Carrier and Freight Forwarders Strategies to Utilize the Immobile Shipping Capacity of Freight Forwarders and Maximize Profits

Abstract

Carriers and freight forwarders (FFs) play several roles in ensuring the effective flow of goods delivery. They are tasked with accommodating the shippers’ needs in transporting goods via containers, following the carrier’s ship destination plan. In practice, FFs often experience overbook and underbook capacity toward the capacity limit for shipping goods. This has consequently increased FF costs. However, for the carrier, this will increase profits. The aim of this study is to develop strategies for carriers and FFs using a mathematical model approach to obtain the optimal quantity of booking shipping capacity; thus, overbooks or underbooks can be minimized. More broadly, this study also proposes several strategies to increase the profits of all parties, both for FFs through collaboration and for carriers by directly selling marketing shipping capacity to shippers. Optimum booking quantity for goods delivery from each FF is performed through the particle swarm optimization (PSO) approach. Using four FF collaboration scenarios, the model test results yield a profit of $121,270, 2.14% more than the non-collaboration scenarios with a profit of $119,169. The carrier generated an average profit of $39,926 when the FF did not collaborate. Conversely, when the FFs collaborated, the carrier experienced a decline of –1.88% on average profit, which was $39,175. However, if the carrier responds with direct selling, the profit will increase by 9.36%, which is $42,840. It is concluded that collaboration can increase the profits of FFs but reduce the profits of carriers, while direct selling can increase the carrier’s profits.

Keywords

• average profit
• carrier
• collaboration
• direct sell
• freight forwarder