Price planning for time-definite less-than-truckload freight services

Price planning simultaneous determines the service demand (with associated prices) and an operational plan to maximize a carrier’s profit. We modeled this integral-constrained concave program in the link formulation and proposed an implicit enumeration embedded with Lagrangian Relaxation upper bounds to determine the optimal prices. Computations on Taiwan’s time-definite less-than-truckload freight market showed that the carrier needs to simultaneously re-evaluate its network capacity while determining prices. The common practice of distance-based pricing that sets price by a base rate over direct shipment distance underestimates operating cost, specifically operating losses for short distance shipments.