The Implication of the Stochastic Gross-Profit-Per-Day Objective on the Cargo Ship Profitability, Capacity, and Speed

Abstract

Ship owners are used to maximizing a deterministic gross-profit objective. This objective may yield a grosser profit if the ship average fixed cost is minimized, which is achieved by building ships of larger capacities. As a result, the ship voyage time tends to prolong due to more cargo handling operations, longer distance due to route restriction, lightening of loads before canals, transshipment operations, and a slower ship speed. Latest research papers recommend a voyage stochastic gross-profit-per-day objective to be used instead. This new objective cares not only for the more voyage gross profit the ship is expected to earn but also for the fewer number of days the ship is expected to take to earn this gross profit. The objective permits the ship owner to earn more gross profit at the year end. And, because the shipping management is not always sure whether the same magnitude of gross profit can be maintained in the future of such ship voyages, that is why the maximization of the gross-profit-per-day objective needs to have a stochastic formulation based on a stochastic cargo transport demand. This paper studies the implication of the new objective on the ship profitability and the ship capacity and speed.