Enhancing Low-Demand Island Shipping: A Network Model with Investment Cost Considerations

Resumen

Remote islands face significant challenges due to their low demand volumes that render shipping commercially unviable. As shipments primarily consist of essential goods for residents, governments are often required to manage the service. This paper develops a network model to improve shipping in low-demand island regions within a hub–spoke–feeder framework, explicitly incorporating investment costs, an aspect rarely addressed in the literature. Investment cost is a critical factor, as limited budgets necessitate careful selection of feeder ports to be upgraded into spokes. Optimal spoke locations are identified by maximizing the benefit–cost ratio (BCR), defined as the reduction in shipping costs relative to the do-nothing baseline divided by the investment required. The proposed model then applied on an actual case study in eastern Indonesia. The numerical results show that a 2-spoke scheme, where two spoke nodes operate simultaneously, yields the highest BCR. The resulting value exceeds one, indicating that investment in port upgrades is economically justified. Moreover, the 2-spoke scheme enhances network resilience, as one spoke can temporarily serve as a backup if the other is disrupted, ensuring the reliable delivery of essential goods to island communities.