Evaluation of expected payoff through container interchange between shipping lines: A solution to container inventory imbalance in Sri Lanka

Lalith Edirisinghe1, A. W.Wijeratne2

1 Faculty of Management,CINEC Maritime Campus,

MalabeSri Lanka

2 Department of Agribusiness Management,Faculty of Agricultural Sciences,

Sabaragamuwa University of Sri LankaBelihuloya 70140

Sri Lanka

1 <Lalith.edirisinghe@gmail.com>, 2< aw.wijeratne@gmail.com>

AbstractThis paper evaluates the expected economic benefit that could be achieved by interchanging containers between shipping lines by employing the popular Game theoretic approach. It comprehensively discusses the causes underlying the container inventory imbalance; the absence of collaboration (work alone) with respect to containers; the models of collaboration (win-win situation); and the quantitative and qualitative benefits that could be achieved through shipping alliances. The paper suggests barriers to a collaborative approach by carriers as confidentiality of information; regulatory, competition and social issues; and business philosophy of firms. The paper identifies the core areas relevant to empty maritime container inventory imbalance including external trade volumes, commodity types, logistical issues, seasonality, container types and sizes. The ultimate objective is to ascertain the appropriateness of collaboration as a solution to container inventory imbalance in Sri Lanka. Therefore attempts were made to calculate economic benefits of container interchange using specific models. Furthermore the paper looks into those aspects that make the implementation of collaboration more difficult (inhibitors) despite the existence of active agreements between shipping lines and the opportunities and facilitators.

Key words: Containers (Equipments), Container Shipping Line (CSL), Carrier, TEU, Inventory imbalance, Game theory, Derived demand, commodities, Empty containers (MTYs), Laden containers (LDN)

Biographical notes: Lalith Edirisinghe is a doctoral candidate in Transport Planning and Logistics Management at the CINEC Maritime Campus, Sri Lanka (SL), affiliated to the Dalian Maritime University, China. He received his Master’s Degree in International Trade and Logistics at the University of Sri Jayawardanepura- SL and University of Canberra –Australia. He holds a Postgraduate Diploma in Business Management and an Executive Diploma in Marketing from the University of Colombo SL. He counts 30 years experience in shipping and presently works as the Head of School at CINEC Maritime Campus- City Branch in Colombo. He is a Chartered member of Institute of Logistics and Transport and also a Chartered Marketer (2010/12). His research interests include maritime transport, Logistics, international trade, border management and marketing.

A.W. Wijeratne obtained his doctoral degree in mathematics from the Harbin Institute of Technology, China, in 2008. He has been working as a senior lecturer in statistics and mathematics at the Department of Agribusiness Management, Sabaragamuwa University of Sri Lanka. He has published over two dozens of research papers in refereed journals, covering a wide range of subjects. He has given his active contribution as a statistician for projects at the national level. His research interests include mathematical modelling in business, experimental designs and applied statistics.