Ocean Transportation

Part One.Marketing Logistics

Ocean Transportation

Ocean Transportation

Type of Ocean Ships

Liners Tramps

Ocean Transportation

Type of Ocean Ships

Liners Tramps

Somewhat likeLTL motor carriers

Ocean Transportation

Type of Ocean Ships

Liners Tramps

Somewhat like truckload motorcarriers.

Ocean Transportation

• Liners

Ocean Transportation

• Liners– Set schedules.

Port

Southbound from Florida Northbound to Florida

Departure Arrival Days Departure Arrival Days

ANGUILLA Friday Wednesday 5 Wednesday Monday 5

ANTIGUA Wednesday Monday 5 Monday Monday 7

BARBADOS Thursday Tuesday 5 Tuesday Tuesday 7

CAYMAN ISLANDS

Tuesday** Thursday 2 Thursday Monday 4

Ocean Transportation

• Liners– Set schedules.

Ocean Transportation

• Liners– Set schedules.– Published tariffs.

Ocean Transportation

• Liners– Set schedules.– Published tariffs.– Container or break-bulk.

http://www.msc.navy.mil/inventory/ships.asp?ship=americantern&type=ContainerShip

From: http://www.scheepvaarthoek.nl/

Ocean Transportation

• Liners– Set schedules.– Published tariffs.– Container or break-bulk.

• Lighter-aboard-ship.

http://www.mdf.ru/english/exhibitions/moscow/northernsearoute70/

Russian nuclear-powered lighter-aboard-ship

Ocean Transportation

• Liners– Set schedules.– Published tariffs.– Container or break-bulk.

• Lighter-aboard-ship.

• Roll-on/Roll-off ship (RORO)

http://www.ship-world.de/photo-archive/roro.htm

http://home.t-online.de/home/shipflag.de/6.htm

http://home.t-online.de/home/shipflag.de/137.htm

Non-Vessel-Operating Common Carrier (NVOCC)

Non-Vessel-Operating Common Carrier (NVOCC)

• Consolidator.

Non-Vessel-Operating Common Carrier (NVOCC)

• Consolidator.

Containership

CA B

Non-Vessel-Operating Common Carrier (NVOCC)

• Consolidator.

Containership

C AB

Non-Vessel-Operating Common Carrier (NVOCC)

• Consolidator.

Containership

C A B

Non-Vessel-Operating Common Carrier (NVOCC)

• Consolidator.

Containership

CA B

Non-Vessel-Operating Common Carrier (NVOCC)

• Consolidator.

Containership

CA B

Non-Vessel-Operating Common Carrier (NVOCC)

• Consolidator.• Handles all details of exporter’s

shipping needs.• Assumes all obligations of

common carrier.Containership

CA

B

• Often serve freight forwarders (who are

shipper’s agents, not carriers).

Go to Part Two.

“Ocean Transportation”

Part TwoMarketing Logistics

Ship’s Brokers

• Liason between shippers and tramp ships.

Ship Agents

• Liason between shippers and tramp ships.• Act for ship operator to execute

– Ship arrival.– Clearance.– Loading, unloading.– Fee payments in port.– Used when amount of business in port does

not justify ship owner having their own people there.

Shipping Conferences

• Voluntary cartel of ship operators who agree on rates.

• Exempt from antitrust concerns.

• Previously carried quality image.

International Air

• Space and weight capacities on aircraft are at a premium.

• Products less than 10.4 pounds per cubic foot are assumed, for purposes of weight calculation, to be 10.4 pounds.

• Products more than 10.4 pounds per cubic foot are rated at actual weight.

International Air

• General cargo rate.

• Class rate – for cargo grouped into classes.

• Commodity rate.

• Container rate.

Container Traffic

• 26% of world container movements in 2003 were intra-Asia.

• China is the fastest-growing market.

• 25% of the container ship fleet is post-panamax.

TDC Trade.com http://www.tdctrade.com/shippers/vol26_4/vol26_4_seafreight05.htm

Lloyd’s Register http://www.lr.org/market_sector/marine/ulcs.htm

Liner Rates

• Liner costs are 80-90% fixed.– Fixed costs of owning/operating large vessels.– High management overhead for required

sales efforts.

• Ship operating costs: 60-70% of costs are for fuel.

• Ship scrapping.– 95% of ship can be recycled – especially

steel.

BIMCO http://www.bimco.dk/Corporate%20Area/Seascapes/Sea%20View%20/The%20business%20of%20ship%20recycling.aspx

http://www.wipro.com/insights/marinebunkering.htm

Coyle, Bardi, Novack (2000) Transportation

Liner Rates

• Ships tend to be built for specific routes.– Size.

• Panamax.• Post-panamax.

– Dimensions.– Ports.– Cargoes.

• Rates tend to be based upon costs per cubic foot of space.– Floor price must cover fixed costs.– Prices are then based upon commodity values.

• The higher the landed cost, the higher the transportation charge that can be charged.

– Elasticities are factored in.

Coyle, Bardi, Novack (2000) Transportation

Tramp Ship Cost Factors

• Tramp ships must be flexible to carry varied cargoes.– Tradeoff: more flexibility, less economy.

Coyle, Bardi, Novack (2000) Transportation

Tramp Ship Rate-Making

• High fixed costs.• Key is to minimize nonrevenue time and

mileage.• Three types of tramp ship charters.

– Voyage charter: specific trip(s).– Time charter: ship, crew used for a specific

time.– Bareboat: vessel is rented for a long period of

time and charterer provides crew.

Coyle, Bardi, Novack (2000) Transportation

Ship Size and Economies of Scale

• Ship size previously had been limited by– Abilities of ship builders.– Materials from which to build ships.– Ability of world’s ports to handle.

• By 1970s ports were basically the only limitation.

http://www.bimco.dk/Corporate%20Area/Seascapes/Maritime%20Matters/Scale%20economies%20and%20giant%20ships.aspx

Ship Size and Economies of Scale

http://www.maersk.com/historyTemplate.asp?nav=1&subnav=12&id=45&decade=&count=31

Ship Size and Economies of Scale

• Ship size previously had been limited by– Abilities of ship builders.– Materials from which to build ships.– Ability of world’s ports to handle.

• By 1970s ports were basically the only limitation.

• Economies of scale.– Quadruple ship size, only double its building

and operating costs.http://www.bimco.dk/Corporate%20Area/Seascapes/Maritime%20Matters/Scale%20economies%20and%20giant%20ships.aspx

End of Program