Doctoral Dissertations

Dong Woo Ha

Date of Award

8-1994

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Business Administration

Major Professor

Gary N. Dicer

Committee Members

James H. Foggin, Frank W. Davis, Jr.

Abstract

This research attempted to investigate the applicability of yield management techniques to the international container shipping industry. Considering the wide demand fluctuation and the inflexibility in scheduling capacity inherent in the container shipping business, it was very plausible that the industry could benefit from the implementation of yield management. By assuming the given price structure, this research focused on market segmentation and capacity control techniques to determine whether to accept early booking requests from a segment, or reject early requests to sell the capacity to a later booking higher paying segment to maximize freight revenue. Using actual booking data of the trans-Pacific westbound voyages, this research examined the booking patterns of major commodities. The difference in booking patterns made it possible to segment the market on the basis of booking patterns as well as freight rate levels of cargoes. The trans-Pacific westbound market was segmented into 4 cargo groups for yield management application. Instead of traditional statistical approaches, the multi-sample cluster analysis using information theoretic statistics was performed to test the difference in booking patterns and to segment the market. On the basis of the 4-group segments, this research applied two capacity control techniques (the expected marginal revenue model and the threshold curve model) to the actual booking data. The results of a total of 102 simulation runs showed that the yield management models effectively increased the freight revenue by controlling the booking requests. However, the revenue impacts of the models varied greatly depending on the level of capacity scheduled and demand per capacity ratio of individual voyages. The results implied that the performance of yield management would be minimal at the current level of scheduled capacity, which is almost sufficient to meet peak demand, and strongly suggested the importance of scheduling adequate capacity. This research concluded that the container shipping industry is a good candidate for yield management application, but for successful yield management implementation, pricing strategy should be incorporated in the yield management system to shift demand between voyages.

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