Optimal allocation of limited and random network resources to discrete stochastic demands for standardized cargo transportation networks

• We study the stochastic resource allocation problem for cargo transportation with discrete random demands, discrete random resource capacities, and network effects.
• We formulate the problem as a stochastic integer programming model.
• We provide theoretical results that completely characterize the optimal solution to the model under a special network.
• We present two solution approaches for solving the stochastic model under a general network.

We consider the resource allocation problem with discrete random demands and discrete random resource capacities for standardized cargo transportation networks, in which a freight operator needs to determine the integral quantity of booking requests to be accepted for each product to maximize the expected profit. We formulate the problem as a stochastic integer programming model and provide theoretical results that completely characterize the optimal solution to the stochastic model under a special case. We present a progressive augmentation algorithm and a sampling based method for solving the stochastic model under a general case. We also offer numerical experiments to test the two methods and shed light on their performances.