Canal effects on a liner hub location problem

Abstract

The Panama Canal and the Suez Canal are two key canals around the world, both of which have a great number of connections with other ports because of various liner shipping service routes. Liner carriers can facilitate container transshipment operations by opening hub ports around the canal. This paper aims to investigate canal effects on hub location in liner shipping. Different from the conventional hub location problem with fixed costs, our hub location problem with fixed costs can be reduced to a p-median problem, while addressing the research issue considered in the conventional hub location problem with fixed costs. In order to describe canal effects, besides its geographic location, this paper mainly considers three aspects: canal toll, canal congestion, and ship capacity limitation when passing through a canal. Several binary linear programming models are mainly developed for our hub location problem considering canal effects. Moreover, a theoretical analysis is also developed for simplified hub location around a canal. Numerical results show that ship capacity limitation has a bigger impact on hub location around a canal, as compared with canal toll and canal congestion. Such phenomenon can be partly supported by the theoretical analysis. This insight to some extent justifies the recent canal expansion projects to widen or add a new lane waterway for the Panama Canal and the Suez Canal, respectively.