Optimal Investment Timing and Size of a Logistics Park: A Real Options Perspective

This paper uses a real options approach to address optimal timing and size of a logistics park investment with logistics demand volatility. Two important problems are examined: when should an investment be introduced, and what size should it be? A real option model is proposed to explicitly incorporate the effect of government subsidies on logistics park investment. Logistic demand that triggers the threshold for investment in a logistics park project is explored analytically. Comparative static analyses of logistics park investment are also carried out. Our analytical results show that investors will select smaller sized logistics parks and prepone the investment if government subsidies are considered; the real option will postpone the optimal investment timing of logistics parks compared with net present value approach; and logistic demands can significantly affect the optimal investment size and timing of logistics park investment.

[1]  Joseph Ying Jun Chow,et al.  Reference Policies for Non-myopic Sequential Network Design and Timing Problems , 2016 .

[2]  T. Oum,et al.  Institute of Transport and Logistics Studies Modeling Airport Capacity Choice with Real Options Title: Modeling Airport Capacity Choice with Real Options Modeling Airport Capacity Choice with Real Options , 2022 .

[3]  Jacqueline M. Bloemhof,et al.  The time dependent two echelon capacitated vehicle routing problem with environmental considerations , 2015 .

[4]  Seyed Jafar Sadjadi,et al.  Location based treatment activities for end of life products network design under uncertainty by a robust multi-objective memetic-based heuristic approach , 2014, Appl. Soft Comput..

[5]  Frank Schultmann,et al.  Freight transportation planning considering carbon emissions and in-transit holding costs: a capacitated multi-commodity network flow model , 2016, EURO J. Transp. Logist..

[6]  Jonathan R. Peters,et al.  Does road pricing affect port freight activity: Recent evidence from the port of New York and New Jersey , 2014 .

[7]  Amelia C. Regan,et al.  A network option portfolio management framework for adaptive transportation planning , 2011 .

[8]  Dezhi Zhang,et al.  Optimal location and size of logistics parks in a regional logistics network with economies of scale and CO2 emission taxes , 2015 .

[9]  Eduardo S. Schwartz,et al.  Evaluating Environmental Investments: a Real Options Approach , 1998 .

[10]  Amelia C. Regan,et al.  Network-based real option models , 2011 .

[11]  S. Wong,et al.  Optimization of Number of Operators and Allocation of New Lines in an Oligopolistic Transit Market , 2012 .

[12]  Yihua Li,et al.  Is now a good time for Iowa to invest in cellulosic biofuels? A real options approach considering construction lead times , 2015 .

[13]  Dezhi Zhang,et al.  Green Supply Chain Network Design with Economies of Scale and Environmental Concerns , 2017 .

[14]  Jc Jan Fransoo,et al.  Freight distribution in megacities: Perspectives of shippers, logistics service providers and carriers , 2015 .

[15]  Shing Chung Josh Wong,et al.  Transport Network Design Problem under Uncertainty: A Review and New Developments , 2011 .

[16]  John Zacharias,et al.  Local distribution and collection for environmental and social sustainability – tricycles in central Beijing , 2015 .

[17]  Alan McKinnon,et al.  Green Logistics : the Carbon Agenda , 2010 .

[18]  M. Dessouky,et al.  Consolidation strategies for the delivery of perishable products , 2014 .

[19]  G. Giuliano,et al.  Economies of scale in bus transit: A review of concepts and evidence , 1985 .

[20]  Xiaoqiang Long,et al.  The facility layout problem in non-rectangular logistics parks with split lines , 2015, Expert Syst. Appl..

[21]  Desirée Knoppen,et al.  Logistics clusters: The impact of further agglomeration, training and firm size on collaboration and value added services , 2016 .

[22]  Stein-Erik Fleten,et al.  Investment timing and optimal capacity choice for small hydropower projects , 2008, Eur. J. Oper. Res..

[23]  William H. K. Lam,et al.  Transit technology investment and selection under urban population volatility: A real option perspective , 2015 .

[24]  Trine Krogh Boomsma,et al.  Renewable energy investments under different support schemes: A real options approach , 2012, Eur. J. Oper. Res..

[25]  Andreas Welling.  The paradox effects of uncertainty and flexibility on investment in renewables under governmental support , 2016, Eur. J. Oper. Res..

[26]  Hubo Cai,et al.  Government incentive impacts on private investment behaviors under demand uncertainty , 2017 .

[27]  Yonglin Gao,et al.  Incorporating Knightian uncertainty into real options analysis: Using multiple-priors in the case of rail transit investment , 2013 .

[28]  Roy E. Welsch,et al.  Logistics agglomeration in the US , 2014 .

[29]  S. Wong,et al.  On the Allocation of New Lines in a Competitive Transit Network with Uncertain Demand and Scale Economies , 2011 .

[30]  Herwig Winkler,et al.  AN EMPIRICAL INVESTIGATION OF GERMAN FREIGHT VILLAGES , 2012 .

[31]  Eiichi Taniguchi,et al.  Optimal size and location planning of public logistics terminals , 1999 .

[32]  R. McDonald,et al.  The Value of Waiting to Invest , 1982 .

[33]  Xiaolei Ma,et al.  A fuzzy-based customer clustering approach with hierarchical structure for logistics network optimization , 2014, Expert Syst. Appl..

[34]  Di Wu,et al.  Pareto-improving congestion pricing on multimodal transportation networks , 2011, Eur. J. Oper. Res..

[35]  Xianpeng Wang,et al.  Solution method for the location planning problem of logistics park with variable capacity , 2013, Comput. Oper. Res..

[36]  Yong Zhao,et al.  Location selection of city logistics centers under sustainability , 2015 .

[37]  Nihan Akyelken.  Green Logistics: Improving the Environmental Sustainability of Logistics , 2011 .