Part C: Liner Shipping and Digitalisation

Question 1

The relevance of container shipping and logistics

Answer 1

• Impact on global economy
• Facilitation of global trade
• Impact on supply chain efficiency

Question 2

The role of shipping in global trade

Answer 2

Shipping allows for the efficient and cost-effective transportation of goods across the globe. Standardised containers make it possible to transfer goods seamlessly between ships, trucks, and trains, facilitating the movement of products from manufacturers to consumers in different countries.

Question 3

Issues for/disruptions to the shipping industry

Answer 3

• COVID-19: supply chain disruptions, delays, port congestion, container shortages, increased freight rates, and increased customer demand (online shopping)
• Piracy: increased operating costs due to insurance and security, route diversions and delays leading to congestion, disruption of trade routes, and loss of revenue
• Water level at Panama Canal is decreasing due to it’s reliance on freshwater from nearby lakes: reduced capacity and increased costs

Question 4

The role of digitalisation for ocean logistics during times of stability and to mitigate disruptions

Answer 4

• Automated processes: Streamlines documentation, customs clearance, and cargo tracking, reducing errors and speeding up operations.
• Predictive analytics: Forecasts potential disruptions and demand trends, enabling proactive risk management.
• Alternative routing: Quickly identifies new routes during disruptions to minimize delays.
• Route optimization: Uses real-time data analytics to optimize shipping routes, lowering fuel consumption and transit times.
• Predictive maintenance: IoT sensors predict maintenance needs, minimizing downtime and reducing costs.
• Regulatory compliance: Automates adherence to international shipping regulations, ensuring consistent compliance.
• Real-time tracking: Provides stakeholders with live updates on cargo movement, enhancing visibility and transparency.
• Cloud-based collaboration: Facilitates real-time communication and collaboration across global partners.
• Blockchain security: Ensures secure, transparent sharing of information among stakeholders.
• Enhanced customer experience: Offers integrated platforms for booking, tracking, and managing shipments seamlessly.

Question 5

Container tracking and cargo monitoring

Answer 5

Though digitalisation and IoT, stakeholders can track containers in real-time, and cargo can be monitored.

For example, if the contents of a reefer container need to be kept at 5°C and it arrives to the final customer in a “poor” condition, the shipper can prove that the container has held the correct temperature (blame game)

Question 6

Cargo categories

Answer 6

There are various sizes and types of containers. The two most common sizes are 20ft and 40ft.

Types include:
- Dry: standard container, transporting clothes, electronics etc.
- Refrigerated (Reefer): equipped with refrigeration units, transporting fruits, dairy etc.
- Tank: transporting liquids, gases, and chemicals (hazardous and non-hazardous materials)

Question 7

The end-to-end ocean transport journey

Answer 7

See image!

Buyer purchases/request shipment of goods

Shipper gives a proposal for shipment to the freight forwarder and receives the bill of lading and export declaration in return -> cargo is picked up at the warehouse and transported to the cargo port depot -> freight forwarder arranges for the shipping company and the paperwork (custom clearance) -> cargo is loaded onto the vessel at the loading port -> cargo is shipped and unloaded and the discharge port -> cargo is transported to the forwarder’s overseas branch -> cargo is released to the consignee

Question 8

Shipper

Answer 8

The seller (consignor)

A person or entity that is responsible for sending or initiating the shipment of goods from one location to another. Shippers can be individuals, businesses, manufacturers, retailers, or any other entity that needs to transport goods. They are typically the ones who own or produce the goods being shipped and are responsible for arranging transportation and ensuring that the goods reach their destination safely and on time

Question 9

Freight forwarder

Answer 9

The intermediary

A company or an individual that acts as an intermediary between businesses or individuals and transportation services, facilitating the movement of goods from one place to another. They handle various aspects of the shipping process, including arranging transportation, preparing and processing documentation, booking cargo space, negotiating freight rates, and managing customs clearance

Question 10

Carrier

Answer 10

The intermediary

A company that owns or operates vessels (ships) for transporting goods via oceanic routes

Question 11

Receiving consignee

Answer 11

The buyer

The person, company, or entity to whom goods are being shipped or consigned. They are typically the recipient or receiver of the goods once they reach their destination. The consignee may be the buyer of the goods, the importer, the ultimate owner, or the party specified in the shipping documents as the entity responsible for receiving the shipment

Question 12

Bill of Lading

Answer 12

A transit document issued by the carrier/shipper to the consignor during the shipment of the goods to the consignee, which spells out the quantity, type, and destination of the goods being shipped. It serves as a receipt of the shipment and can help prevent the theft of goods being transported.

Shipper/sender/consignor hands over the goods for shipment to carrier -> carrier issues bill of lading -> carrier delivers the goods at the destination/ to the receiver/consignee

Question 13

Letter of Credit

Answer 13

An instrument whereby the buyer’s bank agrees to pay a specified amount of money on the presentation of documents stipulated in the letter of credit, usually the bill of lading, an invoice and a description of the goods

Buyer -> Buyer’s Bank -> Seller’s Bank -> Seller (shipping products) -> Bill of Lading -> Buyer (products and bill of lading)

Question 14

Freight rate

Answer 14

The specific freight rate for a given box transport depends on various factors, such as fuels price, weight of the cargo, size of the container, market conditions, distance from origin to end destination, and more

Fright rates have surged to their highest since 2022 following shipping disruptions in the Red sea and Suez canal

Question 15

Industry competition

Answer 15

High competition

The balance between supply and demand has changed in recent years - supply is now higher than demand

Question 16

Entry and exit barriers

Answer 16

High entry- and exit barriers since vessels are expensive and live a long lifetime

• High capital investment
• Economies of scale - difficult for new entrants
• Market dominated by few players

Question 17

Customer/business relationship

Answer 17

• Long-term contracts (committed vs. uncommitted customers)
• Partnerships and alliances

Question 18

Vessel Sharing Agreements (VSA)

Answer 18

Cooperative arrangements between two or more container shipping companies to share space on their vessels, coordinate sailing schedules, and jointly operate specific routes or services. VSAs are commonly formed to improve vessel utilisation, optimise operating costs, and enhance service offerings for customers.

VSA vs. alliances: VSA are limited to a specific trade lane, whereas a shipping alliance is made up of a number of VSAs

Question 19

Conferences

Answer 19

Agreements among multiple shipping lines to collectively set freight rates, regulate capacity, and coordinate services on specific trade routes or within certain geographical regions.

These agreements historically aimed to stabilise rates, ensure service reliability, and prevent destructive rate wars by establishing common pricing and operational standards.

Conferences involve participating carriers adhering to agreed-upon freight rates, terms, and conditions, along with coordinating vessel deployments and sailing schedules to meet market demand. However, they are subject to regulatory oversight in many jurisdictions to prevent anti-competitive behavior and ensure fair and transparent rate-setting practices.

Question 20

Alliances

Answer 20

Strategic partnerships formed among container shipping companies to achieve operational synergies, enhance service offerings, and improve competitiveness in the global marketplace.

Unlike conferences, alliances primarily focus on operational cooperation and network optimisation rather than rate-setting or capacity coordination. These partnerships involve sharing vessel capacity, joint operation of services, and collaboration in areas such as terminal operations and cargo handling.

For example, 2M alliance between MSC Mediterranean Shipping Company (MSC) and Maersk A/S

Question 21

How are the liner shipping routes/ services designed?

Answer 21

Designed so a single vessel can sail to x number of ports on a roundtrip, and thereby deliver and pickup goods along the way. By doing so, vessels aim to stay fully loaded and thereby maximising revenue.

Also:
- Meet supply and demand
- Minimise risk of e.g. sailing through pirate territory
- Minimising cost
- Minimising fuel consumption by sailing a fast and efficient route
- Full utilisation of the vessel - cargo to be dropped off, and bring cargo from these and onwards
- Roundtrips
- Sustainability: plan route around were whales are breeding

Question 22

Slow steaming

Answer 22

Saling slower to:
- Lower CO2 emission
- Minimise costs due to lower fuel consumption
- Spend less time in port; therefore, the vessel can sail slower and still make it on time

Going at twice the speed, eight doubles the fuel consumption (approximately)

Question 23

Commercial and operational decision-making framework

Answer 23

Strategic
- Markets to share
- Fleet size and mix
- Network design

Tactical
- Service selection
- Scheduling
- Fleet deployment
- Cargo routing
- Speed optimisation

Operational (capacity- and booking uptake management)
- Empty repositioning
- Stowage
- Berthing
- Disruption management

Question 24

Capacity management

Answer 24

Objective: maximise profit

• Vessel deployment: size and type of vessel for route
• Scheduling to maintain service and reliability while minimising emplty voyages and maximising vessel utilisation
• Allocation of space
• Yield management: adjusting fright rates based on demand, season and market conditions
• Capacity planning: forecasting demand

Question 25

Measurement of capacity

Answer 25

Slot capacity: the maximum number of containers a ship can carry regardless of factors.

Loadable capacity: the maximum capacity of the ship when factoring in the weight, stability, environmental and operational conditions.

Question 26

Units for measuring capacity of vessel

Answer 26

A TEU (Twenty-Foot Equivalent Unit) is a measure of volume in units of twenty-foot long containers - largest container ship can carry about 24,000 TEUs.

A FEU (Forty-Foot Equivalent Unit) is the same as above, but with forty-foot long containers.

Question 27

Stowage

Answer 27

The arrangement and storage of cargo or goods on a vessel in a manner that ensures safe transportation, efficient use of space, and compliance with regulations.

Question 28

Stowage optimisation

Answer 28

Strategically planning the arrangement of cargo on board to maximise efficiency, safety, and profitability. It aims to utilise the available cargo space effectively while considering factors such as weight distribution, stability, and accessibility. By employing advanced algorithms and software, shipping companies can optimise stowage plans to minimize fuel consumption, reduce transit times, and enhance overall operational performance.

Question 29

Loading

Answer 29

The process of placing cargo onto a vessel for transport.

Question 30

Unloading

Answer 30

(also known as discharge) the process of removing cargo from a vessel upon arrival at its destination port.

Question 31

Restow

Answer 31

The process of rearranging or reorganising cargo on board a vessel after it has been loaded.

Question 32

Rollings

Answer 32

When a shipping line decides to roll (or delay) a booking to a later sailing due to operational reasons such as overbooking, schedule changes, or vessel capacity constraints.

Question 33

No-shows

Answer 33

Situations where customers who have booked cargo space on a vessel fail to deliver the cargo for shipment as scheduled.

Question 34

Overbooking

Answer 34

When a shipping line accepts more bookings for cargo space on a vessel than the available capacity.

This practice is common to account for potential no-shows and optimise vessel utilisation. However, excessive overbookings can lead to operational challenges, such as rollings and customer dissatisfaction, if not managed effectively.

Question 35

Crane split

Answer 35

At a port, the ship will be served by a given number of (usually 3-5) quay cranes to unload and load containers. The bays of the ship will be partitioned into several areas. Each area will be served by one quay crane. This is called crane split.

Cargo which needs to be unloaded at the same port should not be placed next to each other, since only one crane would be able to operate here which decreases efficiency.

Question 36

Demand forecasting

Answer 36

Predicting future demand for shipping services by analysing historical data, market trends, and economic indicators. This process helps shipping companies optimise resource allocation, improve capacity utilisation, and enhance customer service by anticipating and meeting demand more effectively.

Example of support to decision-making:
- Pricing in terms of demand (seasonality)
- Route scheduling

Question 37

Revenue management

Answer 37

The integrated management of customer segments, price and asset inventory/capacity to maximise the profitability of a company. It enables a company to sell the right service to the right customer, at the right time for the right price, through the right sales channel to achieve the highest amount of revenue or contribution margin (yield) possible.

Question 38

Dynamic pricing

Answer 38

The practice of adjusting freight rates in real-time based on various factors such as market demand, capacity availability, fuel costs, and other relevant market conditions.

General trend: Last minute bookings cost more!

Question 39

Willingness to pay

Answer 39

The maximum price that a customer or shipper is willing to pay for a particular shipping service or transport of goods, which is influenced by:
- Urgency and time sensitivity
- Cargo characteristics
- Route and distance
- Market conditions
- Competitive landscape

Value increases over time!

Question 40

Trade balance

Answer 40

The balance between import and export; what is bought and what is sold.

If there is an imbalance, ports risk getting empty containers back or not having enough containers for the shipments.

Question 41

Equipment management and repositioning

Answer 41

• Types of containers to meet demand
• Inventory management - tracking, visibility, stock, storage etc.
• Allocating and positioning

Question 42

The use of linear programming in liner shipping

Answer 42

Used for optimisation problems, scenario planning and general decision-making considering:
- Route and schedule design
- Route planning: finding the fastest route from A to B - route, fuel consumption etc.
- Stowage plans: destination, weight distribution of containers, type of cargo (dangerous goods?) etc.

Question 43

The benefits of digitalisation for container shipping and logistics

Answer 43

This streamlines operations by providing real-time visibility into cargo movement, optimising supply chain processes, and enhancing overall efficiency.

It enables better collaboration among stakeholders, such as shippers, carriers, and port operators, through digital platforms and data sharing, resulting in improved coordination and reduced lead times.

Additionally, digitalisation facilitates predictive analytics and automation, allowing companies to anticipate disruptions, optimise resource utilisation, and deliver enhanced customer service.

Question 44

The support of digitalisation for trade transactions, and market forecasting, revenue or cost optimisation of liner shipping

Answer 44

Trade transactions:
Digitalising electronic bills of lading will accelerate the documentation process, reduce paperwork and cost thereof, and minimise errors. Implementing blockchain technology will enhance trust, provide security, and reduce fraud. Digital portals will allow for smooth ways of communication between customers, carriers, and shippers, make interactions for tasks such as cargo booking, shipment tracking and management of documentation easier. Implementing automated payments, such as for example smart contracts and digital payment platforms would facilitate and enable automated executions of payment terms, secure and faster transactions which would reduce disputes and delays.

Market forecasting:
Big data analysation of large volumes from diverse sources such as weather patterns, global trade flows, shipping routes would enable predicting market demands and trends. Applying machine learning models would improve accuracy. Tracking real-time using IoT (sensors) and automatic identification systems would provide real-time data on condition, location, real-time vessel tracking would help enhance predictive analytics and optimisations.

Revenue:
Dynamic pricing using AI adjusts pricing based on competition, capacity, and demand which optimises revenue. Implementing CRM systems and self-service portals would provide personalised services, improve customer satisfaction, enable customers to manage bookings and services independently, track customer preferences, all increasing and leading to higher efficiency, revenue and retention. Adding value-added services such as better tracking, faster shipping, and additional insurance would attract higher-paying customers.

Cost optimisation of liner shipping:
Applying fleet management software and using data from, for example, sensors would optimise route planning, fuel consumption schedule maintenance, and predict equipment failure. Having platforms collaborate would enable greater coordination which would lead to reducing inventory costs and delays. Robotic process automation such as repetitive tasks could be outsourced to AI or other robotic appliances. This would reduce crew and labour costs and errors and improve safety.

Question 45

The environmental impact of liner shipping

Answer 45

• CO2 emissions - lower than other methods of transport
• Air and water pollution - development of sustainable vessels (green ships), which are fueled by green fuel (Power-to-X = green energy -> electrolysis and synthesis -> fuels and chemicals)
• Noise pollution and habitat destruction - routes are often planned to avoid areas where e.g. whales breed