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Future Meetings

Towards solving two unsolved problems in logistics

Venue: Cardiff School of Mathematics
Speaker: Patrick Beullens, Southampton University
Date: Tuesday, 07 March 2017 at 18:00 - 19:00

The next SWORDS meeting of the 2016-2017 programme is scheduled for Tuesday the 7th of March 2017. The meeting will be held at the School of Mathematics, Cardiff University and will include the AGM. There will be cheese and wine available from 5.15pm in room M/1.04 on the first floor in the School of Mathematics. The talk will commence at 6.00pm in room E/0.15 (ground floor). Please note that times and rooms are different to normal.


This talk will focus on two seemingly unrelated problems in the area of logistics: 

(a)     what is the optimal economic order quantity to maximise a firm's profits after tax? 
(b)     what is the optimal speed of a time chartered ship?

We demonstrate that both problems can be viewed as comparing an infinite set of mutually exclusive choices of investments of different duration. Based on first principles of corporate finance theory, an optimal decision is determined from maximising the annuity stream of the cash-flow functions associated with these activities over the duration of the investment.

One benefit of this approach over traditional average profit models is that it can more accurately account for the influence of different contracts that the firm adopts with the outside world. We illustrate this point by examining how tax legislation affects the profitability of a UK firm that has to take economic order quantity decisions(1). We consider the influence of both corporate tax and value added tax on the firm's inventory problem.

A second benefit of adopting this approach is that it can help us to understand the importance of accounting for the opportunity cost of future investment opportunities after the current investment project is finished. We illustrate by looking into the problem of optimising the speed of a time chartered ship across a pre-determined route(2).

(1) The first problem is based on joint work with PhD student Hua Jin who holds an MSc in Finance and Accounting. (2) The second is based on joint work with PhD student Fangsheng Ge who holds an MSc in Operational Research and Finance, and Dominic Hudson, Shell Professor at the University of Southampton.