Online Freight Network Assignment Model with Transportation Disruptions and Recourse

negative impact of delays on customer service level by keeping redundant inventory or safety stock. Although safety stock protects companies from disruptions or delays, this comes at a cost because higher inventory levels tie up working capital and increase inventory management costs, such as warehousing and damage rates. In addition, the higher inventory level increases the risks associated with product obsolescence and perishability (3). Building supplier and capacity redundancies in the supply chain can also reduce the impact of disruptions; however, redundancies also increase fixed costs and reduce competitiveness (4). Continuous real-time monitoring of shipment cost and delivery time is increasingly used by companies to reduce transportation costs while avoiding costly delays or disruptions, high levels of safety stocks, and system redundancies (5). For example, real-time monitoring and decision support systems are especially relevant to containerized multistage transportation chains for which alternative modes or carriers are available at each stage. The principal focus of this paper is the formulation and analysis of a mathematical model for a new type of freight network assignment problem with recourse defined in a dynamic environment and in the presence of probable network disruptions or significant delays. Recourse refers to the ability of the shipper to update a routing strategy based on information obtained about the state of the network disruptions. The adaptive routing policy will help the shipper save costs. The paper develops a mathematical model (a) to better capture shipper behavior in the presence of network disruptions and rerouting and (b) to include the heterogeneity in shipper routing behavior as a result of commodity or product, mode, and logistics system characteristics. The model presented in this paper is more suitable for national and regional freight transportation and may not be applicable to urban freight flows, which are dominated by multistop tours starting and ending at depots.