A revenue management approach to address a truck rental problem

Abstract

This paper describes an application of revenue management techniques and policies in the field of logistics and distribution. In particular, the problem of transportation operators, who offer products for hire, is considered. A product is a truck of a given capacity, which can be rented for one or several time periods, throughout a multi-period planning horizon. The logistic operator can satisfy the demand of a given product with trucks with a capacity greater than that initially required, that is an ‘upgrade’ can take place. In this context, the logistic operator has to decide whether to accept or reject a request and which type of truck should be used to address it. For this purpose, a dynamic programming (DP) formulation of the problem under consideration is devised. The ‘course of dimensionality’ leads to the necessity of introducing different mathematical programming models to represent the problem. The mathematical models we presented are an extension of the well-known approximations for the DP of traditional network capacity management analysis. Based on these models and exploiting revenue management concepts, primal and dual acceptance policies are developed and compared in a computational study.

Keywords:

• dynamic programming optimization
• transportation problem
• revenue management
• integer linear programming
• nonlinear model