Planning for charters: A stochastic maritime fleet composition and deployment problem

Abstract

This paper introduces a chartering problem that arises in the shipping industry. The chartering decisions determine the time-charter contracts to enter into, in particular, how many ships of each type to charter in, and for how long they are to be hired. We show that this problem can be modeled as a tactical fleet composition problem, with integrated fleet deployment and speed optimization, which also takes into account market uncertainties. We propose a two-stage stochastic programming model, and present a computational study based on the case of Odfjell, a leading chemical shipping company based in Bergen, Norway. We show how the charter plans produced can change depending on different modeling choices. We also show why and how different charter plans affect the company's overall performance, in order to provide guidance in helping the company make its chartering decisions.