Operations and Supply Chain Management Commons^™

Pricing And Product Mix Optimization In Freight Transportation, Michael F. Gorman

MIS/OM/DS Faculty Publications

We propose improved pricing and market mix can improve the profitability of the freight transportation provider through the reduction of equipment repositioning costs. We hypothesize that because of complexities surrounding pricing and equipment repositioning costing, existing pricing strategies in freight transportation fail to fully consider these costs. We test this hypothesis in an applied setting in which Monte Carlo simulation captures the stochasticity of market conditions inherent in the problem. We use a heuristic to improve the nondifferentiable, discontinuous objective function.

Our results from test cases show with high confidence that current prices are not optimal, as indicated by a …