colombo international maritime conference- sri lanka 26.09.2015
TRANSCRIPT
Minimizing Reposition Cost
Lalith EdirisingheCINEC Maritime Campus
Virtual Container Inventory
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The dry container fleet by 2013 was about 34.5 million TEU
The “box to slot” ratio, which measures the number of containers versus the spaces on container ships, considered at present is 2-to-1
Preamble
Preamble
Half the time of container lifetime is idle as they are either being maintained, repaired or in storage
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Empty container volumes 1990 - 2011
05/02/2023 4(Source:Chiang, 2013)
Empty containersIn 2002 estimated empty container
repositioning costs (ECRC) accounted for USD 20 billion globally
This remain stable ranging from 18% to 22% between 1990 and 2011
Empty containers cost Maersk Line USD 1 billion a year (ShippingWatch, 2012)
ECRC of Sri Lanka is USD 100 Million annually
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Container imbalance represents 22% of the overall cost structure
05/02/2023 6Source: (Alderton, 2004)
Solution to ECRCSome researchers proposed that external container sharing or pooling container fleets among different ocean carriers may reduce ECRC
Virtual Container Inventory (VCI) is derived from this ‘out of the box’ thinking
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VCI -The Virtual Container Inventory1. VCI is a strategic CIM solution2. It can operate globally while
keeping carriers’ individual identities intact
3. Each carrier may exchange containers on mutually agreed but continue to control its own inventories
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VCI -The Virtual Container InventoryAs the pooling is done virtually the physical storage of containers will not be a constraint
VCI expands the inventory of a carrier beyond its existing individual capacity(1+1 >2)
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Is the VCI realistic?
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YesNo
VCI is realisticSame mechanism is in practice for shipping space (slots)
Many existing alliance agreements provide provisions to exchange containers
It is evident that carriers accept the VCI in principle
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Alliance Agreements17 mega carrier alliance agreements facilitates equipment interchange
They represent approximately 82 % of total container trade globally
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TA-16 Carrier Agreements Active in the US/North Trade for 2006 through 2010
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Number Name Members
1 11375 Trans-Atlantic Conference Agreement ACL, Maersk, MSC, NYK, OOCL
2 11280 Star West Joint Service Agreement , Overseas3 11854 Greensea Inc. Joint Service Agreement Green Chartering, 4 11982 Evergreen Line Joint Service Agreement Evergreen, Hatsu, Italia5 11602 The Grand Agreement II HL, NYK, OOCL6 11960 New World Agreement APL, Hyundai, MOL
7 10955ACL/H-L Reciprocal Space Charter and Sailing Agreement ACL, HL
8 11415 MPA Space Charter and Sailing Agreement ACL, MSC9 11705 Grand Alliance-CP Ships Atlantic Agreement CP, HL, NYK, OOCL, PO
10 11794The COSCON/KL/YMUK/ Hanjin Worldwide SlotAllocation and Sailing Agreement Cosco, HJ, KL, YM
11 11867Norasia/GSL Round The World Service AgreementCMA CGM/CSCL/ELJSA Cross Space Charter, Gold, Norasia
12 11955 Sailing, and Cooperative Working Agreement , CMA, Evergreen13 11912 Dole-HSud Space Charter and Sailing Agreement Dole, HSud14 11927 ITS/Hatsu Marine MUS Slot Charter Agreement Italia, Hatsu
TP-16 Carrier Agreements In The Transpacific Trade For 2006 Through 2010
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Number Name Members1 11602 The Grand II NYK, OOCL, HL 2 11435 APL/HLAG Space Charter Agreement APL, HL3 11794
COSCO/KL/YMUK/ HANJIN/Senator Worldwide SlotAllocation & Sailing Agreement K-Line, Yang Ming, Hanjin, COSCO
4 11885
CMA CGM/MSC Reciprocal Space Charter, SailingAnd Cooperative Working Agreement
CMA CGM, MSC
5 11940
Cross Space Charter, Sailing And Cooperative Working Agreement CMA CGM, Shipping
6 11948
CMA CGM/CSCL Cross Space Charter, Sailing And CWA-Central China/US West Coast, Yang Tse/ AAC2 Service Shipping, CMA CGM
Source: Federal Maritime (2012)
Container imbalance is an outcome of trade imbalance
Container Inventory Management is a complex matter
Perceived marketing disadvantages due to indirect support to a competitor
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VCI is NOT realistic ????
Possible legal implications as additional party involved in the transport contract
(i.e. Line A load lne C’s containers on line B’s ship)
Possibility of making additional insurance premium
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VCI is NOT realistic ????
Perceived negative impact of the brand image
Whether the additional costs and disadvantages supersede the expected saving on empty reposition cost
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VCI is NOT realistic ????
Evaluating the Pros and ConsSince there is no practice the outcome cannot be measured
A case study and simulation can be done instead
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Sri Lanka’s External Trade (2004-2014)
Laden Domestic Im-ports 62%
Laden Domestic Ex-ports 38%
Sri Lanka External Trade
(In terms of con-tainers)
Laden Domestic Ex-ports 54%
Empty Domestic Exports46%
Sri Lanka Domestic Exports 2004-14(In terms of con-
tainers)
Laden Domestic Imports
90%
Empty Domestic Imports
10%
Sri Lanka Domestic Imports 2004-14(In terms of con-
tainers)
Empty Container Movements in Sri Lanka 289,474 TEU s empty containers
(MTY) were evacuated from port of Colombo in the year 2014
11.6 percent growth against 2013
Paradoxically, shipping lines have imported 48,629 TEUs of empty containers to SL in 2014
24.3 percent growth from 2013(CASA Per. Review, 2015)
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Analysis of Container imbalance of 40’ GP (23 leading carriers in Sri Lanka in 2013)
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Month StatusFinal
outcome Month StatusFinal
outcomeJAN
Excess 557 JUL
Excess 619Shortage 346 Shortage 215
FEB
Excess 286 AUG
Excess 697Shortage 369 Shortage 491
MAR
Excess 477 SEP
Excess 441Shortage 672 Shortage 458
APR
Excess 650 OCT
Excess 121Shortage 235 Shortage 562
MAY
Excess 585 NOV
Excess 334Shortage 338 Shortage 499
JUN
Excess 399 DEC
Excess 419Shortage 163 Shortage 443
Total Excess = 5585
Total Shortage = 4791
Total Imbalance = 10376
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Month Status
Actual inventory position
Status
Outcome of
Exchange
Month Status
Actual inventory position
Status
Outcome of
Exchange
JAN
Excess 557 Excess 211JUL
Excess 619 Excess 404Shortage 346
Shortage 0
Shortage 215
Shortage 0
FEB
Excess 286 Excess 0AUG
Excess 697 Excess 206Shortage 369
Shortage 83
Shortage 491
Shortage 0
MAR
Excess 477 Excess 0SEP
Excess 441 Excess 0Shortage 672
Shortage 195
Shortage 458
Shortage 17
APR
Excess 650 Excess 415OCT
Excess 121 Excess 0Shortage 235
Shortage 0
Shortage 562
Shortage 441
MAY
Excess 585 Excess 247NOV
Excess 334 Excess 0Shortage 338
Shortage 0
Shortage 499
Shortage 165
JUN
Excess 399 Excess 236DEC
Excess 419 Excess 0Shortage 163
Shortage 0
Shortage 443
Shortage 24
Total imbalance estimated after exchange = 2644
Total empty repositioning required after exchange = 2644
Analysis of Container imbalance of 40’ GP (23 leading carriers in Sri Lanka in 2013)
Exchange vs. Work alone 40’ GP - 2013
05/02/2023 23JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 0
200
400
600
800
1000
1200
1400
ExchangeWork alone
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Container Type& Size
Imbalance when Work alone
Imbalance when Collaborate
Trade incentive of Exchange
Saving @ $ 500 per REPO
20'GP 158221 156285 1.20% $968,000 40'GP 10486 794 92.40% $4,846,000 40'HC 44586 27842 37.60% $8,372,000 45'HC 2155 101 95.30% $1,077,500 20'&40'RF 5975 4791 19.80% $592,000
Total 221423 189813 14.30%$15,855,50
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Analysis of Container imbalance Multiple size/type - 2014
Proposed Container Exchange Model
A
B
C20
40
20
40
20
40
A
B
C20
40
20
40
20
40
A
B
C20
40
20
40
20
40
A
B
C20
40
20
40
20
40
Port x Port y
Port w Port v
A
B
C20
40
20
40
20
40
A
B
C20
40
20
40
20
40
25
50
10 25
10
20
4 days
10 days
8 days20
days
Deriving a mathematical explanation
AB1020 + AC50
04 = BA5004 + CA25
08
BC2010 + BA50
04 = AB1020 + CB20
10
CA25
8 + CB2010 = AC50
04 + BC2010
…………………..
……………..ABQ1
t1 + ACQ2t2 = BAQ3
t3 + CAQ4t4
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Evaluating the outcome of exchange
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Offerer Details of Container Exchange Directionof containers
Transit time after exchange
Total EO as perceived by offererCarriers 20’ 40’ TEUS
A A/B 10 - 10 x/w 20 days 400 TEU/DaysA/C 50 - 50 x/y 04 days
B B/C - 10 20 y/v 10 days 400 TEU/DaysB/A - 25 50 x/y 04 days
C C/A 25 - 25 y/w 08 days 400 TEU/DaysC/B 20 - 20 y/v 10 days
Total 105 35 175
Offeree Details of Container Exchange Directionof containers
Transit time after exchange
Total EO as perceived by offererCarriers 20’ 40’ TEUS
A B/A - 25 50 x/y 04 days 400 TEU/DaysC/A 25 - 25 y/w 08 days
B A/B 10 - 10 x/w 20 days 400 TEU/DaysC/B 20 - 20 y/v 10 days
C A/C 50 - 50 x/y 04 days 400 TEU/DaysB/C - 10 20 y/v 10 days
Total 105 35 175
1. Container Inventory Management Matrix - 6R Model
2. Multidimensional Index for Container Inventory Management
3. Common Carrier Container Management System (On-line software application C3MS)
6R Model will be presented at the 14th World Conference on Transport Research that will be held in Shanghai in 2016
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Future contribution……….
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Thank you
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