Direct versus Terminal Routing on a Maritime Hub-and-spoke Container Network

This study formulates a two-objective model by individually minimizing shipping costs and inventory costs to decide whether to route a shipment through a hub or directly to its destination. First, shipping and inventory cost functions are formulated for a multi-port calling route. Shipping costs include capital and operating cost, fuel cost and port charge, while inventory costs include waiting time cost and shipping time cost. Then, based on a trade-off between shipping costs and inventory costs for two types of shipping routes, Pareto optimal solutions of the two-objective model are determined, and a routing decision can be illustrated and made in objective value space. The optimal routing, ship size and sailings frequency with respect to each level of inventory cost is shown. The results show that the optimal decision tends to be direct shipping as container flow between origin and destination ports increases.