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Process graph approach for two-stage decision making: Transportation contracts

Éva König,B. Bertók

Published 2019 in Computers and Chemical Engineering

ABSTRACT

Abstract Freight transportation has always been a key factor in industry and market supply and expanding markets relies on its efficacy even more. Uncertainty cannot be avoided in transportation, e.g., traffic or navigability of rivers, and stochastic nature impacts contracts between a firm and a transport company. It is essential to analyze the conditions of contracts, whether they have medium or short term validity, e.g., one costs less while other offers more flexibility. Medium term scenario analysis can be formulated as a two-stage decision problem typically handled by methods applying decision trees. Since realistic problems are complex enough to result in a decision tree of enormous size, application of such methods is practically limited. Our study presents a computer aided algorithmic method based on P-graph framework, which is capable to implicitly involve and enumerate all feasible scenarios instead of explicitly enumerate the possibilities, while keeping the problem formulation compact and visible.

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