, resulting in extra container

moves being required in order to supply the network with empty containers. A damaged

container needs to be transported to a workshop for repair, resulting in the possibility of a

location changing from a surplus to a deficit of supply. This risk can be mitigated by

incorporating a safety factor into the TSL value. Currently, the storage cost at inland terminals is

low, resulting in almost no impact of an increased TSL on operational cost. However, a higher

16

€ 0

€ 2,000,000.00

€ 4,000,000.00

€ 6,000,000.00

€ 8,000,000.00

€ 10,000,000.00

€ 12,000,000.00

Repair cost Storage cost Handling cost Transport cost

Figure 3 Results of the first step in the heuristic

€ 0

€ 2,000,000.00

€ 4,000,000.00

€ 6,000,000.00

€ 8,000,000.00

€ 10,000,000.00

€ 12,000,000.00

Repair cost Storage cost Handling cost Transport cost

Figure 4 Unit cost per cost category and container type for the ‘base’ scenario.

TSL does mean a larger container fleet. Finally, the repair costs of containers are not directly

related to the other cost aspects, but, nevertheless, they do impact indirectly. The equipment can

be managed in a better way when knowledge of the life cycle of the empty container, whether it

is a dry or a reefer container, is used; see also (Lam and Lee, 2011). This also applies to the extra

costs that are incurred when containers are repaired outside the regional network. Damaged

empty container transport only makes sense if it results in lower total costs compared to repair

overseas.

4.2.2 Step 2. Use an optimal solution to further investigate the influence from forced

repositioning through depots

Running the model with respect to Step 2 of the empirical setup provides the results found in

Table 6. An unsteered network, in other words a solely mathematically optimal result, will send

all flows over the arc which has the lowest cost, until capacity is reached. The current model is

hardly restricted by capacity constraints. In the optimal case, the model will, therefore, send all

containers to a single cheapest depot. In real-life a carrier, such as Maersk Line, is unlikely to

consider only the cheapest depot for monopoly reasons and because of the importance of

spreading the risk of operations. A difference in cost per container type seems to impact how

containers move around in a forced network

17

Table 6 Overview of cost improvements compared to the base scenario (Step 1)

transition 1 transition 2 future

20 DC Open depots A, D A, D A, D

Steering 60/40 60/40 40/60

Cost change -3,91% -3,97% -3,92%

40DC Open depots C, D C, D A, D

Steering 60/40 60/40 20/80

Cost change -8,81% -8,90% -6,53%

40HC Open depots C, D C, D A, D

Steering 60/40 40/60 60/40

Cost change -8,23% -8,12% -6,27%

40HR Open depots A, D A, D A, D

Steering 40/60 40/60 40/60

Cost change -17,64% -17,37% -17,82%

4.2.3 Step 3. Use optimal solutions to investigate influence of direct repositioning and direct

evacuation scenarios.

Running the model with respect to Step 3 of the empirical setup provides the results found in

Table 7. Move types show an immediate advantage of using direct positioning for serving

regional balancing purposes. Even by allowing direct evacuation, a cost reduction can be

obtained. These results might give the impression that, by allowing direct connections between

export and import customers, an easy and obvious cost reduction can be made. However, it is

important to realize what the model results do not show. The implementation of direct

positioning or direct evacuation makes the planning of transport a more complex, and therefore a

more costly operation. However, customers tend to concentrate around terminals, and therefore it

might be worthwhile to further explore direct repositioning (van den Heuvel et al., 2013).

Another aspect that should be considered is the congestion that can occur at the ocean terminal

when the off-dock depots are removed from the network. Better communication between all

18

Table 7 Cost improvements due to move type scenarios compared to ‘only individual move type’

Scenario

type ocean

topology

only indirect

move type

direct

evacuation

and direct

repositioning

only direct

repositioning

only direct

evacuation

20D

C

base 0% -13% -12% -5%

transition 1 0% -11% -10% -4%

transition 2 0% -11% -10% -4%

future 0% -11% -9% -4%

40D

C

base 0% -14% -13% -5%

transition 1 0% -10% -9% -3%

transition 2 0% -10% -9% -3%

future 0% -7% -5% -3%

40H

C

base 0% -16% -15% -5%

transition 1 0% -13% -10% -4%

transition 2 0% -12% -10% -4%

future 0% -8% -6% -3%

40H

R

base 0% -29% -29% -15%

transition 1 0% -16% -17% -1%

transition 2 0% -17% -16% 0%

future 0% -17% -16% 0%

parties is required with more streamlined planning to allow for direct transport to be

implemented.

4.3 Sensitivity of the model

4.3.1 Sensitivity to failure rate

η

The container failure rate is limited by a lower-bound and upper-bound value, which, for the

scenario evaluation in Section 4.2 were set between 20% (lower bound) and 25% (upper bound).

For the sensitivity analysis, the failure rate lower-bound is varied in steps of 1% up to the upper-

bound limit. Three upper-bound limits, i.e. 25% (Figure 5), 50% (Figure 6) and 75%, are

investigated. The model showed infeasibility when the upper-bound failure rate was set to 75%,

which occurs due to the number of damaged containers exceeding the repair capacity of the

19

0

2

4

6

8

10

12

14

16

18

20

22

24

€-

€20.00

€40.00

€60.00

€80.00

€100.00

€120.00

Handling cost

Transport cost

Storage cost

Repair cost

Lowerbound failure rate η [%]

Unit cost [euro]

Figure 5 Results from a sensitivity analysis on the failure rate

η

with a lower-bound from 1 to 24% and an upper-

bound of 25%

η

Figure 6 Results from a sensitivity analysis on the failure rate

η

with a lower-bound from 1 to 49% and an upper-

bound of 50%

workshops. The result showed that transport and handling costs decrease as the failure rate

increases. It is important to realize that the decrease depends on where containers become

damaged in the network. An increase in damaged containers could in the short term mean less

evacuation moves from inland locations, but in the long term results in more repositioning moves

from other locations to meet the demand, because the network becomes more deficit.

4.3.2 Sensitivity to local repair rate

α

The local repair rate is a factor that describes the number of containers which are repaired in

Rotterdam instead of overseas. In the model, the local repair rate has been set at 75%. To identify

the sensitivity of this factor on the model results, the local repair rate is varied between 0 and

99%. A value of 0% means that no containers are repaired in the model and the only repair cost

spent is to transport the containers to the ocean terminal. A value of 99% results in almost all

containers being repaired in the Port of Rotterdam, allowing for a maximum number of

containers, which can be used for future demand in the next time-step. Figure 7 shows the results

from this test. Notice that at a local repair rate equal to 58%, a critical point is found, after which

transport and handling costs start increasing again. The lower the local repair rate is, the more

containers are repaired elsewhere, which does not necessarily benefit the company at a global

scale.

5 Concl

usion

and

recommendations

20

Object 169

Figure 7 Sensitivity of the local repair rate

This paper focuses on empty container repositioning through off-dock empty depots located in

the port area. The main research question in this paper has been: “How can total costs be

optimized in the repositioning of empty containers through off-dock empty depots, while taking

account of operations in the hinterland and ocean terminals?” Empty container repositioning is a

non-revenue generating operation, yet it is an important and costly part of meeting customer

export demand. Large container ports where deep-sea foreland and hinterland meet occupy

important positions in empty container repositioning. In these areas, a more efficient

repositioning system for empty container movement will also contribute to reduced congestion

and emissions.

Three contributions can be distinguished. First, the article contributes to the scientific state of the

art by developing a multi-commodity model that takes into account container failure and repair.

The purpose of the model is to support decision making on empty container repositioning

through a network of inland terminals, depots, and ocean terminals. The model takes into account

all the described flows in the regional transport network of Rotterdam and its hinterland,

including different types of repair flows. The model investigates the opportunities to improve

container handling in the Port of Rotterdam and its hinterland from a network perspective, but

now for a single carrier (Konings, 2007). The proposed model is then used to investigate the

impact on different network topologies and to apply the street-turn (Furió et al., 2013) or depot-

direct (Jula et al., 2006) solutions.

Second, the performance of the model is assessed using Maersk Line reference datasets. Third, a

number of managerial takeaways can be inferred from the study, which considers a number of

scenarios based on: (1) Different terminal combinations in the network; (2) Forced repositioning;

and (3) Direct transport between terminals. These scenarios demonstrate the potential of the

model, and result in several important conclusions. First, operational costs related to empty

container repositioning are affected by many variables, of which container repair is an important

element. Given the high container failure rate, total costs might be optimized by actually

preventing the container failure from occurring possibly leading to considerable cost reductions.

Secondly, damaged containers account for nearly 20% for dry containers and 45% for reefer

containers of the total repositioning costs, depending on where the final customer is located. Dry

containers seem to be required more around inland terminals compared with reefer containers,

which are required more in the port area. Certain container types might thus require a dedicated

21

approach with respect to total cost optimization. Thirdly, a balance needs to be struck between

exporting damaged containers to cheap repair facilities, and repairing them within the region.

Exporting damaged containers might seem to be the optimal solution from a regional

perspective. However, this does not necessarily lead to total cost optimization from the global

perspective. Therefore, empty container management total costs need to be optimized through

collaboration on a global scale within the company. Finally, directly transporting containers from

inland terminals to other inland terminals (direct repositioning) results in cost savings of up to

15% for dry containers and up to 17% for reefer containers. However, the resulting cost-savings

tend to be overstated due to the randomness of the failure rates which makes repositioning a

challenging task leading to lower actual cost-savings. Direct repositioning from customer to

customer might lead to possibilities for further cost savings. However, direct positioning makes

the planning of transport a more complex, and therefore a more costly, operation. But customers

tend to concentrate around terminals and direct repositioning might also reduce congestion, thus

making it worthwhile to explore this further. In the end, a more efficient reposition will also

contribute to a more sustainable port area (it results in reduced congestion and emissions).

Numerous further research opportunities exist. First, categorizing container repair in types of

repairs results in more accurate determination of the repair cost drivers. Secondly, including

multiple hinterland modalities, such as barge and rail, would also improve the model’s

resemblance to reality. Thirdly, the effect of a time-step of 1 day could be implemented to

analyze its impact on cost and model accuracy. Also, the current deterministic model could be

extended by taking stochastic input into account. And, finally, the object of study could be

enlarged in order to analyze the effects of empty container repositioning in global networks.

Acknowledgement

The authors thank Maersk Line for providing access to reference datasets on empty container

flows and providing their expertise judgment on the results. The 2 anonymous reviewers are

acknowledged for their helpful comments and suggestions.

References

Braekers, K., Janssens, G. K., & Caris, A. (2011). Challenges in Managing Empty Container

Movements at Multiple Planning Levels. Transport Reviews, 31(6), 681–708.

22

Chang, C-H., Lan, L.W., Lee, M. (2015). An integrated container management model for

optimizing slot allocation plan and empty container repositioning. Maritime Economics and

Logistics, 17, 315-340.

Choong, S. T., Cole, M. H., & Kutanoglu, E. (2002). Empty container management for

intermodal transportation networks. Transportation Research Part E: Logistics and

Transportation Review, 38(6), 423–438.

Crainic, T. G., Gendreau, M., & Dejax, P. (1993). Dynamic and stochastic models for the

allocation of empty containers. Operations Research, 41(1), 102–126.

Furió, S., Andrés, C., Adenso-Díaz, B., & Lozano, S. (2013). Optimization of empty container

movements using street-turn: Application to Valencia hinterland. Computer & Industrial

Engineering, 66, 909–917.

Gadhia, H.K., Kotzab, H., & Prockl, G. (2011). Levels of internationalization in the container

shipping industry: an assessment of the port networks of the large container shipping

companies, Journal of Transport Geography, 19, 1431-1442.

Heuvel., F.P. van den., Langen, P.W. de, Donselaar, K.H., & van, Fransoo, J.C., (2013). Spatial

concentration and location dynamics in logistics: the case of a Dutch province, Journal of

Transport Geography, 28, 39-48.

Jula, H., Chassiakos, A., & Ioannou, P. (2006). Port dynamic empty container reuse.

Transportation Research Part E: Logistics and Transportation Review, 42(1), 43–60.

Kay, M. G. (2014). Matlog logistics Engineering Matlab toolbox. Retrieved from

http://www.ise.ncsu.edu/kay/matlog/

Konings, R. (2007). Opportunities to improve container barge handling in the port of Rotterdam

from a transport network perspective, Journal of Transport Geography, 15, 443-454.

Lam, S.-W., Lee, (2011). Patterns of maritime supply chains: slot capacity analysis, Journal of

Transport Geography, 19, 366-374.

Mittal, N., Boile, M., Baveja, A., Theofanis, S, (2013). Determining optimal inland-empty-

container depot locations under stochastic demand. Research in Transportation Economics,

42, 50-60.

Moon, I., Do Ngoc, A.-D., & Konings, R. (2013). Foldable and standard containers in empty

container repositioning. Transportation Research Part E: Logistics and Transportation

Review, 49(1), 107–124.

Olivo, A., Di Francesco, M., & Zuddas, P. (2013). An optimization model for the inland

repositioning of empty containers. Maritime Economics & Logistics, 15, 309–331.

Olivo, A., Zuddas, P., Di Francesco, M., & Manca, A. (2005). An operational model for empty

container management. Maritime Economics & Logistics, 7(3), 199–222.

Rodrigue, J., Comtois, C., & Slack, B. (2013). The Geography of Transport Systems (3rd ed.).

New York: Hofstra University.

Song, D.P., Dong, J.X. (2015). Empty Container Repositioning. In: Lee, C.Y, Meng, Q. (eds.)

Handbook of Ocean Container Transport Logistics, Springer, New York, 163–208.

Theofanis, S., & Boile, M. (2009). Empty marine container logistics: facts, issues and

management strategies. GeoJournal, 74(1), 51–65.

Tran, N.K., & Haasis, H.D. (2013). Literature survey of network optimization in container liner

shipping. Flexible Services and Manufacturing Journal, 27(2), 139-179.

Wang, B., & Wang, Z. (2007). Research on the optimization of intermodal empty container

reposition of land-carriage. Journal of Transportation Systems Engineering and Information

Technology, 7(3), 29–33.

23

Annex 1. Optimization model

: #

i

(#:

i∈I={1, … , ITS }

&:(

:#

j

D:

j∈J={1, … , ITD }

&:

:&D4#

k

2E4##

k∈K={1, … , OD }

&2

2E4##

k '

7#

k'∈K'={1, … , WS }

&7(

&#

m

2

m∈M={1, … , OT }

&2

2

v

FG

t

H

t∈T={1,… ,T }

&#

#I

Decision Variables #

XD

J?#>&*.

XND

J4?#>&*.

Input variables #

F In

(

t

)

2

(C , n )

&

n∈I∪J∪K∪M , c ∈C

#

#

T En

(

t

)

2

(n , C )

&

n∈I∪J∪K∪M , c ∈C

#

G#

H #

α

J#?G#

#&&#

η

J<?#J4?

J?

CA

)##D

CImp

:#&D

CFloc

##D##

CFevac

###

##

CEvac

nca p

H#E4##

Dcapk'

##E4##

Ifail

(

t

)

;##

TSL ∀i , j , k , m

4#

I

(

t

)

∀i , j, k , m

4#*4+.;

yv1

(

t

)

#

yv2(t)

24

yv3(t)

B#

Ym

J#?J?

Yk

J#?J?E4

##

Cost function

The carrier aims to minimize cost by optimizing flow in the network with limitations occurring

due to container failure. The cost function, which sums all costs for moving containers through

the network between all nodes {i,j,k,m} for each time-step is given by (1).

2 2

2

' '

1 ' 1 1 1 1 1 1 1

1

1 1 1 1 1 1 1 1

OD WS OD ITS ITS OD OD OT

Floc D A D A D A D

kk kk kj kj ik ik km km

k k k j i k k m

OT OD OT OD ITD ITS OD

A D Fevac D A ND A ND

mk mk mv mv kj kj ik ik

m k m v k j i k

A

ij i

C X t C X t C X t C X t

C X t C X t C X t C X t

C X

�� �� �� ��

�� �� �� ��

3 3

3

3 3

3

1

1 1 1 1 1 1 1 1

1

1 1

ITS ITD ITS OT OT ITD OT

ND A ND A ND Imp ND

j im im mj mj mv mv

i j i m m j m v

OT

Evac ND

v m v m

v m

t C X t C X t C X t

C X t

�� �� �� ��

��

(1)

The cost function contains all decision variables X and their respective unit flow cost C. For each

time-step the optimal cost is calculated. Storage and inventory is determined at the end of each

time-step. For each time-step the network can change completely, i.e., demand patterns can

change due to seasonality resulting in a deficit location becoming surplus, resulting in the size of

the set of ITD and ITS to be dependent on time.

Equality constraints

Figure 7 Supply determination process

25

Equations (2a) until (9) provide the flow balancing per node as indicated in Figure 7. Per index

the subgraph

GD

and the subgraph

GND

equality constraints are given. Node

J

serves

in subgraph

GND

as a sink node and in subgraph

GD

as a source node, because a node with

an empty container requirement can also suffer from damage to containers. Prior to local

balancing of empty containers, available supply at source and sink nodes are divided into

‘damaged’ and ‘non-damaged’ containers per time-step through a ‘failure’ rate η (see (2)-(4)) ,

which is a randomly generated value subject to a lower bound and an upper bound limit. In each

time-step, this results in a random number of damaged containers. Damaged containers are

transported to empty depots, where workshops are located, for local repair, or to ocean terminals

for overseas repair at cheap locations at the ‘local repair’ rate

α

. Figure 2 shows both the local

repair rate and the failure rate have an influence on the available supply at the various nodes

I , J , K , M

.

: 1 ( ) 1

D

i ik

i

i i

i

ND ND ND

i i ij ik im

i i i

FI t X t

i I FI t I t

I t TE t X t X t X t

�

�

�

� ��

�

�

�

�

�

�

� � �

(

2a)

(2b

)

: 1 ( ) 1

D

j jk

k

ND ND ND

j j ij kj mj

i k m

j j

FI t X t

j J FI t I t X t X t X t

I t TE t

�

�

� ��

�

�

�

�

� � �

(

3a)

(3b

)

'

'

: 1 ( ) 1 1

D D D D D

k jk ik mk km kk

j i m m k

ND ND

k k fail mk ik

m i

ND

k k kj

j

FI t X t X t X t X t X t

k K FI t I t I t X t X t

I t TE t X t

�

�

�

� ��

�

�

�

�

� � � � �

� �

�

(

4a)

(4b

)

, ' '

'

, ' ,

'

' ' : 1

D D

fail k kk

k k

D ND

fail k fail k

k k

I t X t

k K I t I t

�

�

��

�

�

� �

� �

(

5a)

(5b

)

26

2

3

3

: 1 ( ) 1

D D D

m km mv mk

k k

ND ND

m m v m im

i

ND ND ND

m m mk mv mj

k j

FI t X t X t X t

m M FI t I t X t X t

I t TE t X t X t X t

�

�

�

� ��

�

�

�

�

� �

�

� �

(

6a)

(6b

)

Equation (7) through (9) illustrate how the model determines the amount of containers that go to

the three virtual nodes. Equation (7) determines the total flow of damaged containers repaired in

time step t by multiplying the total amount of supply by the failure rate and the local repair rate.

Equation (8) calculates the total flow of damaged containers repaired overseas in time step t by

multiplying the total supply by the failure rate multiplied by the evacuation rate, which is the

amount of containers not repaired locally. Equation (9) calculates the total flow of non-damaged

containers and repaired containers evacuated in time step t by adding the non damaged supply to

the required storage plus the amount of containers repaired in the previous time step minus the

previous storage and minus the required demand. Determining these three sink flows the model

becomes balanced and therefore solvable.

1

( ) ( ) ( ) ( ) ( )

v i j k m

i j k m

y t FI t FI t FI t FI t

� �

� �

� �

� � � �

(

7)

2

1 ( ) ( ) ( ) ( )

v i j k m

i j k m

y t FI t FI t FI t FI t

� �

� �

� �

� � � �

(

8)

3

,

1

1 1 1 1 1

v i j k m

i j k m

i j k m i j k m

i j k m i j k m

ND

i j k m fail k

i j k m k

y t FI t FI t FI t FI t

TE t TE t TE t TE t I t I t I t I t

I t I t I t I t I t

� �

� �

� �

� � � �

� � � �

� � � �

� �

� �

� �

� � � �

� � � � � � � �

� � � � �

(

9)

Capacity constraint

Containers that are repaired at a workshop in the previous time-step become available for

repositioning or evacuation in the current time-step. Each node in the

GND

subgraph is limited

by a capacity constraint as found in equations (10)-(13).

,

0

ND ND ND

ik ij im cap i

k j m

X t X t X t n � �

���

(10)

27

,

0

ND ND ND

kj mj ij cap j

k m i

X t X t X t n � �

� � �

(11)

,

0

ND ND ND

kj ik mk cap k

j i m

X t X t X t n � �

� � �

(12)

3 3

,

0

ND ND ND ND ND ND

km mk im mj mv v m cap m

k k i j

X t X t X t X t X t X t n � �

� � � �

(13)

Repair constraint

Equation (14) ensures no more is repaired at a repair shop than the facility allows., given by

'

'

k

0

D

kk capk

X t D� �

�

(14)

Topology selection

Equations (15) and (16) are used for the investigation of open/closed corridors in the model, i.e.

setting

Yk

to 0 a set of arcs are closed and by setting it to 1 that set of arcs are open. M

represents the total flow on the affected arcs for time step t.

' '

k k fail

k

' '

fail

I t 1

D D D D D

ik j m

kk k

i j k m k

ND ND ND ND

ik kj km mk k

i j m m

X t X t X t X t X t I t

X t X t X t X t Y M

�

� � � � �

� � � �

(15)

2

3 3

D D D ND ND ND

km mk mv im mj km

k k i j k

ND ND ND

mk mv v m m

k

X t X t X t X t X t X t

X t X t X t Y M

�

� � � � �

�

(16)

Non-negativity constraint

Equation (17) is the non-negativity integer constraint.

'

D

2 fail

3 3 fail

, , , , , , I , , , , ,

, , , , , I 1 0 , , , , 1, 2, 3

D D D D D ND ND ND ND

ik jk km mk mv ik ij kj km

kk

ND ND ND ND ND

mk im mj mv v m

X t X t X t X t X t X t t X t X t X t X t

X t X t X t X t X t t i j k m v v v � �N

(17)

In our case, we consider a flow perspective, and consequently we can relax the integer restraint

on the variables representing the arcs. Furthermore by comparing results between two cases any

existing error due to considering non-integer values is minimized.

28