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.