Sailing speed optimization for container ships in a liner shipping network

This paper first calibrates the bunker consumption - sailing speed relation for container ships using historical operating data from a global liner shipping company. It proceeds to investigate the optimal sailing speed of container ships on each leg of each ship route in a liner shipping network while considering transshipment and container routing. This problem is formulated as a mixed-integer nonlinear programming model. In view of the convexity, non-negativity, and univariate properties of the bunker consumption function, an efficient outer-approximation method is proposed to obtain an ε-optimal solution with a predetermined optimality tolerance level ε. The proposed model and algorithm is applied to a real case study for a global liner shipping company.     

The effect of high fuel costs on liner service configuration in container shipping

For shipping activities, not least container shipping, bunker fuel is a considerable expense. In the last 5 years, bunker prices have risen considerably. An increasing bunker price in container shipping, especially in the short term, is only partially compensated through surcharges and will therefore affect earnings negatively. This paper deals with the impact of increasing bunker costs on the design of liner services on the Europe–Far East trade. The paper assesses how shipping lines have adapted their liner service schedules (in terms of commercial speed, number of vessels deployed per loop, etc.) to deal with increased bunker costs. The paper also includes a cost model to simulate the impact of bunker cost changes on the operational costs of liner services. The cost model demonstrates for a typical North Europe–East Asia loop that the current bunker prices have a significant impact on the costs per TEU even when using large post-panamax vessels. The model also shows shipping lines are reacting quite late to higher bunker costs. The reasons that explain the late adaptation of liner services relate to inertia, transit time concerns, increasing costs associated with fixing schedule integrity problems and fleet management issues.     

The rationale behind and effects of Bunker Adjustment Factors

The Bunker Adjustment Factor (BAF) system was first introduced following the oil shocks of the 1970s. The underlying justification for such a system was that shipping lines operating in freight conferences could not otherwise adjust their prices promptly enough to counteract the devastating effect of bunker price increases. Thirty years after its imposition, BAF has always been a bone of contention between carriers and shippers. Ocean carriers contend that it is a necessary evil to reduce their exposure to volatile bunker price, while shippers argue that this risk should either be considered as a normal commercial venture, or dealt with in a more transparent way. When bunker surcharges began to climb in 2003, BAF disputes became one of the main obstacles to the dialog between both parties. To settle the dispute over BAF, the Europe Commission (EC) called for the submission on the issue of surcharges.The European Commission banned carrier conferences on October 17th 2008. The shipping lines now set their own independent BAF rates, which are closely monitored by the EC to ensure no collusion. The fluctuation in oil price in 2008 means that the BAF rates are now coming down, but there are still some wide variations in application. During this period of dramatic change in shipping environment, it has become important to provide a theoretical framework for analyzing the BAF. This paper focuses on examining the rationale behind and effects of BAF. A microeconomic model is made to explore the underlying mechanism of BAF. By examining the trade routes of Asia to Europe and Asia to North America during the period 2003-2008, this study finds the practice of BAF cushions an ocean carrier from the negative effects of bunker price fluctuations, and provides shipping lines a powerful tool to change the incentive structure facing carriers. Despite engineers showing that reducing the speed of vessels can economize fuel consumption evidence shows there has been little change by major shipping lines in their transit time and sailing schedules during the recent period of skyrocketing fuel price. It is apparent they use the BAF as the cushion against the effect of rising bunker prices.     

Study on China-EU container shipping network in the context of Northern Sea Route

The emerging Northern Sea Route (NSR) represents change to the existing liner network for China-EU container shipping. It is necessary to re-examine the container network in this context and assist liner companies in decision-making. This paper assesses the potential of the NSR based on designing a multi-port multi-trip liner service by establishing a two-stage optimization model. Based on the estimated data of NSR shipping, ship routing schemes on both the NSR and conventional routes are proposed. It is determined that container service along the NSR is largely influenced by ice-breaking charge, seasonality, and cargo volume, which makes NSR more likely to act as a supplementary line of the liner network in the short or medium term. The results also indicate that use of NSR may drive the redeployment of shipping network and hub ports in the long term. This study's conclusions may prove useful for strategic planning by liner companies, port authorities, and governments to assess the operation of liner service via the NSR.     

The effect of multi-scenario policies on empty container repositioning

This paper addresses a container maritime-repositioning problem where several parameters are uncertain and historical data are useless for decision-making processes. To address this problem, we propose a time-extended multi-scenario optimization model in which scenarios can be generated taking into account shipping company opinions. We then show that multi-scenario policies put shipping companies in the position of satisfying empty-container demands for different values that may be taken by uncertain parameters.     

The liner shipping berth scheduling problem with transit times

In this paper speed optimization of an existing liner shipping network is solved by adjusting the port berth times. The objective is to minimize fuel consumption while retaining the customer transit times including the transhipment times. To avoid too many changes to the time table, changes of port berth times are only accepted if they lead to savings above a threshold value. Since the fuel consumption of a vessel is a non-linear convex function of the speed, it is approximated by a piecewise linear function. The developed model is solved using exact methods in less than two minutes for large instances. Computational experiments on real-size liner shipping networks are presented showing that fuels savings in the magnitude 2–10% can be obtained. The work has been carried out in collaboration with Maersk Line and the tests instances are confirmed to be representative of real-life networks.     

Estimating attributes importance for container shipping industry by closing the listening gap with maximum convergent validity

This paper estimates the relationship of attributes importance (AI) to prospect purchase intention by closing the listening gap between customers and managers of container shipping companies. A proposition of minimum cross entropy is proposed to find a solution to the problem with maximum convergent validity, and this proposition is used to estimate AI, in which both opinions about AI of customers and managers of container shipping companies are included. Results indicate that price, discount, personal selling, and word of mouth, are the most important attributes to prospect purchase intention, within the industry. In addition, managerial implications are also discussed.     

Measuring the perceived container leasing prices in liner shipping network design with empty container repositioning

This paper aims to measure the perceived container leasing prices at different ports by presenting a two-stage optimization method. In stage I, we propose a practical liner shipping network design problem with empty container repositioning. The proposed problem further considers the use of foldable containers and allows the mutual substitution between empty containers to decrease the number of empty containers to be repositioned. In stage II, the inverse optimization technique is used to determine the perceived container leasing prices at different ports, based on the solution obtained in stage I. Based on a set of candidate liner shipping service routes, a mixed-integer nonlinear programming model is built for the proposed problem in stage I. The nonlinear terms are linearized by introducing the auxiliary variables. Numerical experiments based on a realistic Asia-Europe-Oceania liner shipping network are carried out to account for the effectiveness of our two-stage optimization method.     

Combined fleet deployment and inventory management in roll-on/roll-off shipping

In maritime transportation of automobiles, roll-on/roll-off (ro–ro) shipping companies operate liner shipping services across major trade routes. Large ro–ro shipping companies are well placed to offer end-to-end integrated logistics services to auto manufacturers engaged in international trade of vehicles. Therefore, we present a new mixed integer programming model for fleet deployment including inventory management at the ports along each trade route. Due to the complexity of the problem, a rolling horizon heuristic (RHH) is proposed. The RHH solves the problem by iteratively solving sub-problems with shorter planning horizon. Computational results based on real instances are presented.     

Determinants of spreads on new high yield bonds of shipping companies

This paper investigates determinants of pricing of new high yield bond offerings of shipping companies. New high yield bond offerings issued by shipping companies in the US market, during the period 1993–1998, are used in the investigation. The empirical results suggest that credit rating is the major determinant of the price spread of the bond offerings. Financial leverage and shipping market conditions also account for a significant part of the price variability.     

The impact of slow ocean steaming on delivery reliability and fuel consumption

With a dominant volume of global transportation being conducted by sea, ocean container transport greatly impacts the global economy. Since sea vessels are drastically more fuel efficient when traveling at lower speeds, slow steaming has become a widely adopted practice to reduce bunker costs. However, this leads to a longer transportation time, which together with the unpredictability of the delay has been a big challenge. We propose a model to quantify the relationship among shipping time, bunker cost and delivery reliability. Our findings lead to a simple and implementable policy with a controlled cost and guaranteed delivery reliability.     

Capital structure decisions of globally-listed shipping companies

Debt capital has traditionally been the most important source of external finance in the shipping industry. The access that shipping companies nowadays have to the capital markets provides them with a broader range of financing instruments. As such, this study investigates the determinants of capital structure decisions using a sample of 115 exchange-listed shipping companies. We test whether listed shipping companies follow a target capital structure, and we analyze their adjustment dynamics after deviations from this target leverage ratio. When compared with industrial firms from the G7 countries, shipping companies exhibit higher leverage ratios and higher financial risk. Standard capital structure variables exert a significant impact on the cross-sectional variation of leverage ratios in the shipping industry. Asset tangibility is positively related to corporate leverage, and its economic impact is more pronounced than in other industries. Profitability, asset risk, and operating leverage are all inversely related to leverage. There is only weak evidence for market-timing behavior of shipping companies. Because demand and supply in the maritime industry are closely related to the macroeconomic environment, leverage behaves counter-cyclically. Using different dynamic panel estimators, we further document that the speed of adjustment after deviations from the target leverage ratio is lower during economic recessions. On average, however, the capital structure adjustment speed in the maritime industry is higher compared with the G7 benchmark sample. These findings indicate that there are substantial costs of deviation from the target leverage ratio due to high expected costs of financial distress. Our results have implications for shipping companies’ risk management activities.     

Levels of internationalization in the container shipping industry: an assessment of the port networks of the large container shipping companies

This paper examines the internationalization level of the world’s largest container shipping companies by examining their port networks. The results of our analysis show that only three of the nineteen companies could be considered as being truly ‘International’ and service the ‘lion’s share’ of the major and minor ports distributed across the globe. The port networks of the other companies in our survey, whilst having individualized features, shared common characteristics. Guided by the ‘Uppsala Model of Incremental Internationalization’ (Johanson and Vahlne, 1977), we were able to identify four internationalization levels of a container shipping company that are indicated by their port network.We argue that the port network plays an additional role as it contributes to the internationalization level of the container shipping companies. This is important because the internationalization level affects the container shipping company’s ability to expand its customer base both at a local and international level. Local customers would have access to a larger international destination network and international customers would be able access a larger local distribution network without transhipping between different companies.Amongst other issues, we were able to determine that, for the analyzed container shipping companies, ‘Internationalization’ of a port network means including or excluding ports in specific regions or sub-regions in their own network, and that a company’s home base or history plays a significant role in this development.     

Factors affecting the dynamics of yield premia on shipping seasoned high yield bonds

This paper investigates factors that can explain the dynamics of yield premia on seasoned high yield bonds of shipping companies. Our analysis utilises 40 seasoned high yield bonds offered by 32 shipping companies between April 1998 and December 2002 and a set of microeconomic, macroeconomic and, industry related factors. Our model suggests that the dynamics of credit premia of seasoned shipping high yield bonds can be explained by: credit rating; term-to-maturity; changes in earnings in the shipping market, as well as in the yield on 10-year Treasury bonds; and the yield on the Merrill Lynch single-B index.     

Global intermodal liner shipping network design

This paper presents a holistic analysis for the network design problem of the intermodal liner shipping system. Existing methods for liner shipping network design mainly deal with port-to-port demand. However, most of the demand has inland origins and/or destinations. Thus, it is necessary to cope with inland origin–destination (OD) pairs involving a change in transport mode from inland transportation to maritime shipping. A method is first proposed to convert inland OD demand to port-to-port demand. Then, a framework for global intermodal liner shipping network design is proposed. Finally, the proposed methodology is applied to and numerically verified by a large-scale network example.     

Knowledge management enablers in liner shipping

This study empirically identifies crucial knowledge management enablers and examines their impacts on organizational performance using survey data collected from liner shipping firms include shipping companies and agencies. Results indicated that knowledge management enablers such as organizational structure and knowledge management culture are found to have significantly positive effects on the organizational performance aspects of innovativeness, financial performance, and customer service, whereas information technology support is a positive effect on organizational performance aspect of innovativeness. Theoretical and managerial implications of the research findings on knowledge management for liner shipping companies are discussed.     

Corporate social responsibility disclosure: The case of international shipping

Based on practices and legislation in the shipping industry, we construct a corporate social responsibility (CSR) disclosure index for listed shipping companies. We use Markov Chain Monte Carlo (MCMC) techniques for Bayesian inference, and we estimate the marginal effects of firm characteristics on CSR disclosure for each firm. Our results show a positive relationship between CSR disclosure and financial performance for each firm in our international sample. Firm size, financial leverage, and ownership structure are also associated with CSR disclosure. Our findings suggest that a majority of listed shipping companies have integrated CSR practices into their strategic planning and operations.     

Understanding hinterland service integration by shipping lines and terminal operators: a theoretical and empirical analysis

In the present competitive environment of ports, the key determinant in port competition is the ability of a port to be integrated into the local maritime and hinterland transportation chain. Creating effective integrated hinterland chains requires the coordination of several actors both in port and the hinterland. By making use of insights from Transaction Cost Economics and Resource-based View, the paper helps to understand why and how shipping lines and terminal operating companies enlarge their scope in intermodal transport and in inland terminals. The paper discusses a number of cases from the Hamburg–Le Havre range, where shipping lines and terminal operating companies have changed their scope of activities in ports and hinterland networks. After the theoretical and empirical analysis the papers draws conclusions on the explanatory power of the theories in understanding hinterland service integration by shipping lines and terminal operators.     

How different is carrier choice for third party logistics companies?

The purpose of this paper is to test whether third party logistics companies (3PLs) are different from other end-shippers with respect to how they choose their carriers. The results of carrier choice models developed in this paper suggest that 3PLs are more biased against intermodal shipping than other end-shippers. The principal conclusions are as follows: mode and carrier choice modeling needs to take into consideration differences between 3PLs and other end-shippers; and with the increasing role of 3PLs in choosing carriers, their stronger bias against intermodal shipping will present further challenges to increasing freight rail mode share.     

Liner shipping cargo allocation with service levels and speed optimization

The cargo allocation problem is a key strategic problem that determines the profitability of a liner shipping network. We present a novel mixed-integer programming model for this problem that introduces service levels for transit time requirements and optimizes the vessel speed on each leg of a service. These extensions to the cargo allocation problem greatly increase its realism and value for carriers. We evaluate our model on realistic data from the LINER-LIB and perform a sensitivity analysis of transit times versus bunker costs. Furthermore, we show how carriers can use our model to make data driven decisions in their operations.